2021 (6) TMI 880 - Tri - Insolvency and Bankruptcy

Condonation of delay of forty eight days in filing of the present Application on behalf of the Applicant - applicability of time limitation in section 7 and 9 of IBC - HELD THAT - It is no longer res Integra as held by the Hon'ble Supreme Court of India in a couple of decisions that Section 5 of the Limitation Act, 1963 would apply to a proceeding under Section 7 or 9 of IBC, 2016 and hence bowing down to the provisions of Article 141 of the Constitution of India, though this Tribunal had expressed a view otherwise in the matter of M/S. FNA MULTI-TRADE PRIVATE LIMITED VERSUS M/S. VA TECH WABAG LIMITED 2020 (9) TMI 1188 - NATIONAL COMPANY LAW TRIBUNAL, CHENNAI taking into consideration the decision of the Hon'ble Madras High Court under the Presidency Town Insolvency Act, 1909. Be that as it may, the Applicant who seeks for condonation of delay has to adequately explain to the satisfaction of this Tribunal the 'sufficient cause' and 'reasonableness' for condoning the delay in filing the main Application. It is the cardinal principle of limitation that the Applicant, who seeks to condone the delay, has to explain the delay for each and every day as sought for, more particularly this Tribunal is of the considered view in relation to a proceeding under IBC, 2016 being a proceeding in rem and has an impact on all the stakeholders of the Corporate Debtor unlike a suit for recovery of money filed before the Civil Court and in the circumstances this Tribunal is required to be more circumspect in condoning the delay as compared to a liberal approach as canvassed by the Applicant. The stand of the Applicant that the Operational Creditor is operating its office from Chennai depot is not a 'sufficient cause' or a 'reasonable cause' for the Tribunal to condone the delay in filing the main Application. In the present case, the Applicant has not satisfactorily explained to this Tribunal the delay of 48 days (albeit 79 days) in filing the main Application - Application dismissed.

Summary

Issues Involved:
Delay in filing the application under Section 9 of Insolvency and Bankruptcy Code, 2016.

Analysis:
The Applicant, an Operational Creditor, filed an application seeking to condone the delay of 48 days in filing the main application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The Applicant maintained that the delay was due to operational reasons as the Corporate Debtor's documents were in the custody of officials in Chennai, hindering the issuance of the Demand Notice. The Applicant cited relevant legal precedents, including the Supreme Court judgments in B.K. Educational Services Private Limited Vs. Parag Gupta and Associates and Gaurav Hargovindbhai Dave Vs. Asset Reconstruction Company (India) Ltd., to support the application under Section 5 of the Limitation Act, 1963. The Respondent, Corporate Debtor, contended that Section 5 of the Limitation Act does not apply to applications under Sections 7 or 9 of the IBC, 2016.

The Tribunal noted that Section 5 of the Limitation Act, 1963 applies to proceedings under Sections 7 or 9 of the IBC, 2016, based on established legal principles and the Constitution of India. Despite a previous contrary view expressed by the Tribunal, it emphasized the need for the Applicant to provide a satisfactory explanation for the delay, meeting the requirements of 'sufficient cause' and 'reasonableness'. The Tribunal referred to judicial precedents, such as Kandaswamy vs. Krishnamandiram Trust and Oriental Aroma Chemical Industries vs. Gujarat Industrial Development Corporation, to underscore the importance of a valid explanation for condonation of delay.

The Tribunal found the Applicant's explanation for the delay inconsistent, as the Applicant initially sought to condone a delay of 48 days but later mentioned a delay of 79 days. Emphasizing the significance of accurate and justifiable explanations for each day of delay, especially in insolvency proceedings affecting multiple stakeholders, the Tribunal dismissed the application. It concluded that the Applicant failed to provide a satisfactory reason for the delay, leading to the dismissal of the application seeking condonation under Section 5 of the Limitation Act, 1963.

In light of the above analysis, the Tribunal dismissed the application filed by the Operational Creditor, as the delay of 48 days was not adequately explained to the satisfaction of the Tribunal. Consequently, the application under Section 5 of the Limitation Act, 1963 was dismissed, leading to the closure of the case IBA/103/2020.