Limitation for guarantor bankruptcy treated as directory; condonation of delay upheld and appeals dismissed on waiver grounds.

The article addresses whether the three month limit for initiating bankruptcy against personal guarantors is mandatory or directory. It explains the Tribunal treated the statutory deadline as directory on the facts, noting absence of an express statutory embargo for non compliance, and upheld prior condonation of delay and admission of Section 121(1) applications. The piece emphasises reliance on principles of statutory interpretation, limits on inherent powers where statute does not preclude relief, and application of waiver and estoppel because the appellants failed to challenge an earlier condonation order; appeals were dismissed.

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Issues: Whether an application under Section 121(1) of the Insolvency and Bankruptcy Code, 2016 filed beyond the three months period prescribed by Section 121(2) is barred as mandatory (and therefore not maintainable), or whether Section 121(2) is directory such that delay can be condoned and bankruptcy proceedings against personal guarantors may validly proceed.

Analysis: The Tribunal examined Section 121(1) and Section 121(2) of the Insolvency and Bankruptcy Code, 2016 in context of applications for bankruptcy against personal guarantors filed after the three month period. The Adjudicating Authority had framed and answered the limitation question after the appellants raised objections, and had previously allowed condonation of delay by order dated 07.02.2024 which was not challenged. The Tribunal considered the statutory text, the absence of an express consequence or embargo for non-compliance in Section 121(2), the role of Section 238A and related provisions, and the doctrine permitting the exercise of inherent powers only where statute does not preclude such relief. The Tribunal also applied principles of waiver and estoppel where the appellant had not challenged the earlier condonation order and had opportunity to raise objections during proceedings.

Conclusion: Section 121(2) is to be treated as directory in the facts of these cases; the condonation of delay and subsequent admission of the Section 121(1) applications were valid; the appellants are estopped by waiver from challenging limitation; therefore the appeals fail and are dismissed. The result is in favour of the Respondent.

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