Limitation Of Appeal Under IBC From Date Of Pronouncement Of Order
In the Supreme Court of India, Civil Appellate Jurisdiction
Civil Appeal No. 3327 of 2020
SKS ISPAT & POWER LTD. & ORS ………………. Respondent
On 22nd October 2021, the Supreme Court passed an order in the above stated case that limitation period for appeal under Insolvency and Bankruptcy Code (IBC) begins from the date of pronouncement of the order. Any delay in uploading the order copy of the judgment will not escape limitation. A look at the facts, submissions and judgment in the case:
- Mr. V. Nagarajan (“Nagarajan”) was appointed as resolution professional and subsequently as liquidator in the insolvency and subsequent liquidation case of Cethar Ltd (corporate debtor). In the course of liquidation proceedings, Nagarajan alleged that certain bank guarantees were fraudulently invoked by SKS Ispat & Power Ltd. (“SKS Ispat”) against the corporate debtor. Nagarajan filed a Miscellaneous Application before the NCLT to resist the invocation of this performance guarantee until the liquidation proceedings are concluded.
- On 31st December 2019, the NCLT refused to grant injunction against the invocation of bank guarantee by SKS Ispat on the ground that performance guarantees were not part of ‘Security interest’ u/s 3(31) of the IBC. Nagarajan was present when the NCLT pronounced the judgment in the open court.
- However, a copy of the order was uploaded on the website only on 12th March 2020. Further, the said order copy had an incorrect detail of the judicial member. The same was rectified and the corrected order copy was uploaded on the website on 20th March 2020.
- In order to file an appeal against the NCLT order, on 23rd March 2020, Nagarajan sought a free copy of the order to be issued u/s 40(3) of the Companies Act 2013 read with Rule 50 of the NCLT Rules. Nagarajan stated that he awaited the issue of a free copy which was not issued till date.
- On 24th March 2020, the government announced a nationwide lockdown on account of the Covid19 pandemic. Nagarajan stated that due to the lockdown, he filed an appeal before the NCLAT (against the NCLT order) on 8th June 2020. The appeal was filed along with an application for exemption of the certified order copy as it was not received by him.
- The NCLAT dismissed the appeal as barred by limitation. The NCLAT relied on section 61(2) of the IBC which mandates a limitation period for appeals to be 30 days extendable by 15 days. The NCLAT held that the appeal filed u/s 61(1) of the IBC was barred by limitation as the statutory limit of 30 days had expired and an application for condonation of delay was not filed. The NCLAT further noted that every appeal must be accompanied by the certified copy of the impugned order which was not annexed in this case. The NCLAT also observed that Nagarajan had not produced any evidence to prove that the certified order copy was not issued to him. Even on merit, there seemed to be no ground to entertain the appeal as performance guarantee is explicitly excluded from ‘security deposit’ which is under moratorium u/s 14 of the IBC.
- Nagarajan filed a civil appeal before the Hon’ble Supreme Court on the question of limitation.
- Though the order was passed on 31st December 2019, the constitution of the Bench was changed thereafter. Hence the order copy was uploaded only on 12th March 2020. Even that was defective as it had incorrect details of the judges. The rectified correct order copy was uploaded only on 20th March 2020.
- A request was made to the NCLT registry for a free copy of the order on 23rd March 2020. Thereafter the NCLT was shut down from 24th March 2020 due to Covid19 pandemic. The SOP for commencement of virtual hearings was issued on 30th May 2020. The appeal was filed on 8th June 2020 with a downloaded copy (not certified order copy) due to lack of receipt of certified order copy.
- This Court, in its Suo motu order dated 23rd March 2020 stopped the clock of limitation with effect from 15th March 2020 on account of the COVID-19 pandemic. Therefore, the appeal was de jure filed within three days of the order being received, which is within the 30-day limitation period prescribed under Section 61 of the IBC;
- Though the appeal against an order is to be accompanied with the certified copy of the impugned order, Rule 14 of the NCLAT Rules permits a waiver from compliance of any rules, which is granted in the case of a downloaded order copy (in lieu of certified order copy). Hence the appeal cannot be considered defective.
- Section 420(3) of the Companies Act read with Rule 50 of the NCLT Rules mandates a free copy of an order to be issued to every party. This obviates the need for any party to obtain a certified copy of an order it seeks to impugn by way of an appeal. Therefore, the clock of limitation under Section 61 of the IBC would run from the date the free copy is issued to the party. Section 12(2) of the Limitation Act applies from the date on which the copy of the order is made available and not from the date when such order is passed.
- The NCLAT had not heard any arguments on limitation before reserving its orders, and yet has passed an order primarily dismissing the appeal on the ground of limitation. Further, on issue of limitation, it cannot delve into the merits of a case which has been done in this case.
- Under section 61 of the IBC, an appeal against any order under the Act has to be filed within 30 days, extendable by a maximum period of 15 days (which is granted as a matter of discretion). Even then, the limitation period for challenging the NCLT order dated 31st December 2019 expired on 14th February 2020.
- Section 61(2) of the IBC does not state that limitation is to be applicable from the date of the order being ‘made available’. In any case, “made available” does not imply that parties can indefinitely wait until a free certified copy is provided to them. A timely application for a certified copy has to be filed.
- In the Pr. Director General of Income Tax v. Spartek Ceramics India Ltd (2018 SCC OnLine NCLAT 289) it was held that the period of thirty days for filing an appeal commences from the date of the ‘knowledge’ of the order.
- Section 12 of the Limitation Act expressly prescribes that the limitation period can be ascertained only after an application for a certified copy of the judgement or order is filed within the limitation period, in order to not be declared as time barred. In this case, the limitation period can either be calculated from the date of the order – 31st December 2019 or from the date of filing an application for a certified copy of the said order. In the absence of compliance with either, any appeal will be deemed as barred by limitation.
- Time is of the essence under the IBC. Such legislations are special enactments which have been typically interpreted with strict limitation periods. Since timelines are sacrosanct, it is in the best interests of all the stakeholders of the process that resolution or liquidation of the company happens in a time bound manner and is not protracted.
Judgment of the Apex Court
For determining the question of limitation for filing appeals, the Apex court relied on the judgment in Kalpraj Dharamshi v. Kotak Investment Advisors Ltd (2021 SCC OnLine SC204) which held that provisions of the IBC and the Limitation Act have to be construed together while IBC provisions have an overriding effect.
The Limitation Act applies to all legislations. Section 421(3) of the Companies Act prescribes the period of limitation for filing an appeal to the NCLAT and specifies that the computation shall be made from the date when a copy is “made available to the person aggrieved”. However, section 61 of the IBC begins with a non-obstante provision – “notwithstanding anything to the contrary contained under the Companies Act, 2013” when prescribing the right of an aggrieved party to file an appeal before the NCLAT along within the stipulated period of limitation. The notable difference between Section 421(3) of the Companies Act and Section 61(2) of the IBC 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 IBC provisions.
The litigant has to file its appeal within 30 days, which can be extended up to a period of 15 days, and no more, upon showing sufficient cause. A sleight of interpretation of procedural rules cannot be used to defeat the substantive objective of a legislation that has an impact on the economic health of a nation. The lockdown from 23rd March 2020 on account of the COVID-19 pandemic and the suo motu order of this Court has had no impact on the rights of the appellant to institute an appeal in this proceeding as the suo motu order (suspending limitation period) was for those cases still pending in the Tribunals / Appellate tribunals. For those cases for which orders were passed, the suo motu order of the NCLT on account of Covid19 does not hold good.
On the question of whether annexation of a certified copy mandatory for an appeal to the NCLAT against an order passed under the IBC, the Apex court held that though Rule 14 of the NCLT Rules allow for exemptions from compliance, they do not confer an automatic right on an applicant to dispense with compliance and render Rule 22(2) of the NCLAT Rules nugatory. The act of filing an application for a certified copy is not just a technical requirement for computation of limitation but also an indication of the diligence of the aggrieved party in pursuing the litigation in a timely fashion.
In the present case, the period of limitation for filing an appeal under Section 61(1) against the order of the NCLT dated 31 December 2019, expired on 30th January 2020. Any scope for a condonation of delay expired on 14 February 2020, in view of the extended time limit of 15 days prescribed under the proviso to Section 61(2). The Supreme Court held that the NCLAT has correctly dismissed the appeal on limitation. Accordingly, the present appeal under Section 62 of the IBC was dismissed.
Full text of the Judgment: