National Company Law Appellate Tribunal
Adisri Commercial Private Limited vs Reserve Bank Of India And Anr on 21 December, 2022
Author: Ashok Bhushan
Bench: Ashok Bhushan
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Company Appeal (AT) (Insolvency) No.1293 of 2022
& I.A. No. 3984, 3983 of 2022
[Arising out of order dated 08.10.2021 passed by the Adjudicating Authority,
National Company Law Tribunal, Kolkata Bench in CP (IB) No. 295/KB/2021]
IN THE MATTER OF:
Adisri Commercial Pvt. Ltd.
Shareholder of Srei Infrastructure Finance Limited,
3, Middle Road, Hastings,
Kolkata 700 022 ...Appellant
Versus
Reserve Bank of India,
Central Office:
Department of Non-Banking Supervision,
World Trade Centre, Centre 1,
2nd Floor, Cuff Parade, Colaba,
Mumbai - 400 005
Regional Office:
15 N.S. Road, Kolkata 700 001 ...Respondent No.1
Srei Infrastructure Finance Limited,
Represented by Mr. Rajneesh Sharma, Administrator,
residing at 17B, Shenaj Apartments,
19, Napean C Road, Mumbai - 400 006
Registered Office:
"Vishwakarma"
86C Topsia Road (South)
Kolkata 700 046 ...Respondent No.2
Present:
For Appellant: Mr. C. S. Vaidyanathan, Sr. Advocate with Mr.
Abhijeet Sinha, Mr. Rishav Banerjee, Mr. Aditya
Shukla, Mr. Akshat Singh, Ms. Heena Kochar, Mr.
Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022
1
Bhanu Gupta, Ms. Dacchita Shahi, Mr. Shreyas
Edupuganti, Mr. Satvik Misra, Advocates.
For Respondents: Mr. Gopal Jain, Sr. Advocate with Mr. Vijayendra
Pratap Singh, Ms. Vanya Chhabra, Ms. Diksha and
Mr. Aditya Dhupar, Advocates for R-1.
Mr. Arun Kathpalia, Sr. Advocate with Ms.
Sayobani Basu, Mr. Aditya Kumar, Advocates for
R-2.
With
Company Appeal (AT) (Insolvency) No.1294 of 2022
& I.A. No. 3986, 3988 of 2022
[Arising out of order dated 08.10.2021 passed by the Adjudicating Authority,
National Company Law Tribunal, Kolkata Bench in CP (IB) No. 295/KB/2021]
IN THE MATTER OF:
Adisri Commercial Pvt. Ltd.
Shareholder of Srei Infrastructure Finance Limited,
holding company of Srei Equipment Finance Limited,
3, Middle Road, Hastings,
Kolkata 700 022 ...Appellant
Versus
Reserve Bank of India,
Central Office:
Department of Non-Banking Supervision,
World Trade Centre, Centre 1,
2nd Floor, Cuff Parade, Colaba,
Mumbai - 400 005
Regional Office:
15 N.S. Road, Kolkata 700 001 ...Respondent No.1
Srei Equipment Finance Limited,
Represented by Mr. Rajneesh Sharma, Administrator,
residing at 17B, Shenaj Apartments,
19, Napean C Road, Mumbai - 400 006
Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022
2
Registered Office:
"Vishwakarma"
86C Topsia Road (South)
Kolkata 700 046 ...Respondent No.2
Present:
For Appellant: Ms. Garima Prashad, Sr. Advocate with Mr.
Shubham Yadav, Mr. Raman Yadav and S. Madal,
Advocates.
For Respondents: Mr. Gopal Jain, Sr. Advocate with Mr. Vijayendra
Pratap Singh, Ms. Vanya Chhabra, Ms. Diksha and
Mr. Aditya Dhupar, Advocates for R-1.
Mr. Arun Kathpalia, Sr. Advocate with Ms.
Sayobani Basu, Mr. Aditya Kumar, Advocates for
R-2.
JUDGMENT
[Per: Barun Mitra, Member (Technical)] The present appeal has been filed against the order dated 08.10.2021 (hereinafter referred to as "Impugned Order") passed by the Adjudicating Authority, National Company Law Tribunal, Kolkata Bench in CP No. 294/KB/2021 whereby application filed under Section 227 read with Section 239(2)(zk) of the Insolvency and Bankruptcy Code, 2016 ("Code" in short) by the Reserve Bank of India/appropriate regulator has been admitted thus bringing Srei Equipment Finance Limited ("SEFL" in short) under Corporate and Insolvency process('CIRP' in short).
2. The Learned Counsel for the Appellant has submitted that substantial injustice has been caused to SEFL and its shareholders by the Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 3 impugned order passed ex-parte by the Adjudicating Authority whereby SEFL was admitted under Section 227 of the IBC without any notice having been served on SEFL or its promoters or shareholders as required under law. It was further submitted that Reserve Bank of India, present Respondent No.1 after appointing SEFL, present Respondent No. 2 as an administrator under Section 45-IE of the Reserve Bank of India Act, 1934 moved the Adjudicating Authority for admission of SEFL into CIRP. A copy of the petition filed by Respondent No.1 under Section 227 was not served on the superseded Board of SEFL thus denying an opportunity to the Appellant to defend the matter on merits. Aggrieved by this impugned order, passed ex-parte by the Adjudicating Authority, the Appellant submitted that an appeal was filed challenging the impugned order before this Tribunal on 22.11.2021 well within the period of limitation as prescribed under the Code.
3. After the above memo of appeal was presented in the office of this Tribunal on 22.11.2021, after due scrutiny, defects therein were intimated to the Appellant on 24.11.2021. The Appellant thereafter refiled the memo of appeal on 19.10.2022 after a delay of 321 days along with interlocutory application bearing No. 3988 of 2022 seeking condonation of delay in refiling the appeal under Rule 31 read with Rule 11, 14 and 26 of the National Company Law Appellate Tribunal Rules 2016 ("NCLAT Rules" in short).
Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 4
4. While acknowledging that there has been a delay in the refiling of this appeal, the Appellant has claimed that the delay was occasioned by bona- fide and genuine reasons. Elaborating the grounds of delay, it was submitted that the intervening third wave of Covid 19 pandemic and resultant lockdown led to limited functioning which came in the way of rectifying the defects in the appeal. The defects were notified by the Registrar of this Tribunal in November 2021 when the pandemic was still subsisting. In support of their contention, it was mentioned that this period was also covered by the orders of the Hon'ble Supreme Court granting relief and extension of time to all litigants from 15.03.2020 till 28.02.2022. The second reason for the delay was the authorized representative of the Appellant having been severely affected by several illness arising out of high blood pressure, diabetes and arthritis. The third reason arose as the authorized representative was faced with the problem of files having got misplaced and that on resumption of work, reconstruction of the files consumed further time leading to delay.
5. The Learned Counsel for the Appellant pointed out that NCLAT Rule 14 empowers the Appellate Tribunal on sufficient cause being shown, to exempt the parties from compliance with any requirement of the rules, as it may consider just and expedient, to render substantial justice. It was asserted that the above three grounds may be treated as sufficient cause to allow refiling of the present application even with the delays in the interest of rendering substantial justice. It was further stated that under Rule 11 of NCLAT Rules, this Tribunal is vested with inherent powers to make such Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 5 orders or give such directions as may be necessary for meeting the ends of justice or to prevent abuse of the Appellate Tribunal and hence the same can also be readily invoked by this Tribunal in the present case. It was therefore argued that Rules 11 and 14 of NCLAT Rules are aimed at providing substantial justice and the Appellants for justified reasons are seeking relief thereunder.
6. The Learned Counsel for the Appellant further submitted that Rule 26(2) of the NCLAT Rules provides that if on scrutiny an application is found to be defective, the defects are required to be notified to the party for return, after due compliance within seven days, and, that if, there is failure to comply within seven days of the date of return the matter is to be placed before the Registrar who may pass appropriate orders. In the present case, appropriate orders are yet to be passed by the Registrar. As failure to comply to the directions to remove objections within seven days does not lead to an automatic dismissal of the appeal until the Registrar passes an order under Rule 26 (4), and in the present case no such order recommending dismissal having been passed by the Registrar, so far, the Respondents cannot rely on Rule 26 of the NCLAT Rules.
7. Strongly contending that raising of limitation grounds by government/public authority to defeat a just claim of a citizen is an unfair practice, the Learned Counsel for the Appellant placed reliance on the judgment of Hon'ble Supreme Court in Madras Port Trust Vs. Hymanshu International (1979) 4 SCC 176, Urban Improvement Trust, Bikaner v. Mohan Lal, (2010) 1 SCC 512 and Rajendra Shankar Shukla v. State Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 6 of Chhattisgarh, (2015) 10 SCC 400. Stating that the Hon'ble Apex Court in the above cases had strongly deprecated of technical pleas being taken by public authorities to defeat the legitimate claims of the citizens, it was submitted that in the present matter also, the Respondents have not acted like model or ideal litigants by attempting to eclipse substantial justice by agitating the issue of filing delay. It was also articulated that the impugned order had been obtained by the Respondent with unclean hands without the applicants having been served a copy of the petition which is thus a case of ex-facie breach of natural justice. Reliance was further placed on the judgment of the Hon'ble Supreme Court in Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries Private Limited & Anr., (2019) 15 SCC 209 to claim that they were entitled to an opportunity to prove that default had not occurred. Alleging that the Administrator appointed in the present proceedings failed to act as an independent and neutral party to the whole dispute, it would cause considerable prejudice to the applicant if this appeal is dismissed on technicalities and not heard on merits.
8. The Learned Counsel for the Respondent submitted that the reasons adduced by the Appellant to explain the delay in refiling are perfunctory, casual and vague. Imputing lack of bona-fide on the part of the Appellant, it was submitted that they did not provide details of how their functioning was so adversely affected by Covid pandemic that they needed such an inordinately long time in rectifying the filing defects, even beyond the period, which was otherwise to complete within seven days as per NCLAT Rules. It has also been contended that in the absence of documentary Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 7 support, the ill-health of the authorized representative is not a genuine excuse and in any case he could have easily been substituted. It was also pointed out that the plea taken by the Appellant that the relevant files of the appeal got misplaced lacks details and fails to indicate what efforts were taken to obtain a copy of the filed appeal from the Registry of this Tribunal. Hence the Appellant cannot be allowed to take of advantage of the NCLAT Rules for their carelessness and negligence.
9. Arguing that 321 days taken by the Appellant in refiling the appeal is almost the same time which is prescribed for completing CIRP under the IBC, the Learned Counsel for the Respondents vehemently asserted that any condonation of refiling delay of over 300 days would undermine the time-bound nature of CIRP under the Code. Furthermore, placing reliance on the judgement of the Hon'ble Supreme Court in Ebix Singapore Private Ltd vs Committee of Creditors of Educomp Solutions & Anr (2 SCC
401) it was submitted that allowing the belated refiling of the appeal particularly when CIRP is at an advanced stage in the present case, it would clearly vitiate the mandate for timebound resolution under the IBC. It was also submitted that the Hon'ble Supreme Court in V. Nagarajan v. SKS Ispat and Power Ltd. And Others (2022 2 SCC 244) has denounced delay in filing litigation and held the power to condone delay to be tightly circumscribed and conditional only upon showing sufficient cause, which is glaringly amiss in the present case. Reliance was also placed on judgements of the Hon'ble Supreme Court in National Spot Exchange Limited vs. Anil Kohli, 2021 SCC Online SC 716 and Oil and Natural Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 8 Gas Corporation vs Joint Venture Of M/s Sai Rama, 2019 SCC OnLine Del 10456 in this regard.
10. It has also been stated that while the Appellant besides being negligent and lackadaisical in refiling the appeal, their mala-fide becomes clear as during this period they were found to be actively litigating and pleading in other matters before other judicial fora against the CIRP and stated that the details of these cases were furnished as part of their written reply. Further it was also pointed out that in the guise of refiling, the Appellant has added new facts which were not part of the original version of the appeal. It has been pointed out that certain documents have been referred to in the refiling version which had actually come into being after the original date of filing in November 2021. These additions have changed the frame of the original appeal and therefore such refiling actually amounts to fresh filing.
11. We have duly considered the detailed arguments advanced by the Learned Counsel for both the parties.
12. Having heard the rival submissions, the two broad points for consideration before us are outlined as under: -
(i) whether the delay in refiling of 321 days is reasonable and therefore permissible under the Code and rules framed thereunder;
and
(ii) whether in the given facts and circumstances of the present case, adequate and sufficient reasons have been shown to justify that the Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 9 delay in refiling of 321 days is reasonable for the application to be allowed.
13. Both the issues delineated above are inextricably intertwined and therefore we feel that it would be prudent to treat them together. Coming to the first issue, the Appellant's contention is that the NCLAT Rules empowers this Tribunal, in the interest of justice, to allow refiling of the application even if there is substantial delay so long as sufficient cause is shown. Further, it was argued that the Respondent being in the nature of a public authority, it should not obstruct the path of justice by raising technical pleas of refiling delay to defeat legitimate claims of the Appellant. In support of their contention several judgments of the Hon'ble Apex Court were cited including Madras Port Trust Vs. Hymanshu International (1979) 4 SCC 176, Urban Improvement Trust, Bikaner v. Mohan Lal, (2010) 1 SCC 512 and Rajendra Shankar Shukla v. State of Chhattisgarh, (2015) 10 SCC 400.
14. It may be useful to go through the relevant NCLAT rules which have been pointed out by the Learned Counsel for the Appellant in this regard as extracted hereunder:-
"Rule 11: Inherent powers.- Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Appellate Tribunal to make such orders or give such directions as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Appellate Tribunal."
***** ***** ***** Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 10 "Rule14: Power to exempt.- The Appellate Tribunal may on sufficient cause being shown, exempt the parties from compliance with any requirement of these rules and may give such directions in matters of practice and procedure, as it may consider just and expedient on the application moved in this behalf to render substantial justice."
15. There is no quarrel over the proposition that in the absence of any time-limit prescription in considering the question of delay in re-filing either in the Code or the NCLAT Rules, this Tribunal is to that extent not powerless to entertain an application even if there has been delay in re- filing. As a matter of general practice, it is commonplace that the yardstick applicable while considering a prayer for condonation of delay for re-filing purposes is usually less rigid than the standards applied for condoning delay in filing. Pretty much on the same lines it has been urged before this Tribunal by the Appellant, that for reasons proffered, it may take a more liberal approach in allowing the condonation of refiling delay in the present case. Be that as it may, though this Tribunal can well be said to have the jurisdiction to decide on refiling delays, the magnitude of delay in re-filing must necessarily be within tolerable limits. There being no hard and fast rule in this regard makes it all the more incumbent on this Tribunal to examine refiling delays with greater degree of caution.
16. Furthermore, we have to be particularly mindful of the special nature and character of the Code. The Bankruptcy Law Reforms Committee in its November 2015 Report while elaborating on the commercial purpose of a Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 11 revamped insolvency regime had voiced the need to have a coherent code with speed and predictability woven into it. It is with this end in view that an altogether new statute was enacted. Parliament while enacting the Code had realised the pressing need to bring adjudicatory proceedings of insolvency resolution to a prompt, expeditious and time-bound closure. The Statement of Objects and Reasons of the Code also clearly spells out the avowed purpose to expedite the conclusion of insolvency proceedings in a time-bound manner. It follows therefore that any undue benevolence shown in condoning delay in refiling would run counter to the intention of the Code and this aspect cannot be lost sight of.
17. That time is of essence in CIRP proceedings has also been reiterated in several judgments of the Hon'ble Supreme Court. The Hon'ble Apex Court in V. Nagarajan v. SKS lspat and Power Ltd. And Others (2022 2 SCC
244) has held:
"25. The law on limitation with respect to IBC is settled and emphatic in its denunciation of delays. The power to condone delay is tightly circumscribed and conditional upon showing sufficient cause, even within the period of delay which is capable of being condoned. IBC is a watershed legislation which seeks to overhaul the previous bankruptcy regime which was afflicted by delays and indefinite legal proceedings. IBC sought to structure and streamline the entire process of insolvency, right from the initiation of insolvency to liquidation, as a one-stop mechanism."
Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 12 It was also pressed upon by the Learned Counsel for the Respondent that the Hon'ble Supreme Court in Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited & Anr., 2022 2 SCC 401 has held that in the light of the prescribed time-limits under the IBC, the courts should proceed with caution in introducing any element in the insolvency process that may lead to unpredictability, delay and complexity not contemplated by the legislature. The overall purpose of specifying a stringent time frame under the Code has to be kept uppermost in mind and, in the present case too, this aspect weighs heavily on our mind.
18. Any question of delay condonation must go through deep and sufficient scrutiny in the context of the Code. The circumstances cited for condonation of delay in re-filing has to be in consonance with the aims and objects of the Code and not frustrate the scheme of the Code. The natural corollary that follows is that condonation of delay in re-filing is not available just for the asking. This Tribunal needs to be fully satisfied that the delay was unavoidable and the applicant was consistently diligent in pursuing the matter. The question of condoning any delay in re-filing would have to be considered in the context of the plausible explanation given to show that the delay was on account of reasons beyond the control of the applicant and could not be avoided despite all possible efforts by the applicant.
Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 13
19. We now proceed to test the conduct of the applicant on the anvil of whether the applicant acted with due diligence and dispatch. From the submissions and pleadings made by the Appellant, three grounds have been cited for the delay. The first ground raised has been the ill-health of the authorised representative. This has been contested by the Respondents on the grounds that the ill-health of one representative of the company cannot be a justified reason for having stalled the refiling of the appeal for 321 days and that the company could have authorised any other representative to undertake the re-filing of the Appeals. We also note that apart from a general statement, no proof of illness has been placed on record. Furthermore, there is substance in the argument raised by the Respondents that the Company could always have deputed another authorised representative to complete the task of refiling if it was serious. That the Appellant has admitted that they were pursuing another parallel litigation in another court during this period also shows that the grounds raised for inaction in the present refiling is only a pretence. In the face of such gross inaction on the part of the Appellant company, we are not convinced of this ground to be a good enough for condonation of delay.
20. The second ground that has been raised is that because of limited functioning on account of the third wave of Covid, the defects could not be rectified on time. We tend to agree with the Respondents that if the applicant could have filed the appeal in the midst of the ongoing pandemic, it does not stand to reason why they could not remove the defects in a timely manner and re-file the appeals. That the applicant after getting notice for Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 14 curing defects did not even bother to enquire any further from the Registry about their application for months together is deprecatory. If the applicant does not take any interest in pursuing his own application within a reasonable time, it does tantamount to sheer negligence. After being grossly callous on his own part, the Appellant can neither claim negative discrimination nor be entitled to blame the Respondents for denying them justice by pressing technicalities of refiling delay. This Tribunal has been given a latitude of a maximum of 15 days and not a day more for allowing condonation of delay beyond the statutory period of 30 days for filing an appeal as laid down in Section 61(2) of the Code. In the face of such a strict and stringent time regime with no exceptions having been allowed to be carved in giving any exemption beyond 15 days, allowing refiling delay for a period which is nearly close to one year and that too in the face of carelessness, inaction and negligence on the part of the appellant, to our mind, would be a gross distortion and thus impermissible.
21. The third cause for refiling delay has been attributed to the fact that the files got misplaced and that file reconstruction work was time consuming leading to delay. There is no averment in the application as to under what circumstances the file was lost and how it was eventually traced. Even if the file had got lost or misplaced, there is no averment as to what endeavours were made towards tracing out the file or what steps were taken for filing of another set of papers or reconstructing the file. In the absence of there being any specific details thereto, this ground cannot be taken on its face value. We thus do not hesitate to hold that all the Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 15 three grounds including this one to explain a delay of 321 days is perfunctory and does not inspire our confidence.
22. Addition of new facts in the course of refiling which could not have been a part of the original version of the Appeals when it was filed in November 2021 thereby changing the frame of the Appeals as a clever manoeuvre has also been alleged by the Respondents. Though the allegation made is serious, however, since it has been admitted to be a mistake, we are not taking cognisance of it and refrain from making any comments thereon.
23. We are of the considered view that the grounds cited to explain the 321 days refiling delay when viewed against the parameters of timely, effective and efficient resolution as envisaged in the Insolvency and Bankruptcy Code, 2016 fall hopelessly short of meeting the desirable standards of being adequate and sufficient.
24. Another identical memo of appeal bearing No. CA (AT) (Ins.) No. 1293 of 2022 has been filed by Srei Infrastructure Finance Limited along with I.A. No. 3984, 3983 of 2022 challenging the impugned order of 08.10.2021 with condonation of delay of 321 days in refiling. Being an identical matter seeking similar relief, our findings above in CA (AT) (Ins.) No. 1294 of 2022 along with I.A. No. 3986, 3988 of 2022 will apply in this matter also.
25. In view of the above, finding no merit in the applications filed for seeking condonation of 321 days delay in refiling the appeals, the same are Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 16 dismissed. In view of the dismissal of the applications for condonation of delay in refiling the appeal, both the memo of appeals are rejected.
[Justice Ashok Bhushan] Chairperson [Barun Mitra] Member (Technical) Place: New Delhi Date: 21.12.2022 PKM Company Appeal (AT) (Insolvency) No. 1293 of 2022 & 1294 of 2022 17