Case Analysis of Appeal Mechanism under Insolvency & Bankruptcy Code 2016
[ Rahul Kanoujia ]

 

The author is a 2nd year student of GNLU, Gandhinagar.

Introduction:

The most important feature of Insolvency and Bankruptcy Code, 2016[i] (hereinafter referred to as “IBC”) is the time bound resolution process, which tries to make sure that the process of resolution and liquidation does not suffer the trauma of never ending litigation. Such time bound resolution has been made possible through the introduction of limitations under various provisions of the Code, such as those given under Section 61and Section 62. These limitations are going to be the primary focus of this article.

Section 61 of IBC,provides that the Appellate authority for filing an appeal from final order of the National Company Law Tribunal shall be National Company Law Appellate Tribunal. Similarly, Section 62 of IBCprovides that an appeal from the order of National Company Law Appellate Tribunal on a question of law shall lie before the Supreme Court. Such appeal shall be filed within a period of 90 days. [ii] The year 2018 saw a multitude of case laws directly addressing appeals, significantly developing the law. The following section deals with some of those cases and the issues that they address.

Issues before the National Company Law Appellate Tribunals:

  • Whether an appeal filed beyond the maximum prescribed period of 45 days under Section 61 of the Code is maintainable?

In the matter of State Bank of India v. MBL Infrastructure Ltd.[iii]the NCLAT Delhi held that Section 61 clearly stipulates that an appeal has to be preferred within 30 days from the order of the adjudicating authority. A delay not exceeding 15 days can be condoned in filing the appeal if the appellant is able to satisfy the appellate authority that there was sufficient cause for not filing the appeal within the prescribed period of 30 days. Thus, the maximum time frame for preferring an appeal is 45 days, which cannot be extended further on any ground whatsoever.

  • Whether Appellate Tribunal has jurisdiction to condone delay beyond 15 days apart from the 30 days for preferring an appeal, as prescribed under section 61(2) of the I&B Code?

In the matter of Sunil Sharma v. Hex Technologiesand Industrial Services v. Electrosteel Steels,[iv]the NCLAT held that Appellate Tribunal has no jurisdiction to condone delay beyond 15 days apart from the 30 days for preferring an appeal, as prescribed under Section 61 (2) of the Insolvency and Bankruptcy Code.

  • Whether the Insolvency and Bankruptcy Board of India (IBBI)has the standing to challenge the findings of the adjudicating authority?

In Insolvency and Bankruptcy Board of India v. Wig Associates,[v] the Insolvency and Bankruptcy Board of India (“IBBI”) challenged an interpretation accorded to Section 29(A) which allegedly resulted in approval of an ineligible resolution plan.

The NCLAT Delhi held that under section 30(2), the resolution professional is duty bound to ensure that resolution plans are in conformity with the provisions prescribed thereunder. If the resolution plan submitted by an applicant is contrary to Section 29A, in view of Section 30 (2) (e) read with Section 30(3), the resolution professional should not have placed such resolution plan before the committee of creditors. In any case, if the legal interpretation accorded by the adjudicating authority contravenes the provisions of the Code, it is duty of the resolution professional to bring the same to the notice of the appellate authority by preferring an appeal.

Further, it was also held that the IBBI does not have the locus standi to challenge a finding of an adjudicating authority under Section 61 of the Code. However, it is empowered under Section 196(g) to monitor the performance of the insolvency professionals and in appropriate cases, pass any direction as may be required for compliance of the provisions of the Code. Therefore, the appeal filed at the instance of the IBBI was dismissed. The tribunal however also clarified that the IBBI was at the liberty to inform the resolution professional to move an appeal under S.61.

  • Scope of appellate jurisdiction of NCLAT vis-à-vis the power conferred on the central government under section 242 of the Code.

In the matter of Principal Director General of Income Tax v. M/s. Spartek Ceramics Indiaand National Engineering Industries Ltd. v. Cimmco Birla,[vi]The NCLAT held that the NCLAT is empowered to hear the appeal under the Companies Act, 2013, the Code and the Competition Act, 2003only. The central government by exercising the power under section 242 cannot empower the NCLAT to hear an appeal pursuant to a Notification which granted ninety days’ period to prefer an appeal under section 61(1). Grant of ninety days’ period was in clear violation of section 61(2) of the Code, which clearly prescribed a time limit of 45 days only. Thus, while the central government is empowered under section 242 to make any provision to remove the difficulty in giving effect to the provisions of the Code, the provision cannot be in violation of any of the substantive provisions of the Code.

  • Distinction between the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016 as regards the period of limitation for an appeal before the NCLAT.

In the matter of Prowess International Private Limited v. Action Ispat & Power Private Limited, the NCLAT drew a distinction between the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016 as regards the period of limitation for an appeal before the NCLAT. In an appeal preferred under Section 421 of the Companies Act, 2013, the period of limitation is counted from the date on which a copy of the order is made available by the tribunal pursuant to sub-section (3) of Section 421 of the Companies Act, 2013. [vii] Under Section 61 of the Code, 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.

Conclusion

The above judgements provide much needed clarity with regard to the Appeal Mechanism under Section 61, that appeal is to be filed within thirty days. However, as per proviso thereto, the Appellate Tribunal has power to condone the delay, if it is satisfied that there was sufficient cause for not filing the appeal but such period cannot exceed fifteen days from beyond the period of thirty days.

 

 

 

[i]http://www.mca.gov.in/Ministry/pdf/TheInsolvencyandBankruptcyofIndia.pdf

[ii]https://indiankanoon.org/doc/56305508/

[iii]https://nclat.nic.in/Useradmin/upload/8428370435b6c1307c015f.pdf

[iv]https://ibclaw.in/appellate-tribunal-has-no-jurisdiction-to-condone-delay-beyond-15-days-apart-from-the-30-days-for-preferring-an-appeal-as-prescribed-u-s-612-of-the-ib-code-sunil-sharma-vs-hex-technologies-pvt/

[v]https://www.casemine.com/judgement/in/5b648cc69eff430a70e44805

[vi]https://www.casemine.com/judgement/in/5b1046179eff4319d955233b

[vii] http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf

 

 

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