2025 (7) TMI 159 - AT - IBC

Condonation of delay of 280 days in refiling the present Appeal - Delay on the ground of ill-health of the father of Appellant as well as ill-health of the father of the Counsel - sufficient cause for delay or not - HELD THAT - The present Appeal was filed on 06.04.2024 by the Appellant - Mr. Sandeep Kasare who is the Power of Attorney holder of Ms. Anupma Agarwal (Ms. Anupma) the Erstwhile Director of Somerset Estate Private Limited (Corporate Debtor). The registry of this Appellate Tribunal marked the defects on 12.04.2024. As per Rule 26(2) of NCLAT Rules 2016 seven days are prescribed for refiling of the Appeal from the date when the registry intimates the defects to the Appellant. The explanation is not found to be sufficient and justifiable for condonation of delay in refiling the Appeal. The Appellant has been very casual and not pursued it for very long period and the defects remained pending. If the Appellant was serious he could have pursued the matter with the registry in curing the defects and in case they were not getting cured the appellant could have mentioned it before this Tribunal. It is found that none of this was done. The Appellant places its reliance on various judgments. None of them are applicable in the facts and circumstances of the case. Appellant has failed to establish any sufficient or justifiable cause for the inordinate delay of 280 days in refiling the Appeal. The explanation offered that Ms Anupama a shareholder of the Corporate Debtor was unable to provide the relevant documents as the records were managed by her father-in-law is vague unsubstantiated and lacks any evidentiary support. Such a contention is devoid of merit and cannot be accepted as a valid ground for condonation of delay. Furthermore Corporate Insolvency Resolution Process is a time-bound mechanism under the IBC and an inordinate delay of 280 days without any justifiable cause undermines the objective of expeditious resolution and serves only as an impediment to the statutory timelines prescribed under the Code. There is no sufficient cause to condone the delay in refiling for 280 days. Insolvency Resolution is a time bound process and such laxity in pursuing the Appeal is not understandable. Therefore the Application for condonation of delay is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Appellate Tribunal were:

• Whether the delay of 280 days in refiling the Appeal against the order initiating Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) can be condoned.
• The applicability and interpretation of Rule 26 of the National Company Law Appellate Tribunal Rules, 2016 (NCLAT Rules), particularly regarding the prescribed seven-day period for curing defects in the Appeal and the consequences of delay beyond this period.
• The sufficiency and justifiability of the reasons offered by the Appellant for the delay in refiling the Appeal.
• The extent to which procedural delays and non-compliance with registry defects can be excused in the context of the time-bound nature of CIRP under the IBC.
• The relevance and applicability of precedents on condonation of delay in refiling appeals under the NCLAT Rules and principles laid down by the Supreme Court regarding balancing substantial justice against procedural technicalities.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of Delay of 280 Days in Refiling the Appeal

Relevant Legal Framework and Precedents:
The NCLAT Rules, 2016, Rule 26(2) prescribes a seven-day period for refiling an appeal after defects are intimated by the Registry. Rule 26(3) allows the Registrar to extend this time for sufficient cause. The Supreme Court has held in Manoharan vs Sivarajan & Ors. that substantial justice should be preferred over technical considerations unless mala fide is evident. The Tribunal has previously condoned delays on grounds such as ill-health of parties or counsel, or difficulty in procuring documents, as seen in Nishant Bhutada vs Tata Motors Pvt. Ltd., Innovators Cleantech Pvt. Ltd. vs Pasari Multi Projects Pvt. Ltd., and Shreenathii Infrastructure Vs Namasthetu Infratech Pvt. Ltd.

Court's Interpretation and Reasoning:
The Tribunal noted that the Appeal was initially filed on 06.04.2024 and defects were pointed out on 12.04.2024. The Appellant's explanation for delay was the death of Ms. Anupama Agarwal's father-in-law on 10.05.2024, who managed all relevant documents. The Appellant argued that retrieving documents and overcoming the mental disturbance caused the delay in refiling, which was eventually done on 23.01.2025, resulting in 280 days delay.

The Tribunal observed that the Appellant failed to explain the 27-day delay between defect intimation (12.04.2024) and 09.05.2024, and did not produce the defect sheet to clarify the nature of defects. It was also not explained which defects required assistance from Ms. Anupama or her father-in-law. Furthermore, the Appellant did not bring the interlocutory application for condonation of delay to the Tribunal's notice before the Appeal was listed on 04.02.2025, leading to the issuance of notice without condoning the delay. This was later recalled on 16.04.2025 after Respondent No. 2 brought the delay to the Tribunal's attention.

The Tribunal found the explanation vague, unsubstantiated, and lacking evidentiary support. The Appellant's conduct was seen as casual and negligent, not demonstrating due diligence in pursuing the Appeal or curing defects. The Tribunal emphasized the importance of adhering to the time-bound nature of CIRP under the IBC and held that the inordinate delay without sufficient cause undermines the statutory timelines.

Key Evidence and Findings:
- The Appeal was filed within limitation but defects were not cured within the prescribed time.
- No defect sheet was produced to substantiate the nature of defects.
- Delay of 280 days in refiling was primarily attributed to the death of the father-in-law managing documents.
- No explanation for initial 27-day delay after defect intimation.
- Delay application was not placed before the Tribunal timely.
- Precedent cases cited by the Appellant were distinguished on facts.

Application of Law to Facts:
The Tribunal applied Rule 26 of the NCLAT Rules strictly in light of the IBC's mandate for time-bound resolution. It held that the Appellant's failure to cure defects within the prescribed or reasonably extended time, combined with the unexplained and excessive delay, did not constitute sufficient cause for condonation. The principles of substantial justice were considered but outweighed by the need for procedural discipline and timely insolvency resolution.

Treatment of Competing Arguments:
The Appellant argued for a liberal approach based on precedents where delays were condoned due to personal hardships or difficulty in procuring documents. Reliance was placed on Supreme Court judgments emphasizing substantial justice over procedural technicalities. The Respondent countered that the delay was excessive, unexplained for a significant portion, and that the Appellant deliberately withheld the delay application from the Tribunal, thus misleading the Court. The Respondent emphasized the statutory time-bound nature of CIRP and the need to prevent abuse of process through procedural delays.

Conclusions:
The Tribunal concluded that the Appellant failed to provide sufficient or justifiable cause for condonation of the 280-day delay in refiling the Appeal. The delay was held to be inordinate, unexplained for a significant period, and detrimental to the expeditious resolution objectives of the IBC. Therefore, the application for condonation of delay was dismissed, and consequentially, the Appeal was dismissed.

3. SIGNIFICANT HOLDINGS

"The explanation offered that Ms Anupama, a shareholder of the Corporate Debtor was unable to provide the relevant documents as the records were managed by her father-in-law is vague, unsubstantiated and lacks any evidentiary support. Such a contention is devoid of merit and cannot be accepted as a valid ground for condonation of delay."

"Corporate Insolvency Resolution Process is a time-bound mechanism under the IBC and an inordinate delay of 280 days without any justifiable cause undermines the objective of expeditious resolution and serves only as an impediment to the statutory timelines prescribed under the Code."

"The Appellant has been very casual and not pursued it for very long period and the defects remained pending. If the Appellant was serious, he could have pursued the matter with the registry in curing the defects and in case they were not getting cured, the appellant could have mentioned it before this Tribunal."

"We find that none of the judgments relied upon by the Appellant are applicable in the facts and circumstances of the case."

Core principles established include:

• The strict adherence to timelines prescribed under Rule 26 of the NCLAT Rules is essential to uphold the statutory objectives of the IBC.
• Delay in refiling appeals beyond the prescribed period must be supported by sufficient and justifiable cause; vague or unsubstantiated explanations are insufficient.
• Substantial justice considerations do not override the need for procedural discipline in time-bound insolvency proceedings, especially where delay is inordinate and unexplained.
• Parties exercising statutory rights to appeal must act diligently and cannot rely on procedural lapses or personal hardships without adequate evidence to justify delay.

Final determinations on the issues are:

• The 280-day delay in refiling the Appeal was not condoned due to lack of sufficient cause.
• The Appeal was dismissed on account of non-compliance with procedural timelines and failure to cure defects within the prescribed or extended period.
• The Tribunal reaffirmed the importance of procedural compliance and timeliness in CIRP appeals to ensure the efficacy of the insolvency resolution process.