Refiling After Removal Of Defects Is Not A Fresh Filing: NCLAT New Delhi

Earlier, a three-judge bench of the NCLAT raised doubts on the law laid down by the NCLAT in Mr. Jitendra Virmani Vs. MRO-TEK Realty Ltd. & Ors & Arul Muthu Kumaara Samy Vs. Registrar of Companies and vide order dated 12.08.2022 referred the matter to the larger bench by making following observations.

"In view of the Judgment of the Hon'ble Supreme Court in "Northern Railway" (supra) and the Judgment in the matter of "P Ram Bhoopal" (supra), we are of the view that view taken by this Tribunal in the matter of "Mr. Jitendra Virmani" (supra) and "Arul Muthu Kumaara Samy" (supra) does not day down the correct law."

Thereafter, the larger bench was constituted to answer two questions

\"A: Whether the law laid down by this Tribunal in "Mr. Jitendra Virmani Vs. MRO-TEK Realty Ltd. & Ors" and three Member Bench Judgement in "Arul Muthu Kumaara Samy Vs. Registrar of Companies" that when the defect in appeal is cured and the Appeal is refiled before the Appellate Tribunal beyond seven days, the date of re-presentation of the Appeal shall be treated as a fresh Appeal, lays down correct law?

B: Whether the limitation prescribed for filing an Appeal before this Appellate Tribunal under Section 61 of Insolvency and Bankruptcy Code, 2016 or Section 421 of the Companies Act, 2013 shall also govern the period under which a defect in the Appeal is to be cured and this Appellate Tribunal shall have no jurisdiction to condone the delay in refiling/re-presentation if it is beyond the limitation prescribed in Section 61 of the IBC or Section 421 of the Companies Act, 2013."

Question No. A

NCLAT noted that Rule 26 (2) of the NCLAT Rule, 2016 contemplates that if a document is found defective, the same shall be notified to the party which shall cured the same within a period of 7 days and on failure to do so, the Registrar may pass orders.

"…Sub-rule (2) and (3) does not indicate that any penal consequences have been provided for removal of defects after 7 days. When specific power is there under Sub-rule (3) of Rule 26 to extend the time for compliance, the period of 7 days cannot be said to be mandatory period…"

The Bench further observed that in the case of Jitendra Virmani, the basis of conclusion that the if the defects are removed after 7 days, the same will amount to fresh filing was not elaborated and such is a conclusion is contrary to the scheme of Rule 26 of NCLAT Rules.

"The second three-member bench of this Tribunal in "Arul Muthu Kumaara Samy Vs. Register of Companies" (supra) has relied on judgment of 'Jitendra Virmani' and no separate reasoning has been given as to why appeal shall be treated as fresh appeal if it is filed beyond 7 days period prescribed for removal of defects"

NCLAT also referred to Rule 5(3) of the Delhi High Court Rules which specifically provided that filing beyond the period allowed by Deputy Registrar will be treated as a fresh filing but there is no such indication of fresh filing in Rule 26 of NCLAT rules and thus re-presentation beyond the period of 7 days cannot be considered as a fresh filing.

Question No. B

The Bench referred to Section 61 of IBC, 2016 and Section 421 of the Companies Act, 2013 and observed that the time period provided in both these sections is for filing of the appeal and not for refiling of the appeal after curing defects. It was also held that Rule 26 which deals with re filing of the appeal does not provide for any period of limitation and thus, the same cannot be governed by limitation provided under Section 61 of IBC, 2016 and Companies Act, 2013.

However, NCLAT cautioned that the condonation of delay in refiling the appeal has to be examined on case-to-case basis and the criteria laid down under Section 5 of Limitation Act, 1963 may not be strictly applicable to the same.

"…A party who is exercising its right to file a statutory appeal in time has not to be shut out on some procedural or technical defects and when defects notified have been removed although with some delay, question to be considered is as to whether there was justifiable cause for delay or not…"

Accordingly, the NCLAT held that the time period of 7 days for removal of defects is directory and the refiling after removal of defects will not amount to a fresh filing.

Case Title: VR Ashok Rao v, TDT Copper Ltd.

Click Here To Read/Download Order