NCLAT Rejects Guarantor's Plea of Ignorance of Order Appointing Bankruptcy Trustee After Participating In Proceedings

The National Company Law Appellate Tribunal (NCLAT) at Chennai has dismissed an appeal filed by a personal guarantor to MBS Impex Pvt. Ltd. as barred by limitation, holding that his plea of gaining knowledge of the order at a later date was untenable since he had participated in the proceedings and that the delay of 32 days was beyond the condonable limit prescribed under law.

A Bench comprising Judicial Member Justice Sharad Kumar Sharma and Technical Memer Jatindranath Swain observed, “….Though he might not be present on the day of pronouncement of order, but since he has participated in the proceedings right from the day where the application under Section 95 of the Code was filed against him. Therefore, his plea that he was not aware of the fact of the order having been pronounced cannot be accepted by this Appellate Tribunal, being contrary to records. In any case, the limitation will start only from the date of pronouncement and not from the date of knowledge, especially when the Appellant is a party, and was contesting the proceedings. .”

The appeal was filed by Anurag Gupta, personal guarantor to the corporate debtor, against an order dated May 8, 2025 passed by the Adjudicating Authority by which an application filed by Rare Assets Reconstruction Pvt. Ltd., the financial creditor, was allowed and a Bankruptcy Trustee was appointed for Gupta.

Gupta sought condonation of the delay of 15 days in filing the appeal, submitting that he came to know about the impugned order only upon receiving an email communication from the newly appointed Bankruptcy Trustee on May 16, 2025, and thereafter filed the appeal on July 7, 2025.

He further submitted that the National Company Law Tribunal (NCLT), Hyderabad, was closed for summer vacation during May 2025, which prevented him from applying for a certified copy of the impugned order. He also cited technical glitches in making payment for stamps as the reason for applying for the certified copy only on June 9, 2025, which was received on June 18, 2025.

On this basis, he contended that the summer vacation period ought to be excluded while computing limitation under Section 61(2) of the Insolvency and Bankruptcy Code, read with Section 4 of the Limitation Act and Rule 3 of the NCLAT Rules, and that the delay was within the condonable period.

Opposing the plea, the respondents argued that Gupta had been a party to the proceedings before the Adjudicating Authority and could not now claim that he was unaware of the order.

They also pointed out that the tribunal registry continued to function during the vacation period, and that there was enough time for him to apply for a certified copy. According to them, the appeal had in any case been filed beyond the outer limit of 45 days permitted under law.

On examining the record, the appellate tribunal found that Gupta had failed to offer any convincing explanation for the delay. It observed that he appeared to have proceeded on the assumption that a delay would be condoned as a matter of course, which is not the position in law.

The tribunal noted that Gupta had been participating in the proceedings from the stage when action was first initiated against him under the Insolvency and Bankruptcy Code. In that backdrop, it held that he could not take the plea that he was unaware of the order having been pronounced.

The tribunal also declined to accept his argument on exclusion of the vacation period. It clarified that such exclusion is permissible only where the limitation period expires during the time when the tribunal is closed. In this case, the tribunal was functioning well before the limitation period came to an end on June 6, 2025.

Even if his claim of having learned about the order on May 16, 2025 were to be accepted, the tribunal noted that he had not acted promptly thereafter. He did not take timely steps to apply for a certified copy within the limitation period, reflecting a lack of diligence in pursuing his remedy.

Relying on the Supreme Court's ruling in V. Nagarajan v. SKS Ispat & Power, the tribunal held that such lack of diligence is inexcusable.

Finding that the delay in filing the appeal was 32 days, and in any case beyond the condonable limit of 15 days under Section 61(2) of the Insolvency and Bankruptcy Code, the tribunal refused to condone the delay.

Accordingly, the application for condonation of delay was rejected, and the appeal was dismissed as barred by limitation.