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  • Subhasish Pamegam

Unveiling Appeal Limits: Supreme Court Verdict on Section 61 of IBC

[Subhasish is a student at Gujarat National Law University.]

The recent Supreme Court judgment in Sanjay Pandurang Kalate v. Vistra ITCL (India) Limited and Others has brought forth a crucial clarification regarding the limitation for filing appeals under Section 61 of the Insolvency and Bankruptcy Code 2016 (IBC) before the National Company Law Appellate Tribunal (NCLAT). The judgment defines the commencement of the appeal filing period, specifically addressing scenarios where hearings occur but orders are not immediately pronounced or uploaded. This landmark judgment by the Supreme Court highlights the pivotal difference between 'hearing of a case' and formal 'pronouncement' of an order, emphasizing the significance of this distinction under National Company Law Tribunal (NCLT) Rules, 2016.

The central debate in the case revolved around the trigger point for appeal limitation periods: should it initiate from the date of the hearing or the order's subsequent upload, as stipulated in Section 61(2) of the IBC? This legal conundrum spurred meticulous evaluation led by Chief Justice Dr. Dhananjaya Y Chandrachud, Justice J B Pardiwala, and Justice Manoj Misra.

This article aims to trace the jurisprudence on appeal limitations under Section 61 of IBC. It will dissect the recent landmark judgment by the Supreme Court, shedding light on the complexities surrounding appeal limitations, followed by examining the implications of this ruling on the corporate insolvency proceedings landscape in India. Lastly, the article will provide considerations for potential legislative or procedural reforms to streamline and enhance the efficacy of the appellate process under section 61 of IBC.

Evolution of Judicial Interpretation of Section 61 of IBC

Section 61 of the Insolvency and Bankruptcy Code, 2016  stipulates a 30-day limitation period from the NCLT order date for the filing of an appeal in the NCLAT by the concerned party. Additionally, the NCLAT possesses the authority to condone a further delay, which cannot exceed 15 days beyond the initial 30-day period, provided there exists a justifiable reason for the delay.

The evolution of judicial interpretation of limitation of appeals under section 61 of IBC has been significantly shaped by historical precedents and past judicial approaches. In general, the NCLAT has consistently dismissed appeals where the delay was beyond the extended 45-day period allowed under Section 61 of IBC since the NCLAT itself has no inherent authority to condone appeals filed beyond the 45 days threshold.

Section 61 of IBC has remained silent on determining the date of commencement of the 30-day period in filing the appeal which has led to various conflicting interpretations by the courts in calculating the limitation period for appeal. One of the positions that has been taken by appellants while filing for appeal is that if the affected party was unaware of the adjudicating authority's order, it could warrant calculating the 30-day period from the date of acquiring such knowledge. This requirement for date of knowledge of the impugned order has been used as an argument in various cases such as Shashi Mohan Garg v. International Asset Reconstruction Company Private Limited, P Purushothaman v. Union Bank of India and Corporation Bank v. Anuj Jain to reset the statutory limitation period given in Section 61 of IBC where the courts have rejected the argument of want of knowledge citing that the appellants had knowledge of the orders but did not make a definitive ruling on whether the date of knowledge could serve as a valid ground to circumvent the appeal deadline outlined in Section 61 of IBC for filing an appeal before the NCLAT.

In Dhiren Dave v. Pantomath Capital Advisors Private Limited, the court relied upon Prowess International Private Limited v. Action Ispat & Power Private Limited ruling holding that the period for calculating limitation for filing appeal under Section 61 of IBC shall start from the date when the order is pronounced by the adjudicating authority. However, the NCLAT in the case of Dhiren Dave did not correctly interpret the decision given in Prowess International as the knowledge of the order and pronouncement of the order happened on the same day. In the Prowess International case, the NCLAT acknowledged that the appellant was aware of the existence of the impugned order on the date of its pronouncement.  The Prowess International case was an instance where the pronouncement of the order coincided with the appellant's knowledge of the order, with both events occurring on the same day which still makes the argument of date of knowledge valid. Therefore, knowledge of the order has been erroneously overlooked in the Dhiren Dave case for resetting the period of limitation under Section 61 of IBC.

Similarly, in S Kumar Construction Company v. Bharti Airtel Limited, the NCLAT ruled that the date for calculating the limitation period for appeal would commence on the date of knowledge of the order. Whereas in Nagarajan v. SKS Ispat & Power Limited, the Supreme Court ruled that the period of limitation for appeal will be calculated from the day the order is formally announced by the tribunal.

The uncertainty surrounding the date for calculating the period of limitation for appeal under Section 61 of IBC has caused inconsistency in judicial interpretations of the commencement date for the limitation period. This has led to various implications for the stakeholders of insolvency proceedings in India prompting the need for a uniform interpretation. Therefore, the Supreme Court in its recent judgment in the case of Sanjay Pandurang Kalate v. Vistra ITCL (India) Limited and Others has clarified the position on the date for computation of limitation of appeal period, citing the date of upload as the date on which the limitation period is commenced.

Analysis of the Recent Ruling

The Supreme Court in its recent judgment made a crucial distinction between the "hearing" of a case and the "pronouncement" of an order. It held that the computation of the limitation period under Section 61(2) of IBC commences on the date of the order's pronouncement, not on the conclusion of the hearing. The reliance of the court on NCLT Rules 2016, particularly Rule 89(1), aided the court in differentiating cases listed for pronouncement from others, emphasizing the necessity of pronouncement of order. This rule clarifies the essentiality of the act of pronouncing an order for it to be deemed as "pronounced". The court's assessment of the case's cause list for 17 May 2023 clarifies that the matter was listed for admission, not pronouncement, and there was no substantive order on that date. Therefore, given the order was uploaded only on 30 May 2023, the court held that the time to file an appeal would start from the order's upload date.

The court's reliance on the NCLT Rules to determine the commencement of the period of limitation under Section 61 of IBC and allowing flexibility in filing appeal in the interests of substantial justice is commendable, but this distinction between "hearing" and "pronouncement" of an order might still pose practical challenges in cases where the line between these events is blurred. For instance, procedural complexities or case-specific circumstances may blur the line between when a matter is merely heard and when an order is formally pronounced. This ambiguity could complicate determining the precise starting point for the limitation period. Additionally, identifying the exact moment of pronouncement might be subjective or prone to interpretations, especially in situations where courts pronounce orders immediately after hearings or where there's a gap between the conclusion of hearings and the actual pronouncement.

Implications of the Ruling

While the judgment aims to streamline the appealing filing process under IBC, the decision on setting the date of upload as the period for computing limitation is in contrast to the rationale laid down in the case of V Nagarajan where the court draws a clear distinction between Section 421(3) of the Companies Act 2013 and Section 61(2) of the IBC. Section 421(3) of the Companies Act 2013 mentions that the period for filing an appeal begins "from the date on which a copy of the order of the Tribunal is made available to the person aggrieved" whereas Section 61(2) of IBC does not contain a similar requirement. The absence of the words mandating the receipt of the order to the affected person in Section 61(2) of IBC stipulates the determination of the start of the limitation period for filing appeals from the date of pronouncement of the order. By basing the limitation period on the date of upload of the order on the website, it will inadvertently encourage appellants to forego securing a certified copy of the order from the tribunal. Further, not all appellants might have reliable internet access or be proficient in navigating online platforms to access uploaded orders swiftly. This discrepancy in technological resources and capabilities might disproportionately affect certain individuals or entities, undermining their ability to adhere to the prescribed limitation period.

This judgment also redefines the procedural framework and expected diligence from aggrieved parties in the corporate insolvency resolution process (CIRP) in India which could have critical implications on the timely action of the CIRP. Since IBC is a special code in contrast to the Companies Act 2013, it is incumbent upon the aggrieved parties to exercise diligence and request a certified copy immediately after the order is pronounced to ensure swift resolution of the insolvency proceedings under IBC. Allowing the party to wait for the upload of the order on the website without taking any steps to apply for a certified copy from the tribunal would only delay the limitation period and prolong the CIRP. Such indefinite delays could disrupt the rhythm of insolvency proceedings, impacting the resolution's efficiency which would contradict the objective of the IBC to ensure timely and swift resolution of insolvency proceedings in India. The timely resolution of insolvency proceedings is imperative for the growth of a nation, and since the IBC is a legislation that significantly impacts the nation's economic well-being, there should not be any leniency in filing appeals under Section 61 of the IBC.

Way Forward

The recent judgment differentiating between "hearing" of a case and "pronouncement" of order in calculating the period of limitation for appeal shows the commitment of the judiciary in balancing procedural adherence with equitable considerations by allowing for flexibility in filing appeals. However, the court overlooked the object of the IBC in ensuring swift and timely resolution of corporate insolvency proceedings and situations where parties might not be able to access the upload within the prescribed period.

Therefore, there is need for clarity in Section 61 of the IBC to expressly define the commencement date for the limitation period to address potential grey areas or subjectivity that might arise in distinguishing between the 'hearing' and the 'pronouncement' of an order in specific case contexts. Additionally, introducing standardized procedures and timelines ensuring immediate order pronouncement after hearings would minimize delays in the appeals. This would ensure a more practical and consistent application of the limitation period in the realm of insolvency appeals. Balancing procedural adherence with pragmatic considerations remains crucial for a more effective and just insolvency resolution framework.

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