Sundaram Home Finance Limited vs CA G. Murali

Oral Judgment : Justice Sharad Kumar Sharma, Member (Judicial):

The Appellant before us is a Financial Creditor who expresses his grievances, being aggrieved as against the impugned order of 02.07.2024, that has been rendered by the Ld. NCLT, Hyderabad Bench in IA No. 1076 / 2024, as it was preferred, in CP(IB)/325/7/HDB/2020.

The brief backdrop under, which the Appellant is before us is that, in a proceedings of CP(IB)/325/7/HDB/2020, which was said to have been initiated against M/s. Butta Infrastructure Private Limited, under Section 7 of I & B Code, 2016, the Corporate Debtor was placed under CIRP by an order that was passed on 01.03.2021, but, owing to the fact that, since, there was no plan received or the plans which were received were not acted upon, the Ld. Adjudicating Authority by an order passed on IA / 112 / 2022 dated 24.02.2022, directed the Corporate Debtor to be placed under Liquidation.

Its not factually in dispute that, upon the Corporate Debtor, being placed under Liquidation, the Liquidator did publish Form B by giving a Public announcement inviting the claims from all the interested Stakeholders the said publication as made on 03.03.2022, it was intimated to the public at large that, the last date for submission of the claim as specified therein would be 26.03.2022.

The Appellant has come up with the case, that he was informed about the knowledge of the Order of Liquidation only on 23.09.2023 and thereafter, he filed the claim in the shape of Form D, only on 28.09.2023, which according to the Appellant was accompanied with all the proof of his claim and outstanding dues claimed to be payable by the Corporate Debtor.

The said claim thus filed by the Appellant on 28.09.2023 has been rejected, by an order passed by the Liquidator on 29.09.2023, the same has been rejected on the ground that, it has been submitted at a belated stage because, the time period as prescribed under the Publication for submission of the claim had already expired.

It was further observed by the Liquidator that, since under the Statute, he does not exercise any inherent powers to extend the time period for admission of the claim, beyond the period prescribed in the publication, he would not be in a position to entertain the claim, which has been submitted by the Appellant at a belated stage on 28.09.2023.

There was yet another reason, which was taken by the Liquidator for the purposes of rejection of the claim that, the Appellant instead of restricting his claim as filed on 28.09.2023, to be the claim upto the date of the commencement of Liquidation i.e. 24.02.2022, the Appellant had included the claim which were also beyond the period of Liquidation i.e. 26.09.2023, which the Liquidator observed, that was not acceptable under law, as its not prescribed by law to be an admissible claim, for any amount due after the Liquidation Order.

Its aggrieved against the said Order, the Appellant had preferred an Application under Section 42 of the Code by filing of an IA No. 1076 / 2024 before the Ld. Adjudicating Authority.

In the application thus preferred by the Appellant before the Ld. Adjudicating Authority on 20.04.2024, the Appellant had prayed for seeking a condonation of delay that has chanced in preferring the Application under Section 42 of the Code, owing to the fact that the Appellant had to undertake all codal formalities for seeking approval from their own Officers for the purposes of preferring of an Interlocutory Application and further that other documents were required to be collected.

If we go into the reason, which has been given in for the purposes of seeking condonation of delay in filing of the Application before the Ld. Adjudicating Authority, which otherwise under the Appellate provision was required to be filed within a period of 14 days from the date of the rejection Order by the Liquidator and it was preferred only on 20.04.2024, which was much beyond the prescribed period of limitation of 14 days as contained therein.

Apart from it, the reason which has been given in Para 3 of the Application cannot be treated has to be a reasonable explanation that since the Appellant was engaged in seeking the codal approvals for the purposes of filing of an Appeal, the delay could be considered to be condoned.

We cannot be oblivious of the fact, that the Appellant herein is a Financial Institution and is conscious of its Judicial proceedings and legal rights, since functioning in a sensitive area, and more particularly the Appellant was already pursuing his claim after filing the same before the Liquidator.

It would be deemed that, he was conscious of the knowledge of its rejection, by an order of 29.09.2023, seeking of a codal approvals from its own Officers cannot be isolatedly taken as to be a reasonable ground for the purposes of condonation of delay beyond the period, which has been otherwise prescribed under Section 42 of the Code.

There is another reason for not to accept the reasons for seeking condonation of delay in filing of an Appeal under Section 42 of the Code, because, any factor leading to determination of delay, which is having any element of being variable in nature and which cannot be deduced or concluded to be considered by its definite terms cannot be taken into consideration for the purposes of condoning the delay. Because, seeking of an approval for filing of an Interlocutory Application is the process, which has to be resorted by the Appellant himself and the aspect of diligence always lies in the hand of the Appellant to be regulated and if this process of lack of diligence continues for an indefinite period, for which there could be a greater possibility, it cannot be envisaged that the Appellant would be entitled to get the benefit of delay till the period they are able to get the codal approval from the authorities for filing as it could be conveniently manouvered by the Appellant itself. Its absolutely a preposterous reason, which has been given by the Appellant for seeking condonation of delay in filing of the Appeal.

The Ld. Tribunal after considering the grounds taken in the Appeal under Section 42 of the Code (though it was titled to be under Section 60(5) to be read with Rule 11 of the NCLT Rules) which will not be available to them, once the fields stand governed by the provisions contained under Section 42 of the Code and thus, the inference drawn by the Ld. Tribunal, while formulating the question about the sufficiency of cause for condonation of delay was aptly answered in context of the provisions contained under Section 42 of the Code, and had rightly come to the conclusion that in accordance with the functioning of the Commercial Entity and particularly in the nature of being a Financial Institution, where diligence always plays an important role, vigilance over the judicial proceedings is one of the prime factor, which would be deemed to be regulated by the entities like that of the Appellant and more particularly when they were having the knowledge of the proceedings, it would be presumed that they ought to have been prepared themselves for filing of an Appeal, within the time as prescribed under the statute, which otherwise under law is not a condonable period which could be extended to be condoned beyond the period, prescribed under Section 42 of the Code.

Apart from the fact that, there was nothing brought on record by the Appellant by way of an evidence, which was produced by the Appellant for seeking condonation of in-ordinate delay, of 207 days for filing of an Appeal, which is impermissible under law and that was rightly rejected by the Ld. Tribunal.

The Ld. Counsel for the Appellant in support of his contention had primarily tried to impress upon this Tribunal, that the period of limitation as prescribed under Section 42 of the Code is directory in nature and not mandatory.

We are of the view, that once a statute prescribes a restricted period of filing of an Appeal and particularly in context of a statute where time plays an important role for the purposes of completion of Liquidation process, the time period given therein will have to be taken as to be mandatory, because, in case, if this percept of the provisions contained under Section 42 of the Code, is taken as to be directory, it will lead to a distorted interpretation of law where it would be very convenient for any Appellant like the Appellant to conveniently come forward and say that the provisions of limitation contained under Section 42 is directory and hence, the latitude of extension of time could be extended preposterously, that may not be the exact intention of the statute for the reason being that, once the provisions under Section 42 of the Code, is by way of enlargement of an Appellate proceedings for the purposes of settlement of the claim if the time period prescribed therein is taken to be directory it would defeat the very purpose of settlement of claims which the Liquidator is otherwise bound to perform within the time period prescribed under the statute).

The Appellate provision prescribing the limitation cannot be taken to run in contravention to the co-ordinate provisions of the Code and hence, the argument extended that the time period given therein is directory in nature cannot be accepted and this could very well be considered in the context of the present case where if this concept of the provisions, being directory in nature is taken into consideration and where the Appellant seeks a condonation of delay merely on the ground that he had to fulfil the codal formalities for filing of an Appeal.

There own internal in-house mechanism of seeking permission, cannot make the provisions to be directory to be mis-utilized by the Appellant to the provisions contained under Section 42 of the Code.

Thus, the argument extended that the provision is directory is not acceptable by us and hence, rejected.

The Ld. Counsel for the Appellant had in support of his contention has made reference to a Judgment as rendered by us in Company Appeal (AT) (CH) (INS) No. 304 / 2025 M/s. Prakash Oil Depot V. G. Madhusudhan Rao & Anr. where we have held that the extension of time as contemplated for the purposes of completion of the enforcement or the operalization of the Scheme of Arrangement cannot be read in parlance to the provisions contained under Section 42 of the I & B Code, 2016. Enforcement of a Scheme of Arrangement under Section 230 of the Companies Act, is altogether meeting a different purpose of law, it cannot be equated to be applied for Appellate provision.

It was at a stage when the parties to a dispute have arrived at a consensus where a settlement is to be enforced and if there is a minor variation in enforcement of the settlement, the time period prescribed therein and the terms of the settlement itself could be made variable in order to enable to enforce the Scheme so that, the object of the Scheme itself is not defeated. Hence, the ratio propounded therein cannot be read in parlance to the controversy involved herein.

Lastly, the Ld. Counsel for the Appellant has argued that by condonation of delay, no prejudice is going to be caused to the other side. Prejudice is not a parameter that has been prescribed to be considered under Section 42 of the Code, nor it is contemplated under law. No prejudice to the other side does not call for creation of a right for the Appellant to file an Appeal at a belated stage, upon it to their own choice, and at their own whims.

Exclusively prejudice in itself, may not be the reason, we are not inclined to interfere in the Appeal because, even otherwise, the Appeal, which was preferred under Section 42 of the Code was much beyond the period prescribed therein and it was preferred at a highly belated stage, with a delay of 207 days.

Thus, the Company Appeal (AT) (CH) (INS) No. 333 / 2024 lacks merit and the same is dismissed. All pending Interlocutory Applications, would stand closed.