New filing after defect removal is not new filing: NCLAT New Delhi

A five-judge bench of the National Company Law Appeals Tribunal (NCLAT) made up of Justice Ashok Bhushan, Justice Rakesh Kunar, Justice M Satyanarayana Murthy, Ms Shresha Merla and Mr Kanthi Narahari held that the re-filing of an appeal after remedying the defects beyond the seven-day period will amount to a re-filing and any delay even beyond the period prescribed under Article 61 of the Code of insolvency and bankruptcy, 2016 (BAC, 2016) or section 421 of the Companies Act 2013 to re-file the appeal may be tolerated on sufficient evidence.

Earlier, a three-judge bench of the NCLAT raised doubts about the law established by the NCLAT in Mr. Jitendra Virmani Vs. MRO-TEK Realty Ltd. & Ors & Arul Muthu Kumaara Samy Vs. Companies Registry & Void decree of 12.08.2022 referred the matter to the greater bench with the following observations.

In view of the judgment of the Supreme Court in the “Northern Railway” case (supra) and the judgment in the “P Ram Bhoopal” case (supra), we are of the opinion that the point of view adopted by this Tribunal in the case of “Mr. Jitendra Virmani” (supra) and “Arul Muthu Kumaara Samy” (supra) does not follow the correct law. »

Subsequently, the largest bench was formed to answer two questions

-“A: The law enacted by this Tribunal in the case of “Mr. Jitendra Virmani Vs. MRO-TEK Realty Ltd. & Ors” and three member judgment in “Arul Muthu Kumaara Samy Vs. Registrar of Companies” only when the defect of appeal is corrected and the appeal is refiled in the appellate court beyond seven days , the date of re-submission of the appeal will be treated as a new appeal, establishes the correct right?

B: The prescribed limit for filing an appeal to this Appeal Tribunal under Section 61 of the Insolvency and Bankruptcy Code 2016 or Section 421 of the Companies Act Will 2013 also govern the period during which a defect in the appeal must be corrected and this appeal tribunal has no jurisdiction to condone the delay in re-filing/re-submission if it exceeds the prescribed limit section 61 of the IBC or section 421 of the Companies Act 2013.”

Question No. A

NCLAT noted that Rule 26(2) of the NCLAT Rule, 2016 provides that if a document is found to be defective, it must be notified to the party who must remedy it within 7 days and failing to do so , the Registrar can place orders.

“…Sub-rules (2) and (3) do not indicate that penal consequences have been provided for removal of defects after 7 days. Where there is specific power under sub-rule (3 ) of Rule 26 to extend the compliance period, the 7-day period cannot be characterized as a mandatory period…”

The bench further observed that in the case of Jitendra Virmani, the basis for the conclusion that if the defects are removed after 7 days, it will amount to a new filing has not been worked out and such a conclusion is contrary to the pattern. of Rule 26. of the NCLAT Rules.

“The second bench of three members of this Tribunal in “Arul Muthu Kumaara Samy Vs. Registrar of Companies” (supra) relied on the judgment of “Jitendra Virmani” and no separate reasoning was given as to why for which the appeal shall be treated as a new appeal if filed beyond the prescribed 7-day period for removal of defects”

The NCLAT also referred to Rule 5(3) of the Delhi High Court Rules, which specifically provided that filing beyond the period permitted by the Deputy Registrar will be treated as a new filing, but it does not There is no indication of this type of filing in Rule 26 of the NCLAT Rules and so a resubmission beyond the 7 day time limit cannot be considered a new filing.

Question No. B

The bench referred to Section 61 of the IBC, 2016 and Section 421 of the Companies Act, 2013 and observed that the time limit provided in these two sections is for the filing of the appeal and not for filing the appeal after correcting the defects. It was also held that Rule 26 which deals with the re-filing of the appeal does not provide for any limitation period and therefore it cannot be governed by the limitation provided in Article 61 of the IBC, 2016 and the Companies Act, 2013.

However, the NCLAT cautioned that the tolerance of delay in filing the appeal must be considered on a case-by-case basis and that the criteria set out in section 5 of the Limitation Act 1963 may not strictly apply. to the same.

“…A party exercising its right to timely legal action shall not be disqualified for certain procedural or technical defects and where the notified defects have been removed, albeit with some delay, the matter to be considered is whether there was justifiable cause for the delay or not…”

Accordingly, the NCLAT has determined that the 7-day time limit for removal of defects is directive and that re-filing after removal of defects will not constitute a new filing.

Case title: VR Ashok Rao v., TDT Copper Ltd.

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