Strict Timeline for Filing an Appeal Under the IBC Regime

[Megha Shaw is a final year law student at WBNUJS Kolkata]

Section 61(2) of the Insolvency and Bankruptcy Code, 2016, (Code) provides a limitation period of 30 days from the date of the NCLT order to allow the aggrieved party to file an appeal in the NCLAT. The NCLAT has the power to condone further delay, not exceeding 15 days, in addition to the 30 days, if the appellate tribunal is satisfied that there was a sufficient cause for the delay. This article seeks to find an answer to the question of whether any delay beyond the prescribed 45 days (30 days plus additional 15 days) can be condoned by the NCLAT. In order to answer this question, it is pertinent to analyze the two latest Supreme Court decisions in the cases of National Spot Exchange Limited v. Anil Kohli[i] (NSEL case) decided on 14 September 2021, and V. Nagarajan v. SKS Ispat and Power Ltd.[ii] decided on 22 October 2021. In these cases, the Supreme Court has refused to condone the delay and justified the strict interpretation of section 61(2) of the Code by upholding the NCLAT’s decision denying condonation of delay beyond 45 days.

National Spot Exchange Limited v. Anil Kohli

In this case, the Supreme Court declined to condone the delay of 44 days beyond the limitation period and upheld the NCLAT’s decision of rejecting the appeal due to the delay, as per section 61(2) of the Code. The appeal was filed against an NCLT order, which approved the rejection of the claim of the appellant by the interim resolution professional. The appellant pleaded that the Supreme Court should exercise its power under article 142 of the Constitution to condone the delay due to peculiar facts of the case. It was the case of the appellant that PD Agro has an admitted debt of Rs. 693 crores to the appellant and it has siphoned off Rs. 744 crores to the corporate debtor, which is the sister company of PD Agro. Thus, the appellant prayed that it was necessary to lift the corporate veil and accept the claim of the appellant against the corporate debtor. However, it should be noted that Supreme Court did not venture into the factual aspect to discuss whether the jurisdiction of the Court under article 142 of the Constitution can be exercised.

But the Supreme Court clearly held that as per section 61(2) of the Code, the appeal was required to be filed within 30 days, and any appeal beyond this period would be barred by limitation. However, as per the proviso to section 61(2) of the Code, the appellate tribunal may allow an appeal to be filed after the expiry of the said period of 30 days if there was sufficient cause for not filing the appeal, but such period shall not exceed 15 days. Therefore, it was held that under the scheme of the Code, the appellate tribunal has no jurisdiction at all to condone the delay exceeding 15 days from the period of 30 days. Moreover, the Court also discussed its inability to condone delay even where the delay may be caused due to genuine reasons such as accident or illness, etc., because such exceptions are not carved out by the legislature in the Code. The Court held that if such power of condonation of delay has not laid down in the Code, then the Court cannot insert a new provision as it is not permissible.

Nagarajan v. SKS Ispat and Power Ltd.

In this case, the Supreme Court dismissed an appeal arising under section 62 of the Code against the NCLAT order, which refused to entertain an appeal against the NCLT order on the ground of limitation under section 61(2) of the Code. The appeal in the NCLAT was filed against an NCLT order, which dismissed the application of the liquidator seeking interim relief against the invocation of a bank guarantee against the corporate debtor, as bank guarantee is not a part of ‘security interest’ as defined under section 3(31) of the Code. It was the case of the appellant that the NCLT order dated 31 December 2019 was uploaded on NCLT’s website on 20 March 2020, but the appellant never received the free certified copy of the NCLT order. On 08 June 2020, the appellant filed an appeal to the NCLAT with an application for exemption from filing a certified copy of the NCLT order, as it had not been issued. NCLAT, vide order dated 13 July 2020, dismissed the appeal, ruling that as per rule 22 of the NCLAT Rules, the appellant should have filed the appeal with the certified copy of the NCLT order, but the appellant had not done so. It also held that the appeal was filed after the limitation period of 30 days as laid down in section 61(2) of the Code and even the 15 days period for which the delay can be condoned had also lapsed.

Even though the appellant prayed to take recourse of section 421(3) of the Companies Act, 2013, the Supreme Court clearly held that the Insolvency and Bankruptcy Code is a complete code with an overriding effect as enshrined under section 238 of the Code. Thus, the rule from the Companies Act that limitation would start from the date of order being ‘made available’ would not apply to the Code, as special acts override general enactments. Supreme Court also emphasized that section 61 of the Code, begins with a non-obstante provision – “notwithstanding anything to the contrary contained under the Companies Act, 2013”. Hence, it observed that the stark difference between section 421(3) of the Companies Act and section 61(2) of the Code is in the absence of the words “from the date on which a copy of the order of the Tribunal is made available to the person aggrieved” in the Code. The Supreme Court held,

The absence of these words cannot be construed as a mere omission which can be supplemented with a right to a free copy under Section 420(3) of the Companies Act read with Rule 50 of the NCLT Rules for the purposes of reckoning limitation. This would ignore the context of the IBC’s provisions and the purpose of the legislation.

Thus, the Court held that the aggrieved party should be proactive in filing an appeal without waiting for the free certified copy. The appellant should have filed an application for getting the certified copy within the limitation period of 30 days from the date of the NCLT order and then only the period taken by the Tribunal to provide the certified copy would have been excluded under the section 12(2) of the Limitation Act.

The court also remarked that the Code is a watershed regulation that was formulated to get rid of the inordinate delays in the insolvency and liquidation proceedings. Thus, the tribunals are bound by the timeline provided under the Code as by providing the leniency to extend the limitation would be against the objective of the Code.

Concluding Remarks

Therefore, in both the cases, Supreme Court has clarified that NCLAT does not have any power to condone delay beyond the prescribed 45 days period. The clock of limitation has been given a lot of importance in the Code, a special legislation impacting the economic health of the nation, and there can be no scope of leniency and leisure of time when it comes to filing an appeal before the appellate tribunal. Even the extraordinary jurisdiction under article 142 of the Constitution of India cannot be availed to seek condonation of delay. The parties should not keep waiting to recieve free certified copies of the NCLT order to file an appeal before NCLAT, and they will have to file an application to get a certified copy within 30 days of the limitation period, as decided in the Nagarjan case.

The author is of the view that while it is necessary to implement a short limitation period to provide finality to decisions, the Code should carve out exceptions to this rule. In the NSEL case, the Court discussed that the Parliament has not carved out any exceptions in the statute to pause the clock of limitation for genuine causes of unintentional delay, like accident and illness, where the aggrieved party could not file the appeal within the prescribed 45 days period. Thus, the legislators should review the current position of law to take into account  genuine cases of delay that is beyond the control of the parties. If such an exception is not carved out, then even the Court cannot rescue the innocent parties, who will be deprived of their right to file an appeal, as the Court lacks the authority to carve out such exceptions on its own.

Megha Shaw

 

[i] 2021 SCC OnLine SC 716

[ii] 2021 SCC OnLine SC 959

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