NCLT's Inherent Powers Cannot Be Invoked To Override 30-Day Limit For Restoration Of Petitions: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has refused to revive an insolvency plea filed by V-Con Integrated Solutions Pvt. Ltd. against Shreeram Technology Services Pvt. Ltd., holding that statutory timelines under the Insolvency and Bankruptcy Code cannot be bypassed by invoking the tribunal's inherent powers.

A bench comprising Judicial Member Justice N. Seshasayee and Technical Members Arun Baroka and Indevar Pandey reiterated that the 30-day limit prescribed under Rule 48(2) of the NCLT Rules, 2016 for seeking restoration of a petition is binding and cannot be relaxed by resorting to Rule 11.

"Thus, as per the ruling GLAS Trust Company LLC [Civil Appeal No. 9986 of 2024] inherent powers (e.g., Rule 11 or 15) cannot override other express statutory provisions under Rule 48(2). Thus, we find that the Rule 11 or Rule 15 cannot be invoked to bypass the 30-day limit under Rule 48(2) in this case."

It also noted that “...time is of the essence in insolvency proceedings and the appellant could not have been lax in his appeal. Before its dismissal and thereafter for restoration, the appellant has not been vigilant enough and he cannot take refuge that the Advocate appearing on his behalf did not brief him about the proceedings. This cannot be a sufficient cause for condonation of delay. We find that the combined reading of various statutory provisions shows that there has to be sufficient cause in some form and not necessarily in the form of formal delay condonation application. And in this case we find the cause on placed record and in submissions is not sufficient for the condonation of delay beyond 30 days for restoration of the petition which was dismissed for nonprosecution."

The appellate tribunal was hearing a challenge to a December 11, 2024 order of the NCLT's Indore bench, which had rejected V-Con's plea to restore its Section 9 insolvency petition filed against Shreeram Technology Services Pvt. Ltd.

The company's original petition had been dismissed on March 25, 2022 after it failed to pursue the matter for around six months. While the NCLT had granted liberty to seek revival, V-Con approached the tribunal only on August 13, 2022, more than five months later.

Under Rule 48(2), a restoration application must be filed within 30 days of dismissal and must disclose sufficient cause for non-appearance. The NCLT rejected the plea on the ground that it was filed well beyond this period.

Before the NCLAT, V-Con argued that the delay occurred because its counsel failed to inform it about the dismissal. It submitted that a litigant should not suffer for the fault of its advocate and urged the tribunal to take a liberal view.

The company also contended that the rules do not require a formal application for condonation of delay and that the tribunal could exercise its powers under Rules 11 and 15 to extend timelines in the interest of justice.

Opposing the plea, Shreeram Technology Services Pvt. Ltd. argued that Rule 48(2) clearly mandates filing within 30 days and that the delay in the present case was substantial. It also submitted that negligence of counsel could not constitute sufficient cause.

Agreeing with the respondent, the appellate tribunal said the record showed prolonged non-prosecution followed by a delayed attempt at revival. It found that the explanation offered did not justify condonation of delay.

Relying on the Supreme Court's ruling in GLAS Trust Company LLC, the tribunal said inherent powers can be exercised only where there is no express provision and cannot be used in a manner that defeats statutory timelines.

“We find that for condonation of delay liberal interpretation cannot extend to gross negligence, inaction, or lack of bona fides. We find that Appellant-V-Con's conduct of repeated non-appearance and delayed filing for restoration falls within “gross negligence” and doesn't justify condonation of delay.”

Holding that the delay beyond the prescribed 30-day period was not liable to be condoned in the facts of the case, the NCLAT dismissed the appeal.