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The Supreme Court has held that that limitation period for appeal under Insolvency & Bankruptcy Code starts running from the date of pronouncement of the order.

A bench of Justices DY Chandrachud, Vikram Nath and Nagarathna stated that "a sleight of interpretation of procedural rules cannot be used to defeat the substantive objective of a legislation that would impact on the economic health of the nation while".

The bench ruled the above in a case where the National Company Law Tribunal (NCLT) had on December 31, 2019 refused an injunction, by holding that performance guarantee is not a part of security interests as defined under Section 3 (31) of Insolvency and Bankruptcy Code (IBC).

The appellant had claimed that a free copy of the order was made available on the NCLT website only on March 20, 2020 and that he awaited for a free copy and sought for it 3 days later under Section 420 (3) of the Companies Act, 2013 and Rule 50 of the National Company Law Appellate Tribunal Rules (NCLAT) 2016.

However, according to the appellant the free copy had not been issued till date.

Owing to the lockdown, an appeal before the NCLAT was filed on June 8, 2020 with an application for exemption from filing a certified copy.

The NCLAT dismissed the appeal on the ground that it had been filed beyond the statutory time limit of 30 days (extendable by 15 days) and the appeal had not been filed with an application for condonation of delay.

The NCLAT further noted that Rule 22 of the NCLAT rules provides that every appeal must be accompanied with a certified copy of the impugned order which the appellant had not done. Finally the NCLAT observed that the appellant had not provided any evidence to prove that a certified copy had not been issued to him. The appellant filed a civil appeal against this order of NCLAT.

The appellant contended that NCLAT was shut on account of the pandemic and the virtual hearings commenced only in June 2020 and that he filed an appeal with a downloaded copy, relying on the Supreme Court’s suo motu order dated March 13, 2020 extending limitation.

They further contended that Rule 14 of the NCLAT rules permits a waiver from compliance with any of the rules which has been granted in case of a downloaded online copy.

In this context, the appellant relied on Sagufa Ahmed Vs Upper Assam Plywood Products Pvt ltd which held that the limitation period would run only from the date on which a copy of the order is made available to the aggrieved party. The appellant further contended that under Section 12 (2) of the Limitation Act, 1963, the period of limitation runs from the date on which the copy of the order is made available and not from date it is passed.

The respondent relying on Pr Director General of Income Tax Vs Spartek Ceramics contented that the period of 30 days commences from the date of knowledge of the order. They further relied on Ebix Singapore Pvt Ltd Vs Committee of Creditors of Educomp Solutions that IBC is a special enactment and the limitation period will have to be interpreted strictly.

The court in its analysis made it clear that its finding would be limited to a determination of whether the appeal before the NCLAT under Section 61(1) of IBC was barred by limitation.

The court observed that the question of limitation for filing appeals would have to be answered by construing the provisions of IBC and Limitation Act with IBC having an overriding effect.

The court held that an appeal is a creature of a statute and hence there is a fundamental discretion between a right to file a suit and the right to file an appeal. The court observed that in terms of Section 9 of CPC there is an inherent right to bring a suit of a civil nature unless it is barred by a statute. However an appeal must have a clear authority of law.

The court noted that IBC envisages a comprehensive dispute resolution process by empowering NCLT as an adjudicating authority.  The order of NCLT is appealable before the NCLAT and the order of NCLAT is subject to an appeal before the Supreme Court, the jurisdiction of civil courts have explicitly been ousted by Section 63 of IBC. The court held

“Section 61(2) specifically provides for a limitation period of thirty days, which can be extended by a maximum of fifteen days on the demonstration of sufficient cause for the delay. The determination of the present appeal would hinge on two issues: (i) when will the clock for calculating the limitation period run for appeals filed under the IBC; and (ii) is the annexing of a certified copy mandatory for an appeal to the NCLAT against an order passed under the IBC.”

The court noted that NCLT was constituted under Section 408 of the companies Act, replacing the company law boards. The court further held that Chapter XXVII of the Companies Act describes the  functioning of the NCLT and NCLAT, including the procedural requirements governing their functioning. Section 433 of the Companies Act 2013 similarly invokes the provisions of the Limitation Act for proceedings before the NCLT and the NCLAT. Further noting that 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”

Furthermore Rule 50 of the NCLT Rules operationalises Section 421(3) of the Companies Act by mandating the Registry of the NCLT to share a free certified copy of the order. The court then read into Sagufa Ahmed where a three judge bench of the Supreme Court held that in the context of a winding up petition under the Companies Act, that the aggrieved party could wait till it received its free copy under Section 420(3) of the Companies Act 2013 read with Rule 50 of the NCLT Rules, and was not obligated to file an application for a certified copy for the purposes of the computation of limitation. The court however made it clear that this principle would not apply once an application for a certified copy is made and the order has been received.

The court held that “the IBC is a complete code in itself and over-rides any inconsistencies that may arise in the application of other laws. 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.”

It was further noted that the the law on limitation in IBC is settled and is explicit in its denunciation of delays. The power to condone delay is conditional upon showing sufficient cause, even within the period of delay which is capable of being condoned. The court further held that when timelines are placed even on legal proceedings reading in the requirement of an “order being made available” under a legislation like companies act would be detrimental to the special provisions enacted under IBC where timing is of utmost importance and on which the health of the economy of the nation is dependent.

The court held that IBC is a prescriptive mechanism affecting rights which has an impact on the rights of persons who may not be parties to the proceedings but maybe affected by the outcome of a litigation. Hence the omission of the words “From the date on which the order is made available” for computing limitation is consistent with the intention of the legislature.

The court held that “On the question of a certified copy for filing an appeal against an order passed by the NCLT under the IBC, Rule 22(2) of the NCLAT Rules mandates that an appeal has to be filed with a certified copy of the ‘impugned order.” Therefore, it cannot be said that the parties can automatically dispense with their obligation to apply for and obtain a certified copy for filing an appeal. Any delay in receipt of a certified copy, once an application has been filed, have been envisaged by the legislature and duly excluded to not cause any prejudice to a litigant’s right to appeal. “

The court further observed that Section 12 of the Limitation Act provides guidance on reckoning the period of limitation and excludes the time taken by a party for obtaining a certified copy of the order it seeks to appeal.

In conclusion the court held that Sections 61(1) and (2) of the IBC consciously omit the requirement of limitation being computed from when the “order is made available to the aggrieved party.” Owing to IBC being a special legislation, the aggrieved party is expected td apply for a certified copy upon pronouncement of the order it seeks to challenge in consonance with the requirements.

It further held that it is not open to a person aggrieved by an order under the IBC to await the receipt of a free certified copy to prevent limitation from running and  accepting such a construction will upset the timely framework of the IBC.

The court asserted that the  litigants must file their appeal within thirty days, which can be extended up to a period of fifteen 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.

On the question of NCLAT Rules mandating the certified copy being annexed to an appeal, which continues to bind litigants under the IBC, the court held that a mere discretionary waiver from filing the certified copy does not act as an automatic exception where litigants make no efforts to pursue a timely resolution of their grievance. The appellant having failed to apply for a certified copy, rendered the appeal filed before the NCLAT as clearly barred by limitation.

Case Title: V Nagarajan Vs. SKS impact & Power Ltd. & Ors.

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