Limitation for Appeal under Section 61 IBC: The Dust Settled

[By Aayush Mishra]

The author is a student at the Himachal Pradesh National Law University, Shimla. 

Introduction

Recently, on the 22nd of October 2021, the Supreme Court in the case of V. Nagarajan v. SKS Ispat and Power Limited shed light on the period of limitation to file an appeal against an Order under Section 61 of the Insolvency and Bankruptcy Code of 2016 (IBC, hereinafter). The Court held that the period of limitation shall begin to function as soon as the Order is pronounced and the same shall not have any bearing upon the date on which the said Order is uploaded. Consequently, if any party has failed to file an application to secure a copy of such Order, they shall not be allowed a respite of extension in the period of limitation on the ground of delay in uploading of such Order.

In the forthcoming article, the author discusses the uncertainty regarding the limitation period that used to surround the IBC. Thereafter, the confusion concerning the applicability of the Companies Act in place of IBC for the production of a certified copy of the Order is dealt with. A distinction has been made between the circumstances in which the certified copy has to be made available to the appellant in contrast to when the appellant himself is required to apply for the same. Lastly, these uncertainties and distinctions have been succinctly analyzed with the help of relevant precedents and statutory provisions.

Confusion Around Beginning of Limitation Period

The appeal in the present matter emerged from the impugned order of the National Company Law Appellate Tribunal (NCLAT, hereinafter), as the same had dismissed the plea of the appellant for being barred by limitation.

The appellant had filed a miscellaneous application pertaining to a liquidation proceeding before the National Company Law Tribunal (NCLT, hereinafter), seeking interim relief against the invocation of a bank guarantee against the corporate debtor by one of the respondents. However, based on its understanding that performance guarantees do not form a part of ‘Security Interest’ as per Section 3(31) of the IBC, the NCLT refused to grant an injunction in favour of the appellant in its Order dated 31st December 2019.

While the appellant had agreed to his presence before the NCLT during the pronouncement of this Order, he highlighted that the copy of this Order had been uploaded only on March 12, 2020. Subsequent to this, the appellant pointed towards the COVID-19 nationwide lockdown, due to which the appeal before the NCLAT could be filed only on June 8, 2020. It is also due to this reason that the appellant had filed for an exemption from filing a certified copy of the Order because the same never got issued.

Nevertheless, the NCLAT resorted to Section 61(2) of the IBC which allows a limitation period of 30 days, extendable by 15 days, and held that appeal under Section 61 was barred by this limitation period. Herein, this limitation period expired on February 14, 2020 (45 days over NCLT Order). In addition, while acknowledging the absence of a certified copy of the impugned Order in the appeal as mandated by Rule 22(2) of NCLAT Rules, the Tribunal further observed that the appellant had failed to provide any evidence that the certified copy was never issued to him.

Overlap in Interpretation of Companies Act and IBC Provisions

The major point of cause that the appellant raised was the imposition of nationwide lockdown as a result of the pandemic. Due to the lockdown, the NCLT had halted the clock of limitation with effect from March 15, 2020. Based on this rationale, the appellant claimed that the appeal had been de jure filed within three days of the release of Order, which was on March 12, 2020. Furthermore, the appellant highlighted Rule 14 of the NCLAT Rules that grants a waiver from adherence to any other rules under special circumstances.

In addition to this, the appellant presented his interpretation of Section 420(3) of the Companies Act 2013, read with Rule 50 of NCLT Rules, and expressed that a certified copy of the Order is to be sent to concerned parties. In this light, he sought reliance on Sagufa Ahmed v. Upper Assam Plywood Products Private Limited, wherein the Supreme Court had held that the limitation period would start only and exactly from the date on which a copy of the Order is ‘made accessible’ to the aggrieved party.

It is also to be necessarily noted that the appellants had placed reliance on Section 12 of the Limitation Act 1963 and claimed that a certified copy is to be made accessible to the aggrieved party and the same has been statutorily mandated. Also, since the Sagufa Ahmad ruling was predominantly under the umbrella of the Companies Act, the appellant had also relied on the case of B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates, wherein the court had expressed that all proceedings under Chapter XXVII of Companies Act shall apply to that of the IBC.

made available’ – A Key Phrase

The Respondents submitted that the IBC by no means directs or implies that the limitation period shall start from the date on which the certified copy of Order has been ‘made available to the aggrieved party. Aggrieved parties cannot possibly be expected to wait indefinitely for the copy of the Order to be provided to them. In any circumstance, it is expected out of a responsible party to make a timely application for the certified copy of the Court Order. Furthermore, the respondents stressed upon appellant’s presence during the pronouncement of the Order and precisely referred to the court observation in Pr. Director-General of Income Tax v. Spartek Ceramics India Ltd., wherein it was held that the period of limitation begins from the date on which the contesting party has attained ‘knowledge’ of Order when pronounced. Highlighting that the IBC is a special statute and time is an intrinsic essence in it, the respondents further relied upon the case of Ebix Singapore Private Limited v. Company of Creditors of Educomp Solutions Limitedand established that the limitation period in such statutes shall be strictly interpreted and enacted.

The Court’s Analysis: A Discussion

The Court’s resolve, in this case, has been to assess the provisions of the IBC and the Limitations Act in tandem in order to arrive at a conclusion regarding the existing time bracket to file appeals. However, the Court has precisely expressed herein that the IBC is a special statute and shall principally have an overriding effect on other statutes as stated in Section 238 of the Code. In this light, the court cited the case of Kalpraj Dharamshi v. Kotak Investment Advisors Limited, wherein the limitation period for appeal under Section 61(1) of the IBC was ascertained in accordance with Section 14 of the Limitations Act. Following this reasoning, the Court asserted that an appeal is the entity of a respective statute (herein, IBC) and differs from the initiation of a civil suit, especially as described under Section 9 of the Civil Procedure Code.

Moving ahead from this, the Court sought to explain the difference in provisions of the Companies Act and IBC with respect to the access to certified copies of Orders. Drawing from cases such as B.K. Educational Services and Sagufa Admed, the Court established, regarding matters under the Companies Act, that the certified copy of the Order is to be made available to parties as prescribed under Section 420(3) and 421(3) along with Rule 50 of NCLT Rules. The Court even cited the Sagufa Ahmed case to point out that the aggrieved party is not necessarily required to file an application and could await the Order to be made available to them.

However, the Court precisely highlighted that this practice is only limited to those cases that are not governed by any special statute. Thus, in the current scenario, the IBC is the principal statute and the omission of the phrase ‘…order of the Tribunal is made available to the aggrieved party’ in Section 61 is not an inadvertent oversight. In effect, therefore, aggrieved parties in such scenarios must promptly apply for the certified copy of the Order subject to their wish to challenge the same through appeal.

Finally, because the appellant had never applied for the certified copy of the NCLT Order, the Court also sought to delineate the relevance of the same. It expressed that Rule 22(2) of the NCLAT Rules directs every party to a dispute under IBC to necessarily apply for the true copy of Order. It stressed that the provision of waiver under Rule 14 is merely discretionary and by no means allows parties to sit back indefinitely waiting for the certified copy to be provided to them.

Thus, the appeal was dismissed.

Afterword

The present judgement marks its significance by acknowledging IBC as a unique statute and one bearing an overriding effect. Remarkable contradistinction regarding the limitation between IBC and the Companies Act has been set in this case, whereby it is succinctly established that the absence of words ‘order is made available to aggrieved party’ in IBC is not a mere omission but a conscious manoeuvre.

In addition, this judgement shall become a good precedent for aggrieved parties to conduct due diligence and file application for certified copies of Orders within the prescribed period of limitation. Such parties may now be conscious to comply with the provisions set out in Rule 22 of the NCLAT Rules. It may be now expected from aggrieved parties to not await the certified copy of Order indefinitely as per Section 420(3) of the Companies Act. This will thus preserve the time efficiency of the IBC.

Lastly, with respect to the procedural requirement of a certified copy of the Order during the filing of the appeal, the Court has set a worthy precedent that requires the aggrieved party to make conscious efforts to apply for the same. Any failure in doing so shall not necessarily be preserved by the waiver mentioned under Rule 14 of the NCLAT Rules.

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