IBC avoidance application for suspect transactions-delay beyond CIRP timelines excused under Covid limitation extension; appeal dismissed, merits hearing ordered.

The dominant issue was whether an avoidance application under the IBC (ss. 43, 44, 66, 69 read with Reg. 35A(3)) was barred by limitation due to filing beyond the CIRP timelines and without a formal condonation application. The Tribunal held that limitation stood extended by SC's suo motu Covid-19 orders excluding the relevant period, and the filing was also within the time impliedly granted by the prior directions; further, delay could be condoned even absent a formal application where sufficient material existed on record, consistent with SC precedent. Reliance on an HC decision under CPC/HMA was rejected as inapposite/per incuriam. The appeal was dismissed, and the application was directed to be heard on merits.

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1. ISSUES PRESENTED AND CONSIDERED

1. Whether the avoidance/misfeasance application seeking directions and monetary contributions under the I&B Code (including under Sections 43, 44, 66 and 69) was barred by limitation on account of (i) alleged non-compliance with Regulation 35A timelines, (ii) the time gap between an earlier disposed application and the later application, and (iii) the absence of a separate application seeking condonation of delay.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Limitation for the application under Sections 43, 44, 66 and 69 and the effect of Regulation 35A timelines

Legal framework (as discussed by the Court): The Court considered the filing of the application in the context of Regulation 35A(3) and the provisions invoked in the application (Sections 43, 44, 66 and 69), as well as the effect of the Supreme Court's Covid-19 limitation extension directions for exclusion of the period stated in those directions for computing limitation.

Interpretation and reasoning: The Court accepted that the later application was filed pursuant to express liberty granted earlier to revive or file a fresh application after completing enquiry and making suitable modifications, and treated the later filing as arising from that liberty, thereby supporting its maintainability on limitation. The Court also accepted the explanation that steps such as completing procedural formalities and securing documents contributed to the elapsed time. It further held that the Covid-19 limitation exclusion directions applied to the computation in the present matter, and that the period was also "impliedly" protected in light of the direction that the resolution professional comply within the timeframe fixed by the Tribunal in the subsequent order. The Court rejected the contention that Regulation 35A timelines, or the time taken from the earlier order, rendered the later application time-barred in the facts accepted by the Tribunal.

Conclusions: The Court upheld the finding that the application could not be dismissed as time-barred and affirmed the direction that it be heard on merits. The appeal challenging the limitation ruling was dismissed.

Issue 2: Whether a separate, formal application for condonation of delay was mandatory

Legal framework (as discussed by the Court): The Court addressed condonation principles in the context of limitation, including that delay may be condoned if sufficient cause is disclosed on record, even in the absence of a formal condonation application.

Interpretation and reasoning: The Court held that no statutory provision was shown that makes a separate condonation application mandatory in the circumstances, and found that delay can be condoned without a formal application where sufficient material exists on record explaining the delay. It also rejected reliance placed on a decision arising from a different statutory setting and factual matrix, holding it inapplicable to the insolvency context being considered.

Conclusions: The Court concluded that absence of a separate condonation application did not invalidate the filing or require dismissal on limitation, and therefore the impugned order refusing to reject the application on limitation was not legally flawed.

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