Delay in filing appeal under Section 42 of IBC can’t be condoned Suo Moto

Section 42 of the IBC states that a creditor may appeal to the Adjudicating Authority against the decision of the liquidator accepting or rejecting the claims within fourteen days of the receipt of such decision. But what happens when a creditor does not prefer an Appeal within this prescribed period of 14 days?

This question has been answered by the NCLAT in the ruling of Canara Bank Vs Commercial Tax Department Circle 09, Indore, vide Company Appeal (AT) (Insolvency) No. 655/2023 wherein it was held that the delay in filing the Appeal under Section 42 is clearly condonable while exercising the power under Section 5 of the Limitation Act.

The question then is whether this delay can be condoned ‘Suo-Moto’ by the Adjudicating Authority?

NCLT Hyderabad dealt with this question in IA(IBC)/168/2022 in CP(IB) No.369/10/HDB/2019.

The relevant facts of the case are as follows:

The Application (IA(IBC)/168/2022) was filed by the Applicant under Section 42 of the Insolvency and Bankruptcy Code, 2013 read with Rule 11 of the NCLT Rules, 2016 praying the Tribunal to set aside the rejection of part claim of the Applicant Company and to direct the Respondent to verify and admit the rejected portion of the claim of the Applicant Company. This IA was filed after delay of 209 days from the date of part rejection of the claim by the liquidator. Further, the Applicant Company has not justified the delay. The impugned communication was sent by email dated 06.07.2021 to the Applicant. The Application, however, was preferred on 22.02.2022.

Thus, there was a delay of 209 days in filing the Appeal wherein it was held as follows: “Therefore, when the Application itself is being bared by limitation and for condonation of delay not even a single ground is pleaded, the delay cannot be condoned ‘Suo-Moto’. Hence, the question of giving a direction to the liquidator to consider the claim of the Applicant does not arise. Therefore, the Application is dismissed as not maintainable.”

My view: A complete reading of the order indicates that NCLT Hyderabad states that such delay can be condoned even in the absence of a separate application for condonation of delay. Furthermore, even an oral prayer for condonation of delay stating the reasons for not filing the Appeal within 14 days may be enough provided the Appeal/Application must plead the grounds for condonation of delay in order for the Adjudicating Authority to condone it.

Saurabh is an independent Counsel, practicing in National Company Law Tribunal and other Courts and Tribunals in Mumbai.

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