Limitation Period For Appeal Under Section 61 IBC Starts Running From Date Of Pronouncement; Delay In Uploading Won't Exclude Limitation : Supreme Court

The Supreme Court has held that the period of limitation for filing of appeal against an order as per Section 61 of the Insolvency and Bankruptcy Code will start running as soon as the same is pronounced, and that it is not dependent on the date when the order is uploaded.

So, a party who failed to file an application for the certified copy of the order immediately cannot raise a plea to extend the period of limitation on the ground of delay in uploading the order.

The Court held that period awaiting the receipt of a free certified copy does not extend the limitation period under Section 61(2) of the IBC for a party who has not applied for the same.

The Court held that a diligent litigant is expected to apply for the certified copy immediately.  The act of filing an application for a certified copy is not just a technical requirement for computation of limitation but also an indication of the diligence of the aggrieved party in pursuing the litigation in a timely fashion, the bench of Justices DY Chandrachud, Vikram Nath and BV Nagarathna observed.

The Supreme Court also held that annexation of a certified copy for an appeal to the NCLAT against an order passed in a proceedings the Insolvency and Bankruptcy Code, 2016, cannot be automatically dispensed with. If an application has been filed, the period between the date of application and the date of receipt of order can be excluded from limitation as per Section 12 of the Limitation Act.

The litigant has to file the appeal within thirty days, which can be extended up to a period of fifteen days, upon showing sufficient cause and no more, the court added.

Background

The subject order was pronounced by the NCLT on December 31, 2019. The corrected copy of the order was uploaded only on March 20, 2020. The appellant applied for a free copy on March 23, 2020, and claims that the same has not been received.  However, by the time the application for certified copy was made, the period of limitation for filing the appeal was already over on February 14, 2020.

The appeal before the NCLAT was filed on 8 June 2020 with an application for exemption from filing a certified copy of the order as it had not been issued.

NCLAT relied on Section 61(2) of the IBC which mandates a limitation period for appeals to be thirty days, extendable by fifteen days, to hold that the appeal filed under Section 61(1) was barred by limitation. The NCLAT also noted that the appellant did not produce any evidence to show that the certified copy has not been issued to him.

Appellant's Contentions

Challenging the NCLAT order, the appellant approached the Supreme Court. The main contention was that the clock of limitation will start running only after the issuance of the certified copy of the order.

Section 420(3) of the Companies Act read with Rule 50 of the NCLT Rules mandates a free copy of an order to be issued to every party. This obviates the need for any party to obtain a certified copy of an order it seeks to impugn by way of an appeal. Therefore, the clock of limitation under Section 61 of the IBC would run from the date the free copy is issued to the party. The mere absence of the words "from the date on which a copy of the order of the Tribunal is made available to the person aggrieved" in Section 61(2) of the IBC, in contradistinction to Section 421(3) of the Companies Act, has no material bearing since an appeal cannot be filed without a copy of the order.

Rule 22 of the NCLAT Rules mandates a certified copy of the order for filing an appeal. However, Rule 14 of the NCLAT Rules permits a waiver from compliance with any of the rules, which has been usually granted in case of a downloaded online copy, in lieu of a certified copy of the order.

Issues Considered

Thus the issues raised before the court were:

(i) when will the clock for calculating the limitation period run for appeals filed under the IBC; 

(ii) is the annexing of a certified copy mandatory for an appeal to the NCLAT against an order passed under the IBC.

On the first issue, the court observed:

15. 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. The notable difference between Section 421(3) of the Companies Act and Section 61(2) of the IBC is in the absence of the words "from the date on which a copy of the order of the Tribunal is made available to the person aggrieved" in the latter. The absence of these words cannot be construed as a mere omission which can be supplemented with a right to a free copy under Section 420(3) of the Companies Act read with Rule 50 of the NCLT Rules for the purposes of reckoning limitation. This would ignore the context of the IBC's provisions and the purpose of the legislation.

17. In this background, when timelines are placed even on legal proceedings, reading in the requirement of an "order being made available" under a general enactment (Companies Act) would do violence to the special provisions enacted under the IBC where timing is critical for the workability of the mechanism, health of the economy, recovery rate of lenders and valuation of the corporate debtor. The IBC, as a prescriptive mechanism, affecting rights of stakeholders who are not necessarily parties to the proceedings, mandates diligence on the part of applicants who are aggrieved by the outcome of their litigation. An appeal, if considered necessary and expedient by an aggrieved party, is expected to be filed forthwith without awaiting a free copy which may be received at an indefinite stage.

Hence, the omission of the words "from the date on which the order is made available" for the purposes of computation of limitation in Section 61(2) of the IBC, is a consistent signal of the intention of the legislature to nudge the parties to be proactive and facilitate timely resolution.

On the question of a certified copy for filing an appeal against an order passed by the NCLT under the IBC, the court noted that the Rule 22(2) of the NCLAT Rules mandates that an appeal has to be filed with a certified copy of the 'impugned order'. The court observed.

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 noted that Section 12 of the Limitation Act exempts the period between the date of application for certified copy of the order and the date of receipt of the same from the period of limitation. However, the period before the date of application is not excluded.

"A person wishing to file an appeal is expected to file an application for a certified copy before the expiry of the limitation period, upon which the "time requisite" for obtaining a copy is to be excluded. However, the time taken by the court to prepare the decree or order before an application for a copy is made cannot be excluded. If no application for a certified copy has been made, no exclusion can ensue", the Court said.

In conclusion of the judgment, the court answered the issues as follows:

1. 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", in contradistinction to Section 421(3) of the Companies Act. Owing to the special nature of the IBC, the aggrieved party is expected to exercise due diligence and apply for a certified copy upon pronouncement of the order it seeks to assail, in consonance with the requirements of Rule 22(2) of the NCLAT Rules. Section 12(2) of the Limitation Act allows for an exclusion of the time requisite for obtaining a copy of the decree or order appealed against. It is not open to a person aggrieved by an order under the IBC to await the receipt of a free certified copy under Section 420(3) of the Companies Act 2013 read with Rule 50 of the NCLT and prevent limitation from running. Accepting such a construction will upset the timely framework of the IBC. The litigant has to file its 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.
2. On the second question, Rule 22(2) of the NCLAT Rules mandates the certified copy being annexed to an appeal, which continues to bind litigants under the IBC. While it is true that the tribunals, and even this Court, may choose to exempt parties from compliance with this procedural requirement in the interest of substantial justice, as re-iterated in Rule 14 of the NCLAT Rules, the discretionary waiver 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.

In conclusion, the Court observed :

"The appellant was present before the NCLT on 31 December 2019 when interim relief was denied and the miscellaneous application was dismissed. The appellant has demonstrated no effort on his part to secure a certified copy of the said order and has relied on the date of the uploading of the order (12 March 2020) on the website. The period of limitation for filing an appeal under Section 61(1) against the order of the NCLT dated 31 December 2019, expired on 30 January 2020 in view of the thirty-day period prescribed under Section 61(2). Any scope for a condonation of delay expired on 14 February 2020, in view of the outer limit of fifteen days prescribed under the proviso to Section 61(2). The lockdown from 23 March 2020 on account of the COVID-19 pandemic and the suo motu order of this Court has had no impact on the rights of the appellant to institute an appeal in this proceeding and the NCLAT has correctly dismissed the appeal on limitation. Accordingly, the present appeal under Section 62 of the IBC  stands dismissed"

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