Recently, the Supreme Court, in the case of Gaurav Agarwal vs CA Devang P. Sampat, has issued notice to the parties for adjudicating the crucial question of law pertaining to the ‘Period of Limitation’ for preferring an appeal under Section 61 of Insolvency and Bankruptcy Code, 2016 (“the Code”).
Section 61 of the Code enables any party aggrieved by the decision of the National Company Law Tribunal (“NCLT”), to file an appeal before the National Company Law Appellate Tribunal (“NCLAT”). Clause 2 of the same provision sets out the statutory time limit of 30 days, within which the appeal can be preferred by the aggrieved party.[1]
Moreover, the Code allows an additional period of 15 days to file the appeal if the NCLAT is satisfied that there was sufficient cause for not filing it earlier, within the initial 30 days. This provision, which prima facie appears to be very straight forward in its application, has been a subject of debate in the legal framework largely due to: (a) the practical difficulties faced by the parties in accessing the Certified Copies of the order passed by the NCLT (b) expeditious nature of the Code which leaves no scope for a benevolent judicial approach when dealing with issues pertaining to limitation.
The judicial trend while interpreting Section 61 of the Code has been rather uniform with the judiciary refraining from extending its judicial arm in giving liberal interpretation to the statutory time limit prescribed by the legislature. In the case of Sagufa Ahmed vs Upper Assam Plywood[2], the Supreme Court provided an interpretation of the term ‘Prescribed Period’ under Section 4 of the Limitation Act, 1963. It held that any discretionary period beyond the statutorily prescribed period, during which the court or tribunal has the discretion to allow a person to initiate proceedings, does not fall within the purview of the statutorily ‘prescribed period’.[3]
By resorting to such literal interpretation of the term ‘prescribed period’, the Supreme Court has endorsed a slightly strict standard for the contesting party. The NCLAT, in the case of Isolux Corsan India Engineering & Constructions Pvt. Ltd vs Shailesh Verma[4], echoed a very similar reasoning involving an interplay between Section 61 of the Code and Section 4 of the Limitation Act, which provides for extension of the prescribed period for preferring any appeal, suit, or application, if the court is closed on the last day of such prescribed period. Further, the NCLAT observed that the additional 15 days under Section 61(2) is subject to the discretion of the NCLAT and it does not qualify to be included in statutory limit of 30 days. The natural connotation of such a reasoning is that the outer limit is 30 days for filing an appeal under Section 61(2) and the extendable period of 15 days provided in the proviso to Section 61(2) is subject to discretion of the NCLAT, and therefore, does not fall under the statutory prescribed limit. This is in line with the interpretation of the Supreme Court in Sagufa Ahmed vs Upper Assam Plywood.
In the landmark judgment passed by the Supreme Court in the case of V Nagrajan vs. SKS Ispat & Power Limited[5],the primary contentions raised by the appellants was non availability of the certified copies of order and exclusion of this period of ‘non-availability’ from the period of limitation for filing under Section 61(2) of the Code.
The Supreme Court while distinguishing Section 421(3) of Companies Act and Section 61(2) of the Code, adopted a purposive interpretation and observed that use of the phrase “from the date on which a copy of the order of the Tribunal is made available to the person aggrieved”[6] in Section 421(3) of Companies Act is indicative of the overt intention of the legislature to commence the period of limitation only upon the receipt of certified copies of the order by the aggrieved party.
However, the scheme of Section 61 of the Code does not contain the condition for commencement of the period of limitation only after obtaining the certified copy of the order. The Supreme Court’s purposeful reading refuted the justification of non-availability of the certified copy of the order offered for the delay in filing the appeal. Moreover, the Supreme Court adopted a harmonious approach in reading the Code and observed that allowing the litigants to await the receipt of the certified copies as allowed under Section 421 of the Companies Act will upset the timely framework of the Code.
In Gaurav Agarwal vs CA Devang P. Sampat[7], the appellants approached the NCLAT under Section 61 of the Code. The appeal was filed beyond the period of 45 days as provided under Section 61(2) of the Code and the appellants submitted that the time period in receiving the certified copy of the order ought to be excluded from the 45 days period provided under Section 61(2) read along with the proviso. The NCLAT relying on the decision of the Supreme Court in the Nagrajan Judgement, dismissed the appeal primarily for three reasons:
a) It is not open to a person aggrieved by an order under the Code to await the receipt of a free certified copy and prevent limitation from running.
b) The appellants applied for certified copies after 30 days of the order being passed by NCLT.
c) The judgment was delivered by the NCLT in open court in the presence of the appellants’ counsel and, therefore, the period of limitation started running that very day. The appellant is, however, entitled to seek relief under Section 12(2) of the Limitation Act for excluding the period during which the certified copy was under preparation.
Therefore, while the Judiciary has adopted a non-interventionist approach in strictly interpreting Section 61 of the Code, it has inadvertently overlooked the precarious position of an aggrieved party, which might result from wide ranging practical difficulties like illness, accident, illiteracy etc., thus, leaving the bona fide aggrieved party remediless.
In fact this issue has already been highlighted by the Supreme Court in the case of National Spot Exchange vs Mr. Anil Kohli[8], stating that “It is true that in a given case there may arise a situation where the applicant/appellant may not be in a position to file the appeal even within a statutory period of limitation prescribed under the Code and even within the extended maximum period of appeal which could be condoned owing to genuineness viz. illness, accident, etc.” However, the Supreme Court in this case as well confined itself in strictly construing the limitation provision, when ideally the Supreme Court should have adopted a balanced approach.
The much-awaited decision of the Supreme Court in the Gaurav Agarwal case maychange the long-followed precedents where strict interpretation of Section 61(2) has been adopted by the NCLAT and the Supreme Court. A rationale approach in the Gaurav Agarwal case will provide the much-needed respite to the litigants, who are left without any remedy, when their appeals are barred by limitation, despite having a good case on merits. Such an interpretation will be beneficial for all stakeholders involved in the maximation of the value of the assets of the corporate debtor under the Code.
For further information, please contact:
Sumit Attri, Partner, Cyril Amarchand Mangaldas
sumit.attri@cyrilshroff.com
[1] Section 61(2), Insolvency and Bankruptcy Code, 2016
[2] (2021) 2 SCC 317
[3] Section 4, The Limitation Act, 1963
[4] I.A. NO. 3349 of 2022
[5] (2022) 2 SCC 244
[6] Section 421(3), Companies Act, 2013
[7] I.A. No. 2588 of 2022 in Company Appeal (AT) (Insolvency) No. 916 of 2022
[8] SCC OnLine SC 716
