In a landmark ruling, NCLAT Chennai emphasizes the imperativeness of timely appeals under the Insolvency and Bankruptcy Code, dismissing State of Tamil Nadu's belated claim against Sri Nagananthana Mills Limited.
In a significant judgment delivered by the National Company Law Appellate Tribunal (NCLAT) Chennai, the tribunal upheld the rejection of a delayed claim filed by the State of Tamil Nadu against the Corporate Debtor, M/s. Sri Nagananthana Mills Limited, which was undergoing liquidation. The ruling reiterates the importance of adhering to statutory timelines under the Insolvency and Bankruptcy Code, 2016, emphasizing that once a liquidation process reaches finality, reopening it is impermissible even on equitable grounds.
The case, heard by Justice Sharad Kumar Sharma, Member (Judicial), and Jatindranath Swain, Member (Technical), revolved around the rejection of a tax liability claim amounting to Rs. 1,70,15,094 by the liquidator of the Corporate Debtor. The liquidation process had been initiated on 21st June 2018, following the NCLT's order in CP/611/IB/2017. Despite the public notice issued by the liquidator inviting claims by 26th July 2018, the State of Tamil Nadu filed its claim much later on 12th February 2020, which was subsequently rejected on 17th February 2020 due to non-compliance with prescribed formats and statutory limitations.
The State filed an Interlocutory Application under Section 42 of the I&B Code seeking to set aside the liquidator's rejection order after a significant delay, further complicated by the Covid-19 pandemic-related extensions. However, the Tribunal, referencing the prescribed 14-day limitation period under Section 42 and the exclusions from 15th March 2020 to 28th February 2022, found the appeal time-barred, as the applications were filed on 19th July 2023.
The tribunal highlighted that the liquidation process was substantially advanced, with assets distributed under Section 53, and cited the judgment in Deputy Commissioner Commercial Taxes (Audit), Raichur v. Surana Industries Ltd., reinforcing the necessity for timely claims and appeals. Consequently, the Appellate Tribunal dismissed the Company's appeal, emphasizing the finality of liquidation proceedings and the non-entertainment of time-barred claims.
Bottom Line:
Insolvency and Bankruptcy Code - Limitation is pivotal in liquidation proceedings, and time is of the essence under the I & B Code. Once the liquidation process is substantially progressed and assets are distributed under Section 53, the process cannot be reopened even on equitable considerations.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 42, 53; Regulation 16(1) and Regulation 44(1) of IBBI (Liquidation Process) Regulations, 2016.
State of Tamil Nadu v. Mr. S. Muthuraju, (NCLAT)(Chennai) : Law Finder Doc Id # 2822795
