The National Company Law Appellate Tribunal (NCLAT) rejected an application filed by Adisri Commercial Pvt Ltd, a shareholder of Srei Infrastructure Finance Ltd, the holding company of Srei Equipment Finance Ltd. Adisri Commercial has refiled the plea after a delay of 321 days and challenged an order admitting Reserve Bank of India (RBI)'s application filed under Section 227 of the Insolvency and Bankruptcy Code (IBC) for initiating insolvency proceedings against the SREI group company.
In an order issued on 21 December 2022, NCLAT bench of justice Ashok Bhushan (chairperson) and Barun Mitra (member-technical) says, "...the grounds cited to explain the 321 days refiling delay when viewed against the parameters of timely, effective and efficient resolution as envisaged in the IBC fall hopelessly short of meeting the desirable standards of being adequate and sufficient."
The grounds cited by Adisri Commercial for the refiling delay included the ill health of the authorised representative, limited functioning on account of the third wave of COVID for which defects could not be rectified on time and misplacement of files.
However, NCLAT noted the inaction on the part of the company and remarked, "We thus do not hesitate to hold that all the three grounds… to explain a delay of 321 days is perfunctory and does not inspire our confidence."
Noting that Adisri Commercial refiled the appeal with 321 days of delay and application for condonation of delay, NCLAT explains that "Any question of delay condonation must go through deep and sufficient scrutiny in the context of the IBC. The circumstances cited for condonation of delay in refiling have to be in consonance with the aims and objects of the IBC and not frustrate the scheme of the Code."
The bench also observed that while Adisri Commercial claims to be negligent and lackadaisical in refiling the appeal, "their mala-fide becomes clear as during this period they were found to be actively litigating and pleading in other matters before other judicial fora against the corporate and Insolvency process (CIRP)..."
"Further it was also pointed out that in the guise of refiling, the appellant has added new facts which were not part of the original version of the appeal. It has been pointed out that certain documents have been referred to in the refiling version which had actually come into being after the original date of filing in November 2021. These additions have changed the frame of the original appeal and therefore, such refiling actually amounts to fresh filing," the Tribunal says.
During the hearing, Adisri Commercial contended that NCLAT Rules empowers the bench, in the interest of justice, to allow refiling of the application even if there is a substantial delay so long as sufficient cause is shown.
After perusing the Rules, NCLAT says, "There is no quarrel over the proposition that in the absence of any time-limit prescription in considering the question of delay in refiling either in the IBC or the NCLAT Rules, this Tribunal is to that extent not powerless to entertain an application even if there has been delay in refiling."
However, it emphasised that "…the magnitude of delay in refiling must necessarily be within tolerable limits."
In October 2021, RBI took over the management of the Kolkata-based non-banking housing finance company due to its deteriorating financial conditions and governance issues. Following this, the company came under CIRP. As per the Srei group website, 44 financial creditors have consolidated claims worth Rs32,750 crore against the two companies, as of August.
As per an NCLT order dated 31 October 2022, the Srei administrator had sought more time till January 2023 for completion of CIRP.
(Company Appeal (AT) (Insolvency) No1293 of 2022 Date: 21 December 2022)