2025 (8) TMI 1228 - AT - IBC

Condonation of 125-day refiling delay denied for lack of sufficient cause, gross negligence and no exceptional circumstances

Shri B. Mahesh & Ors. Versus Abhay Narayan Manudhane & Ors.

Shri B. Mahesh & Ors. Versus Abhay Narayan Manudhane & Ors. - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether condonation of a cumulative 125 days' delay in refiling an appeal should be allowed where defects were repeatedly pointed out by the Registry and cured belatedly. 2. What standard and legal framework govern condonation of delay in refiling before the Tribunal in time-bound insolvency proceedings under the Insolvency and Bankruptcy Code (IBC). 3. Whether explanations of (a) personal illness/death in the counsel's family, (b) counsel's engagement in other litigations, and (c) alleged 'technical issues'/contradictory directions by Registry officials, together or severally, constitute sufficient cause to condone refiling delay. 4. Whether prior statements made by the applicant to the Tribunal (purporting that defects had been cured and the appeal refiled) bearing on the applicant's 'clean hands' affect the condonation application. 5. The weight to be accorded to precedents addressing condonation of refiling delay and the applicability of a liberal approach versus scrutiny to protect IBC timelines. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether to condone 125 days' delay in refiling Legal framework: Condonation of refiling delay is within Tribunal's discretion and is to be exercised on the basis of whether 'sufficient cause' or 'reasonable and justifiable cause' is shown; cognizance is required of IBC's objective of time-bound resolution (statutory scheme and judicial pronouncements emphasizing expedition). Precedent treatment: The Tribunal referred to prior decisions where liberal approach is endorsed but subject to satisfaction that reasons are reasonable, and to other decisions where inordinate delays were not condoned for failure to demonstrate diligence (cases of repeated procedural negligence rejected). Interpretation and reasoning: The Tribunal examined the sequence of filing, scrutiny, defect notices and re-filings; found initial refile within seven days but a cumulative 125-day lapse thereafter. Scrutiny of material (defect sheets, affidavits, additional affidavit) showed recurrent, largely clerical defects and long intervals without corrective action. Explanations (counsel's personal bereavement/ill-health; registry technicalities; other engagement of counsel) were assessed for plausibility and timeliness; personal bereavement accepted as deserving leniency, other grounds not persuasive. Ratio vs. Obiter: Ratio - where an applicant fails to demonstrate cogent, exceptional or unavoidable reasons and shows procedural negligence in curing repeated registry defects, condonation of long refiling delay in IBC proceedings may be refused despite some sympathetic grounds. Obiter - reference to acceptance of bereavement as a leniency factor and observations on impracticality of renumbering being a time-consuming task. Conclusion: The Tribunal held that sufficient grounds were not made out to condone the 125-day refiling delay; IA for condonation rejected and attendant appeals/IA disposed of. Issue 2 - Standard and legal framework for condonation of refiling delay in IBC matters Legal framework: Condonation is to be determined on facts; Tribunal must be satisfied of reasonable and justifiable cause beyond the applicant's control and of due diligence and despatch in attempting to cure defects. The process must be balanced against IBC's statutory timelines. Precedent treatment: The Tribunal acknowledged authorities endorsing a liberal approach to condonation but emphasized the qualifier that such liberalism is not absolute; Supreme Court guidance (liberal construction to advance substantive adjudication) noted but observed not to be a binding precedent altering fact-sensitive inquiry. Interpretation and reasoning: The Tribunal reiterated that liberal approach applies only where the applicant shows bona fide, reasonable causes and due diligence; routine or avoidable procedural lapses and negligence do not qualify. The test includes whether the reasons were beyond the control of the applicant and whether all reasonable steps were taken to overcome delay. Ratio vs. Obiter: Ratio - condonation requires demonstration of circumstances beyond control plus bona fide, diligent efforts; liberal construction does not override IBC's time-sensitive policy. Obiter - discussion on absence of a hard and fast rule to measure due diligence. Conclusion: The Tribunal applied a fact-sensitive standard requiring cogent explanation and bona fide diligence; mere procedural lapses fail the test in IBC context. Issue 3 - Sufficiency of specific explanations: (a) counsel's bereavement/illness, (b) counsel's engagement elsewhere, (c) Registry technical issues and power of attorney confusion Legal framework: Each ground evaluated against the 'sufficient cause' rubric and the duty of litigants/advocates to act with due diligence; need for evidence where plausible. Precedent treatment: Decisions cited where ill-health or similar personal events have been considered; cases where counsel's other engagements or alleged registry mishandling were rejected as excuses when not supported or when alternate steps were available. Interpretation and reasoning: (a) Bereavement/ill-health - though unsupported by medical evidence, Tribunal accepted bereavement and hospitalisation as deserving of leniency and treated it favorably. (b) Counsel's engagements elsewhere - rejected as ground for condonation because multiple advocates were on vakalatnama and counsel could have delegated; engagement in other litigations does not excuse neglect here. (c) Registry technical issues and PA confusion - rejected as insufficiently substantiated; claimed repeated persistence of prior defect sheets and contradictory directions not supported by record of approaches to Registry; the Tribunal found these explanations 'frivolous and vague' and observed that routine clerical tasks (power of attorney corrections, repagination) would not justify two months' delay. Ratio vs. Obiter: Ratio - personal bereavement may be a relevant mitigating factor; however, counsel's other commitments and unsubstantiated registry technicalities will not constitute sufficient cause if adequate alternatives or reasonable efforts were available. Obiter - sympathy expressed for bereavement while emphasizing limits of such sympathy in the face of extended delays. Conclusion: Bereavement accepted as a partial exculpatory ground but insufficient in combination with other inadequate and unproven explanations to justify 125 days' delay; overall explanation held feeble and non-cognizable for condonation. Issue 4 - Effect of prior averments and 'clean hands' on condonation application Legal framework: Applicants must approach the Tribunal with clean hands; false or factually inaccurate averments may disentitle relief or affect credibility. Precedent treatment: Tribunal cited authorities holding that if an applicant makes false averments, the application may be dismissed. Interpretation and reasoning: Respondents alleged that the applicant had represented to the Tribunal earlier that defects were cured and the appeal refiled, when records showed defects then persisted. Tribunal took such conduct as relevant to credibility; while not the sole basis for dismissal, it weighed against the applicant in assessing bona fides and diligence. Ratio vs. Obiter: Ratio - misstatements impacting the applicant's bonafides are a legitimate factor in refusing condonation. Obiter - not determinative in absence of other failings, but cumulative with evidence of negligence strengthens rejection. Conclusion: The applicant's prior inaccurate averment undermined credibility and, combined with other shortcomings, supported refusal to condone the delay. Issue 5 - Application of precedents and balancing liberal approach with IBC timelines Legal framework: Precedents guide but do not supplant fact-sensitive judicial discretion; the Tribunal must balance liberal adjudication with the IBC's imperative of expedition. Precedent treatment: The Tribunal accepted that precedents advocate liberal construction for condonation where justified, but reiterated that such liberalism is constrained by the need to protect IBC timelines and to deter dilatory tactics. Interpretation and reasoning: Condonation cannot be routinely granted where delays are lengthy and explanations indicate negligence; allowing inordinate refiling delays would undermine statutory objectives and encourage disregard for timelines. Ratio vs. Obiter: Ratio - while precedents may favor liberalism, each case must demonstrate special facts warranting relief; protection of IBC timelines is a controlling concern. Obiter - cautionary remarks about not encouraging 'speed-breakers' in IBC process. Conclusion: Precedents permitting liberal condonation do not mandate relief where the record shows lack of diligence, inadequate explanations and potential prejudice to the time-bound scheme; the Tribunal refused condonation accordingly.