Whether It Is Mandatory To File A Formal Application For Condonation Of Delay? An Examination Of SC Judgement In Sesh Nath Sing's Case

The dispute between the parties in Sesh Nath arose out of a cash credit facility granted to the Appellant (Corporate Debtor) by the Respondent (Financial Creditor) sanctioned on 15^th February 2012. Since the Appellant defaulted in repayment, the Respondent declared the account of the Appellant as a Non-Performing Asset on 31^st March 2012 and issued a notice under Section 13 (2) of the SARFAESI Act^[6] on 18^th January 2014. Subsequently, on 13^th December 2014, notice for handing over possession of the secured immovable assets under Section 13(4)(a) of the said Act was issued by the Respondent to the Appellant. Eventually on 19^th December 2014, the Appellant challenged both the said notices issued under Section 13(2) and (4) of the said Act in the Calcutta High Court and on 24^th July 2017, the High Court passed an interim order restraining the Respondent from taking steps against the Appellant under the SARFAESI Act. Eventually, in July 2018, the Respondent filed Corporate Insolvency Resolution Proceedings under Section 7 of IBC in the National Company Law Tribunal (hereinafter referred to as "the NCLT"), Kolkata Bench which was opposed by the Appellant albeit on grounds other than limitation. The said application was admitted by the NCLT in April 2019, and the Bench appointed an Insolvency Resolution Professional and declared a moratorium. This order was challenged by the Appellant before the National Company Law Appellate Tribunal (hereinafter referred to as "NCLAT") under Section 61 of the IBC on the ground that the application under Section 7 was barred by limitation. The NCLAT dismissed the appeal and rejected the challenge on the ground of limitation with an observation that the said ground had been agitated for first time in appeal before the NCLAT. On merits, the NCLAT held that the application under Section 7 was filed within the period of limitation. Against the NCLAT order, an appeal was filed in the Supreme Court.

Issues involved and the reasoning of the Court

According to the Court, two issued were involved.^[7] (i) Whether a delay beyond three years in filing the application under Section 7 of IBC could be condoned in the absence of an application for condonation of delay under Section 5 of the Limitation Act. (ii) Whether Section 14 of the Limitation Act applies to Section 7 of the IBC. For the purpose of this column, only the first issue is relevant.

So far as the first issue, the Court opined that Section 5 of the Limitation Act "does not speak of any application." The Court further stated, "Although, it is the general practice to make a formal application under Section 5 of the Limitation Act, 1963, in order to enable the Court or Tribunal to weigh the sufficiency of the cause for the inability of the appellant/applicant to approach the Court/Tribunal within the time prescribed by limitation, there is no bar to exercise by the Court/Tribunal of its discretion to condone delay, in the absence of a formal application." (Emphasis and Italics supplied.)

The Court opined that it is not mandatory to file an application in writing before relief under Section 5 is granted because if that were the case, the legislature would have worded the said section differently or would have added a proviso to the section. It was further opined that the Court can always insist on filing of an application or affidavit showing cause of delay. However, no applicant or appellant "can claim condonation of delay under Section 5 of the Limitation Act as of right, without making an application."^[9] In other words, the Supreme Court clarified that the delay cannot by way of right be condoned without filing an application for condonation and it is matter of discretion of the Court/Tribunal. In light of the aforesaid reasoning, the Supreme Court on merits held that the application under Section 7 of the IBC was within limitation and eventually upheld the order of the NCLAT^[10]

1. CERTAIN PREVIOUS DECISIONS BY COORDINATE BENCHES OF THE SUPREME COURT ON THE ISSUE

The Supreme Court has had the occasion to consider this issue in its previous decisions that have not been referred to in Sesh Nath. The said decisions are examined below.

1. In a short order passed by the Supreme Court in Ragho Singh v. Mohan Singh and others,^[11] (hereinafter referred to as "Ragho Singh") the Court was hearing a matter in which a suit for pre-emption that had been decreed by the Deputy Collector was challenged by the Appellant before the Supreme Court. The Appellant had filed an appeal before the Additional Collector, Saran challenging the order of the Deputy Collector. The Additional Collector allowed the appeal, though there was a delay of 10 days in filing the appeal and even though no application for condonation of delay was filed by the Appellant "under Section 5 of the Limitation Act."^[12] The Respondent no. 4 filed a revision before the Board of Revenue against the order of the Additional Collector which was dismissed by the Board. Eventually, a Writ Petition was filed by the said Respondent in the Patna High Court that held that the appeal before the Additional Collector ought to have been dismissed on the ground of limitation "as no application was filed for condonation of delay as contemplated by Section 5 of the Limitation Act."^[13] The Supreme Court held that since the appeal before the Additional Collector was beyond time and no application for condonation of delay had been filed under Section 5 of the Limitation Act, "there was no jurisdiction in the Additional Collector to allow that Appeal" and the appeal was liable to be dismissed on the ground of limitation.^[14] According to the Supreme Court it was "patently erroneous" for the Board of Revenue to have held that even though an application for condonation of delay was not filed, " the delay shall be deemed to have been condoned."^[15] The Civil Appeal before the Supreme Court was thus dismissed.

2. In Bhagmal and others v. Kunwar Lal and others,^[16] (hereinafter referred to as "Bhagmal") the Supreme Court was considering an appeal arising out of a civil suit for declaration of title, possession and permanent injunction that had been decreed ex parte against the Appellants before the Supreme Court.^[17] The Appellants allegedly came to know about the ex parte decree only when execution proceedings had commenced against them.^[18] Therefore, according to the Appellants, on coming to know about the execution proceedings, they moved an application under Order 9 Rule 13^[19] of the Code of Civil Procedure, 1908 (hereinafter referred to as "CPC") read with Section 151 of CPC for setting aside the ex parte decree within a period of 30 days from the date of knowledge.^[20] The application under Order 9 Rule 13 was dismissed by the Trial Court that held that it was time barred. An appeal was preferred to the District Judge, Bhopal who allowed the appeal and set aside the order of the Trial Court. Against the order of the District Judge, a revision came to be filed before the Madhya Pradesh High Court. The High Court took the view that the application under Order 9 Rule 13 was time barred and also held that the Appellate Court (District Court) "had not recorded any finding on the question as to whether the filing of the application under Section 5 of the Limitation Act was necessary or not" and therefore the Appellate Court had exceeded its jurisdiction by allowing the application "without condoning the delay".^[21] The High Court set aside the order of the Appellate Court and restored the order of the Trial Court. Allowing the appeal, the Supreme Court held that the High Court was not justified in taking a hyper technical view that no separate application for delay condonation was filed under Section 5 of the Limitation Act, particularly when the Trial Court had entertained the application on merits. According to the Supreme Court, the Trial Court did not reject the application under Order 9 Rule 13 merely because there was no application for condonation of delay but it had also gone on to consider the delay aspect, allowed parties to lead evidence and also considered the merits of the matter.^[22] According to the Court, the question of delay was interlinked with the merits of the matter and the Appellants had clearly pleaded that they did not know about the ex parte decree and came to know about decree only when they were served the execution notice.^[23] This according to the Court was also a "valid explanation of the delay."^[24] The Court further held that the application under Order 9 Rule 13 of CPC "had all the ingredients of the application for condonation of delay".^[25] The Court also distinguished the observations made by it in paragraph 70 of Sneh Gupta v. Devi Sarup^[26](hereinafter referred to as "Sneh Gupta") and observed that in that case the Court was considering Article 123 of the Limitation Act and on facts, the appellant in the said case had knowledge of passing of the compromise decree and yet no application for condonation of delay was filed.^[27] Therefore, there was a difference in both cases according to the Court.

3. In Sneh Gupta, a clear finding had been arrived at which was that the Appellant before the Supreme Court had knowledge of the passing of a compromise decree and in spite of knowing this, she had not filed an application for condonation of delay. The Court also observed, "In the absence of any application for condonation of delay, the Court had no jurisdiction in terms of Section 3^[28] of the Limitation Act, 1963 to entertain the application for setting aside the decree."^[29] The Court also referred to two of its previous decisions namely Dipak Chandra Ruhidas v. Chandan Kumar Sarkar^[30](hereinafter referred to as "Dipak Chandra") and Sayeda Akhtar v. Abdul Ahad (hereinafter referred to as "Sayeda Akhtar").^[31]

4. In Dipak Chandra, a similar observation had been made in the context of Section 116-A of the Representation of People Act, 1951. Section 116-A provides for an appeal within thirty days to the Supreme Court from on an order made by the High Court under Section 98 or 99 of the said Act.^[32] The Supreme Court has the discretion to entertain an appeal after the expiry of the said period of thirty days if it is satisfied that the appellant had sufficient cause for not preferring the appeal within such period. In this case, an election petition had been filed in the Gauhati High Court that was summarily dismissed by the High Court on the ground of vagueness and lack of material particulars. Against the said order, rather than filing an appeal under Section 116-A to the Supreme Court, the Appellant preferred a Special Leave Petition (hereinafter referred to as "SLP") under Article 136 of the Constitution of India, 1950 (hereinafter referred to as "the Constitution") in the Supreme Court. A preliminary objection was raised by the Respondent that the SLP was not maintainable, and an appeal lay before the Supreme Court. The Appellant urged that the SLP be treated as an appeal. Upholding the objection and revoking the leave granted, the Supreme Court held that no application for condonation of delay" had been filed in terms of the proviso "appended to sub-section (2) of Section 116-A of the Act" and as the appeal would otherwise be barred by limitation, the Court was not in a position to treat the SLP as an appeal under Section 116-A.^[33]

1. In Sayeda Akhtar, the Supreme Court was dealing with Section 13 (1) of the M. P. Accommodation Control Act, 1961^[34] which states that on a suit or proceeding instituted by the landlord, the tenant shall within one month of service of the writ of summons, deposit the rent in Court or pay the same to the landlord. The section provides that further time beyond 30 days may be granted by the Court on an application made to it. According to the Supreme Court, this application in Section 13 (1) is one for condonation of delay. On merits, the Supreme Court allowed the appeal on the ground that there was in fact an application made for condonation of delay and the High Court had erred by recording a finding that no such application was made.                                                                                                                                                                                                                                                                                                                         2. WHETHER SESH NATH IS PER INCURIAM OR WHETHER THE AFOREMENTIONED JUDGMENTS OF THE SUPREME COURT ARE DISTINGUISHABLE?

It is pertinent to note that the judgment in Sesh Nath as well as the previous decisions referred to above have been delivered by two Judge Benches. Therefore, can it be said that on the issue of filing a delay condonation application, Sesh Nath is per incuriam since the Court has not referred to previous decisions of the Supreme Court? In order to answer the question posed, it would be necessary to first examine whether the decision of the Supreme Court in Sesh Nath is "law declared" under Article 141^[35] of the Constitution and also whether it constitutes ratio decidendi.

In Roger Shashoua v. Mukesh Sharma^[36], the Supreme Court, after summing up various authorities on ratio decidendi stated,

"….. a ratio of a judgment has the precedential value and it is obligatory on the part of the Court to cogitate on the judgment regard being had to the facts exposited therein and the context in which the questions had arisen and the law has been declared. It is also necessary to read the judgment in entirety and if any principle has been laid down, it has to be considered keeping in view the questions that arose for consideration in the case. One is not expected to pick up a word or a sentence from a judgment de hors from the context and understand the ratio decidendi which has the precedential value. That apart, the Court before whom an authority is cited is required to consider what has been decided therein but not what can be deduced by following a syllogistic process." (Emphasis and Italics supplied)

The ratio of a judgment is the basic essence of a judgment.^[37] It must be understood in the background of the facts of a particular case.^[38] "It is the rule deducible from the application of law to the facts and circumstances of a case which constitutes its ratio decidendi and not some conclusion based upon facts which may appear to be similar."^[39] However, additional or different facts can make considerable difference "between conclusions in two cases even when the same principles are applied in each case to similar facts."^[40] But, as has been observed in Director of Settlements, A.P. and others v. M.R. Apparao and another,

"what is binding is the ratio of the decision and not any finding of facts. It is the principle found out upon a reading of a judgment as a whole, in the light of the questions before the Court that forms the ratio and not any particular word or sentence. To determine whether a decision has "declared law" it cannot be said to be a law when a point is disposed of on concession and what is binding is the principle underlying a decision. A judgment of the Court has to be read in the context of questions which arose for consideration in the case in which the judgment was delivered." (Emphasis and Italics supplied)

In light of what the Supreme Court has stated above, it is apposite to examine whether the reasoning of the Court in Sesh Nath on the mandatory requirement of filing an application for condonation of delay would be law declared under Article 141 and would it thus constitute the ratio of the judgment. As has already been stated in Part II of this column, the Appellants in Sesh Nath had impugned the order of the NCLAT before the Supreme Court that had rejected the Appellant's contention that the application filed under Section 7 of the IBC was time barred. A specific contention was raised in the Supreme Court by the Appellant that no application had been filed in the NCLT by the Respondent under Section 5 of the Limitation Act.^[42] The Supreme Court specifically referred to Section 238A of the IBC which states that the Limitation Act shall "as far as may be" apply to proceedings before the NCLT, NCLAT, the DRT and the DRAT.^[43] It further stated that since no specific provision in the Limitation Act prescribes a specific period of limitation, Article 137 of the Limitation Act, that sets out a limitation period of three years from date of accrual of the right to apply would be made applicable.^[44] Thereafter, the Court referred to Section 5 of the Limitation Act and stated that one of the two issues involved in the Appeal before it were whether an application under Section 7 of IBC can be condoned in the absence of an application for condonation of delay under Section 5 of the Limitation Act.^[45] Eventually, the Court clearly declared that a formal application to condone the delay is not mandatory.^[46] This declaration would be law under Article 141 of the Constitution and would constitute the ratio of the decision. The finding of fact that the Application under Section 7 of IBC is within limitation would not matter because it is the principle laid down that is relevant.

Sesh Nath whether per incuriam

The law declared under Article 141 of the Constitution is binding on all courts. The Supreme Court in Bengal Immunity Co. Ltd. v. State of Bihar has held that the expression "all courts" does not include the Supreme Court and the Supreme Court is not prevented from departing from its previous decision if erroneous and if against the general interest of the public.^[47] However, it is settled law that the decision rendered by a coordinate Bench is binding on subsequent Benches of equal or lesser strength.^[48] But if the coordinate Bench disagrees with the view taken by a previous coordinate Bench, it can refer the issue to a larger Bench for consideration and adjudication.^[49] That being the case, if (i) a previous decision of a coordinate or larger Bench is not brought to the notice of a latter coordinate Bench or smaller Bench or (ii) if the latter coordinate Bench chooses not to follow the previous decision of the coordinate Bench or larger Bench, the decision of the latter coordinate or smaller Bench is per incuriam. "A decision or judgment can also be per incuriam if it is not possible to reconcile its ratio with that of a previously pronounced judgment of a Co-equal or Larger Bench."^[50] The per incuriam rule is "strictly and correctly applicable to the ratio decidendi and not to obiter dicta."^[51] However, as has been observed by the Supreme Court in Punjab Land Development and Reclamation Corporation Ltd. Chandigarh v. Presiding Officer, Labour Court, Chandigarh and others^[52] "the problem of judgment per incuriam when actually arises, should present no difficulty as this Court can lay down the law afresh, if two or more of its earlier judgments cannot stand together."^[53] (emphasis supplied)

In light of the law laid down above, can it be said that since Sesh Nath has not referred to the previous decisions set out in Part III of this column, it is per incuriam? Could it be possible to reconcile the previous judgments with Sesh Nath so that they can all "stand together." The reader's attention is once again invited to the decisions referred to in Part III of this Column.

1. In Ragho Singh^[54], the case arose out of a quasi-judicial proceeding in which Supreme Court passed a short order dismissing the Civil Appeal and confirming the order of the Patna High Court. The High Court had allowed the Writ Petition of the Respondent no. 4 on the ground that the appeal filed by the Appellant before the Additional Collector ought to have been dismissed since it was filed beyond time by 10 days and no application for condonation of delay was filed. The Supreme Court upheld the view of the High Court and observed that the Board of Revenue, whose decision was challenged before the High Court, was erroneously of the view that "though an application for condonation of delay was not filed, the delay shall be deemed to have been condoned." It cannot be said that this judgement lays down a principle or declaration of law that it is mandatory to file an application for condonation of delay under Section 5 of the Limitation Act as has been laid down in Sesh Nath. The principle if any that can be derived from Ragho Singh is that delay cannot be deemed to be condoned.

2. On the other hand, in Bhagmal^[55], the Supreme Court in the facts of the case held that the application to set aside the ex parte decree under Order 9 Rule 13 "had all the ingredients of the application for condonation of delay" and since the delay was completely interlinked with the merits of the matter, the High Court, whose order was challenged, was not justified in taking a hyper technical view that there was no application for condonation of delay filed.^[56] No principle of law was laid down in the instant case nor was there any declaration of law. The principle, if any, that could be culled out of the judgment is that for applications to set aside ex parte decrees under Order 9 Rule 13, if the said application explains the reason for the delay, then no separate application needs to be filed to condone the delay. This principle can in fact harmoniously be read with the declaration of law in Sesh Nath, and thus, both Bhagmal and Sesh Nath can be reconciled and can "stand together".

3. Even in Sneh Gupta, a passing observation was made towards the end of the judgment that since the applications for setting aside the decree were filed beyond limitation and no application for delay condonation was filed, the Court had no jurisdiction under Section 3 (not Section 5) of the Limitation Act to entertain the application for setting aside the decree.^[57] No ratio is laid down that an application for delay condonation under Section 5 is mandatory. Such passing observations cannot certainly be construed as a declaration of law under Article 141 of the Constitution. A similar passing observation has also been made in Dipak Chandra^[58] in the context of Section 116-A of the Representation of People Act, 1951.^[59] The proviso to Section 116-A of the said Act, does not speak about filing an application for condonation of delay.

4. Lastly, in Sayeda Akhtar, the case is distinguishable on the ground that Section 13 (1) of the M. P. Accommodation Control Act, 1961 provides further time to the tenant beyond 30 days from service of writ of summons to deposit the rent "on an application made" to the Court.^[60] Therefore, unlike Section 5 of the Limitation Act, Section 13 of the said Act clearly mandates the filing of an application for condonation of delay.

Thus, it cannot be said the decision in Sesh Nath is per incuriam, even though it has not referred to the aforesaid decisions.

1. CONCLUDING COMMENTS

Sesh Nath has in no uncertain terms laid down the correct law on the issue. However, for this principle of law to remain undisturbed, it would have been preferable for the Supreme Court to have referred to its previous decisions on the issue. Though it is difficult to ascertain whether these previous decisions were actually brought to the attention of the Court by counsel, by distinguishing these judgments, the Court could have ensured uniformity and continuity in the law and could have further ensured that its otherwise excellent opinion remained immune from challenges by crafty litigators in the near future.

Viwes are Personal