Limitation under Section 61 of the IBC: End of the Interpretation Saga?

[By Himanshu Gupta & Nandika Seth]

The authors are students of NMIMS School of Law, Mumbai.

 

INTRODUCTION 

The concept of limitation provides a timely framework within which an aggrieved can file a suit, appeal or an application in court. It also empowers courts to dismiss any suit, appeal or application filed after the stipulated period has expired. Therefore, limitation plays a vital role in any proceedings as it can serve as a ground for rejecting a suit even if the plaintiff has a cause of action.  However, a conundrum arises as to which date triggers limitation to commence when the matter is conclusively heard on one day and the order is directly uploaded on the website. The Apex Court for the very first time in Sanjay Pandurang Kalate vs Vistra ITCL India Pvt. Ltd. (“Vistra ITCL”) answered the aforesaid question. 

It held that the period to compute limitation to file an appeal under Section 61 of the Insolvency and Bankruptcy Code (“IBC”) from an order of the National Company Law Tribunal (“NCLT”) commences from the date of upload of the order by the Registry. This ruling ensures that the clock of limitation starts clicking once both parties are aware of the content of the order and therefore, they can act accordingly. 

FACTUAL MATRIX 

The appeal before the Apex Court arose out of an application filed under Section 62 of the IBC against the judgement of the National Company Law Appellate Tribunal (“NCLAT”). The previous appeal was dismissed by NCLAT on the grounds of limitation. Vistra ITCL applied to initiate a Corporate Insolvency Resolution Process under Section 7 of the IBC against the Corporate Debtor.  NCLT heard the application filed by Vistra ITCL on 17th May 2023, however, no order was pronounced on that day. Though the said order bore the date of 17th May 2023, it was uploaded by the Registry on 30th May 2023.  

 The Tribunal in the present case dismissed the application of Vistra on the ground that the application was frivolous and lacked authorisation of Board of Directors of the Debtor. The appeal was filed before the NCLAT on 10th July 2023. Through the application for condonation of delay filed by Vistra, they contended to have received the certified copy of the order on June 1, 2023 for which the application was made on May 30, 2023 and therefore, time for computation of limitation should start from the 30th May 2023 since it was on that day, they became aware of the content of the order. The NCLAT held that the appeal was barred by limitation as it was instituted beyond the 45 days limitation period as stipulated under Section 61 of the IBC. It opined that the period of limitation was to be computed from the date the order was pronounced. Therefore, an appeal was filed before the Apex Court challenging the order passed by the NCLAT. 

OBSERVATIONS OF THE APEX COURT 

The Apex Court set aside the impugned order of the NCLAT which dismissed the application for condonation of delay filed by Vistra. It held that no substantive order was pronounced on 17th May 2023. Besides, the cause list stipulated that the case was listed for admission and not for pronouncement.   Further, the Court held that the period of limitation should trigger from May 30, 2023, the date when the order was uploaded. The 30 days’ limitation period in accordance to IBC would end on June 29, 2023, hence the appeal was within the condonable period of 15 days. The Court ruled that the limitation for filing an appeal would trigger from the date when the order was uploaded and not the date on which the Bench heard the matter. 

ANALYSIS 

The decision in the present case came at the ripe time resolving yet another conundrum in Pandora’s Box of interpreting Section 61 of the IBC wherein the Court clarified the position of law in cases where the matter is conclusively heard but an order is not pronounced. 

It has been previously settled in the cases of Prowess International Pvt. Ltd vs Action Ispat & Power Pvt. Ltd and V. Nagarajan v. SKS Ispat and Power Limited & Ors. that the period of limitation begins to run from the date of pronouncement of the order. However, there remained a lacuna as to the situations where the Court decides not to pronounce an order on a given date before the parties but makes it available directly on the Court’s website on a different date. 

Previously, in the case of Pr. Director-General of Income Tax v. Spartek Ceramics India Ltd. it was categorically held that the period of limitation runs from the date when the aggrieved party becomes aware of the order. Contrary to this, in the case of Raiyan Hotels and Resorts Pvt. Ltd. Vs. Unrivalled Projects Pvt. Ltd., NCLAT clarified that the period of limitation under Section 61 of the IBC for filing of an appeal does not commence on the date when the appellant became aware of the content, but it shall commence when the order was pronounced. 

A harmonious interpretation of these rulings concludes that the only essential to contemplate the period of limitation is the date of pronouncement of the order. In the present case of Vistra ITCL, the NCLT though heard the interlocutory application on 17th May 2023, did not pronounce any order. Vistra became aware of the contents of the order only when it was uploaded on the website, i.e., on 30th May 2023. Hence, the limitation ought to be computed from the latter date which the Supreme Court rightly did. 

Furthermore, in Embee Software Pvt. Ltd. v. Solicon Pvt. Ltd., a matter similar to the present case at hand, the aggrieved party was unable to file an appeal owing to the late uploading of the order by the Court, summer vacation of the Court and demise of a family member. The NCLAT taking a lenient, liberal, meaningful and purposeful view satisfied with the reasons ascribed for the delay in question, allowed the Interlocutory Application, in furtherance of substantial cause of justice. 

In the case of Mobilox Innovations Private Ltd. v. Kirusa Software Private Ltd, it was ruled that in matters of appeal, timelines are statutorily fixed under the IBC as it is in the best interests of all the stakeholders involved in the process of that resolution or liquidation of the company which happens in a time bound manner and is not prolonged. 

Therefore, the limitation to file an appeal under Section 61 of the IBC depends on a range of situations which are unique to each case. Hence, it becomes pertinent to note down various situations that have been settled by the Courts in this regard. 

SETTLED POSITION OF LAW 

The situation where an order has been pronounced and limitation has to be computed has been settled in V. Nagarajan v. SKS Ispat and Power Limited & Ors. It was ruled that the period of limitation to file an appeal against an order under Section 61 of IBC would commence from the time of the pronouncement of the order. 

Further, it was settled in the matter of Sagufa Ahmed v. Upper Assam Products Pvt Ltd & Ors and State of Maharashtra v. Ark Builders and Ors that the period of limitation triggers from the date when the aggrieved party receives a copy of the order. Thereafter, the NCLAT had clarified in the case of Wadhwa Rubber v. Bandex Packing1hat the limitation is to be counted from the date of preparation of a certified copy & not from the date of delivery of the order.  

Furthermore, in Sanket Kumar Agarwal v. APG Logistics Private Limited (“APG Logistics”) the Supreme Court has ruled that filing of an e-copy is sufficient and presentation of a physical copy is not mandatory. The clock of limitation stops ticking upon e-filing itself. 

Lastly, it has been time and again questioned, whether the NCLAT is empowered to invoke its inherent power under Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 (“NCLAT Rules”) to condone delay beyond the expiry of the limitation period. Rule 11 of the NCLAT Rules enables the Appellate Tribunal to pass any order or give any direction as may be imperative for meeting the ends of justice or to prevent abuse of the process of the Appellate Tribunal. 

The NCLAT in Mrs. Jamal Ahmad v. Reliance Nippon Life Asset Management & Ors has clarified that inherent power under Rule 11 cannot be invoked against express provisions of the statute. On similar lines, the Supreme Court in the case of National Spot Exchange Limited v. Anil Kohli unequivocally 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 an express provision of the statute. 

CONCLUSION 

Coming back to the present case, even though the Apex Court clarified the position of law, it committed an inherent error of computing the limitation. The NCLAT through the notification clarified that the registry of the Tribunal will remain open during vacations and filing of cases shall be operational, the Supreme Court erred in not including the period of vacation while calculating the limitation. The Supreme Court itself in APG Logistics had clarified that e-filing is sufficient to stop limitation from running, which could have been done in the vacation as well. Even if one overlooks the aforesaid notification, the Court has clarified the locus and it has settled the position that the period of limitation in cases where as order has not been pronounced runs from the date when it is uploaded on the website and not from the date it was last heard. 

Though this ruling gives the litigants a sigh of relief, it should not make them complacent to simply wait for the order to be uploaded to take action. Thus, it can be discerned that the Apex Court ruled in the right direction by enabling limitation to start ticking from the date the order is uploaded on the website provided the parties act diligently.  

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