2025 (8) TMI 1353 - AT - IBC

Repeated registry defects, clerk absence not sufficient cause; 160-day delay in refiling under s.95 IBC denied

NCLAT (PB, New Delhi) dismissed applications seeking condonation of 160 days' delay in refiling company appeals under s.95 IBC, finding no sufficient ... Condonation of 160 days’ delay in refiling of Company Appeal - sufficient cause for delay or not - Admission of application u/s 95 of Insolvency & Bankruptcy Code, 2016 - HELD THAT:- It is noticed that it is the contention of the Applicant that the Memo of Appeal could be refiled after curing the defects only after the file was recovered from the clerk. The first set of defects was admittedly notified by the Registry on 23.07.2024 and thereafter the defect sheets were notified again on 20.08.2024, 21.09.2024, 21.10.2024 and 09.12.2024. The defects pointed out include missing details of impugned order, unsigned index, incomplete respondent information, pagination and annexure issues, incorrect page orientation, missing court fees and stamps etc - the fact that the Applicant had to be explicitly instructed by the Registry to file the delay in refiling application and upload the same on three occasions shows how casually the corrections were being carried out. The delay was clearly not occasioned by factors which were beyond the control of the Applicant. It is agreed that nothing has been shown to demonstrate what alternative steps were taken by the counsel to overcome the inaction on the part of the clerk employed by him and the slipshod manner in which defects were being remedied by him. By merely referring to exchange of WhatsApp messages with the derelict free-lancer staff is not enough to prove that the counsel was sufficiently proactive in curing the defects. Putting the entire blame upon the clerk to wriggle out of their own lack of bonafide does not commend us. The delay in refiling is clearly attributable to lack of due diligence and proper care on the part of the counsel to pursue completion of the procedural compliances with due earnest. The inaction and absence of the clerk of the counsel being the mainstay ground for delay therefore does not meet our countenance. This game of each one passing on the buck to the other cannot be taken by us casually. There are no unavoidable or exceptional circumstance had come in the way of the Applicant or their counsel which prevented them from refiling the defect-free Appeal in a timely manner. In this case there was gross inaction, negligence and display of lethargy on the part of the Applicant in curing the defects. In the given facts and circumstances, IBC being a time bound matter, it cannot be perceived that refiling delays spreading from 141 to 160 days as a non-serious matter. There are no merit in the present I.A. seeking condonation of delay of 160 days in refiling the Appeal. Sufficient grounds have also not been made out for condonation of delay of 141 to 160 days in respect of the other five I.A.s in the refiling of the respective Appeals - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether condonation of refiling delay in appeals under Section 95 of the Insolvency & Bankruptcy Code is permissible where the delay (141-160 days) is attributed to misplacement of the original memo by a freelance clerk and repeated defects intimated by the Registry. 2. What standard of scrutiny and legal principles should guide the Tribunal in deciding applications for condonation of refiling delay in IBC appeals, including the interplay between a liberal, justice-oriented approach and the need to preserve timeliness in IBC proceedings. 3. Whether negligence or lack of due diligence of counsel (including reliance on freelance staff) or routine, curable defects notified repeatedly by the Registry constitute sufficient cause beyond the control of the appellant to justify condonation of delay. 4. The relevance of litigant factors such as senior citizenship and geographical distance in assessing the culpability or excusability for delay in refiling appeals. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Permissibility of condoning refiling delay where delay is attributed to misplacement by freelance staff and repeated registry defects Legal framework: Applications for condonation of delay in refiling appeals arising from IBC proceedings must be examined against the statutory imperatives of the IBC, which treat timeliness as a cardinal feature; the Tribunal retains discretion to condone delay where sufficient cause is shown. Precedent treatment: The Tribunal reiterated its prior approach that condonation requires credible and convincing explanation; reference was made to earlier decisions emphasizing the necessity of explanation for each day's delay and the strict timelines of IBC proceedings. Interpretation and reasoning: The Tribunal accepted the factual claim that a freelance clerk had possession of the original memo and that the Registry had repeatedly pointed out defects. However, on scrutiny the Tribunal found that most defects were minor and curable, and that repeated failure to cure defects over serial defect sheets demonstrated lack of vigilance. Reliance on a derelict freelance clerk without evidence of proactive alternative steps by counsel did not constitute an exceptional or unavoidable circumstance beyond control. Ratio vs. Obiter: Ratio - Delay caused by misplacement with freelance staff and routine registry defects will not, without more (e.g., demonstrable unavoidable circumstances or proactive remedial steps), justify condonation of substantial refiling delay in IBC appeals. Obiter - use of WhatsApp exchanges as sole proof of dereliction by staff is inadequate absent evidence of counsel's attempts to mitigate. Conclusions: Condonation was refused for the 160-day delay and similarly for delays of 141-147 days in related matters; the Tribunal held that misplacement by freelance staff and repeated minor defects did not establish a justifiable cause for such prolonged delay. Issue 2 - Standard of scrutiny: balancing liberal, justice-oriented approach with IBC timeliness Legal framework: The Tribunal must adopt a pragmatic, justice-oriented approach when considering condonation applications, avoiding pedantry while also respecting objectivity, reasonableness and the statutory emphasis on time-bound resolution under IBC. Precedent treatment: The Tribunal followed the established principle that litigants should not be punished for counsel's negligence, but qualified this by insisting on credible, bonafide explanations and reasonable diligence by counsel and litigants. Interpretation and reasoning: The Tribunal articulated a twofold standard: (a) a liberal approach to secure substantive justice; (b) simultaneous scrutiny of tenability, reasonableness and bona fides of the grounds. The Court emphasized that freedom from pedantry does not equate to abandoning objectivity; where explanation lacks credibility or shows gross inaction, liberalism must yield to the need for timeliness. Ratio vs. Obiter: Ratio - The Tribunal will balance liberal judicial approach with strict adherence to IBC timelines; credible proof of unavoidable circumstances is required for condonation. Obiter - general guidance that litigants owe a duty to be vigilant of judicial proceedings and cannot shift entire blame to counsel or staff. Conclusions: The Tribunal applied a balanced standard and concluded that the present explanations failed that test; liberal considerations did not override the requirement for strong, credible reasons to breach IBC timelines. Issue 3 - Effect of counsel's negligence and reliance on freelance clerks on condonation applications Legal framework: Responsibility for timely compliance lies with the counsel and the litigant; circumstances attributable to counsel's lack of supervision are not ordinarily exceptional. Precedent treatment: The Tribunal relied on prior decisions holding that mere negligence of lawyers or staff does not automatically disentitle litigants from relief, but such negligence must be weighed against the need for diligence and the IBC's time-sensitivity. Interpretation and reasoning: The Tribunal found that the counsel's reliance on a freelance clerk who became unavailable, without demonstrable alternative steps or oversight, exhibited lack of due diligence. The presence of multiple rounds of rectification for largely minor defects indicated lethargy rather than unavoidable hindrance. The Tribunal rejected the contention that counsel could entirely offload responsibility for compliance upon external staff. Ratio vs. Obiter: Ratio - Negligence or lack of due diligence by counsel, including inadequate supervision of freelance staff, is not a sufficient ground to condone substantial refiling delay absent demonstrable unavoidable impediments and proactive remedial measures. Obiter - counsel should maintain continuous vigil over staff and files; mere production of messages with staff is inadequate. Conclusions: The Tribunal held counsel's negligence as a decisive factor against condonation; the delay was attributable to inaction and could not be excused by blaming the freelance clerk. Issue 4 - Relevance of litigant circumstances (senior citizenship, geographic distance) in excusing delay Legal framework: Personal hardships (e.g., advanced age, distance) may be relevant but must be assessed contextually and not in isolation from other responsible parties' conduct and the seriousness of delay. Precedent treatment: The Tribunal accepted in principle that senior citizenship and travel difficulty can be mitigating factors but must be corroborated and must explain why others in the same cohort could not overcome the impediment. Interpretation and reasoning: The Tribunal accepted that two applicants being senior citizens and resident away from the seat of the Tribunal faced difficulty in repeated travel to sign documents. Yet, this did not satisfactorily explain why the same impediment affected other applicants, nor did it excuse the pattern of repeated, curable defects and lack of timely follow-up by counsel. Sympathy or equity cannot override the IBC's stringent timelines without strong and credible reasons. Ratio vs. Obiter: Ratio - Personal difficulties such as seniority and distance are relevant but not determinative; they must be accompanied by convincing proof that no reasonable alternative steps could have been taken. Obiter - litigants are expected to be vigilant about proceedings initiated by them. Conclusions: The Tribunal found seniority and distance insufficient to justify condonation in the factual matrix; such factors did not excuse the collective delays. Final Conclusion and Disposition (ratio applied across issues) The Tribunal applied a pragmatic but rigorous standard requiring credible, day-by-day explanation and evidence of proactive steps to mitigate delays. Finding gross inaction, negligence of counsel, repeated failure to cure curable defects, and inadequate proof that the delay was beyond control, the Tribunal refused to condone refiling delays ranging from 141 to 160 days and consequently rejected the refiled memos of appeal. This judgment establishes that condonation in IBC refiling contexts demands objective, convincing proof of unavoidable circumstances and demonstrable diligence by counsel and litigants; mere blame on freelance staff or repeated registry defects without mitigation will not suffice.