Limitation in Filing Appeal before the NCLAT — Interesting Development

Overview

Section 61(1)¹ of the Insolvency and Bankruptcy Code, 2016 (hereinafter “the IB Code”) provides for the statutory right to appeal against the order of the adjudicating authority — NCLT before the NCLAT. To that effect, Section 61(2)² provides for a limitation period of 30 days, which is extendable for a further fifteen days, provided there is a sufficient cause for the delay. In Embee Software (P) Ltd. v. Solicon (P) Ltd.,³ there was a delay of 15 days beyond the 30 days’ time. The causes were late uploading of the order combined with the intervention of summer vacation and bereavement in the family of the counsel of the appellant. The Court found that the delay was neither intentional nor wilful and therefore, condoned the delay.

As a matter of general rule, the NCLAT in numerous cases has consistently rejected the appeal on the sole ground that the appeal is preferred beyond the 30 + 15 days period.⁴ The limitation in filing the appeal has been rigorously upheld and no inherent power of the NCLAT has been invoked to condone an appeal filed after 45 days.⁵

The Supreme Court in National Spot Exchange Ltd. v. Dunar Foods Ltd. (Resolution Professional),⁶ has reaffirmed the position of the law that an appeal must be filed within 30 days, and any delay beyond 15 days cannot be condoned in terms of Section 61(2) of the IB Code. The Supreme Court even refused to exercise its extraordinary power under Article 142 of the Constitution of India to condone a delay of 44 days holding that the extraordinary power could not be exercised against the express provisions of a statute.⁷

However, there are two crucial points to be taken note of herein. Firstly, the principled question of law, that whether Section 61(2) really does not allow any scope to allow delay beyond 45 days and secondly, the existing reality where the rigorous position is anyway getting circumvented by the current jurisprudence before the NCLAT.

These two points form the subject-matter of the discussion in this column post:

A. Principled question

Section 61(2) of the IB Code stipulates that every appeal must be filed within thirty days before the National Company Law Appellate Tribunal, provided that the NCLAT may allow an appeal to be filed after the expiry of the said period of 30days, if it is satisfied that there was sufficient cause for not filing the appeal, but such period shall not exceed 15days.

The same is interpreted to not allow any scope of condonation of delay beyond 15 days after the 30 days’ time in filing the appeal.⁸ It is here pertinent to note Section 238-A of the IB Code which states:

238-A. Limitation.—The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the adjudicating authority, the National Company Law Appellate Tribunal, the Debts Recovery Tribunal, or the Debts Recovery Appellate Tribunal, as the case may be.

(emphasis added)

The above clearly shows that Sections 61(1) and (2) of the IB Code is now qualified further by the provision of Section 238-A of the IB Code. The same as a corollary must mean that the defences and grounds of resetting/restarting of limitation time or condonation of delay contained in provisions such as Sections 5,⁹ 14,¹⁰ 18,¹¹ and 19¹² of the Limitation Act, 1963 must also be available to an appellant filing an appeal before the NCLAT.

The inspiration must be looked into the interpretation given to Section 238-A of the IB Code in context of original applications before the NCLT. The Supreme Court in Sesh Nath Singh v. Baidyabati Sheoraphuli Cooperative Bank Ltd.¹³ has interpreted Section 238-A of the IB Code in the following manner:

66. [w]e see no reason why Section 14 or Section 18 of the Limitation Act, 1963 should not apply to proceeding under Section 7 or Section 9 of the IBC.

* * *

86. … under Section 9 of the IBC, is default on the part of the corporate debtor, and the provisions of the Limitation Act, 1963, as far as may be, have been applied to proceedings under the IBC, there is no reason why Section 14 or Section 18 of the Limitation Act would not apply for the purpose of computation of the period of limitation.

Therefore, principally the provision of Section 61(2) of the IB Code, on account of Section 238-A of the IB Code, must be supplemented by the provisions of the Limitation Act, 1963 as far as they apply.

Furthermore, the Supreme Court in its decision in Kalpraj Dharamshi v. Kotak Investment Advisors Ltd.¹⁴ applied Section 14 of the Limitation Act and held that the appellant before the NCLAT was entitled to the extension of the period, for the time spent in arguing writ petition before the High Court. While the judgment may not be rightly applying Section 14 of the Limitation Act to the facts at hand, however, the principle stands affirmed that the provisions of the Limitation Act could be invoked while calculating limitation time for filing an appeal (under Section 61 of the IB Code) before the NCLAT.

B. Existing reality: Date of knowledge of impugned order

Now coming to the existing reality, where there are anyway ways to circumvent or creatively bypass the stringent application of Section 61(2). The statutory provision is silent on the point from which the 30 days’ time, for the purposes of filing of the appeal, is to be calculated. The Supreme Court has calculated the limitation from the date the impugned order is pronounced.¹⁵

Since Section 61(2) itself does not mention the time from which 30 days’ time has to be calculated, exceptions may arise. For instance, whether the statutory silence allows for an argument that the aggrieved party was not aware of the order passed by the adjudicating authority and thereby allows that the period of 30 days could be calculated from the date of knowledge. The same shall be seen in the discussion below, where date of knowledge of the impugned order is certainly a defence set up to reset the limitation period mandated under Section 61 of the IB Code.¹⁶

In Shashi Mohan Garg v. International Asset Reconstruction Co. (P) Ltd.¹⁷, the appeal was filed after the delay of 270 days on the only ground that the appellant had no knowledge about the impugned order. From the impugned order, it was also noticed that despite issuance of notice, the NCLT recorded in its order sheets that nobody appeared on behalf of the corporate debtor. However, the NCLAT based on the facts found that the notice was served and the appellant despite the same, did not appear. Hence, the appeal was rejected on the grounds of maintainability, without any specific finding whether date of knowledge could be a ground to circumvent Sections 61(1) and (2) deadline to prefer an appeal before the NCLAT.

In P. Purushothaman v. Union Bank of India¹⁸, the NCLAT finding that the appellant was represented by its advocates when the impugned order was passed, rejected the plea of want of knowledge.

In Corporation Bank v. Anuj Jain¹⁹, the NCLAT recorded that “it is not the appellant’s case that it did not have knowledge of passing of impugned order” before dismissing the appeal as not maintainable.

The aforementioned cases show that the date of knowledge of the impugned order is certainly a defence set up to reset the limitation period.

In the ruling dated 30-8-2019 in Dhiren Dave v. Pantomath Capital Advisors (P) Ltd.²⁰, the NCLAT, placing reliance on its previous ruling in Prowess International (P) Ltd. v. Action Ispat & Power (P) Ltd.²¹, held that the period of limitation in terms of the provisions of Section 61, IB Code must be computed from the date of the pronouncement of the impugned order.

It is submitted that the observations of the NCLAT did not correctly record the decision in Prowess International case²². In Prowess International case²³, the NCLAT had found that the appellant had knowledge of the impugned order as on the date of pronouncement of the impugned order and it was not the case of the appellant that its lawyer did not inform him about the decision. Therefore, Prowess International²⁴ was a case where the event of pronouncement and event of knowledge fell on the same day and, therefore, the date of knowledge argument is still a credible way to escape limitation under Section 61.

In fact, in Prowess International case²⁵, the NCLAT explicitly recognised that the date of knowledge would be the date from which limitation would be computed. The NCLAT therein firstly distinguished the provision of appeal under the Companies Act, 2013 to be the one under Section 61, IB Code and referred to Section 421, Companies Act, 2013, which reads as:

421. Appeal from orders of Tribunal.— (1) Any person aggrieved by an order of the Tribunal may prefer an appeal to the Appellate Tribunal.

(2) No appeal shall lie to the Appellate Tribunal from an order made by the Tribunal with the consent of parties.

(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order of the Tribunal is made available to the person aggrieved and shall be in such form, and accompanied by such fees, as may be prescribed:

Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days from the date aforesaid, but within a further period not exceeding forty-five days, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within that period.

… (emphasis added)

The NCLAT noted the provision quoted above and opined that in an appeal under the Companies Act, 2013, the Appellate Tribunal counts the period of limitation from the date on which a copy of the order is made available by the Tribunal in terms of Section 421(3), Companies Act, 2013. Regarding the provision of appeal under Section 61(1), IB Code, the NCLAT held, “… [a]s per the aforesaid provision, the appeal is required to be filed within thirty days, means within thirty
days from the date of knowledge of the order against which appeal is preferred. “²⁶

In Anmol Tekriwal v. M.N. Auxichem²⁷, the shareholder submitted that the impugned order dated 8-6-2018 came to knowledge on 12-8-2018 and even the corporate debtor had no knowledge of the same. The NCLAT, taking into consideration the stand taken by the parties, recorded its satisfaction with the grounds and condoned the delay of six days in preferring the appeal. The NCLAT specifically stated:

…[e]ven if it is accepted that certified copy is not sent to all the shareholders, but the date of knowledge is to be taken into consideration counting the period of limitation … we have accepted the period of the date of knowledge as pleaded by the appellant, and condone the delay.²⁸

Similarly, in Prateek Gupta v. Columbia Petro Chem (P) Ltd.²⁹, the NCLAT noted that the order of admission was passed on 25-1-2018; however, the appeal was filed on 26-3-2018. The NCLAT still allowed the appeal to be decided on merits holding:

…[h]owever, in view of the fact that the appellant is the director and shareholder of the corporate debtor and was not a party before the adjudicating authority by name, on the basis of date of knowledge of the appellant, we find that the appeal is on time.³⁰

(emphasis added)

When the NCLAT rejected the appeal on the ground that it could not condone a delay beyond 15 days after 30 days of limitation, it still rendered its opinion that it is difficult to believe that the appellant did not have the knowledge of the impugned order based on the facts and circumstances therein.³¹

In Sunil Sanghavi v. Cytech Coatings (P) Ltd.³², if limitation was to be counted from the date of knowledge, then there is no delay but there is a delay of six days if it is counted from the date of the impugned order. The NCLAT, finding that the appellant was not apprised of the order and was not a party before the NCLT, held that there is no delay in preferring the appeal.³³

In Vandana Industries Ltd. v. IL and FS Financial Services Ltd.³⁴, the NCLAT set aside the order of admission and the order directing liquidation on the ground that the application under Section 10 was wrongly admitted since the shareholders’ consent was not taken. It seems that the challenge was allowed since the appellant shareholder stated that, neither it had any knowledge of the application under Section 10, IB Code being moved, nor of the admission order. Since, the NCLAT allowed the appeal, it must be that there was no limitation issue while the date of limitation was calculated from the date of knowledge, which reset the date from which the limitation started.

Conclusion

From the above observations, it can certainly be argued that the provisions of Section 61(2) are not as rigid as initially interpreted by the NCLAT, and the same may allow for invoking grounds of excluding time/resetting date from which limitation is to be calculated for condonation of delay.

“This topic is covered in detail in the comments on Section 61 in the commentary titled ‘Insolvency and Bankruptcy Code: Law and Practice’ by the author of this column post. The same is available at https://www.ebcwebstore.com/product_info.php?products_id=99097372.”