TaxTMI 
TaxTMI 
2026 (7) TMI 172
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....e month period provided in terms of Section 121 (2) of the Insolvency and Bankruptcy Code, 2016 ('IBC'). Submissions of the Appellant 2. Appellant which is the Financial Creditor namely Cosmos CO-Operative Bank Limited briefly brings the facts in the case as noted hereinafter. 3. During the period 2013-2017, the Appellant Bank sanctioned various credit facilities to the Corporate Debtor. The Respondent, Mr. Anil Kumar Gilra, being one of the directors of the Corporate Debtor, executed Deeds of Guarantee in his personal capacity, thereby acting as Personal Guarantor for the said credit facilities. 4. Subsequently, on 16.12.2019, the Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor commenced on an application bearing No. CP (IB) No. 44/CTB/2019. In view of the aforesaid, on 20.10.2020, the Appellant issued a demand notice to the Respondent under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, demanding payment of the defaulted amount of Rs. 87,25,02,828/-. As the Respondent failed to respond to the said demand notice,....
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....ayment plan by the debtor/personal guarantor, it is ordered that the debtor and creditors shall be entitled to file an application for bankruptcy under Chapter IV. Thus, this application is allowed and disposed of." 8. The Appellant contends that it was not a party to the said application and was, therefore, unaware of the directions passed therein. Further the Resolution Professional failed to duly intimate the passing of the said order to the then Authorized Representative of the Appellant Bank and instead communicated the same to a former employee of the Bank, who consequently failed to apprise the Appellant of the said order. Therefore, the Bank was completely unaware of the passing of the aforesaid order dated 11.12.2023 and it was only on 03.06.2024 that the Appellant Bank became aware that it was entitled to file a bankruptcy application against the Respondent Personal Guarantor. 9. Appellant also brings to our notice that the credit facilities were sanctioned and disbursed at Hyderabad; the Appellant Bank's head office is situated at Pune; and the Respondent Personal Guarantor resides at Cuttack. Consequently, though the Appellant became aware of the order on 03.0....
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....hy such explanation was not adequate. Moreover, the Adjudicating Authority also failed to consider that no prejudice was caused to the Respondent on account of such delay and even any prejudice had been caused the same could adequately be compensated by payment of reasonable costs. 13. Appellant claims that the Respondents had never specifically denied the reasons provided by the Appellant in its application for condonation of delay and had instead only argued on the absence of jurisdiction of the Adjudicating Authority to condone such delay. While the Impugned Order fails to disclose any reasons for why it refused to condone the delay in filing of the Section 121 petition, even if it were to be assumed that the Authority had accepted the submissions of the Respondent on its lack of jurisdiction, the same would have been unsustainable in law. 14. Appellant contends that from the very language of Section 121(2) it is evident that the period of 3 months for filing of an Application for Bankruptcy is directory in nature and is not mandatory and therefore there was no occasion to seek condonation of delay to begin with. 15. Appellant places its reliance on the decision of this....
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.... the Hon'ble NCLAT. Section 61 explicitly provides both an inner limit of 30 days and an outer limit of 15 additional days for filing an appeal, beyond which any delay in filing the appeal cannot be condoned as has been explicitly held by the Hon'ble Supreme Court in the cases of Tata Steel Ltd vs Raj Kumar Banerjee 2025 SCC OnLine SC 1042 and Kalpraj Dharamshi & Anr v. Kotak Investment Advisors Limited & Anr (2021) 10 SCC 401. However, the absence of such an outer limit in Section 121 indicates that the Legislature did not intend for applications under this provision to be subject to a rigid inflexible bar. Section 121(2) merely prescribes a period of three months, functioning as an inner limit, for filing the application after an order under Section 115(2), and does not render the application non-maintainable beyond that period. 20. The Appellant has relied on the judgment of Honorable Supreme Court in P.T. Rajan Vs. T.P.M. Sahir and Ors. (2003) 8 SCC 498 and contends that if a provision in a statute which is procedural in nature although employs the word "shall" may not be held to be mandatory if thereby no prejudice is caused. Furthermore, the Hon'ble Supreme Cou....
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....e is no mandatory timeline or limitation period for the purpose of filing of an Application under Section 121 of the IBC, therefore it is contended that in view of Section 238 A of the IBC, Section 5 of the Limitation Act shall still continue to apply with respect to filing of Applications where no outer time limit is prescribed. Therefore, the Adjudicating Authority has the power to consider and allow applications under Section 5 of the Limitation Act and condone the delay in filing of Applications under Section 121 of the IBC. Submissions of the Respondent 26. The petition is non-maintainable in law. The reliefs sought are legally untenable, and thus, the petition is damnum sine injuria (a wrong without a legal remedy). The petition is completely mis-conceived and designed only to harass the petitioner by multiplying litigation. Respondent claims that averments made in the I.A do not reflect true state of affairs and the same are made only trying to defame by hook or crook and misleading this Hon'ble Court. The Appellant's pleadings are in pari delicto (self-contradictory) and replete with suppressio veri, suggestio falsi (suppression of the truth is the suggestion ....
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....een described either before the learned NCLT Cuttack or before this Hon'ble Tribunal. 28. It is well settled position of law that each and every day has to be described for condonation of delay but it is not described by the Appellant in any petition. The Appellant has taken different grounds in every affidavit to suppress the material averments before this Hon'ble Tribunal, which reflects that the Appellant has not come to this Hon'ble Tribunal is a clean hand. 29. This I.A is otherwise liable to be dismissed for suppression of material facts and misleading statements made on affidavit. Analysis and Evaluation 30. We have heard the counsels of both sides and also perused the material placed on record. 31. We note that the Adjudicating Authority had dismissed the CP (IB) No. 39/CB/2024, which was filed in terms of Section 121(2) of the Code for initiating bankruptcy proceedings against the personal guarantor namely Mr. Anil Kumar Gilra. While dismissing the petition, the Adjudicating Authority noted as follows: "3. The Submission made by the Respondent/Personal Guarantor in its reply are summarized herein: i. The Respondent contends this....
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....shall be filed within a period of three months of the date of the order passed by the Adjudicating Authority under the Sections referred to in sub-section (1)". In the above provision, we note that there is no upper limit provided in this Section. 36. It is brought to our notice that only where a statute expressly provides both an inner and an outer time limit for filing an appeal or application, does the outer limit operate as an absolute bar, beyond which even the provisions of the Limitation Act do not apply as observed by the Hon'ble Supreme Court in the case of Consolidated Engg. Enterprises (supra) and J.J. Merchant (Dr) (supra). However, in the present case, there is an absence of any such express outer limit under Section 121, therefore, there exists no absolute prohibition against condonation of delay in filing an application under the said section. Thus, the filing of a Bankruptcy Application under Section 121 of the IBC is not subject to a rigid statutory bar and thus there is no bar in preferring an Application beyond a period of 3 months. Thus. in the absence of any express outer limit under Section 121, their exist no absolute prohibition against condonation of....
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.... procedural in nature although employs the word "shall" may not be held to be mandatory if thereby no prejudice is caused. In the present case, Section 121(2) of the IBC prescribes a three-month period for filing the application but does not provide for any adverse consequence in the event of non-filing within this time. In the absence of any penal consequence, and in view of the law laid down in P.T. Rajan (supra), it can be interpreted that the said timeline is directory and not mandatory. Therefore, even though Section 121(2) uses the term "shall," the provision ought not to be construed as imposing a rigid, non-extendable deadline. 41. Furthermore, it is brought to our notice that the Hon'ble Supreme Court has on numerous occasions interpreted the word "shall" in a statute to mean 'may'. An analogous position can be seen in the context of the time limit prescribed for filing Written Statements by defendants under Order VIII Rule 1 of the CPC, 1908. The Hon'ble Supreme Court in the case of Rani Kusum (supra) held that: XXX 10. All the rules of procedure are the handmaid of justice. The language employed by the draftsman of processual law may ....
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....e a strict bar on filing an application under Section 121(1) even after the expiry of three months from the date of the order passed under Section 115. 43. Furthermore, the appellant while referring to the Bankruptcy Law Reforms Committee (BLRC), report has also brought to our notice the legislative intent behind Section 121(2). It is informed to us that the scheme of personal insolvency under the Insolvency and Bankruptcy Code, 2016 stands in marked contrast to the corporate insolvency framework, where adherence to strict timelines is the very essence of the Corporate Insolvency Resolution Process ("CIRP"). In the corporate regime, the Code mandates a time-bound process culminating in an automatic transition into liquidation, in the absence of resolution, thereby ensuring certainty and value maximization. However, under the personal insolvency regime, the legislative intent is fundamentally different. The legislature has consciously refrained from making the process strictly time-bound. This distinction is rooted in the recognition that bankruptcy, in the case of individuals, carries serious civil consequences and has a direct bearing on the dignity and livelihood of a person w....
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....or filing a bankruptcy application under Section 121(1), the limitation provided under Section 121(2) must be construed as directory in nature. This Court in para 10 of the said judgement observed: "We are of the view that when the provision in itself does not create any embargo while prescribing three months' time, as an upper limit for the purposes of initiation of the proceedings under Section 121(1) of 1 & B Code, 2016, in that eventuality the aspect of limitation contained under Section 121(2) of 1 & B Code, 2016, though despite of the fact that it uses the word 'shall', will have to be taken as to be directory in nature, as the provision itself does not prescribe a restraint in extension of time, so as to attract Section 238A of 1 & B Code, 2016." 45. We were also informed about the comparison of the provisions under Section 121 with the provisions under Section 7 of the Code, which prescribes that the Adjudicating Authority "shall" within 14 days ascertain the existence of a default. However, the same was held to be procedural in nature by this Tribunal in JK Jute Mills Company Limited (supra). Furthermore, in the aforesaid case even the 14 days' ....
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....e and are capable of extension in appropriate cases. In addition to the absence of an outer limitation period, the statutory framework of the IBC itself expressly incorporates the applicability of the Limitation Act. Section 238A of the IBC provides that the provisions of the Limitation Act, 1963 shall apply to proceedings under the Code insofar as they are not inconsistent with its provisions. In the absence of any inconsistency or express exclusion under Section 121, the provisions of the Limitation Act continue to apply in full force. Consequently, Section 5^1 of the Limitation Act squarely applies, thereby empowering the Adjudicating Authority as well as this Hon'ble Appellate Tribunal to condone delay upon sufficient cause being shown. The refusal to exercise such jurisdiction, therefore, constitutes an error of law. 50. On the other hand, the Respondent claims that the Appellant's plea that Section 121(2) of the IBC is merely directory is misconceived, as the provision fixes a mandatory three-month limit binding on the applicant. Whether the delay is 90 or 160 days makes no difference since both are beyond the statutory period. The contention that no prejudice is c....