Kerala Financial Corporation Vs Bharath Chandran (NCLT Kochi)
NCLT Kochi held that delay in filing bankruptcy application u/s. 123 of the Insolvency and Bankruptcy Code, 2016 condoned considering that compliance with Section 121(2) should be considered directory in nature. Accordingly, present appeal is allowed.
Facts- These two applications have been filed by the Kerala Financial Corporation, Applicant/Creditor, seeking condonation of delay in filing applications u/s. 123(1) of the Insolvency and Bankruptcy Code, 2016, for initiating bankruptcy proceedings against Dr. Bharath Chandran and Dr. Ashalatha Nair, who had extended personal guarantees for the debt of the same Corporate Debtor, namely Trivandrum International Health Services Limited.
Conclusion- Held that a plain reading of sub-section (2) of Section 121 of the Insolvency and Bankruptcy Code, 2016, which states that an application for bankruptcy “shall” be filed within a period of three months from the date of the order passed by the Adjudicating Authority under the sections referred to in sub-section (1), may prima facie appear mandatory. However, the provision is conspicuously silent as to any consequence or penalty for non-compliance with this timeline. In the absence of such consequences, the use of the word “shall” in this context may be construed as directory rather than mandatory. The underlying intent behind prescribing the three months appears to be to ensure expeditious proceedings, rather than to create a rigid limitation that would defeat substantive justice. Accordingly, compliance with Section 121(2) should be considered directory in nature, especially when delays are justified and do not prejudice the rights of the parties involved. Thus, the delay in filing the present bankruptcy applications under Section 123 of the Insolvency and Bankruptcy Code, 2016, is hereby condoned.
