NCLAT Upholds Condonation of 26 days of Delay in filing of Report u/s 106 of I & B Code by RPl due to delayed submission of Repayment Plan by Personal Guarantor [Read Order]

The Chennai bench of the National Company Law Appellate Tribunal (NCLAT) upheld the condonation of 26 days of delay in the filing of the report under section 106 of the Insolvency and Bankruptcy Code (I & B Code), 2016 by the Resolution Professional (RP) due to the delayed submission of the repayment plan by the personal guarantor.

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A bunch of appeals are preferred under Section 61 of the I & B Code, 2016. The challenge was on propriety of the impugned order of 11.12.2024, as it was passed by the Adjudicating Authority being an interlocutory application preferred, in a pending Company Petition (IB)/7/BB/2021. The consequential effect of the said order had been that the application which was preferred on 19.09.2022 by the Resolution Professional by invoking the provisions contained under Section 106 of I & B Code, 2016, to be read with Regulation 9 of the Insolvency and Bankruptcy Board of India (IBBI) (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019, thereby praying to take on record the report of the Resolution Professional, and the status regarding to the repayment plan and the list of creditors, had been allowed.

The Adjudicating Authority, while admitting the application under Section 95 (1) of the I & B Code, 2016, vide its order of 07.06.2022, as against the Personal Guarantors for the credit facilities, which was provided by the Financial Creditor, State Bank of India to M/s. Scotts Garments Limited, the Corporate Debtor, had initially appointed Mr. Hem Chandra as the Resolution Professional. Subsequently on an application filed by the State Bank of India, the Adjudicating Authority, by an order passed, replaced the Resolution Professional and appointed the Applicant, to the interlocutory application namely Shri. Ravindra Beleyur, the Respondent as Resolution Professional.

The Respondent had issued a public announcement, by way of paper publication by circulating the notices in the daily newspapers inviting claims from the stakeholders. He had also sought clarifications from the Erstwhile Resolution Professional of M/s. Scotts Garments Limited, the Corporate Debtor, regarding whether the Resolution Professional/Committee of Creditors had filed any application on avoidance transaction or registered any complaint, regarding management of the Corporate Debtor.

As per the provisions of Section 106 of the I & B Code, 2016, the Resolution Professional was expected to submit before the Adjudicating Authority the repayment plan received from the Personal Guarantor along with his report on such plan within the prescribed period stipulated therein i.e., within 21 days from the last date of submission of the claim under Section 102 of I & B Code, 2016, that is, by 20.08.2022, but he submitted the report on 15.09.2022.

He had contended before the Adjudicating Authority that despite of several follow-ups being made, the Personal Guarantor did not submit any information or the repayment plan as required under the regulations and hence he could not submit the Report required to be filed under Section 106 of the I & B Code, 2016, in time and that there is a delay of 26 days in submitting the same which may be condoned and that, in case any separate application is required to be filed in this regard, he undertakes to file the same.

In the same proceeding, the Respondent/Personal Guarantor had filed a statement of objection on 21.02.2023, objecting the prayer to Condone Delay of 26 days in submitting the report, contending thereof that the delay of 26 days, which has chanced in submission of the report, ought not to be allowed because there is no valid or sufficient cause for condonation of such delay and since the same is being contrary to the provisions of the I & B Code, 2016.

He had also raised other grounds of objection as against the said IA stating that provisions of I & B Code, 2016, have been violated, the proceedings is being used as a recovery mechanism, claims have been mechanically admitted, that SBI CAP Trustee can only invoke the guarantee and not the banks and that the impact of approval of Resolution Plan with respect to the Corporate Debtor and the recoveries already made have not been taken into account.

The Adjudicating Authority while allowing the impugned order observed that though the repayment plan which is received from the Personal Guarantor it ought to have been submitted within the stipulated period of 21 days, of the submission of the claim under Section 106 of the I & B Code, 2016, that is by 20.08.2022 and the Resolution Professional had been requesting the Guarantor, since 04.07.2022 to provide the repayment plan and the other information with regards to the preparation of a statement of affairs by 20.07.2022 and though on request of the Guarantor dated 26.07.2022 grant four weeks time to comply, the Resolution Professional vide his e-mail dated 04.08.2022 had extended the date of submission of the repayment plan by three weeks to 11.08.2022 and subsequently to 19.08.2022, the Guarantor failed to submit the Repayment Plan or any related information as required under the Regulation and hence the Resolution Professional was not in a position to give his report as contemplated under Section 106 of the I & B Code, 2016, in time and could submit the same with a delay of 26 days.

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Owing to the reason, which has been assigned in the impugned order, it is evident that the delay, which has been caused in submission of the report regarding the repayment plan, was because of the fact that the Guarantors themselves have failed to provide the repayment plan by the date fixed by the Resolution Professional that is 19.08.2022 despite repeated follow-ups and hence no malice or malicious intention could be attached on part of the Respondent/Resolution Professional, in submitting his report under Section 106 of the I & B Code, 2016.

The delay of 26 days in submission of the report by the Resolution Professional, being neither deliberate nor intentional, condonation of the same and taking on records and report thus submitted, by the impugned order does not at all cause any procedural prejudice to the rights of the Appellant.

A two member bench of Justice Sharad Kumar Sharma, Member (Judicial) and Jatindranath Swain, Member (Technical) viewed that, by Condonation of Delay of 26 days rather has facilitated the decision-making process to be expedited in deciding the matter. Besides that, the Condonation of Delay not being prejudicial to the interest of any of the parties to the proceedings, may not have any adverse bearing on the lis.

Since condonation of 26 days of delay in filing of the report under Section 106 of the I & B Code, 2016, by the Resolution Professional in respect of the status of the repayment plan and the list of creditors on record, are absolutely justifiable and are in the wider interest of dispensation of justice for an effective adjudication of the controversy or merits, it does not call for any interference.

The bench dismissed all three appeals filed.

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