Vysyaraju Kalpana vs State Bank Of India & Anr.

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

These are the bunch of five company appeals, wherein the Appellant questions the impugned order dated 09.12.2024, which is under challenge in these company appeals as rendered by the Ld. NCLT, Hyderabad Bench, whereby the Ld. Adjudicating Authority, while passing an order under Section 121 of IBC, had ordered a direction for initiation of Bankruptcy as against personal guarantors who are the Appellants, before this Appellate Tribunal. Brief facts which invariably happen to be common in all the appeals are that the application was filed by Respondent No. 1/financial creditor under Section 7 of I & B Code, 2016 IN 19/06/2018, seeking initiation of the corporate Insolvency Resolution process against the corporate debtor M/s. Varam Bio Energy Private Energy and that on 18.07.2019, the section 7 application was allowed for admission into the CIRP proceedings of the Corporate Debtor in CP (IB) No. 377/7/HDB/2018 and subsequently, an order of liquidation was also passed on 08.07.2021.

The Respondent No. 1/financial creditor had also filed an application under section 95 of I&B code vide CP IB/99/2021 on 11/02.2021 for initiation of insolvency process against the Appellants/personal guarantors. Ld Adjudicating Authority took up these applications for consideration and vide its orders on 24.08.2022/23.09.2022 permitted Respondent No. 1 to file an appropriate application to initiate bankruptcy process against the Appellants / personal guarantors under Section 115(2) of the code after taking on record the report of the Resolution Professional (RP) that the repayment plan submitted by Appellants/personal Guarantors are not satisfactory. Pursuant to the aforesaid orders of Ld. Adjudicating Authority, the Financial Creditor/Respondent No. 1 herein proceeded to file bankruptcy applications under Section 121 of the Code against the Appellants/Personal Guarantors. Initially Ld. Adjudicating Authority returned the application, stating that there is a delay in filing of the same. Then the Financial Creditor/Respondent No. 1 filed the application once again along with interlocutory applications to condone delay in filing the same. Ld. Adjudicating Authority, after condoning the delay, admitted the respective applications filed under Section 121(1) of initiation of Bankruptcy process against the respective Appellants/Personal Guarantors.

The details of the orders, which is the subject matter of challenge in each of the present company appeals are as under: -

The consequential effect of these impugned orders, which are the subject matter under challenge, in these instant company appeals, is that Bankruptcy process has been ordered against the respective Appellant/Personal Guarantors, they have been declared as to be bankrupt, and Shri. Dantu Indu Sekhar, a IBBI registered Resolution Professional, has been appointed as the bankruptcy trustee in each of the 5 bankruptcy cases.

The Ld. Counsel for the Appellant has vehemently argued that, the entire proceedings of passing of an order under Section 121 (1) of I & B Code, 2016, is vitiated for the reason being that the proceedings are barred by Section 121(2) of I & B Code, 2016. For the purposes of brevity and better elucidation, provisions contained under Section 121 (1) of I & B Code, 2016, are extracted hereunder: -

In the proceedings, before Ld. Adjudicating Authority, the following questions were sought to be determined at the behest of the Appellant, after exchange of pleadings between the parties to the proceedings, wherein the Appellant was represented by none other than the counsel, who is presently appearing in these instant appeals. The question formulated by the Ld. Adjudicating Authority was to the following effect:

The Ld. Counsel appearing for the Appellant in each of these appeals had contended before the Ld. Adjudicating Authority that, Section 121(1) of I & B Code, 2016, prescribes for a three months period for the purposes of initiation of the bankruptcy proceedings under Section 121(2) of I & B Code, 2016, that it is mandatory in nature because the legislature has used the word “shall” and not “may”, that the ratios laid down in following judicial precedents [Para 9 (i), (ii), (iii) & (iv)] which is extracted hereunder: -

The grounds raised by Ld. Counsel for the Appellants before this Appellate Tribunal are that Ld. Adjudicating Authority has failed to take note of the time limit of 3 months permitted under Section 121(2) of the I & B Code, 2016, that any application under Section 121 of the I & B Code, 2016, beyond 3 months is not maintainable, that, no separate delay condonation application was filed by the Financial Creditor/Respondent No. 1, that Ld. Adjudicating Authority has failed to take note of the ratio in GLAS Trust Company LLC vs. BYJU Raveendran & Ors. [Civil Appeal No. 9986 of 2024, Civil Appellate Jurisdiction] with regard to scope of inherent powers of Tribunal under Rule 11 (in part D of Judgment), and that Ld. Adjudicating Authority has failed to take note of the law laid down by the Apex Court in a catena of Judgments that “the Court is not empowered to condone delay before the statutory prescriptions in special statutes containing a provision for limitation.” This contention is vehemently opposed by the Ld. Counsel for the Respondent, Mr. ML. Ganesh, by drawing the attention of this Tribunal to the findings recorded in Para 8 of the impugned order, wherein the Ld. Tribunal, had observed that objections raised by the Respondents (Appellant herein) are baseless as they were present during key proceedings and had ample opportunity to raise substantive objections on Condonation of Delay, which they had not done. This Tribunal deems it fit to observe at this juncture that the orders passed on the Condone Delay Applications as respectively preferred in each of the company petitions, by the Ld. Adjudicating Authority has attained finality, as the same has been informed to be not been questioned by the Appellant before any superior forum. In that eventuality, the principle of waiver would apply since the Appellant has acceded to the aspect of Condonation of Delay, which was allowed by the order of 07.02.2024 by the Ld. Adjudicating Authority.

Another feature which has been attempted to be argued by the Ld. Counsel for the Appellant is that, no effective opportunity of hearing was granted by the Ld. Tribunal, while adjudicating upon the question of limitation as envisaged under Section 121(2) of I & B Code, 2016. This argument to the Ld. Counsel for the Appellant is belied, from the findings recorded in the impugned order itself, for the reason being that:

There would be another feature, which would be required to be answered by this tribunal, in order to, controvert the argument extended by the Ld. Counsel for the Appellant, where he stresses upon, that, the use of the language under Section 121(2) of I & B Code, 2016, where it uses the word “shall”, makes it mandatory, that no proceedings under Section 121(1) of I & B Code, 2016, could be drawn, beyond the period of three months as prescribed under statute. We are of the view that when the provision in itself does not create any embargo while prescribing three months’ time, as an upper limit for the purposes of initiation of the proceedings under Section 121(1) of I & B Code, 2016, in that eventuality the aspect of limitation contained under Section 121(2) of I & B Code, 2016, though despite of the fact that it uses the word ‘shall’, will have to be taken as to be directory in nature, as the provision itself does not prescribe a restraint in extension of time, so as to attract Section 238A of I & B Code, 2016.

Owing to the fact that, the question was formulated by the Tribunal, based on the objection filed by the Appellant by filing an objection, and it was subsequently answered by the Ld. Tribunal by holding that Section 121(2) of the I & B Code, 2016, is directory in nature and there was no challenge given to the order of 07.02.2024 granting an extension of limitation, the principle of waiver, will operate and the Appellant would principally be estopped from, arguing to the contrary that the proceedings under Section 121(1) of I & B Code, 2016, was barred by limitation. Apart from this, Ld. Adjudicating Authority has proceeded to hold that the application has been filed in due compliance of Section 121 of the I & B Code, 2016, that the Personal Guarantors did not submit repayment plans, as contemplated under Section 105 of the I & B Code, 2016, that the application filed under Section 121 of the I & B Code, 2016, beyond the time limit of 3 months will not be invalidated in view of the ratio laid down by Hon’ble Apex Court in Topline Shoes Vs Corporation Bank and therefore the application is in accordance with Section 121 of the I & B Code, 2016.

From the above observations extended by us to answer the argument of the Ld. Counsel for the Appellant, we do not find any merits in the appeals. Accordingly, the ‘appeals’ would accordingly stand ‘dismissed’.