NCLAT Upholds NCLT’s Condonation of 26 Days delay under IBC being Justiciable [Read Order]

Mr. Naseer Ahmed , the appellant filed the company appeals are accompanied with an application for Leave to Appeal. The Resolution Professional, questions the propriety of the impugned order of 11.12.2024, as it was passed by the Adjudicating Authority in IA No. 8/2023, 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.

In the same application, the Resolution Professional had also sought for condoning the delay of 26 days, chanced in submission of the said report that is, for the period from 20.08.2022 to 15.09. 2022. By virtue of the impugned order the said delay has been condoned, resulting into permitting the report of the Resolution Professional to be taken on record.

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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 on IA No. 219/2022 dated 23.06.2022, replaced the Resolution Professional and appointed the Applicant, to the interlocutory application IA No. 8/2023, namely Shri. Ravindra Beleyur, the Respondent herein 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 in IA No. 8/2023.

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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. However these grounds agitated in the response filed by the Personal Guarantor, may not be of much concern as far as the instant appeal is concerned, where the Principal challenge to the impugned order in IA No. 8/2023 has been the condonation of delay and consequential taking on record the report of the Resolution Professional and the status regarding the repayment plan.

The Tribunal found 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.

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Apart from it, under law, there is no specific restriction, which has been imposed by statute that a report containing the repayment plan, and remarks on the same to be submitted under Section 106 of the I & B Code, 2016, if it is submitted at a belated stage, it is not specifically barred to be accepted on record because placing the said plan and the report on the same on record only facilitates the proceeding to decide the controversy on its merits. Thus, 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) held that 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, and accordingly the same are ‘dismissed’ with no order as to cost.

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