Assessing the Recently Reinterpreted Period of Limitation under Section 61 of the IBC

[Raghav Sengupta is pursuing the B.A., LL. B (Hons.) course at Jindal Global Law School]

In its recent decision in V. Nagarajan v. SKS Ispat and Power Ltd. (22 October 2021), the Supreme Court of India has ruled that the period of limitation to file an appeal against an order under section 61 of the Insolvency and Bankruptcy Code (“IBC”) would commence from the time of the decision’s pronouncement. The Court has also clarified that the period of limitation would not be dependent on the date on which the order was uploaded on the adjudicating authority’s website. Therefore, a person who fails to promptly submit a claim for a certified copy of the order is barred from arguing that the delay in the publication of the order extended the statute of limitation.

The Court ruled that a conscientious plaintiff should ask for the certified copy as soon as possible. Furthermore, the Court also held that the requirement of procuring a certified copy for the purpose of challenging an order at the National Company Law Appellate Tribunal (“NCLAT”) issued in an IBC process cannot be waived. Section 12 of the Limitation Act permits the interval between the filing date and the date of receipt of order to be exempted from the period of limitation when such an application has been submitted.

Factual Background

The impugned order in question had been delivered by the National Company Law Tribunal (“NCLT”) on 31 December 2019. In its order, the NCLT refused to grant an injunction in favor of the appellant, Nagarajan, who had sought interim relief against the invocation of a bank guarantee. The NCLT’s reasoning was based on the understanding that a performance guarantee did not form a part of the security interests enumerated in section 3(31) of the IBC. Interestingly, the order uploaded on 31 December 2019 had the incorrect name of the judicial member who had passed it and the corrected order was published much later on 20 March 2020.

On 23 March 2020, Nagarajan requested a free copy of the order and contended that they were yet to receive it. However, when the request for certified copy was submitted, the appeal deadline had already expired. An application was submitted with a motion for an exemption from producing a certified copy of the impugned order, since it had not been declared before the NCLAT. In holding that the certified copy had not been provided to Nagarajan, the NCLAT utilized section 61(2) of the IBC that imposes a thirty-day maximum term for reviews, which can be extended by 15 days. Furthermore, the NCLAT noted that Nagarajan did not furnish sufficient proof to establish that he had not received a certified copy of the impugned order. Nagarajan appealed to the Supreme Court against the NCLAT ruling. The key argument was that the statute of limitations would commence its operation only after the certified copy of an order had been issued to an applicant.

Issues framed by the Court

The Supreme Court upheld the judgment of the NCLAT and set aside the appeal. The Court also made several observations while dealing with the following issues:

  • When will the clock for calculating the limitation period run for appeals filed under the IBC?
  • Is the annexing of a certified copy mandatory for an appeal to the NCLAT against an order passed under the IBC?

Analysis of the Parties’ Submissions

Nagarajan stated that the NCLAT had remained closed due to the COVID-19 outbreak and that online proceedings eventually resumed in June 2020. He had appealed the decision with a downloaded copy, based on the Supreme Court’s directive, published on 13 March 2020, that went on to extend the period of limitation. Nagarajan cited the decision of Sagufa Ahmed v. Upper Assam Plywood Products Pvt Ltd., which established that the period of limitation begins to operate precisely when the affected stakeholder receives a copy of the decision. He also argued that, according to section 12 (2) of the Limitation Act, the limitation period begins to operate from the moment the copy of the decision is made accessible and not merely from the date that it has been issued.

On the other hand, SKS Ispat placed reliance on Pr. Director General of Income Tax v. Spartek Ceramics to argue that the 30-day window begins on the date that a person is made aware of the decision. They further went on to cite the decision of Ebix Singapore Pvt Ltd v. Committee of Creditors of Educomp Solutions, where the Court held that the IBC is a unique statute and that the period of limitation would have to be strictly interpreted.

Analysis of the Judgment

In its decision, the Court declared that its reasoning would be restricted to determining if the NCLAT’s review in terms of section 61(1) of the IBC was precluded by the statute of limitation. For the first issue, the Court stated that the matter of the time restriction for submitting appeals must be resolved by interpreting the terms of the IBC as well as the Limitation Act. However, in case of disputes, the IBC would take precedence. The Court observed that considering that the right to appeal is a legislative creation, there is indeed a basic distinction between the right to initiate a lawsuit and the right to appeal a decision. The Court stated that under section 9 of the Civil Procedure Code, 1908 there is an intrinsic right to bring forth a civil lawsuit  except if it is banned by law.

The Court stated that by appointing NCLT as an adjudicatory authority, the IBC envisions a complete conflict settlement mechanism. The NCLT’s ruling can be appealed to the NCLAT, and even the NCLAT’s decision can be appealed to the Supreme Court. However, section 63 of the IBC expressly excludes civil courts from exercising authority in such cases. Section 421(3) of the Companies Act is made functional by rule 50 of the NCLT Rules, which requires the NCLT Registry to provide a free certified duplicate of the decision. The Court then placed reliance on Sagufa Ahmed to hold that the affected stakeholder could wait until it obtained its copy in terms of section 420(3) of the Companies Act 2013 read with rule 50 of the NCLT Rules. Essentially, one need not compulsorily submit a request for certified copy simply for the calculation of the limitation period. The Court also clarified that this rule would not be applicable once a request for a certified copy is submitted and the same is received.

The Court went on to explain that section 12 of the Limitation Act explains how one can calculate the limitation period and precludes the duration it requires for a stakeholder to get a certified copy of the decision that they would like to challenge. Finally, the Court concluded that sections 61(1) and (2) IBC intentionally exclude the stipulation that the period of limitation commences as soon as a copy of the decision is provided to the affected stakeholder. Since the IBC is a unique legislative act, the affected party is required to ask for a certified copy immediately after the decision it wishes to contest is issued by a court.

For the second issue, the Court placed reliance on rule 22(2) of the NCLAT Rules, which stipulates that the certified copy appended to an appeal would remain binding on the parties to a dispute governed by the IBC. The Court concluded that, according to rule 14 of the NCLAT Rules, a simple discretionary remission of the requirement to apply for a certified copy would not serve as a default exception in instances where the parties made no attempt to resolve their dispute in a prompt manner. Therefore, the appeal submitted to the NCLAT was indisputably precluded by limitation because Nagarajan had not applied for a certified copy.

Concluding Remarks

This decision is consistent with similar judgments of the Court pertaining to the period of limitation for filing an appeal. In State of Maharashtra v. Ark Builders Pvt. Ltd., the Court held that “if a law prescribes that a copy of the order is to be communicated to the parties then the period of limitation can only commence from the date on which the order was received by the party concerned in the manner prescribed by the law”. Conversely, in State Bank of India v. Sree Rayalaseema Paper Mills Ltd, the Court was unwilling to accept the interpretation that the limitation period for filing an appeal commences when the copy of the contested order is issued.

The present judgment essentially adopts a contextual interpretation of section 61 and allows the courts to act as a reservoir of a plethora of principles, evolved over time, in a particular area of law. This also includes the utilization of such principles, as a properly regulated justification, for departing from the text of the statute. Given the unique structure of the IBC, this decision represents a forward step towards the protection of stakeholders’ rights. It considers the principles and factors that separate the parties to a dispute and satisfactorily concludes that an aggrieved party is required to exercise due diligence and apply for a certified copy of the order, it intends to challenge, upon its pronouncement.

Raghav Sengupta

 

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