NCLAT reprimands NCLT for undue delay as time being essence under code

NCLAT reprimands NCLT, Allahabad (‘Tribunal/’Adjudicating Authority’) for taking mandatory timeframe scheme prescribed under the Insolvency and Bankruptcy Code, 2016 (‘the Code’) “leisurely and lightly”, thus dismisses petition pending before Tribunal for delay in rectification beyond prescribed period;

Surendra Trading Company(‘Operational Creditor’/ ‘Respondent’) filed insolvency petition before the Tribunal against Jute Mills (‘Appellant’/’Corporate Debtor’) w.r.t. claims pertaining to 2001-02 which was opposed by the Corporate Debtor for being time barred,

Tribunal directed Operational Creditor to remove procedural defects in the petition and passed status quo order,which was challenged by the Corporate Debtor while proceedings were pending before the Tribunal;

Compares Insolvency Resolution Process under different provisions of the Code and opines that time is of essence for adjudication of petitions, accordingly postulates time limit for maintaining/ rejecting the petition as directory while adding that provisos providing for rejection of application in case of failure to rectify petition within time limit as mandatory;

Observes that Sec. 12 of the Code (which provides time period of 270 days for completion of insolvency resolution process, inclusive of one time extension) is mandatory, resultant effect being initiation of liquidation proceedings u/s 33,in case of non-completion of Corporate Insolvency Resolution process within prescribed period;

Relies on SC ruling in Smt. Rani Kusum wherein it was observed that “The Humanist rule that procedure should be the handmaid and not mistress, of legal justice compels consideration of vesting a residuary power in the judges to act ex debito justitiae where the tragic sequel otherwise would be wholly inequitable”:New Delhi NCLAT

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