Length Of Delay Immaterial, Reason Stated For Condonation Matter: NCLT Hyderabad Reiterates

Background Facts

Corporate Insolvency Resolution Process was initiated against Viceroy Hotels Limited (“Corporate Debtor”) on 12.03.2018. Corporate Debtor is the Principal Employer covered under Employees State Insurance Act, 1948. However, it failed to make contributions under the Act and failed to pay interest for delayed contributions. Due to this, the Applicant filed its claim before the Resolution Professional (“RP”) in Form-F on 24.08.2022. However, the Resolution Professional rejected the claim of the Applicant on 13.10.2022 on the ground that the process of submission of the claims stood closed in 2018. The Applicant contends that such rejection is arbitrary and contrary to the IBC. The dues are statutory in nature, and have priority over debts under Section 94 of the ESIC Act. Thus the RP is bound to transfer the amount due to the Applicant. It was further argued that the delay in submission was not intentional and the Tribunal has in previous cases also condoned delay in submitting the claims.

Observations of the Tribunal

The Tribunal held that it is settled law that the length of the delay is immaterial, but the reasons stated for condonation of delay are what matter. Reliance was placed on the Judgment of the Hon’ble Madras High Court in S.R.Vediappan vs S.P.Ramalingam C.M.P. No. 7730 of 2017 in A.S.SR. No. 34779 of 2017 wherein it was held that the courts must be cautious while condoning delay and that they were empowered to condone the delay for only genuine reasons.

The Tribunal observed that publications inviting claims by RP were published on 16.03.2018 in English and Vernacular Language newspapers. They invited claims on or before 30.03.2018 and were in circulation in the area in which the office of the Applicant is situated.

It was further held that the focus of the application was on the entitlement of the claim rather than on the reason for not making the claim on time. Hence no reason, much less a sufficient one has even been pleaded before the Tribunal for condonation of delay.

With the aforesaid observations, the Tribunal dismissed the application.

Case: Deputy Director, Employees State Insurance Corporation vs Dr. Govindarajula Venkata Narasimha Rao (Resolution Professional) in the matter of Asset Reconstruction Company (India) Limited vs Viceroy Hotels Limited

Case No. :I.A. No. 1204/2022 in CP (IB) No. 219/7/HDB/2017

Counsels for the Applicants:Mr. Venkateshwarlu Gummdavelly

Counsel for the Respondent :Mr. Shabeer Ahmed

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