2023 (1) TMI 920 - AT - Insolvency and Bankruptcy

Appeal Outcome on Transaction Avoidance Application: Focus on Procedural Compliance

ARVIND GARG LIQUIDATOR OF CARNATION AUTO INDIA PVT. LTD. Versus JAGDISH KHATTAR & ORS.

The appeal against the dismissal of the application for avoidance of transactions was the primary issue, but the judgment primarily focused on procedural ... Delay in filing of appeal - Time Limitation - Avoidance of transactions - extension of prescribed period in certain cases in respect of delay caused in filing of the appeal or application within the prescribed period - Section 5 of the Limitation Act, 1963 - HELD THAT:- In normal circumstances, as per the provision of Article 120 of the Limitation Act, 1963, after the death of Respondent No. 1 on 26.04.2021 the application for impleadment for LRs could have been filed up to 26.07.2021 but in the present case the death of Respondent was not within the knowledge of the Appellant (Liquidator) and it cannot also be presumed that he knew about his death until and unless some cogent evidence is produced rather the factum of the death was brought before the Tribunal as well to the notice of the Applicant for the first time on 12.07.2021 without disclosing the details of LRs of the Respondent No. 1. It has been urged by the Appellant that it tried to find out from the available record of the Corporate Debtor about the LRs of the deceased of R1 but when he could not find the same, filed the application i.e. I.A. No. 2693 of 2021 on 29.11.2021. The said application was ultimately decided on 24.08.2022 by this Tribunal and the information was given by Counsel for Respondent No. 1 to the Appellant on 08.09.2022 and thereafter, the application was filed on 12.09.2022. In the integrum, because of order of the Hon’ble Apex Court, in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [2021 (3) TMI 497 - SC ORDER] the period from 15.03.2020 to 28.02.2022 was excluded with further grace period of 90 days. In that manner, the limitation provided under Article 120 of the Limitation Act, 1963 became non-operative and can be stated to have again started from 28.05.2022 but during this period application i.e. I.A. No. 2693 of 2021 filed by the Appellant on 29.11.2021 for seeking the details of the LRs of Respondent No. 1 was pending which ultimately decided on 24.08.2022 without there being any fault on the part of the Appellant and as soon as when the particulars were provided by Counsel for Respondent No. 1 to the Appellant on 08.09.2022 through email the necessary application i.e. I.A. No. 3473 of 2022 was filed within four days. There are no delay in filing of the application and as Counsel for the Appellant has submitted that the Application for condonation of delay has been filed with abundant caution, in case there is any delay, the Appellant has been successful in providing the sufficient cause for condonation of delay - Ultimately result is that the application is allowed. Issues Involved:1. Application for Avoidance of Transactions2. Impleadment of Legal Representatives (LRs)3. Condonation of Delay in ImpleadmentDetailed Analysis:1. Application for Avoidance of Transactions:An application under Section 7 of the Insolvency and Bankruptcy Code, 2016, was filed by Punjab National Bank against M/s Carnation Auto India Pvt. Ltd. The Adjudicating Authority admitted the petition and ordered the liquidation of the Corporate Debtor on 01.08.2018. The Liquidator filed an application under Sections 43, 45, 50, and 66 of the Code for avoidance of transactions, which was dismissed on 24.07.2020. The present appeal was filed against this dismissal.2. Impleadment of Legal Representatives (LRs):The Respondent No. 1 passed away, and the Appellant was directed to file an appropriate application to bring the LRs on record. The Appellant filed I.A. No. 2693 of 2021 for a direction to Respondents No. 2 and 3 to provide details of the LRs. This application was disposed of on 24.08.2022 with a direction to provide the details of the LRs by 05.09.2022. Subsequently, the Appellant filed I.A. No. 3437 of 2022 to bring the LRs on record, which was contested on the grounds of limitation.3. Condonation of Delay in Impleadment:The Appellant filed I.A. No. 4401 of 2022 for condonation of delay of 427 days in impleading the LRs. The delay was attributed to the lack of knowledge about the death of Respondent No. 1 and the time taken to obtain details of the LRs. The Supreme Court's orders regarding the exclusion of the period of limitation due to COVID-19 were cited to argue that the application was within the extended limitation period.Judgment:Application for Avoidance of Transactions:The appeal against the dismissal of the application for avoidance of transactions was the primary issue, but the judgment primarily focused on procedural aspects related to the impleadment of LRs and the condonation of delay.Impleadment of Legal Representatives (LRs):The Tribunal acknowledged the death of Respondent No. 1 on 26.04.2021 and noted that the Appellant was informed on 12.07.2021. The Appellant's efforts to obtain details of the LRs were recognized, and the application for impleadment filed on 12.09.2022 was considered timely, given the Supreme Court's orders on the extension of limitation periods due to COVID-19. The Tribunal allowed the application to bring the LRs on record, including the widow Ms. Kiran Khattar, citing the definition of LRs under Section 2(11) of the Code of Civil Procedure, 1908, and the Hindu Succession Act, 1956.Condonation of Delay in Impleadment:The Tribunal found that the delay in filing the application for impleadment was justified due to the lack of knowledge about the death and the subsequent efforts to obtain details of the LRs. The Supreme Court's orders extending the limitation period due to COVID-19 were applied, and the delay was condoned. The Tribunal emphasized that the Appellant had shown sufficient cause for the delay and allowed the application for condonation of delay.Conclusion:The Tribunal allowed the applications for condonation of delay and impleadment of LRs, enabling the continuation of proceedings with the LRs of the deceased Respondent No. 1 on record. The judgment highlighted the procedural compliance and the impact of the Supreme Court's orders on limitation periods due to the COVID-19 pandemic.