NCLT Hyderabad: NCLT Cannot Exercise Inherent Powers To Condone Delay Under Section 42 Of IBC When There Is A Clear Statutory Bar

The Tribunal held that it cannot exercise its inherent powers to condone delay when there is a clear statutory bar in entertaining an appeal filed beyond the period prescribed under the Code.

Background Facts:

The Applicant, a government undertaking had provided financial support of Rs. 150 crores to the Corporate Debtor. However, the Corporate Debtor was admitted into the Corporate Insolvency Resolution Process. The Applicant submitted its claim in response to the Public Announcement, which was accepted by the Resolution Professional.

Following the rejection of the resolution plan by the CoC, a liquidation order was issued on 25.10.2019 with a Liquidator was appointed. On 25.01.2021, the Liquidator rejected the Applicant's claim, citing reasons that the claims were unsustainable and violated the provisions of the Code. The Applicant was eligible to file an appeal under Section 42 of the Code. However, the Applicant could not file the appeal within 14 days as per the Code.

Contentions of the Liquidator:

The Liquidator relied upon the Supreme Court case of National Spot Exchange Ltd. vs. Mr.Anil Kohli, Resolution Professional for Dunar Foods Ltd., and contended that where the period of limitation and the permissible extension to such period, attributable to a sufficient cause justifying such delay, is unambiguously stated in the Code, the NCLT had no inherent powers to condone a delay being the extended period specified under the Code.

NCLT Verdict:

The NCLT Hyderabad dismissed the application and held that the Tribunal cannot exercise its inherent powers to condone delay when there is a clear statutory bar in entertaining an appeal filed beyond the period prescribed under the Code.

The Tribunal concurred with the observations made in the NCLAT case of Regional Provident Fund Commissioner vs. Titanium Tantalum Products which had dismissed the appeal for condoning the delay of 936 days and held:

“An unpardonable lackadaisical approach/ attitude of the ‘Party in pursuing a matter before the Competent Authority/Tribunal’ is not to be accepted. The ‘Law of Limitation’ being harsh, will affect a ‘Litigant’, but it has to be pressed into service with all its vigour and rigour in the considered opinion of this “Tribunal’. In Law’, a ‘Tribunal’/ a Court of Law’ has no power to find out a device in granting Relief to a ‘Party’ who may appeared to have been hard done by. To put it precisely, an Application’ for condonation of delay undoubtedly create a jurisdictional fetter’ against ‘consideration of tangible/substantive matter on merits’. A “Tribunal’ cannot determine the ‘sufficiency of cause’, apart from the facts pleaded and made out in a given case.

Just because the Appellant is a Statutory Organisation, no “indulgence’ or ‘latitude’ can be shown, since the ‘Law’ applies to one and all in a level playing field. In reality, the Officials must act with as much as diligent as is expected from a “Litigant’, as per decision in District Board, Sargodha.

To be noted, that Section 42 of the I & B Code, 2016, enjoins that as against the decision of the Liquidator either accepting or rejecting the claims, a ‘Creditor’ may prefer an ‘Appeal’ before the Adjudicating Authority’ and it cannot be gainsaid that the process of Liquidation’ is to be completed, within the prescribed time and conclusion of proceedings in this regard, is to be made within one year as enunciated under 1 & B Code, 2016.

“Speed” is the essence of I & B Code, 2016. “Time Wasted/ Lost cannot be revisited/regained. The process of Liquidation is time bound, to be completed within one year in the teeth of the 1 & B Code, 2016. Undoubtedly, the Code is an inbuilt and self-contained one and the object of the I & B Code, 2016, is that, a time barred ‘Debt cannot be resurrected or given a fresh tenure of life, as opined by this “Tribunal’.

The NCLT also held that an appeal filed beyond 14 days cannot be entertained as per State Bank of India vs. BS Ltd., which relied upon the National Spot Exchange Ltd. vs. Mr. Anil Kohli, RP of Dunar Foods Ltd. It further placed reliance on the case of the Chhattisgarh State Electricity Board (2010) which clearly lays down that the constitution of a special adjudicatory forum is meant to expeditiously decide the grievances of a person who may be aggrieved by an order of the adjudicatory officer. Further, the limitation has to be the binding effect and shall be followed mandatorily.

In conclusion, the Tribunal pointed out that the case relied upon by the Applicant i.e. Canara Bank vs. Commercial Tax Department Circle 09, Indore, is distinguishable of facts and not in favor of the Applicant. Further, the case KVK Nilanchal Power Private Ltd. vs. Power Finance Corporation Ltd. which relates to the condonation of delay in filing the claims is also distinguishable since it is not the case here.

Case Title: IFCI Limited. vs. BS Limited. (In liquidation)

Case No.: IA No.1082/HBD/2022 and IA No.1083/HDB/2023 in CP(IB) No.278/7/HDB/2018

Counsel for Applicant: Mr. VVSN Raju, Mr.AVP.Reddy, Mr Praveen Kumar Jain, Ms.Aiswarya Rajasree N, Ms.Sowmya TRN, Advocates

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