Delay In Filing Of Appeal Under Section 42 Of IBC Is Condonable Under Section 5 Of Limitation Act: NCLAT Delhi

The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Canara Bank v Commercial Tax Department Circle 09, Indore, Madhya Pradesh & Anr., has held that delay in filing the Appeal under Section 42 of IBC is condonable in exercise of power under Section 5 of the Limitation Act, 1963.BACKGROUND FACTSThe Commercial Tax Department Circle 09 (“Tax Department”) filed its claim in the Corporate Insolvency Resolution Process (“CIRP”) of a Corporate Debtor, which was admitted for an amount of Rs. 23,05,11,486/-. Thereafter, Liquidation commenced against the Corporate Debtor and claims were to be submitted with the Liquidator by 04.09.2022. The Tax Department filed its claim alongwith interest in Form-C on 23.09.2022, which was rejected by the Liquidator for being filed after 19 days prescribed deadline.However, the Liquidator admitted the claim to the extent of Rs. 23,05,11,486/-, as was admitted in the CIRP. Section 42 of IBC provides for filing an appeal against the decision of Liquidator of either accepting or rejecting the claim, within 14 days of passing of such order.On 27.02.2023, the Tax Department filed an appeal under Section 42 of IBC before the NCLT, seeking acceptance of its entire claim inclusive of interest. The NCLT passed an order dated 21.04.2023, directing the Liquidator to reconsider the claim submitted in Form-C.The Canara Bank (“Appellant”) filed an appeal before the NCLAT against the NCLT order dated 27.02.2023. The Appellant placed reliance on the Supreme Court judgment in State of Madhya Pradesh & Ors. v Bherulal, (2020) 10 SCC 654, wherein it was held that inordinate delay by Government or State Authority does not deserve condonation. It was argued that the delay in filing of appeal under Section 42 of IBC could not have been condoned by the NCLT. NCLAT VERDICTThe Bench observed that State of Madhya Pradesh & Ors. v Bherulal was a case where appeal was filed after 663 days of delay. Whereas, the Tax Department filed its claim before the Liquidator with 19 days delay and after non-acceptance of the claim, an Appeal was filed under Section 42 of IBC with delay of 111 days. “It is submitted that the time for filing the Appeal under Section 42 is 14 days only. The present is a case where claim was admitted in the CIRP Process and when Liquidation commenced the claim was filed of the same amount with interest claim hence we are of the view that in the interest claim, the rejection on the ground that it is filed with the delay was not correct and has already been set aside by the Adjudicating Authority. The delay in filing the Appeal under Section 42 is clearly condonable while exercising the power under Section 5 of the Limitation Act.”The Bench held that the delay in filing of Appeal under Section 42 of IBC is condonable in exercise of power under Section 5 of the Limitation Act, 1963.Relying upon the facts and events of the case, the Bench held that the filing of the claim with interest cannot be said to with any laches or any inordinate delay. The Bench has upheld the NCLT order and appeal has been dismissed. Case Title: Canara Bank v Commercial Tax Department Circle 09, Indore, Madhya Pradesh & Anr.Case No.: Company Appeal (AT) (Insolvency) No. 655 of 2023Counsel for Appellant: Advocate Kaustubh Rai, Advocate Anuj Tiwari, Advocate Nikhil Anand, Advocate Swankit Nanda, Advocate Rahul Kumar.Click Here To Read/Download Order

Delay In Filing Of Appeal Under Section 42 Of IBC Is Condonable Under Section 5 Of Limitation Act: NCLAT Delhi

Pallavi Mishra

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