2025 (8) TMI 1151 - AT - IBC

Application to condone 91-day delay in refiling appeal dismissed for lack of sufficient explanation beyond 'logistical constraints'

Sahara Export Versus About U Fashions Pvt. Ltd.

Sahara Export Versus About U Fashions Pvt. Ltd. - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the Appellate Tribunal should condone a 91-day delay in re-filing an appeal after registry-notified defects, when the application for condonation merely alleges 'logistical constraints' and that the delay was not intentional or deliberate. 2. What legal standard and principles govern condonation of delay in re-presentation/refiling of an appeal under the NCLAT Rules and the Insolvency and Bankruptcy Code (IBC) - specifically, the interplay between Rule 26 (and Rules 11, 14) of the NCLAT Rules, earlier coordinate bench precedents on condonation in refiling, and the time-sensitive scheme of the IBC (Section 12 and related regulations). 3. Whether the liberal approach to condoning delay in refiling applied in non-IBC contexts (and in certain coordinate-bench decisions) is applicable without modification to matters arising under the IBC, given the Code's emphasis on time-bound resolution. 4. Whether, on the facts, the applicant discharged the obligation to provide a sufficient and reasonable explanation for the delay such that the Tribunal could exercise its discretion to condone the 91-day delay. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether to condone 91-day delay in refiling where explanation is limited to 'logistical constraints' and non-intentionality Legal framework: Rule 26 of the NCLAT Rules (endorsement/scrutiny and return for compliance with a 7-day period, Registrar's power to allow reasonable time), Rule 11 (inherent powers) and Rule 14 (power to exempt). The Tribunal exercises discretion to condone delay in refiling on sufficient cause. Precedent treatment: Coordinate benches have both rejected and accepted condonation in refiling cases depending on sufficiency of explanation. A five-member bench (V.R. Ashok Rao and connected matters) held that (a) re-presentation after expiry of 7 days is not to be treated as a fresh filing and (b) limitation for filing an appeal under Section 61 or Section 421 does not strictly govern the period for curing defects - condonation in refiling may be allowed on sufficient justification. However, multiple coordinate-bench orders have refused condonation where no adequate explanation was furnished. Interpretation and reasoning: The Tribunal recognizes a duty to adopt a liberal but cautious approach to condonation in refiling; however, even under a liberal approach the applicant must plead factual averments that, if accepted on their face, justify the delay and demonstrate diligence or absence of wilfulness. A bare assertion of 'logistical constraints' and non-intentionality, without supporting facts, does not satisfy the minimum threshold for 'sufficient and reasonable cause' that a prudent person would accept. Ratio vs. Obiter: Ratio - an applicant seeking condonation of delay in refiling must state facts sufficient to prima facie explain the delay; mere conclusory averments are inadequate. Obiter - while a liberal approach is to be adopted, the Tribunal retains a duty to assign reasons for allowing condonation and cannot do so on no or insufficient grounds. Conclusion: Condonation of the 91-day delay was rejected because the application failed to plead any facts beyond a conclusory claim of logistical constraints and non-deliberateness; consequently the requisite showing of sufficient and reasonable cause was not made. Issue 2 - Legal standard governing condonation of delay in re-presentation/refiling under NCLAT Rules and relationship with IBC time-lines Legal framework: Rule 26(2)-(4) (scrutiny, 7-day return, Registrar's power to allow reasonable time or decline to register for non-compliance), Rule 11 (inherent powers) and Rule 14 (power to exempt). Section 12 IBC (time-limit for CIRP), Regulation 40-A (model time-line) and the objective of IBC to ensure time-bound resolution. Precedent treatment: Five-Member Bench decisions of this Tribunal and Supreme Court pronouncements (Innoventive, ArcelorMittal, Essar, RPS Infrastructure, Tata Steel) emphasize that while Rule 26's 7-day period is directory and condonation of refiling delay is examinable on case-to-case basis, the IBC is a time-bound special enactment where time is of the essence. Coordinate benches have recognized that condonation of refiling is distinct from condonation under Section 5 Limitation Act and may be approached more liberally, but must still be supported by sufficient cause, especially in IBC matters where delay can prejudice resolution/liquidation timelines. Interpretation and reasoning: The Tribunal reconciles the permissive language of Rule 26(3) (Registrar may allow reasonable time) and the Tribunal's inherent/exemptive powers with the IBC's emphasis on expeditiousness. Although the 7-day period for defect removal is directory, the Tribunal cannot treat refiling delay lightly in IBC matters; condonation requires factual justification that the delay was not wilful, that the applicant acted with diligence, or that exceptional circumstances existed. The Tribunal must balance liberalism in procedural matters against preserving the statutory time-framework of the IBC to prevent value destruction. Ratio vs. Obiter: Ratio - Rule 26(3) confers power to allow reasonable time and the 7-day period is directory; condonation in refiling is a discretionary exercise requiring sufficient cause even if the strict Section 61/limitation metrics do not directly apply. Obiter - the Tribunal should adopt a 'liberal but cautious' approach in IBC cases given the Code's emphasis on timelines. Conclusion: The correct legal standard is that condonation of delay in refiling is permissible on a case-by-case basis under Rule 26 and inherent/exemptive powers, but where the subject matter arises under the IBC, a more cautious application of liberalism is required and the applicant must give a prima facie adequate factual explanation for delay. Issue 3 - Applicability and limits of the 'liberal approach' to condonation in IBC matters Legal framework & precedents: The five-member bench decisions and Supreme Court authorities (Innoventive; ArcelorMittal; Essar; RPS; Tata Steel) inform that while procedural timelines may be directory in some contexts, the IBC's scheme is time-sensitive and exceptions to timelines are strictly circumscribed; Essar permits limited extension beyond statutory outer limits in exceptional circumstances; Tata Steel underscores strict adherence to prescribed and condonable periods in appellate contexts. Interpretation and reasoning: The Tribunal accepts that the liberal approach to condoning refiling delays (as distinct from condonation under Section 5 Limitation Act) remains available, but it must be tempered by the Code's object to preserve value and ensure speedy resolution. Liberalism cannot substitute for the applicant's basic obligation to plead facts explaining how delays arose and to demonstrate diligence. Where no factual foundation is pleaded, even a liberal approach cannot justify condonation because it would undermine the IBC time-scheme and make reasoned orders impossible. Ratio vs. Obiter: Ratio - liberal approach to condonation in refiling is subject to the applicant's obligation to plead sufficient facts; in IBC matters that obligation is heightened by the Code's time imperative. Obiter - the Tribunal's discretion to condone will be exercised sparingly in IBC matters where unexplained delays risk prejudice to stakeholders and value erosion. Conclusion: The liberal approach is available but constrained in IBC cases; unexplained or conclusory assertions do not suffice and the Tribunal will not condone delay absent adequate factual justification. Issue 4 - Whether the applicant met the evidentiary/pleading threshold to justify condonation and the consequence of failure Legal framework: Requirement to plead 'sufficient and reasonable cause' in the refiling application; Registrar direction to place condonation application before Tribunal; obligation to assign reasons when exercising discretion. Precedent treatment: Coordinate decisions rejecting condonation where applicants failed to furnish particularized facts; authority that bare assertions of inadvertence or logistical difficulty without factual explanation are inadequate. Interpretation and reasoning: The applicant's condonation application contained only three short paras asserting (i) appeal e-filed on date X, (ii) removal of defects took 91 days due to 'logistical constraints' and that delay was not intentional or deliberate, and (iii) prayer for refiling in interest of natural justice. No particulars of the logistical constraints, efforts undertaken, communications, or reasons for inability to comply within time were furnished. Tribunal cannot accept a conclusory statement as a sufficient cause; absent pleadings, there is nothing to evaluate and no reason the Tribunal can assign for condonation. Ratio vs. Obiter: Ratio - the applicant must plead factual particulars sufficient to show that the delay was not wilful and that the applicant acted diligently; failure to do so warrants rejection of condonation. Obiter - even where affidavit is filed, lack of factual detail renders it ineffective for condonation purposes. Conclusion: The applicant failed to discharge the minimal obligation to plead factual circumstances explaining the 91-day delay. For this reason, condonation was refused and the refiled memo of appeal was rejected as consequential.