Sec 54C Application Filed After 14 Day of Sec 7 Application

Analysis of the Admissibility of Section 54C Applications Filed After 14 Days of a Section 7 Application

This article examines whether an application under Section 54C of the IBC Code can be admitted if filed after 14 days from the filing of a Section 7 application. Moreover, it explores whether 14-day period u/s 11A(3) is mandatory or directory and, if mandatory, whether the time taken for approvals u/s 54A & 54B can be excluded from its calculation.

Section 11A: Priority of Disposal of Insolvency Applications.

Section 11A of the Code governs the prioritization of insolvency applications filed under Sections 7, 9, 10, and 54C. It mandates that:

• If an application under Section 54C is pending, it must be decided before any applications under Sections 7, 9, or 10 against the same corporate debtor.
• If a Section 54C application is filed within 14 days of a Section 7, 9, or 10 applications, Section 54C application shall be decided first.
• If a Section 54C application is filed after 14 days from the filing of a Section 7, 9, or 10 applications, the latter applications shall be disposed of first.

From the above, the IBC Code gives precedence to a Section 54C application, provided it is filed within the stipulated 14-day period. However, Provision explicitly states that if Section 54C application is filed after this period, priority shifts to the earlier filed applications.

Judicial Interpretation: Bank of Baroda v. Shree Rajasthan Syntex Ltd.

NCLAT addressed the issue of whether the 14-day period u/s 11A(3) is mandatory or directory in Bank of Baroda v. Shree Rajasthan Syntex Ltd.

Arguments Presented: The applicant contended that the 14-day period should be considered directory, allowing for the exclusion of the time taken for approvals u/s 54A & 54B. It was argued that delays due to regulatory approvals should not disadvantage an applicant under Section 54C.

Tribunal’s Findings: The tribunal emphasized that statutory provisions prescribing consequences for non-compliance are generally considered mandatory. It cited the Supreme Court’s ruling in Sharif-ud-Din v. Abdul Gani Lone, which held that when non-compliance with a statutory provision defeats its purpose, it must be deemed mandatory.

• The tribunal noted that the Amendment Act of 2021, which introduced Section 11A, was enacted with full awareness of Sections 54A and 54B. The legislature did not provide any relaxation regarding the 14-day period.
• Consequently, it held that the time period u/s 11A(3) is mandatory and does not permit the exclusion of delays due to approvals u/s 54A & 54B.

Conclusion: Timeline U/s 11A(3) is Mandatory

NCLAT’s decision underscores that the 14-day period u/s 11A(3) is a strict statutory mandate. Any Section 54C application filed beyond this period will not receive priority over previously filed Section 7, 9, or 10 applications. IBC Application under section  7 required to be decided 1st when Application under Section 54C is Filed 14 days after Section 7 applications under IBC law. This ruling reinforces the necessity for applicants to ensure timely compliance with statutory timelines to avoid procedural disadvantages.

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