The National Company Law Appellate Tribunal (NCLAT) in a recent judgment1 held that an appeal preferred under Section 32 of the Insolvency and Bankruptcy Code, 2016 (IBC) is not independent of the provisions of Section 61 of the IBC and is to be filed within the prescribed time limit.
Facts
Pursuant to an order dated 20 April 2022, the National Company Law Tribunal, Hyderabad (NCLT) admitted a Company Petition under Section 7 of the IBC against IVRCL Chengapalli Tollways Ltd. (ICTL) and ordered commencement of corporate insolvency resolution process. National Highway Authority of India (NHAI/ Appellant) submitted is claim and revised claim, which was partially admitted. Subsequently, the resolution plan of ICTL was admitted by the NCLT by its order dated 1 May 2023 (Plan Approval Order).
NHAI filed an appeal only in January 2024, after 299 days from the Plan Approval Order. As the Appeal was filed after the 45 days statutory time limit under Section 61 (2) of the IBC, it was challenged on preliminary grounds of limitation.
The novel defence to this was pleaded by NHAI, stating that the Appeal was filed under Section 32 of the IBC and hence the limitation period under Section 61 (2) was not applicable to such an appeal.
Arguments advanced by NHAI
- The Appeal is filed within the ambit of the provisions of Section 32 of the IBC, which provides that "an appeal from an order approving the resolution plan shall be in the manner and on the grounds laid down in sub-section (3) of section 61".
- Since Section 32 or Section 61(3) does not prescribe the period of limitation for preferring an appeal against an order approving a resolution plan, there is no limitation applicable for an appeal filed under Section 32 of the IBC.
- The specific provision contained in Section 61(3) of the IBC, which provides the manner and procedure for filing an appeal under Section 32 will prevail over the general provisions contained in Section 61(1) and Section 61(2).
- While Section 61(1) may be applicable to appeals from all other orders, directions and decisions which are subject to a limitation period outlined in Section 61(2), Section 61(3) distinctly allows for appeal against orders approving a resolution plan without a specified limitation period.
- Even if limitation under Section 61 of the Code is attracted, the NCLAT, by invoking its inherent powers under Rule 11 of the NCLT Rules, can create an exception to the provisions of Section 61 with respect to limitation and admit the appeal since no limitation has been expressly provided in Section 32 of the Code.
Respondents' arguments
- Section 32 is an enabling provision identifying the right to file an appeal against orders approving resolution plans. However, the same is to be read with provisions Section 61 holistically as the jurisdiction of the NCLAT, prescribed limitation and grounds to challenge a resolution plan are enlisted in Section 61 of the IBC.
- Section 61(3) of the IBC has no independent existence. Once the appeal has been preferred even if under Section 32 read with Section 61(3), the provisions contained under Section 61(1) and Section 61(2) will be applicable and accordingly, the time taken to file an appeal would have to be considered under Section 61(2) of the IBC.
- The provisions of Section 61(1) provides that any person aggrieved by an order passed by the Adjudicating Authority 'under this part', i.e. Part II, Chapter II of the IBC, may prefer an appeal to the NCLAT. Since Section 32 also forms part of the same Chapter II and Part II referred to in Section 61, Section 61 in entirety would be applicable to all appeals including the appeals supposedly preferred under Section 32.
- Not having a limitation period for appeals to challenge approval of resolution plans will lead to an anomalous situation whereby resolution plans will be open to challenge years after implementation, which is completely contrary to the spirit of the IBC.
Analysis of the judgment
The NCLAT, while relying upon the judgment in Principal Director General of Income Tax Admin. And TPS Vs Spartak Ceramics India Ltd. & Anr.2 held that Section 61(3) referred to in Section 32 of the IBC only lays down the grounds on which a resolution plan approved can be referred to appeal, however, the appeal has to be filed within the limitation period provided in Section 61(2) of the IBC. Section 61(3) of the IBC cannot operate in exclusion of Section 61(1) and Section 61(2) of the IBC. This is further fortified from the fact that Section 61(1) starts with a non-obstante clause. Thus, the limitation period as contained in Section 61(2), would also be applicable to appeals filed under Section 32 of the IBC. Since an appeal challenging a resolution plan is filed under Section 32 read with Section 61(3), Section 61 would be applicable in entirety and not in piecemeal.
NCLAT further clarified that the Rule 11 of the NCLT Rules being the subordinate legislation cannot override the principal statute, being the IBC, which already lays down the period of limitation for filing appeals in Section 61.
Conclusion
The legal interpretation of the IBC concerning the applicability of limitation to appeals under Section 32 is well-founded. NHAI's interpretation that since limitation period is not specified either in Section 32 or Section 61(3) and that Section 61(1) and Section 61(2) cannot be read into Section 32 was found to be fundamentally flawed.
It should be emphasised that NCLAT derives its jurisdiction to hear appeals from Section 61(1). Accepting NHAI's interpretation - that Section 61(1) does not apply to appeals against orders approving a resolution plan under Section 32 – would lead to other serious ramifications, as it would then mean that there is no forum prescribed for such appeals, potentially allowing such appeals to be challenged in any court of law and at any time in perpetuity, undermining the very purpose and intent of the IBC.
Footnotes
1. National Highway Authority of India Through DGM (T) & Project Director vs. IVRCL Chengapalli Tollways Ltd. & 3 Ors. IA No.626/2024 in Company Appeal (AT) (CH) (Ins.) No.62/2024
2. 2018 SCC Online NCLAT 617 – Paragraphs 49 and 50
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