Case Title:- Aditya Kumar Tibrewal v. Om Prakash Pandey
The National Company Law Appellate Tribunal, New Delhi dealt with an appeal filed against an impugned order of the NCLT, wherein it had rejected the application by RP under Section 43, 45 read with Section 49 & 66 of IBC by holding that the same is hit by Regulation 35A of the CIRP Regulations. It observed that the time period of 75/15 days mentioned in the Regulations is only directory in nature.
Regulation 35 A reads thus:
"35A. Preferential and other transactions. –
1) On or before the seventy-fifth day of the insolvency commencement date, the resolution professional shall form an opinion whether the corporate debtor has been subjected to any transaction covered under Sections 43,45,50 or 66.
2) Where the resolution professional is of the opinion that the corporate debtor has been subjected to any transactions covered under sections 43, 45, 50 or 66, he shall make a determination on or before the one hundred and fifteenth day of the insolvency commencement date,
3) Where the resolution professional makes a determination under sub-regulation 2, he shall apply to the Adjudicating Authority for appropriate relief on or before the one hundred and thirty-fifth day of the insolvency commencement date."
The case, in brief, is that the suspended directors of Balaji Forest were not cooperating and creating hindrances in the work of the Resolution Professional despite being directed by the Adjudicating Authority to refrain from doing so. The same caused delay in making of the Report and the audited balance sheet of Balaji Forest was finalized after which RP filed an application under Section 43, 45 read with Sections 49 & 66 of IBC which was dismissed by NCLT due to it crossing the timelines mentioned u/r 35A.
However, the Appellate Authority observed that the expressions used in Regulation 35A, "shall form an opinion" "shall make a determination" and "shall apply to the Adjudicating Authority" needed an interpretation and it has to be ascertained as to what is the intent and purpose of using the expression "shall" in regulation 35A. It further held that the rules of statutory interpretation for finding out the true nature of the statutory provision, whether mandatory or directory, are well settled. The same principles have been laid out in the State of Uttar Pradesh Vs. Manbodhan Lal Shrivastava.
The Appellate Tribunal further referred to Montreal Street Railway Vs. Normandin wherein it has been held that “When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts in neglect of this duty would work serious general inconvenience, or injustice to persons who have no control over those who are entrusted with the duty, and at the same time would not promote the main object of the Legislature, it has been the practice to hold such provisions to be directory only.”
Therefore, in light of the above the Appellate Tribunal observed that if the actions taken by the Resolution Professional after the timeline prescribed in Regulation 35A of the CIRP Regulations are to be annulled, the undervalued and fraudulent transactions will go out of the reach of Resolution Process, as well as the Court and shall cause great inconvenience and injustice to Corporate Debtor. Therefore, the timeline prescribed in Regulation 35A of the CIRP Regulations is only directory and cannot be discarded merely on the ground that it has been taken beyond the prescribed limit under regulation 35 A.