Analyzing SC Ruling on Condonation of Delay in Appeals before NCLAT
Advocate Avinash Krishnan Ravi
It is trite that any order of the NCLT, passed under the Companies Act, 2013, may be appealed against, before the NCLAT under section 421 of the Companies Act, 2013. Similarly, any order of the NCLT under the tenets of the Insolvency and Bankruptcy Code, 2016 may be appealed before the NCLAT under section 61 of the Insolvency and Bankruptcy Code, 2016. The “time limit” set for appeals under section 421 of the Companies Act, 2013 is 45 days from the date of the impugned order with a “further period” of 45 days, beyond which, the NCLAT cannot condone delay. Similarly, the time limit set for appeals under section 61 of the Insolvency and Bankruptcy Code, 2016 is 30 days from the date of the impugned order with a further period of 15 days, beyond which, the NCLAT cannot condone delay. In the context of computing the time limit for calculation of limitation and to determine whether an appeal is barred by limitation, a number of questions arise, some of which have been answered in the recent judgment of the Hon’ble Supreme Court in Sagufa Ahmed vs. Upper Assam Plywood Products Pvt. Ltd., Civil Appeal No. 3007-3008 of 2020, namely:
(i) Should the limitation be counted from the date on which a certified copy of the impugned order is received or from the date of the impugned order itself?
(ii) In cases where the certified impugned order is not received and where a party applies for a certified copy and obtains the same, should limitation be computed from the date of receipt of such certified copy, obtained at the instance of a party or from the date of the impugned order itself?
(iii) If the “time limit” for filing an appeal falls on a holiday, does the appeal become barred by limitation?
(iv) If the last day of the “further period” falls on a holiday, does the delay in filing become incapable of condonation by the NCLAT?
(v) If the “time limit” was over prior to the COVID-19 lockdown and extension of limitation order passed on 23.03.2020 and the “further period” fell during the lockdown, would the lockdown period stand excluded for the purpose of calculating the “further period”?
Brief Outline of Facts:
The Appeal was filed against an order of the NCLAT, dismissing an application for condonation of delay. In the case, the NCLT had passed an order on 25.10.2019, in respect of which, the Appellant filed an application for certified copy on 21.11.2019 and the certified order copy was received by the Appellant on 19.12.2019, pursuant to the copy application made. It is relevant to note that the Appellant had not received the free order copy. Subsequently, after receiving the certified copy on 19.12.2019, the Appellant preferred an appeal before the Hon’ble NCLAT on 20.07.2020. The appeal was dismissed by the NCLAT on the ground that under section 421 of the Companies Act, 2013, the Appellate Tribunal did not have power to condone delay beyond a period of 45 days. Preferring an appeal against this order, the Appellant before the Hon’ble Supreme Court contended as follows:
- That the NCLAT erred in computing limitation from the date of the order of the NCLT.
- That the Appellate Tribunal failed to take note of the fact that the “further period” fell during the lockdown, during which period, limitation stood extended by the order of the Hon’ble Supreme Court in Suo Moto Writ Petition (Civil) No. 3 of 2020 dated 23.03.2020.
Considering the aforesaid contentions of the Appellant, the Hon’ble Supreme Court answered the questions formulated hereinabove, as follows:
i. Should the limitation be counted from the date on which a certified copy of the impugned order is received or from the date of the impugned order itself?
The Hon’ble Supreme Court, taking note of Rule 50 of the NCLT Rules, held that the Registry of the NCLT is mandated to send a certified copy of all final orders to the parties free of cost. Further, the Hon’ble Court held that under section 421(3) of the Companies, Act, a limited discretion is conferred upon the NCLAT to condone delay, subject to a maximum period of 45 days. Having regard to Rule 50, the Hon’ble Supreme Court held that the “time limit” for computation of limitation, i.e. the period of limitation of 45 days in the case of appeals under Companies Act and consequently, the period of 30 days in the case of appeals under the Insolvency and Bankruptcy Code, 2016, would begin to run from the date on which the copy of the order of the Tribunal is made available to a person aggrieved. The Hon’ble Supreme Court further held that if a party chooses to wait for a certified copy, free of cost and then files an appeal after receipt of such certified copy, the period for limitation would commence from the date of receipt of the free of cost certified copy only.
ii. In cases where the certified impugned order is not received and where a party applies for a certified copy and obtains the same, should limitation be computed from the date of receipt of such certified copy, obtained at the instance of a party or from the date of the impugned order itself?
In the facts of this case, this question directly arose before the Hon’ble Supreme Court. However, the court has not expressly dealt with this issue, but has instead proceeded to deal with the issues involved in questions (iii) and (iv), by finding that they did not want to hold the fact that a copy application was applied, against the Appellant. For this purpose, the Hon’ble Supreme Court took the date of receipt of the order copy, i.e. 19.12.2019, as the date on which the time period for computing limitation would begin. On a matter of principle, it is submitted that such an approach of the Hon’ble Supreme Court is correct and deserves to be followed in future cases, although this case may not be a direct authority on law for such a proposition. It is submitted that if the alternative to this approach, i.e. finding that the filing of the copy application would result in limitation being computed from the date of the order of the Tribunal itself is accepted, it would result in a situation where a party to chooses to do nothing about the delay in obtaining a free order copy would have limitation extended forever, whereas a party who choose to proactively obtain such copies to file an appeal, would lose out because of his vigilance itself. It is submitted that such an approach would have been anomalous and has rightly been rejected by the Hon’ble Supreme Court.
iii. If the “time limit” for filing an appeal falls on a holiday, does the appeal become barred by limitation?
The Hon’ble Supreme Court in Sagufa, has recognized a distinction in law, between the “period of limitation”, i.e. the “time period” and the further period of time, upto which delay can be condoned. Interpreting section 10 of the General Clauses Act 1897 and section 4 of the Limitation Act, 1963, which provisions deal with the methodology for computing limitation in cases where the last day falls on a day when the court is closed, held that the principle of sections 4 and 10 deal with the “period of limitation”, i.e. the “time period” within which appeals should be filed and not with the “further period”. Thus, the Hon’ble Court held that where the last day of the “time period” prescribed under the Act falls on a holiday, the next working day may be construed as the last day of the “time period” within which such appeal should be filed. In other words, in the context of the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016, where the 45th day and the 30th day from the date of receipt of the certified copy falls on a day when the court is closed, the next working day would be construed as the 45th or 30th day and consequently, no application for condonation of delay needs to be filed.
iv. If the last day of the “further period” falls on a holiday, does the delay in filing become incapable of condonation by the NCLAT?
In light of the distinction between the “time period” prescribed under the Act and the “further period” within which delay can be condoned, the Hon’ble Supreme Court held that the benefit of section 4 of the Limitation Act and section 10 of the General Clauses Act, would only be applicable to the last day of the “time period” falling on a holiday and not the last day of the “further period” falling on a holiday. Consequently, if the last day of the further period falls on a holiday, the Court will not deem the next working day as the last day of the “further period”. In other words, if the 90th day for an appeal on a holiday, say a Sunday, the 91st day cannot be deemed as the 90th day and the delay, as on the date of filing, i.e. the 91st day, being 46 days, is incapable of being condoned under the Companies Act, 2013. To this end, the Hon’ble Supreme Court followed its earlier decision in Assam Urban Water Supply Board v Subash Projects and Marketing Ltd, (2012) 2 SCC 624, wherein, the Supreme Court had held that that section 10 of the General Clauses Act would not apply to the additional 30 day period, prescribed for condonation of delay, in section 34 of the Arbitration and Conciliation Act, 1996.
v. If the “time limit” was over prior to the COVID-19 lockdown and extension of limitation order passed on 23.03.2020 and the “further period” fell during the lockdown, would the lockdown period stand excluded for the purpose of calculating the “further period”?
In the context of the COVID-19 lockdown extension of limitation order passed on 23.03.2020, by the Hon’ble Supreme Court of India, the Hon’ble Court has clarified that the said order would only benefit cases where the “time period” prescribed under the Act has not expired and would not apply to cases where time period had expired prior to the COVID-19 lockdown. In other words, if the 45th day falls after 23rd March, 2020, i.e. after the extension of limitation order, then the right of such persons to file an appeal is protected by the order in Suo Moto Writ Petition (Civil) No. 3 of 2020. However, where the 45 day period was over before 23rd March, 2020 and the further period extends during the lockdown period, i.e. extends beyond 23.03.2020, the order does not benefit persons seeking to file their appeals during the extended period and if the clock would tick for them, for the purpose of determining “delay” in filing the appeal. Thus, as a result of this order of the Hon’ble Supreme Court, all persons, whose 45-day or 30-day period to file appeals before the NCLAT had expired prior to 23rd March, 2020, would lose their right to file an appeal, altogether, if they have not filed their appeals within the further period 45-days or 15-days. The rationale behind this order of the Hon’ble Supreme Court is that such persons, by failing to file appeals within the “time period” had failed to act with vigilance in respect of their rights.
Conclusion
As a result of this order, the Hon’ble Supreme Court has finally settled the law on a number of pressing questions in the context of computing delay and period of limitation for appeals before the NCLAT. Owing to the restriction placed by the Supreme Court in Sagufa on the order passed in Suo Moto Writ Petition (Civil) No. 3 of 2020 on 23.03.2020, it is likely that a number of persons may lose their right to file appeals altogether, owing to the further period falling during the lockdown, where filing was impossible due to the COVID lockdown.
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