Adisri Commercial Private Limited vs Reserve Bank Of India And Anr

[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