The Supreme Court ("the Court") on 23rd March, 2020 while taking suo motu cognizance of the COVID-19 pandemic extended the period of limitation under the Limitation Act, 1963 ("Limitation Act") for filing of petitions/applications/suits/ appeals/all other proceedings until further notice. This has led to confusion in computation of the period of limitation and has provided an opportunity to unscrupulous litigants to take undue advantage of this extension.
One such issue regarding limitation has been addressed by the Supreme Court in V Nagarajan v. SKS Ispat and Power Limited and Others wherein it was held that the period of limitation for filing an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 ("IBC") starts running from the date of pronouncement of the order.
The Appellant, V. Nagarajan, was appointed as the Liquidator for Cethar Limited ("Corporate Debtor") by virtue of which, he initiated proceedings under Sections 43 and 45 of the IBC against Respondents No. 1 – 4 and further filed a Miscellaneous Application seeking an injunction against the Respondents from invoking the certain performance guarantee until the liquidation proceedings were concluded.
The National Company Law Tribunal, Chennai ("NCLT") refused to grant the injunction and pronounced the order in open court. However, the order was uploaded on the NCLT website on 12th March, 2020 which was further corrected and finally uploaded on 20th March, 2020. The Appellant sought a free copy of the order on 23rd March, 2020 but did not receive it. On 8th June, 2020 the Appellant filed an appeal from this order before the National Company Law Appellate Tribunal ("NCLAT") along with an application for exemption from filing a certified copy of the NCLT order.
The NCLAT held that the appeal was barred by limitation as the statutory time period of 30 days, extendable by 15 days, had elapsed and an application for condonation of delay had not been filed. Further, the Appellant had not provided any evidence to prove that a certified or free copy had not been issued to him. Aggrieved by the order of the NCLAT, the Appellant filed a Civil Appeal before the Hon'ble Supreme Court on the question of limitation.
Findings of the Court
- Applicability of Limitation Act to IBC
The Court held the IBC is a complete code in itself and over-rides any inconsistencies that may arise in the application of other laws and that for the question of limitation for filing appeals the provisions of the IBC would have an overriding effect over the Limitation Act as held in the case of Kalpraj Dharamshi & Another v. Kotak Investment Advisors Limited & Another. The Court also relied on the judgment in B. K. Educational Services (P) Limited v. Parag Gupta and Associates wherein it was held that the Limitation Act is applicable to proceedings under the IBC by virtue of Section 238-A of the IBC.
The Court observed that Section 29(2) contained three important aspects –
- prescription of a period of limitation under any special law or local law may differ from the period prescribed by the Schedule under the Limitation Act;
- in such a case, the period of limitation prescribed under the special or local law shall be deemed to be period prescribed for the purpose of Section 3 of the Limitation Act; and
- Section 3 of the Limitation Act shall apply accordingly.
- Limitation to be computed from the date of pronouncement
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', in contrast to Section 421(3) of the Companies Act wherein limitation period begins from the date when a copy of the order is made available. Such omission could not be supplemented with a right to a free copy under Section 420(3) of the Companies Act for the purposes of reckoning limitation as that would ignore the context of the IBC's provisions. It must rather be taken as a signal for the parties to be proactive and facilitate timely resolution.
It was further noted that the power to condone delay under the IBC is tightly circumscribed and conditional upon showing sufficient cause, even when the delay is capable of being condoned. Therefore, reading in the requirement of an 'order being made available' would be counterintuitive.
- Requirement of certified copy
Rule 22(2) of the NCLAT Rules requires a certified copy of the order to be filed along with an appeal. This being a statutory requirement, the Court observed that the parties cannot automatically dispense with their obligation to apply for and obtain a certified copy for filing an appeal, and seek such dispensation as a matter of right. Once an application for certified copy of the order is filed, the time taken in obtaining the order is excluded from the computation of limitation under Section 12 of the Limitation Act. Thus, if no application for a certified copy has been made, no exclusion of time from the period of limitation can ensue.
The Court held that the period of limitation commenced from the date the order was pronounced and therefore, the appeal was barred by limitation. Further, the suo motu order of the Supreme Court dated 23rd March, 2020 would not aid the case of the Appellant as the extension of the period of limitation therein was only available in cases where such period had not ended before 15th March, 2020.
This judgment aids in clarifying not just the application of the Limitation Act to the proceedings under the IBC, but also the applicability of the extension of limitation granted by the Supreme Court suo motu for the benefit of the litigants during the COVID-19 pandemic. It is a right step in preventing the misuse of the extension granted and would ensure diligence on the part of litigants. Indiscriminate extension in all matters would defeat the purpose of a time-bound process as envisaged under the IBC.
The judgment has also reiterated the overriding effect of the IBC over general laws, such as the Limitation Act and the need for its strict interpretation for the effective and timely implementation of its provisions so as to attain its intended objectives.
Authors: Deepak Deshmukh – Associate Partner and Jahan Chokshi – Manager, Naik Naik & Co. Views are personal.