Ten-Day Time Period U/S 99 Of IBC For Submission Of Report By Resolution Professional Is Directory, Not Mandatory: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) has held that the 10-day period provided under Section 99 of the Insolvency and Bankruptcy Code,2016 (Code) within which the Resolution Professional has to submit the report after appointment, cannot be considered mandatory, as no consequences are prescribed in the provision itself for failure to submit the report within the stipulated period, even though the word "shall" has been used. Brief Facts: Geekay Colonizers and Builders Limited (corporate debtor) was sanctioned a project loan of Rs. 94 Crore by Dewan Housing Finance Ltd. (DHFL), of which Rs. 69 Crore was disbursed. The appellant provided a guarantee for the loan. In DHFL's Corporate Insolvency Resolution Process (CIRP), Piramal Capital and Housing Finance Limited acquired DHFL with effect from 30.09.2021. A demand notice dated 13.07.2022 under Rule 7(1) of the IBBI (Resolution Process for Personal Guarantor) Rules, 2019 was issued for the defaulted amount. As no payment was made, an application under section 95 of the Code was filed on 31.10.2022. A Resolution Professional (RP) was appointed.The personal guarantor filed objections before the adjudicating authority, stating that the RP's report was submitted beyond 10 days and hence cannot be accepted. Adjudicating authority, heard the counsel for the parties and by its order dated 20.12.2024 has passed an order under Section 100 admitting Section 95 application. Against the above order, the present appeal has been filed. Contentions: The Appellant submitted that RP was obliged to submit a report within 10 days of his appointment, i.e., up to 26.01.2024, whereas, he filed the report only on 02.02.2024, which was beyond the period provided for submitting a report. It was further submitted that period of 10 days provided in the statute for submission of the report is a mandatory. There is no provision for condonation of delay in submission of the report which is clear from the scheme of the IBC. Per contra, the Respondents submitted that the 10 days period provided for submission of report by RP is a directory provision. There were sufficient reasons explained before the adjudicating authority for submitting the report on 02.02.2024. Lastly, it was submitted that the report as well as the amended report dated 14.02.2024 were filed by the RP which was accepted on record by adjudicating authority, which clearly means that adjudicating authority has accepted the said report for consideration. Observations: The Tribunal observed that Section 99(1) requires the RP to examine the application under Sections 94 and 95 of the Code within 10 days of appointment and submit a report, while Sub-section (4) empowers the RP to seek further information or explanation from the debtor or creditor as needed. The Tribunal further observed that When we examine the scheme under Section 99(1), (4), (5), (6), and (7), it becomes evident that the 10-day period for submission of the report by the RP is directory, not mandatory. If, upon examining the application, the RP finds further information or explanation necessary, he may seek it from the debtor, creditor, or any other person. It further added that such person must respond within seven days of the request, and under sub-section (6), the RP must examine the received information before submitting his recommendation under sub-section (7). This legislative framework shows that the use of "shall" in the 10-day requirement does not necessarily imply a mandatory obligation; its interpretation depends on the statute's overall scheme. The Tribunal further observed that in the present case, the need for an amended report arose due to information received from the financial creditor after the initial report was submitted on 02.02.2024. The reports were placed on record through a supplementary affidavit and duly accepted. Based on the above, the Tribunal held that there was no undue delay in submitting either the report on 02.02.2024 or the amended report on 14.02.2024 warranting their rejection by the adjudicating authority. Our conclusion that the 10-day timeline in Section 99(1) is directory is further supported by the absence of any consequence in Section 99 for non-filing within that period. The Tribunal also observed that the appellant's submission that there is no provision for condonation of delay in filing the report is unpersuasive. Applications under Section 5 of the Limitation Act apply only when a prescribed limitation period is exceeded. The 10-day period for submitting the report is not a limitation period; hence, Section 5 does not apply. While the adjudicating authority may choose not to consider unduly delayed reports, if the delay is properly explained,...

Ten-Day Time Period U/S 99 Of IBC For Submission Of Report By Resolution Professional Is Directory, Not Mandatory: NCLAT

Mohd Malik Chauhan

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