Introduction
The Supreme Court of India, in a recent judgment, reiterated that the limitation period for filing of an appeal against the order of the National Company Law Tribunal (“NCLT”) as laid down under Section 61 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) has to be interpreted strictly.
In the case Safire Technologies Pvt. Ltd. v. Regional Provident Fund Commissioner & Anr. – Civil Appeal No. 2212 of 2021, the Supreme Court observed that an appeal against the order of the NCLT shall be preferred within a period of 30 days from the date on which the order was passed by the NCLT and that the National Company Law Appellate Tribunal (“NCLAT”) has the power to extend this period only by an additional 15 days. Furthermore, the Supreme Court also rejected the argument that the limitation period would start running from the date of knowledge of the order of the NCLT.
Facts of the Case
The Corporate Insolvency Resolution Process (“CIRP”) against a company was initiated before the NCLT. The resolution plan was approved by the Committee of Creditors, and subsequently, the NCLT vide its order dated October 22, 2019 (“Order”) also approved the same. However, a claim filed later by the Respondent before the Resolution Professional (“RP”) was not considered. Since, the NCLT had already approved the resolution plan vide its Order, the Respondent challenged the Order by way of an appeal before the NCLAT filed on December 12, 2020. The NCLAT issued notice in the appeal. The Appellant/ Safire Technologies Pvt. Ltd., aggrieved by the issuance of notice by the NCLAT, filed an appeal before the Supreme Court.
Arguments
The Appellant argued that Section 61 of the IBC envisages a maximum period of 45 days within which an appeal can be filed before the NCLAT against an Order of the NCLT. Whilst Clause (2) of Section 61 states that an appeal shall be filed within 30 days, the proviso to this Section states that the NCLAT may allow an appeal to be filed after the expiry of 30 days, if it is satisfied that there was sufficient cause for not filing an appeal, but such period shall not exceed 15 days. It was contended that, in any scenario, the total period of limitation cannot exceed 45 days from the date of the order of the NCLT. Furthermore, reliance was placed by the Appellant on the case of Kalpraj Dharamshi & Anr. v. Kotak Investment Advisors Ltd. Anr. Civil Appeal MNo. 2943-2944 of 2020 wherein it was held that an appeal against the order of the NCLT shall be preferred within 30 days.
On the other hand, the Respondent pleaded that the period of limitation would begin only from such date when the Respondent received knowledge of the Order of the NCLT. It was further argued that even though the Respondent had filed its claim before the RP, it was not a party before the NCLT when the Order was passed, therefore, the Respondent became aware of the Order much later. The Respondent placed reliance on the case of Raja Harish Chandra Raj Singh v. Dy. Land Acquisition Officer AIR 1961 SC 1500 for submitting that provisions relating to limitation have to be construed liberally by the Courts.
Findings of the Hon’ble Supreme Court
After considering the arguments raised by the Appellant and the Respondent, the Supreme Court, while allowing the appeal, observed that the Raja Harish (Supra) judgment relied upon by the Respondent dealt with Section 18 of the Land Acquisition Act and not Section 61 of the IBC.
For the purposes of interpretation of Section 61 of the IBC, reliance has to be placed on the Kalpraj Dharamshi (Supra) judgment wherein it was categorically held that an appeal against the order of NCLT shall be preferred within a period of 30 days from the date on which the order was passed by the NCLT and that the Appellate Tribunal has the power to extend the period of limitation by another 15 days.
Analysis
Even though the question of the maximum period of limitation of limitation was squarely covered under the Kalpraj Dharamshi (Supra) judgment, however, the question of whether the period of limitation period under Section 61 starts running from the date of knowledge of the order was not considered therein.
A deeper look into the past gives us an insight into how the Supreme Court has dealt with similar issues relating to (i) when to construe a provision relating to limitation strictly or liberally and (ii) whether the limitation period starts running from the date of knowledge of the order or from the date of the order itself.
In Raja Harish (Supra), the Supreme Court, while dealing with Section 18 of the Land Acquisition Act, 1894, observed that unless a party had knowledge of the order, the question of approaching the appropriate forum to challenge the order did not arise. It was also observed that it was essential for a party affected by an order to have knowledge of the order as it was an essential requirement of natural justice.
However, in the case of Popat Bahiru Govardhane Etc. v. Special Land Acquisition Officer & Anr – it was observed that the judgment in the case of Raja Harish (Supra) had been reconsidered in the case of State of A.P. & Anr. v. Marri Venkaiah & Ors. – AIR 2003 SC 2949, wherein it was held in view of the express language of the statute, the question of date of knowledge did not arise. Therefore, the argument that the limitation period would begin from the date of knowledge of the order could not be accepted. Furthermore, it was held that whoever wanted to take advantage of a beneficial legislation had the responsibility of being vigilant and must take appropriate action within the time limit prescribed under the statute.
Therefore, it was held in Popat Bahiru (Supra) that it was a settled legal proposition that the law of limitation may harshly affect a particular party but it has to be applied with all its rigour when the statute so prescribes and that in such cases the courts have no power to extend the period of limitation on equitable grounds.
Conclusion
The position of the Supreme Court interpreting statutory limitation periods strictly has remained consistent for quite some time. The latest judgment of the Supreme Court in the case of Safire Technologies (Supra) simply extends this interpretation to Section 61 of the IBC and rejects the argument that the period of limitation shall start running from the date of knowledge of the order. Furthermore, this interpretation is also an indication of the positive outlook of the Supreme Court to ensure that insolvency proceedings are completed in a time bound manner in consonance with the objectives of the IBC.
For further information, please contact:
Shikha Tandon, Partner, Cyril Amarchand Mangaldas
shikha.tandon@cyrilshroff.com.
