Strictly By The Code: NCLAT’s Limited Power To Condone Delay Under IBC
The Court while setting aside the order of the NCLAT agreed with the contention of the Appellant that the period of limitation expired on 7 May 2022 which was a working Saturday, and the Registry was functioning and open.
In a recent Supreme Court judgment (Tata Steel Limited Vs. Raj Kumar Banerjee and Ors.1), the Court observed that in statutory appeals, time is of the essence and the limitation period prescribed under a statute must be strictly adhered to.
FACTS OF THE CASE:
The Civil Appeal arose out of an order dated 14 December 2022 passed by the National Company Law Appellate Tribunal (‘the NCLAT’) which allowed an interim application seeking condonation of delay in filing an appeal before it.
The Appellant was the successful resolution applicant of the Corporate Debtor i.e., Rohit Ferro-Tech Limited. In 2022, the National Company Law Tribunal, Kolkata (‘the NCLT’) approved the resolution plan for the Corporate Debtor. Respondent No. 1 was an erstwhile minority shareholder of the Corporate Debtor.
Being aggrieved by NCLT’s order, Respondent No. 1 filed an appeal before the NCLAT along with the interlocutory application seeking condonation of delay of 15 days in filing the appeal. Respondent No.1 e-filed the appeal along with the application for condonation on 23 May 2022 (46th day from the order passed by the NCLT) and a physical copy on 24 May 2022 (47th day from the order passed by the NCLT). By way of an order dated 14 December 2022, the NCLAT condoned the delay. The successful resolution applicant challenged NCLAT’s order condoning the delay before the Supreme Court.
CONTENTIONS OF THE PARTIES:
Contentions by the Appellant:
Under the Insolvency and Bankruptcy Code, 2016 (‘the IBC’) more specifically Section 61 (2), the limitation period of 30 days expired on 7 May 2022 which was a Saturday. The Appellant contended that assuming that Respondent No. 1 had the benefit of Section 4 of the Limitation Act, 1963, the extendable period provided under Section 61 (2) of the IBC would allow Respondent No. 1 to file the appeal latest by 22 May 2022 and that NCLAT had erroneously condoned the delay. The Appellant relied on various judgments of the Supreme Court that held that the extension of 15 days can be granted upon the Court being satisfied that just and sufficient cause existed for delay in filing of an appeal.
The Appellant relied on several judgments of the Supreme Court to contend that no appeal can be entertained beyond the extendable period. The Appellant also relied on the judgment of Ajay Gupta v. Raju @ Rajendra Singh Yadav2 which held that the benefit of Section 4 of the Limitation Act, 1963 is not attracted in a situation where the Saturday is a court working Saturday since the Registry remains open for filing of pleadings. It was contended that 7 May 2022 was the first Saturday and was therefore a court working Saturday for the Registry of NCLAT. Accordingly, the 30 day period would expire on 7 May 2022.
Contentions by Respondent No. 1:
Respondent No. 1 made the following submissions: Respondent No. 1 became aware of the order dated 7 May 2022 on 8 May 2022 only after the Corporate Debtor informed the shareholders via intimations to the stock exchanges. Respondent No. 1 was not privy to the proceedings before the NCLT and was not aware of the proceedings before the NCLT. On the basis of the above calculation, it was contended by Respondent No. 1 that the initial limitation period of 30 days expired on 8 May 2022, Sunday. Therefore, the limitation period ended on 9 May 2022 and consequently, the extendable period of 15 days ended on 24 May 2022. In view of the above calculation, the NCLAT had rightfully allowed the condonation of delay in filing the appeal. As per the disclosure obligations on a listed company to inform the shareholders of material events, the Corporate Debtor was obligated to inform the NSE and BSE at least two working days prior to the hearing scheduled for consideration of a resolution plan which was not done by the Corporate Debtor. In view of the lapses, the limitation period commenced from 8 May 2022 i.e., when the disclosure was made by the Corporate Debtor.
Analysis by the Court:
The Apex Court made its rulings on two key issues viz., whether the appeal was filed within Section 61 (2) of the IBC and whether the NCLAT has power to condone the delay beyond the prescribed period.
While deciding the first issue, the Court relied upon Section 238A of the IBC which makes the Limitation Act applicable to the provisions of the IBC as far as may be applicable, Section 2 (j) of the Limitation Act which defines period of limitation as the time period defined in the Schedule of the Limitation Act, Section 4 of the Limitation Act which gives the benefit to the party filing a pleading by excluding the last day of instituting the pleadings should the last day fall on a day when the court is closed and Rule 3 of the NCLAT Rules which also highlights the same provision.
The Supreme Court relied on its various judgments to reiterate and clarify the following:
- The benefit of exclusion of the time during which the court is closed is available when the application is filed within the prescribed period of limitation;
- The period of limitation for filing an appeal before the NCLAT commences from the date of pronouncement of the order as opposed to the date of obtaining a copy of the order. The Court has carved out an exception that if the party has applied for obtaining a certified copy of the order, the time taken to obtain the certified copy will be excluded from the limitation period;
- When the judgment is pronounced in an open court, the period of limitation will start running from the same date. In such cases, the aggrieved party is entitled to seek an exclusion of the period during which the certified copy was prepared by the Registry;
- Unlike a civil suit, the NCLAT does not have the jurisdiction to condone delay beyond 15 days on equitable grounds;
- The procedure of appeal has been designed by the IBC so as to dispose of appeals in a timely manner.
Conclusion:
- The Court while setting aside the order of the NCLAT agreed with the contention of the Appellant that the period of limitation expired on 7 May 2022 which was a working Saturday, and the Registry was functioning and open.
- Given the above, Respondent No. 1 filed the appeal beyond the prescribed period of limitation and also the condonable period of 15 days;
- As regards the first issue, the Apex Court held that Respondent No. 1 had not filed the appeal as per Section 61 (2) of the IBC.
- Further, it also observed that the Corporate Debtor had in fact informed the NSE and BSE on the date the resolution plan was approved by the NCLT i.e., 7 April 2022 within 30 minutes of the pronouncement. Hence there was no delay in informing the shareholders or intimating the stock exchange as contended by Respondent No. 1.
- The Court also observed that when a limitation period has been prescribed by the statute, the time period should be strictly adhered to and NCLAT does not have the power to condone the delay.
- Thus, litigants in NCLT proceedings need to be diligent and extremely careful while calculating the number of days available to challenge an order before NCLAT. Even a day’s delay could prove fatal to the case as the IBC does not provide for any further condonation on any ground.
Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.
1. 2025 SCC OnLine SC 1042.
2. (2016) 14 SCC 314