Highlights:

Corporate Brief 

• Circular dated 23.04.2024 issued by RBI to notify Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) (Amendment) Regulations, 2024.
• Circular dated 26.04.2024 issued by SEBI regarding Framework for Category I and II AIFs to create encumbrance on their holding of equity of investee companies.
• Circular dated 26.04.2024 issued by SEBI to provide flexibility to AIFs and their investors to deal with unliquidated investments of their schemes.
• Circular dated 29.04.2024 issued by Securities and exchange board of India (“SEBI”) regarding Relaxation in requirement of intimation of changes in the terms of Private Placement Memorandum (“PPM”) of Alternative Investment Funds (“AIFs”) through Merchant Banker. 

Real Estate Brief 

• Office order dated 03.04.2024 issued by Uttar Pradesh Real Estate Regulatory Authority (UP RERA Authority) regarding procedure to be followed by complainants in respect complaint and submission of related documents.
• Office order dated 12.04.2024 issued by Uttar Pradesh Real Estate Regulatory Authority (UP RERA Authority) regarding SOP for registration of Promoters in a Real Estate Project.
• Office order dated 18.04.2024 issued by Uttar Pradesh Real Estate Regulatory Authority (UP RERA Authority) regarding SOP for obtaining certified copies of orders etc. of the UP RERA Authority. 

NCLT Brief

• Whether the liability of corporate debtor arising out the decree of DRT and consequent Recovery Certificate falls under the definition of ‘financial debt’ under Section 5(8) of IBC, 2016, or not?

Litigation Brief 

• Condonation of Delay Application Filed By Non-Party Is Totally Unsustainable In Law.

 

Corporate Brief 

Circular dated 23.04.2024 issued by RBI to notify Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) (Amendment) Regulations, 2024.

• RBI vide circular dated 26.04.2024 bearing number FEMA.395(2)/2024-RB announced amendments to the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019. These changes were introduced through the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) (Amendment) Regulations, 2024.
• Following amendments have been made: –

3. The amendment to regulation 3.1 now permits the payment for equity shares of an Indian company listed on an International Exchange through banking channels, either to the company’s foreign currency account or as an inward remittance from abroad. Additionally, sale proceeds from equity shares can be sent abroad or credited to the bank account of the permissible holder, as per the provisions of the Foreign Exchange Management (Deposit) Regulations, 2016.
4. Further, the amendment to regulation 4 (8) necessitates the reporting of the purchase or transfer of equity instruments by Foreign Portfolio Investors (FPIs) to the Reserve Bank. This reporting is to be done through form LEC (FII) by Authorized Dealer Category I. In the case of investee Indian companies, FPIs must report the purchase or subscription of equity shares classified as FPI to the Reserve Bank via an Authorized Dealer Category I bank, using the same form, with the exception of transfers between permissible holders.

Circular dated 26.04.2024 issued by SEBI regarding Framework for Category I and II AIFs to create encumbrance on their holding of equity of investee companies.

• SEBI vide circular dated 26.04.2024 bearing number SEBI/HO/AFD/PoD1/CIR/2024/027 laid down conditions that must be adhered to create encumbrance on equity of investee companies for borrowing purposes, particularly those involved in the development, operation, or management of projects within the infrastructure sub-sectors listed in the Harmonised Master List of Infrastructure:-

1. To facilitate borrowing of the investee company, existing schemes of Category I or Category II AIFs, which have not on-boarded investors, before April 25, 2024, may create encumbrance on the investee company’s equity. However, this encumbrance must be explicitly disclosed in their Private Placement Memorandums (PPMs), along with a clear disclosure of associated risks.
2. For encumbrances created before April 25, 2024, by Category I or II AIF schemes on the investee company’s securities, may continue if such encumbrance was created after making an explicit disclosure in the PPM of the scheme.
3. Category I or Category II AIFs are obligated to ensure that borrowings against encumbered equity are strictly allocated for development, operation or management of investee company purposes and not diverted for any other use including investing in another company.
4. The period of encumbrance created shall not exceed the remaining tenure of the schemes of Category I or Category II AIFs.
5. In the case of Category I or Category II AIFs with 50% foreign investment or foreign sponsors/managers or with non-resident Indians as external members in their investment committee shall ensure compliance with para 7.11.12 of the RBI Master Direction dated January 04, 2018, “Foreign Investments in India”, as though the AIF is a person who resides outside India.
6. In the event of default by the borrower investee company, Category I or Category II AIF must ensure that neither the fund nor its investors are subject to liabilities beyond the equity of the borrower investee company encumbered by the AIF.
7. In case encumbrances were created by a scheme of Category I or Category II AIF without making necessary disclosure in PPM-
   • If the encumbrances were created on securities of the investee company as stated in para 2 of the circular and all investors’ consent is obtained by October 24, 2024, at the latest, such encumbrances may persist. In case the consent of investors is not obtained within aforementioned period, the encumbrances will be removed by January 24, 2025 at the latest
   • In cases where encumbrance was created on securities of the investee company other than as provided in para 2 of the circular, such encumbrance is not to be continued with and will be removed by October 24, 2024 at the latest.
8. Interpretation is not to be given to the aforementioned flexibility of creating encumbrance to mean the allowing of schemes of category I and II AIFs to extend any form of guarantee for investee company.
9. Encumbrance is not to be created by schemes of Category I or Category II AIFs on their investments in foreign investee companies.
10. Implementation standards are to be formulated by the pilot Standard Setting Forum for AIFs (SFA) with SEBI’s consultation in order to ensure that encumbrance created on equity of investee company by Category I or Category II AIFs is only used for facilitation of debt raising at the infrastructure sector investee company as stated in para 2 of the circular. Such implementation standards are to be adhered to and adopted by the managers of such AIFs.

Circular dated 26.04.2024 issued by SEBI to provide flexibility to AIFs and their investors to deal with unliquidated investments of their schemes.

• SEBI vide circular dated 26.04.2024 bearing number SEBI/HO/AFD/PoD-I/P/CIR/2024/026 outlined conditions regarding Regulation 29(9) and Regulation 29(9A) of the AIF regulations. The conditions for Regulation 29(9) are as follows:

1. The AIF/manager must conduct a bid for at least 25% of the value of its unliquidated investments before seeking requisite investor consent. The bid is to represent the consolidated value of all unliquidated investments of the scheme’s investment portfolio.
2. Before seeking their consent, the AIF/ manager shall disclose the following to the investors-
3. Details of unliquidated investment, proposed tenure of Dissolution Period, value recognition of the unliquidated investments for reporting to Performance Benchmarking Agencies, etc.
4. A range indicative of bid value in addition to the valuation of the unliquidated investments carried out by two independent valuers.
5. Prior to the expiry of the Liquidation Period, the AIF/manager must notify SEBI about obtaining investor consent and their decision to enter into the Dissolution Period.
6. If a minimum bid of 25% of value of unliquidated investments of the scheme is successfully organized by the AIF/manager, dissenting investors should have the option to completely exit the scheme out of the 25% Post the exercise of such option by dissenting investors, any unsubscribed portion may be utilized for pro-rata exit for non-dissenting investors in case they opt for the same.
7. In the event that a minimum bid of 25% is not organized, the AIF can still choose the Dissolution Period, provided that consent is obtained from at least 75% of investors by value of their investment in AIF scheme.
8. In cases where the bidder or its related parties are investors in the scheme, exit from the scheme out of the bid shall not be provided to such investors.
9. For suitably grasping the track record of performance of the manager and for reporting the same to Performance Benchmarking Agencies, at the time of entering into the Dissolution Period, the value of such unliquidated investments of the scheme shall be computed in the following method-
10. Based on bid value, in case the AIF/ manager arranges a bid for a minimum of 25% of the value of unliquidated investments of the scheme; or
11. One Rupee, in case the AIF/ manager fails to arrange a bid for a minimum of 25% of the value of unliquidated investments of the scheme.
12. Management fee shall not be charged by the manager of the AIF during the Dissolution Period.
13. The performance of the manager during the Dissolution Period must be documented and reported to Performance Benchmarking Agencies separate from the performance of the scheme prior to entering the Dissolution Period.
14. Should unliquidated investments remain unsold by the scheme of the AIF during the Dissolution Period, they must be distributed in-specie to investors as a mandatory measure. No additional extension or Liquidation Period will be made available to these schemes after the expiry of the Dissolution Period.
15. In the context of proviso of Regulation 29(9), the following is stipulated-
    • During the Liquidation Period, in case the AIF fails to obtain the necessary investor consent for entering into the Dissolution Period or in-specie distribution, then the unliquidated investments shall be mandatorily distributed to investors in-specie, without the requirement of obtaining the consent of 75% of the investors by value of their investment in the scheme of the AIF.
    • 1.2. Such investments distributed in-specie shall be valued at one rupee for capturing the track record of performance of the manager and for reporting to Performance Benchmarking Agencies.
    • 1.3. In the case of an investor who is not willing to take in-specie distribution of unliquidated investments, such investments shall be written off.

• Following are the conditions of regulation 29(9A)-

2025. AIF schemes that have a Liquidation Period that expired or is due to expire on or before July 24, 2024, will receive a fresh Liquidation Period extension till April 24, 2025.
2026. This extension is exclusively available to schemes that do not have any pending investor complaints concerning the non-receipt of funds/securities as of April 25, 2024. Schemes with such pending complaints may avail of the fresh Liquidation Period upon resolution of the complaints, starting from the resolution date until April 24, 2025.
2027. Throughout the fresh Liquidation Period, the scheme must complete the liquidation of investments or distribute investments in-specie, or opt for Dissolution Period.

• The manager, trustee, and key personnel of the AIF, as well as the manager, bear the responsibility of ensuring adherence to the aforementioned procedures. Additionally, the manager is required to submit a compliance report with the provisions of this circularl in the specified format provided on SEBI Intermediary Portal.
• The trustee/ sponsor shall ensure that the ‘Compliance Test Report’ prepared by the manager in terms of SEBI Master Circular for AIFs, includes compliance with the provisions of this circular.
• With regard to Regulation 29A (8) of AIF Regulations, the following is specified-
  • In case of any Liquidation Scheme launched by an AIF before April 25, 2024 will continue to be governed by SEBI Circular No. SEBI/HO/AFD/PoD1/CIR/2023/098 on “Modalities for launching Liquidation Scheme and for distributing the investments of AIFs in-specie” till such schemes are concluded.

Circular dated 29.04.2024 issued by Securities and exchange board of India (“SEBI”) regarding Relaxation in requirement of intimation of changes in the terms of Private Placement Memorandum (“PPM”) of Alternative Investment Funds (“AIFs”) through Merchant Banker. 

• The SEBI vide circular dated 29.04.2024 bearing number SEBI/HO/AFD/PoD/CIR/2024/028 has relaxed the obligations concerning modifications to the PPM for AIFs and Large Value Funds for Accredited Investors (LVFs). As per the updated regulations outlined in Annexure A of the circular, AIFs and LVFs are now permitted to directly submit these changes to SEBI without the involvement of a Merchant Banker.
• Further, LVFs have the option to submit any alterations to the PPM directly to SEBI. However, this submission must include a duly signed and stamped declaration from the CEO of the AIF Manager (or an individual in a comparable role) and the Compliance Officer of the AIF Manager, adhering to the format outlined in Annexure B of this circular.

Real Estate Brief

Office order dated 03.04.2024 numbered 4771 of 2024-25 issued by Uttar Pradesh Real Estate Regulatory Authority (UP RERA Authority) regarding procedure to be followed by complainants in respect complaint and submission of related documents.

An office order was issued by UP RERA Authority to provide directions in respect of submission of physical copies of complaint and related documents after registration of complaint on RERA portal. In the said office order, it has been mentioned that:

• As per the Real Estate (Regulation and Development) Act, 2016 (“Act”) and Rules of 2016, the complainants can register their complaints through the facility available on the portal (up-rera.in).
• Prior to the hearing of the complaint by the concerned bench of UP RERA Authority, an Evaluator would evaluate the complaint details and related documents uploaded. In case there is any deficiency in complaint or documents, the complainant is intimated about the same via e-mail. The complainant can rectify such deficiencies by logging onto the portal.
• Once all the deficiencies have been rectified, the complainant is sent a message that the evaluation of the complaint is complete and then, the complainant needs to submit the physical copies at the RERA office, after which the matter can be listed for hearing before the concerned bench.

The said office order further states that the complainant is required to ensure the following in respect of submission of physical copies of complaint and related documents:

1. To take the prints of all the documents submitted are taken, including Allotment Letter, BBA, Payment Receipts etc., submitted on the portal w.r.t. the complaint.
2. Each and every document needs to be numbered as per the serial number and every copy thereof needs to be self-attested.
3. The complainant needs to prepare a photocopy set of all the documents and the complaint and thereafter, send it by post or personally submit at the UPRERA office.
4. The complainant also needs to upload at the portal the acknowledgment receipt received on the delivery.

Also, the documents pertaining to the complaint need to be made available at the UPRERA office immediately after the receipt of message of evaluation being complete by the UP RERA Authority.

Office order dated 12.04.2024 numbered 5075 of 2024-25 issued by Uttar Pradesh Real Estate Regulatory Authority (UP RERA Authority) regarding SOP for enrolment of Promoters in a Real Estate Project:

UP RERA Authority vide its office order dated 12.04.2024 issued SOP in respect of enrolment of Promoters of a project which inter alia includes the following steps:

1. Online Enrolment;
2. Creation of Login Id;
3. Creation of Promoter Profile;
4. Details to be provided by the Promoter.

Once the details are provided by the Promoter, an evaluation shall be conducted by the technical division of the UP RERA Authority. In case there are no objections published within a period of 15 days from the date of submission of application of enrollment, then the profile of the Promoter shall be automatically validated. In such a case, the details of information and documents submitted by the Promoter may be scrutinized in future at the time of future project registration.

The Promoter shall keep the profile updated from time to time and whenever registration is applied for a new project, the Promoter shall update the details via ‘edit detail’ option.

In case any deficiency or incorrect information is found by the UP RERA Authority, then the Promoter shall be held liable under Section 60 and 61 of the Act.

These SOP shall be effective from the date the UP RERA Portal is updated and the said online facility for Promoter enrolment goes live.

Office order dated 18.04.2024 issued by Uttar Pradesh Real Estate Regulatory Authority (UP RERA Authority) regarding SOP for obtaining certified copies of orders etc. of the UP RERA Authority 

UP RERA Authority vide its order dated 18.04.2024 prescribed Standard Operating Procedure (SOP) in respect of complaints under Section 31 of the Act and orders issued in respect thereof. The said certified copies may be applied for online through ‘Request for Certified Copy of Documents’ link on the website of UP RERA Authority.

NCLT Brief

Whether the liability of corporate debtor arising out the decree of DRT and consequent Recovery Certificate falls under the definition of ‘financial debt’ under Section 5(8) of IBC, 2016, or not?

The aforementioned question was duly answered in a recent judgment passed by the Hon’ble National Company Law Appellate Tribunal (“NCLAT”), Chennai Bench dated 02.05.2024 in the matter of Virigineni Anjaiah vs. Pridhvi Asset Reconstruction and Securitization Company Limited & anr. [CA(AT)(Ins) 224/2024]

Brief facts:

The appeal was preferred by Mr. Virigineni Anjaiah (“Appellant”), the suspended Director of the M/s. Sri Pavana Keerthi Hotels India Pvt. Limited (“Corporate Debtor”) which dealt in the business of hospitality. The Corporate Debtor was granted a loan of Rs.19.28 crore from Andhra Bank which was payable in 94 instalments commencing from June 2015 to March 2023 and was secured by the personal guarantee of the Directors and other collateral securities.

Due to the non-completion of its project, the Corporate Debtor defaulted in the repayment of the loan. Subsequently, the loan account of the Corporate Debtor was classified as Non-Performing Asset (“NPA”) on 31.10.2015. Further, Andhra Bank filed an Original Application (“OA”) before the Debts Recovery Tribunal-I (“DRT”), Hyderabad against the Corporate Debtor and the guarantors. Ld. DRT vide Order dated 19.02.2019 allowed the OA for recovery of Rs.25,71,79,268/- along with interest @12% with cost against the Corporate Debtor and the guarantors and thereafter, issued Debt Recovery Certificate on 09.07.2019. Consequently, the Recovery Officer of Ld. DRT issued Demand Notice dated 22.07.2020 for payment of the said sum.

During the pendency of the OA before the Ld. DRT, Andhra Bank assigned the debt portfolio of Corporate Debtor in favour of M/s. Pridhvi Asset Reconstruction and Securitization Company Limted (“M/s PARAS”) vide Assignment Agreement dated 27.09.2017. Thereafter, M/s PARAS became the applicant in the OA and ultimately the decree holder.

M/s PARAS (“Financial Creditor/Respondent”) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) before National Company Law Tribunal (“NCLT”), Hyderabad with a prayer for seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) proceedings of the Corporate Debtor. The Hon’ble NCLT vide Order dated 11.04.2022 allowed the Section 7 IBC application and initiated the CIRP proceedings against the Corporate Debtor.

The Appellant, being aggrieved by the order of NCLT, filed an appeal under Section 61 of the IBC before NCLAT, Chennai Bench to set aside the said order of NCLT, Hyderabad.

Contentions of the Appellant:

The Appellant contended that the Financial Creditor cannot assume the character of a financial creditor under IBC merely on the basis of the Assignment Agreement and Recovery Certificate issued by the DRT. The Appellant relied upon the judgement of the Hon’ble NCLAT in the matter of Ashok Agarwal Vs Amitex Polymers Pvt. Ltd. [ CA(AT) (Ins) 608/2020] wherein it was held that the term ‘financial creditor’ under Section 5(7) of IBC do not include a decree holder and hence, the appeal was allowed while setting aside the Order of NCLT.

Further, the Appellant relied upon the principles laid down in the judgment of NCLAT in the matter of Sushil Ansal Vs Ashok Tripathy & Ors. [CA(AT)(Ins) 452/2020], and contended that the Financial Creditor/ Respondent does not qualify to be a ‘financial creditor’ within the definition of Section 5(7) of the IBC as the Financial Creditor is merely a decree holder and the claimed amount is an adjudicated amount under a decree and not against a debt disbursed. Hence, the Section 7 IBC application against the Corporate Debtor is not maintainable.

Contentions of the Respondent:

The Respondent/ Financial Creditor contended that it is an asset reconstruction company and it became the financial creditor of the Corporate Debtor by virtue of the Assignment Agreement entered with Andhra Bank dated 27.09.2017 under Section 5 of SARFAESI Act, 2002 during the pendency of the proceedings before DRT, Hyderabad. The Financial Creditor initiated steps to enforce the security interests and in the meanwhile, DRT allowed the OA on 19.02.2019 and issued a Debt Recovery Certificate against the Corporate Debtor on 09.07.2019. In between the Corporate Debtor acknowledged the debt by giving ‘one-time settlement offer’ vide letter dated 16.01.2020.

The Respondent also contended that the appeal has been filed on untenable grounds with an intention to frustrate the object of the IBC and delay the CIRP proceedings. The Respondent relied upon the judgment of the Hon’ble Supreme Court in the matter of Kotak Mahindra Bank Limited Vs A. Balakrishna [2022 9 SCC 186] wherein the Hon’ble Supreme Court held that the Recovery Certificate gives rise to fresh cause of action and the holder of the Recovery Certificate would be a ‘financial creditor’ under Section 5(7) of the IBC.

Findings of NCLAT:

The Hon’ble NCLAT while relying on the judgment passed by the Hon’ble Supreme Court in Kotak Mahindra Bank Limited Vs A. Balakrishna, held that a liability in respect of a claim arising out of a Recovery Certificate would be considered a ‘financial debt’ within the purview of Section 5(8) of the IBC an the Recovery Certificate holder would be the ‘financial creditor’ within the purview of Section 5(7) of the IBC who would be entitled to initiate the CIRP.

NCLAT further held that the fact that a decree holder who has moved an application under Section 7 of IBC would not lead to a conclusion that CIRP, if ordered, will only result in recovery of the dues of the financial creditor. Hence, the NCLT has committed no default in admitting CIRP proceedings of the Corporate Debtor.  Consequently, the appeal was dismissed by the Hon’ble NCLAT.

Conclusion:

Through the eyes of the law laid down in Kotak Mahindra Bank Limited(supra), it is of utmost clarity that the liability arising out of a decree obtained from DRT and the consequent Recovery Certificate falls under the definition of ‘financial debt’ under Section 5(8) of the IBC and the decree holder falls under the purview of ‘financial Creditor’ under Section 5(7) of the IBC. 

Condonation of Delay Application Filed By Non-Party Is Totally Unsustainable In Law

Vijay Laxman Bhawe Since Deceased through his Legal Heirs v. P & S Nirman Pvt. Ltd. and Others, 2024 SCC OnLine SC 838 (May 8, 2024) passed by Hon’ble Supreme Court of India

The appeal was filed against a disputed judgement where a non-party, who were claiming rights which were based on an unregistered agreement with the legal heirs of the original plaintiff, were allowed by trial court to restore a dismissed suit concerning land acquisition. The same was also upheld by High Court.

In 2019, the legal heirs of the plaintiff filed an application in the subject suit seeking condonation of delay of 8 years and 4 days in filing application for restoration of subject suit. The application is still pending adjudication. Later in 2021, during the pendency of the application, a private limited company named P&S Nirman Pvt. Ltd., claiming to be assignee from the plaintiff’s legal heirs, filed an application seeking condonation of delay. The company had entered into an agreement of sale with the legal heirs to procure benefit arising out of the subject land and also undertook an irrevocable power of attorney, making itself Attorney for doing all such acts, deeds related to the agreement of sale.  Such restoration of application was allowed by Trial court and upheld by High court by dismissal of civil application filed by appellants. The issue was whether P&S Nirman Private Limited has rights to file application on condonation of delay?

The Apex court observed that the entertaining of application filed by the respondent by the trial court is totally unsustainable in court. The claim made by respondent is based upon an unregistered agreement for sale and the court refrains from commenting anything about the sale as that is prejudicial to the rights of parties. But the point of entertaining of application filed at the behest of a stranger, who is not a party to the suit is illegal. The court further noted that if such approach is approved, anyone will be able to move to court and file an application for condonation of delay in filing an application on restoration of suit even if he is not the part to the suit in question.

The High Court had ignored the urge of appellants where they claimed that the respondent is totally a stranger as well as the reasons given by him for condonation of delay do not fulfil “sufficient cause”. At present, although it was not necessary for the court to go into the reasoning as given by both trial court as well as High court regarding “sufficient cause” for condonation of delay is right or not, but the apex court is of the idea that the reasonings given do not fulfil the factor of sufficient cause which has been propounded through several judgements. Additionally, if the application which was filed by the actual parties, the legal heirs of the plaintiff, still pending then questioning the necessity and propriety of looking into a subsequent application filed by non-party is travesty of justice. The Apex Court quashed the judgments given by Trial Court and High Court which allowed the condonation of delay and restoration of suit as filed by non-party.

Litigation Brief

Condonation of Delay Application Filed By Non-Party Is Totally Unsustainable In Law.

Vijay Laxman Bhawe Since Deceased through his Legal Heirs v. P & S Nirman Pvt. Ltd. and Others, 2024 SCC OnLine SC 838 (May 8, 2024) passed by Hon’ble Supreme Court of India

The appeal was filed against a disputed judgement where a non-party, who were claiming rights which were based on an unregistered agreement with the legal heirs of the original plaintiff, were allowed by trial court to restore a dismissed suit concerning land acquisition. The same was also upheld by High Court.

In 2019, the legal heirs of the plaintiff filed an application in the subject suit seeking condonation of delay of 8 years and 4 days in filing application for restoration of subject suit. The application is still pending adjudication. Later in 2021, during the pendency of the application, a private limited company named P&S Nirman Pvt. Ltd., claiming to be assignee from the plaintiff’s legal heirs, filed an application seeking condonation of delay. The company had entered into an agreement of sale with the legal heirs to procure benefit arising out of the subject land and also undertook an irrevocable power of attorney, making itself Attorney for doing all such acts, deeds related to the agreement of sale.  Such restoration of application was allowed by Trial court and upheld by High court by dismissal of civil application filed by appellants. The issue was whether P&S Nirman Private Limited has rights to file application on condonation of delay?

The Apex court observed that the entertaining of application filed by the respondent by the trial court is totally unsustainable in court. The claim made by respondent is based upon an unregistered agreement for sale and the court refrains from commenting anything about the sale as that is prejudicial to the rights of parties. But the point of entertaining of application filed at the behest of a stranger, who is not a party to the suit is illegal. The court further noted that if such approach is approved, anyone will be able to move to court and file an application for condonation of delay in filing an application on restoration of suit even if he is not the part to the suit in question.

The High Court had ignored the urge of appellants where they claimed that the respondent is totally a stranger as well as the reasons given by him for condonation of delay do not fulfil “sufficient cause”. At present, although it was not necessary for the court to go into the reasoning as given by both trial court as well as High court regarding “sufficient cause” for condonation of delay is right or not, but the apex court is of the idea that the reasonings given do not fulfil the factor of sufficient cause which has been propounded through several judgements. Additionally, if the application which was filed by the actual parties, the legal heirs of the plaintiff, still pending then questioning the necessity and propriety of looking into a subsequent application filed by non-party is travesty of justice. The Apex Court quashed the judgments given by Trial Court and High Court which allowed the condonation of delay and restoration of suit as filed by non-party.

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