Supreme Court Holds That With No Pronouncement Of The Final Order By The NCLT, Limitation Under IBC Commences From The Date Of Upload Of The Final Order On The NCLT Website

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On December 4, 2023, a division bench of the Supreme Court of India in the case of, Sanjay Pandurang Kalate v. Vistra ITCL (India) Limited & Ors., held that in the absence of the judgment/final order...
India Litigation, Mediation & Arbitration
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On December 4, 2023, a division bench of the Supreme Court of India in the case of, Sanjay Pandurang Kalate v. Vistra ITCL (India) Limited & Ors., held that in the absence of the judgment/final order being pronounced by the National Company Law Tribunal ("NCLT"), the period of limitation under the Insolvency and Bankruptcy Code, 2016 ("Code") commences from the date when the judgment/final order of the NCLT is uploaded on its website.

Brief Facts:

1. Vistra ITCL (India) Limited ("Respondent No. 1") filed an application under Section 7 of the Code seeking the institution of Corporate Insolvency Resolution Process ("CIRP") against Evirant Developers Private Limited, the Corporate Debtor ("Corporate Debtor") in the NCLT.

2. An interlocutory application was filed before the NCLT by Sanjay Pandurang Kalate ("Appellant"), who is a former director of the Corporate Debtor, alleginginter alia, that the reply to the application under Section 7 of the Code filed by the Corporate Debtor, had been filed by the Respondent No. 2, without authorization of the Board of Directors or intimation to the Appellant.

3. The interlocutory application filed by the Appellant was heard by the NCLT on May 17, 2023, on which date the order was not pronounced and no substantive order was passed. The order was uploaded by the Registry of the NCLT on May 30, 2023, though the order carries the date of May 17, 2023. The NCLT dismissed the Appellant's interlocutory application on the ground that the application was filed without authorization from the Board of Directors of the Corporate Debtor and was prima facie frivolous, to delay the proceedings in the application under Section 7 of the Code filed by the Respondent No. 1. The Appellant applied for the certified copy of the said order on May 30, 2023, which was received on June 01, 2023.

4. The Appeal against the aforementioned order was e-filed before the National Company Law Appellate Tribunal ("NCLAT") on July 10, 2023. The Appellant filed an application for condonation of delay before the NCLAT on the ground that the Appellant became aware of the contents of the order only on May 30, 2023 and the limitation period should run from the said date and the NCLAT was closed for summer vacations from 05 June, 2023 to July 02, 2023 and this period should be excluded from the calculation of limitation.

5. The NCLAT dismissed the appeal filed by the AppellantvideOrder dated September 14, 2023 ("Impugned Order") on the ground that the appeal was instituted beyond the outer limit of 45 (forty five) days permissible under Section 61 of the Code. The NCLAT relied on the judgment of the Supreme Court of India in V. Nagarajan v. SKS Ispat [(2022) 2 SCC 244] and rejected the contention of the Appellant that the time should begin from May 30, 2023 i.e. the date the order was uploaded on the website of the NCLT. As the period of limitation was found to have begun from May 17, 2023, the filing of the appeal on July 10, 2023 was held to be beyond the outer limit of 45 (forty five) days prescribed under the Code. The NCLAT also rejected the contention that the annual summer vacations of the NCLT were from June 05, 2023 to July 02, 2023 and the said period should also be excluded on the ground that the NCLAT had issued a notification stating that the registry would remain open and filing of appeals was permissible.

6. The Appellant filed an appeal under Section 62 of the Code against the Impugned Order.

Issue:

When would the period of limitation commence for the purposes of preferring an appeal under the Code?

Relevant Law:

Section 61 of the Code is reproduced hereinbelow for your ready reference:

"

Section 61. Appeals and Appellate Authority.

(1)Notwithstanding anything to the contrary contained under the Companies Act 2013 (18 of 2013), any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal.

(2)Every appeal under sub-section (1) shall be filed within thirty days before the National Company Law Appellate Tribunal:

Provided that the National Company Law Appellate Tribunal may allow an appeal to be filed after the expiry of the said period of thirty days if it is satisfied that there was sufficient cause for not filing the appeal but such period shall not exceed fifteen days.

....]

Rules 89, 146, 150 and 151 of the National Company Law Tribunal Rules, 2016 ("NCLT Rules") are reproduced hereinbelow for your ready reference:

"89. Preparation and publication of daily cause list.— (1)The Registry shall prepare and publish on the notice board of the Registry before the closing of working hours on each working day the cause list for the next working day and subject to the directions of the President, listing of cases in the daily cause list shall be in the following order of priority, unless otherwise ordered by the concerned Bench; namely;-

(a) cases for pronouncement of orders;

(b) cases for clarification;

(c) cases for admission;

(d) cases for orders or directions;

(e) part-heard cases, latest part-heard having precedence; and

(f) cases posted as per numerical order or as directed by the Bench;

..."

"146. Disposal of Cases.-On receipt of an application, petition, appeal etc, the Tribunal, after giving the parties a reasonable opportunity of being heard, pass such orders thereon as it thinks fit:

Provided that the Tribunal, after considering an appeal, may summarily dismiss the same, for reasons to be recorded, if the Tribunal is of opinion that there are no sufficient grounds for proceedings therewith."

"150. Pronouncement of Order.- (1)The Tribunal, after hearing the applicant and respondent, shall make and pronounce an order either at once or, as soon as thereafter as may be practicable but not later than thirty days from the final hearing.

(2) Every order of the Tribunal shall be in writing and shall be signed and dated by the President or Member or Members constituting the Bench which heard the case and pronounced the order.

(3) A certified copy of every order passed by the Tribunal shall be given to the parties.

(4) The Tribunal, may transmit order made by it to any court for enforcement, on application made by either of the parties to the order or suo motu.

(5) Every order or judgment or notice shall bear the seal of the Tribunal.

151.Pronouncement of order by any one member of the Bench.-(1) Any Member of the Bench may pronounce the order for and on behalf of the Bench. (2) When an order is pronounced under this rule, the Court Master shall make a note in the order sheet, that the order of the Bench consisting of President and Members was pronounced in open court on behalf of the Bench"

Relevant Judgments:

1. V. Nagarajan v. SKS Ispat [(2022 2 SCC 244] ("V. Nagarajan")

2. Sanket Kumar Agarwal v. APG Logistics Private Limited [2023 SCC OnLine 976] ("Sanket Agarwal")

Observations of the Court:

1. InV. Nagarajan, a three- judge bench of the Supreme Court of India had held that limitation commences from the date of pronouncement and not the date of the upload of the order or receipt of a certified copy. The Court expressly clarified that that the time taken to procure the certified copy of the order would be excluded from the calculation of the period of limitation, provided the appellant applies within the prescribed period under Section 61(2) of the Code. In the said case, there was a pronouncement on the date mentioned in the order and the appellant did not dispute his presence before the NCLT when the order was pronounced in open court.

2. Subsequently in Sanket Agarwal, the Supreme Court of India clarified the law laid down in V. Nagarajan and held that limitation stops running on the e-filing of an appeal before the NCLAT and not on presentation of a physical copy and the date on which the order is pronounced is to be excluded from the calculation of limitation provided the appellant applies within the prescribed period under Section 61(2) of the Code.

3. The date on which the limitation begins to run is intrinsically linked to the date of pronouncement and therefore, it is to be determined as to when an order is deemed to be 'pronounced'.

4. Rule 89 (1) of the Rules indicates that when the NCLAT Registry publishes its cause list, a distinction is drawn between cases listed for pronouncement of orders and other cases.

5. Rules 146, 150 and 151 of the NCLT Rules make a clear distinction between the 'hearing' of an appeal and the'pronouncement'of the order.

6. The cause list of May 17, 2023 listed the case for admission and not for pronouncement. Further, it is an undisputed fact that no substantive order was passed on May 17, 2023 by the NCLT. Limitation would, thus, not begin on May 17, 2023, which was the date on which the hearing was concluded.

7. As no order was passed before May 30, 2023, there was no occasion for the Appellant to file an application for a certified copy of the Impugned Order on May 17, 2023.

8. The time for filing an appeal would commence only when the Impugned Order was uploaded since prior to that date, no order was'pronounced'.

Decision:

The Court held that the period of limitation under Section 61(2) of the Code began on May 30, 2023 and concluded on June 29, 2023. Though the appeal was filed beyond the period of 30 (thirty) days, it was within the condonable period of 15 (fifteen) days. The Court allowed the appeal, set aside the Impugned Order and directed that the appeal filed by the Appellant before the NCLAT be restored to the NCLAT for reconsidering whether the Appellant had shown sufficient cause for condoning the delay beyond 30 (thirty) days.

Analysis:

The present judgment has made it amply clear that although the NCLT may reserve orders on the day of the conclusion of arguments, in the absence of the order being pronounced in open court by the NCLT, the limitation period for preferring an appeal under Section 61(2) of the Code would begin on the date the order was uploaded on the website of the NCLT and not on the day the order was reserved and/or the date on the order.

Please find attached a copy of the judgment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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