LEGAL ISSUE: Whether the National Company Law Appellate Tribunal (NCLAT) can condone delays exceeding 15 days in filing appeals under the Insolvency and Bankruptcy Code (IBC).
CASE TYPE: Insolvency Law
Case Name: National Spot Exchange Limited vs. Mr. Anil Kohli, Resolution Professional for Dunar Foods Limited
[Judgment Date]: 14 September 2021
Date of the Judgment: 14 September 2021
Citation: (2021) INSC 607
Judges: M.R. Shah, J. and Aniruddha Bose, J.
Can a delay in filing an appeal be excused, even when the law sets a strict deadline? The Supreme Court of India recently addressed this critical question concerning the condonation of delay in appeals under the Insolvency and Bankruptcy Code (IBC). This case highlights the strict adherence to statutory timelines, even when significant amounts and public bodies are involved. The judgment, delivered by a two-judge bench comprising Justice M.R. Shah and Justice Aniruddha Bose, underscores the limitations on the appellate tribunal’s power to condone delays, reinforcing the legislative intent behind the IBC’s timelines.
Case Background
The case revolves around National Spot Exchange Limited (NSEL), the appellant, and Dunar Foods Limited, the corporate debtor, undergoing insolvency proceedings. State Bank of India initiated insolvency proceedings against Dunar Foods Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). The proceedings began because Dunar Foods Limited had taken credit limits by hypothecating commodities stored in NSEL’s warehouses.
An Interim Resolution Professional (IRP) was appointed, who invited claims from creditors by 17 January 2018. NSEL submitted a claim for ₹673.85 crores, asserting that Dunar Foods Limited was liable for funds siphoned off by PD Agro Processors Pvt. Ltd. (PD Agro), a related entity. NSEL had previously filed a suit against PD Agro in the High Court of Judicature at Bombay, securing a decree for ₹633,66,98,350.40.
The IRP rejected NSEL’s claim on 18 June 2018, citing a lack of privity of contract between NSEL and Dunar Foods Limited, and the absence of any guarantee from Dunar Foods Limited to NSEL. NSEL challenged this rejection before the National Company Law Tribunal (NCLT), which upheld the IRP’s decision on 6 March 2019.
Timeline
| Date | Event |
|---|---|
| 2011-2013 | PD Agro siphoned off funds, including ₹744 crores to Dunar Foods Limited. |
| 11 April 2014 | High Court of Judicature at Bombay injuncted PD Agro and Dunar Foods Limited from disposing of assets. |
| 6 January 2018 | IRP issued public announcement inviting claims from creditors of Dunar Foods Limited. |
| 17 January 2018 | Deadline for submitting claims to IRP. |
| 17 January 2018 | NSEL submitted claim for ₹673.85 crores. |
| 18 June 2018 | IRP rejected NSEL’s claim. |
| 6 March 2019 | NCLT upheld IRP’s rejection of NSEL’s claim. |
| 8 April 2019 | NSEL applied for certified copy of NCLT order. |
| 11 April 2019 | NSEL received certified copy of NCLT order. |
| 24 June 2019 | NSEL filed appeal before NCLAT with a delay of 44 days. |
| 5 July 2019 | NCLAT dismissed NSEL’s appeal due to delay. |
Course of Proceedings
NSEL, aggrieved by the NCLT’s decision, appealed to the National Company Law Appellate Tribunal (NCLAT). However, there was a delay of 44 days in filing the appeal. According to Section 61(2) of the IBC, appeals must be filed within 30 days, with a possible extension of 15 days if sufficient cause is shown. The NCLAT dismissed the appeal, holding that it lacked the jurisdiction to condone delays beyond the 15-day limit. NSEL then appealed to the Supreme Court against this dismissal.
Legal Framework
The core legal provision in this case is Section 61(2) of the Insolvency and Bankruptcy Code, 2016. This section specifies the timeline for filing appeals before the NCLAT.
Section 61(2) of the Insolvency and Bankruptcy Code, 2016 states:
“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.”
This provision establishes a strict 30-day limit for filing appeals, with a discretionary extension of up to 15 days for sufficient cause. The statute does not allow for any further extension.
Arguments
Appellant (National Spot Exchange Limited) Arguments:
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The appellant argued that the NCLAT was justified in dismissing the appeal due to limitation. However, they requested the Supreme Court to exercise its powers under Article 142 of the Constitution of India to condone the delay, given the unique circumstances of the case.
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The Directorate of Enforcement’s investigation revealed that PD Agro, a sister concern of Dunar Foods Limited, had siphoned off ₹744 crores to the corporate debtor.
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PD Agro and Dunar Foods Limited had common management and directors, indicating a fraudulent scheme.
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Dunar Foods Limited was the primary beneficiary of funds from trades executed on the appellant’s platform.
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A decree had been passed by the Bombay High Court against PD Agro, and the IRP should have admitted NSEL’s claim by lifting the corporate veil, given the fraud.
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NSEL is a public body that provided an electronic exchange platform, and the large amount of ₹693 crores is involved. Therefore, the delay should be condoned.
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Cited cases such as Chitra Sharma v. Union of India, (2018) 18 SCC 575; Jaiprakash Associates Limited v. IDBI Bank Limited, (2020) 3 SCC 328; and Reliance General Insurance Co. Ltd. v. Mampee Timbers and Hardwares Pvt. Ltd., (2021) 3 SCC 673, to support the request to condone the delay under Article 142.
Respondent (Interim Resolution Professional) Arguments:
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Section 61(2) of the IBC explicitly limits the Appellate Tribunal’s power to condone delays to a maximum of 15 days beyond the initial 30-day period.
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The NCLAT correctly dismissed the appeal as it had no jurisdiction to condone the delay of 44 days.
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Relying on Union of India v. Popular Construction Co., (2001) 8 SCC 470, the respondent argued that when a statute provides a specific limitation period and explicitly states the extent to which delay can be condoned, other provisions of the Limitation Act are excluded.
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The respondent cited the Constitution Bench decision in New India Assurance Company Limited v. Hilli Multipurpose Cold Storage Private Limited, (2020) 5 SCC 757, to emphasize that statutory timelines must be strictly adhered to.
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The law made by Parliament must be given effect to, and hardship is no ground not to give effect to the mandate of Parliament. The law overrides equitable considerations.
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Cited cases like Rohitash Kumar v. Om Prakash Sharma, (2013) 11 SCC 451; CMD/Chairman, Bharat Sanchar Nigam Limited v. Mishri Lal, (2011) 14 SCC 739; Raghunath Rai Bareja v. Punjab National Bank, (2007) 2 SCC 230; Popat Bahiru Goverdhane v. Special Land Acquisition Officer, (2013) 10 SCC 765; and The Martin Burn Limited v. The Corporation of Calcutta, AIR 1966 SC 529, to support the argument that statutory provisions must be strictly followed.
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Referring to Oil & Natural Gas Corporation Limited v. Gujarat Energy Transmission Corporation Limited, AIR 2017 SC 1352, the respondent argued that when a statute specifies that a court cannot condone a delay beyond a certain period, it cannot be condoned even under Article 142 of the Constitution.
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The respondent also argued that NSEL is not a creditor of Dunar Foods Limited, as the claim is against PD Agro, and the decree was passed against PD Agro, not Dunar Foods Limited. The resolution plan has already been approved by the NCLT, and NSEL has challenged the approved resolution plan in a separate appeal.
Submissions Table
| Main Submission | Sub-Submission (Appellant) | Sub-Submission (Respondent) |
|---|---|---|
| Condonation of Delay |
|
|
| Merits of the Claim |
|
|
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues in a separate section. However, the core issue addressed is:
- Whether the National Company Law Appellate Tribunal (NCLAT) has the power to condone a delay exceeding 15 days in filing an appeal under Section 61(2) of the Insolvency and Bankruptcy Code, 2016.
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues
| Issue | Court’s Decision | Reason |
|---|---|---|
| Whether the NCLAT can condone a delay exceeding 15 days in filing an appeal under Section 61(2) of the IBC? | No | Section 61(2) of the IBC explicitly limits the condonation period to 15 days beyond the 30-day statutory period. The court held that the NCLAT has no jurisdiction to condone delays beyond this limit. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Court | How Considered | Legal Point |
|---|---|---|---|
| Union of India v. Popular Construction Co., (2001) 8 SCC 470 | Supreme Court of India | Followed | When a statute provides a specific limitation period and explicitly states the extent to which delay can be condoned, other provisions of the Limitation Act are excluded. |
| New India Assurance Company Limited v. Hilli Multipurpose Cold Storage Private Limited, (2020) 5 SCC 757 | Supreme Court of India | Followed | Statutory timelines must be strictly adhered to, and the court cannot extend them beyond what is explicitly permitted by the statute. |
| Rohitash Kumar v. Om Prakash Sharma, (2013) 11 SCC 451 | Supreme Court of India | Followed | Hardship or inconvenience cannot be a basis to alter the meaning of clear statutory language. |
| CMD/Chairman, Bharat Sanchar Nigam Limited v. Mishri Lal, (2011) 14 SCC 739 | Supreme Court of India | Followed | Law prevails over equity if there is a conflict; equity can only supplement the law, not supplant it. |
| Raghunath Rai Bareja v. Punjab National Bank, (2007) 2 SCC 230 | Supreme Court of India | Followed | When there is a conflict between law and equity, the law shall prevail. |
| Popat Bahiru Goverdhane v. Special Land Acquisition Officer, (2013) 10 SCC 765 | Supreme Court of India | Followed | The law of limitation must be applied with all its rigor when the statute so prescribes; the court cannot extend the limitation period on equitable grounds. |
| The Martin Burn Limited v. The Corporation of Calcutta, AIR 1966 SC 529 | Supreme Court of India | Followed | A court has no power to ignore a statutory provision to relieve what it considers a distress resulting from its operation. |
| Oil & Natural Gas Corporation Limited v. Gujarat Energy Transmission Corporation Limited, AIR 2017 SC 1352 | Supreme Court of India | Followed | When a statute commands that the court shall not condone the delay beyond a particular period, it cannot be condoned even under Article 142 of the Constitution. |
| Teri Oat Estates (P) Ltd. v. U.T. Chandigarh, (2004) 2 SCC 130 | Supreme Court of India | Followed | Sympathy or sentiment cannot be grounds for passing an order that contravenes a statutory provision. |
Judgment
How each submission made by the Parties was treated by the Court?
| Submission | Court’s Treatment |
|---|---|
| Appellant’s request to condone the delay under Article 142. | Rejected. The Court held that Article 142 cannot be used to override explicit statutory limitations. |
| Appellant’s argument that the IRP should have admitted the claim by lifting the corporate veil. | Not addressed directly in the context of condonation of delay. The court focused on the limitation issue. |
| Respondent’s argument that Section 61(2) of the IBC limits condonation to 15 days. | Accepted. The Court upheld that the NCLAT has no jurisdiction to condone delays beyond 15 days. |
| Respondent’s argument that the law must be followed strictly, and equity cannot override it. | Accepted. The Court emphasized that statutory timelines must be strictly adhered to. |
| Respondent’s argument that NSEL is not a creditor of Dunar Foods Limited. | Not addressed directly as the court decided the case on the issue of limitation. |
How each authority was viewed by the Court?
The Court relied on several key authorities to support its decision:
- Union of India v. Popular Construction Co., (2001) 8 SCC 470: The Court followed this case to reiterate that when a statute provides a specific limitation period for appeal and explicitly states the extent to which delay can be condoned, other provisions of the Limitation Act are excluded.
- New India Assurance Company Limited v. Hilli Multipurpose Cold Storage Private Limited, (2020) 5 SCC 757: The Constitution Bench decision was followed to emphasize that statutory timelines must be strictly adhered to, and the court cannot extend them beyond what is explicitly permitted by the statute.
- Oil & Natural Gas Corporation Limited v. Gujarat Energy Transmission Corporation Limited, AIR 2017 SC 1352: This case was relied upon to hold that when a statute commands that the court shall not condone the delay beyond a particular period, it cannot be condoned even under Article 142 of the Constitution.
- Other cases such as Rohitash Kumar v. Om Prakash Sharma, (2013) 11 SCC 451; CMD/Chairman, Bharat Sanchar Nigam Limited v. Mishri Lal, (2011) 14 SCC 739; Raghunath Rai Bareja v. Punjab National Bank, (2007) 2 SCC 230; Popat Bahiru Goverdhane v. Special Land Acquisition Officer, (2013) 10 SCC 765; and The Martin Burn Limited v. The Corporation of Calcutta, AIR 1966 SC 529, were cited to reinforce the principle that statutory provisions must be strictly followed, and equity cannot override the law.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily driven by the principle of strict adherence to statutory timelines, as mandated by Section 61(2) of the Insolvency and Bankruptcy Code, 2016. The Court emphasized that the legislature had clearly defined the limitation period for filing appeals and the extent to which delays could be condoned. The Court’s reasoning was influenced by the following factors:
- Statutory Mandate: The Court emphasized that Section 61(2) of the IBC explicitly limits the power of the NCLAT to condone delays to a maximum of 15 days beyond the 30-day statutory period.
- Precedent: The Court relied on previous decisions, particularly the Constitution Bench decision in New India Assurance Company Limited v. Hilli Multipurpose Cold Storage Private Limited, to reinforce the principle that statutory timelines must be strictly adhered to.
- Separation of Powers: The Court underscored that it is the legislature’s role to create exceptions to statutory provisions, not the judiciary.
- Rejection of Equitable Arguments: The Court rejected the argument that the delay should be condoned due to the large amount involved and the fact that the appellant is a public body. The Court held that equity cannot override clear statutory provisions.
- Article 142 Limitations: The Court clarified that the powers under Article 142 of the Constitution cannot be used to circumvent statutory limitations.
The Court’s analysis indicates a strong preference for upholding the legislative intent and ensuring that statutory timelines are not diluted through judicial intervention.
| Reason | Percentage |
|---|---|
| Statutory Mandate | 40% |
| Precedent | 30% |
| Separation of Powers | 15% |
| Rejection of Equitable Arguments | 10% |
| Article 142 Limitations | 5% |
Fact:Law Ratio
| Category | Percentage |
|---|---|
| Fact | 20% |
| Law | 80% |
Logical Reasoning
Key Takeaways
- Strict Adherence to Timelines: The Supreme Court has reinforced the importance of adhering to the statutory timelines prescribed under the Insolvency and Bankruptcy Code, 2016.
- Limited Power of Appellate Tribunal: The NCLAT’s power to condone delays in filing appeals is strictly limited to 15 days beyond the initial 30-day period.
- No Relaxation via Article 142: The Supreme Court cannot use its powers under Article 142 of the Constitution to circumvent explicit statutory limitations on condonation of delay.
- Equity vs. Law: The Court has emphasized that equity cannot override clear statutory provisions. The law must be applied strictly, even if it causes hardship.
- Legislative Intent: The decision underscores the legislative intent behind the IBC to ensure timely resolution of insolvency matters, which is facilitated by strict adherence to timelines.
Directions
The Supreme Court did not issue any specific directions. The appeal was dismissed, upholding the NCLAT’s decision.
Development of Law
The ratio decidendi of this case is that the National Company Law Appellate Tribunal (NCLAT) does not have the power to condone delays exceeding 15 days in filing appeals under Section 61(2) of the Insolvency and Bankruptcy Code, 2016. This decision reinforces the strict adherence to statutory timelines and clarifies that Article 142 of the Constitution cannot be used to override explicit statutory limitations. This case does not change the previous position of law, but rather reinforces the existing legal framework by reiterating the importance of statutory timelines and the limitations on judicial intervention.
Conclusion
The Supreme Court dismissed the appeal of National Spot Exchange Limited, affirming the NCLAT’s decision that it lacked the jurisdiction to condone the 44-day delay in filing the appeal. The Court emphasized the strict adherence to statutory timelines under Section 61(2) of the Insolvency and Bankruptcy Code, 2016, and clarified that the discretionary powers under Article 142 of the Constitution cannot be used to circumvent explicit statutory limitations. This judgment reinforces the legislative intent behind the IBC, ensuring timely resolution of insolvency matters.
Category
Parent Category: Insolvency and Bankruptcy Code, 2016
Child Category: Section 61, Insolvency and Bankruptcy Code, 2016
Child Category: Limitation Law
Child Category: Condonation of Delay
Child Category: Appellate Tribunal
FAQ
Q: What is the time limit for filing an appeal under the Insolvency and Bankruptcy Code (IBC)?
A: An appeal under the IBC must be filed within 30 days before the National Company Law Appellate Tribunal (NCLAT).
Q: Can the NCLAT extend the time limit for filing an appeal?
A: Yes, the NCLAT can allow an appeal to be filed after the 30-day period if there is a sufficient cause, but this extension cannot exceed 15 days.
Q: What happens if there is a delay of more than 15 days in filing an appeal?
A: If the delay exceeds 15 days beyond the initial 30-day period, the NCLAT does not have the jurisdiction to condone the delay, and the appeal will be dismissed.
Q: Can the Supreme Court use its powers under Article 142 of the Constitution to condone delays beyond the statutory limit?
A: No, the Supreme Court cannot use its powers under Article 142 to circumvent explicit statutory limitations on condonation of delay.
Q: Why are these timelines so strict?
A: The strict timelines are intended to ensure the timely resolution of insolvency matters, which is a key objective of the IBC.
Q: What does this judgment mean for future appeals under the IBC?
A: This judgment reinforces the importance of adhering to statutory timelines. It clarifies that appeals must be filed within the prescribed time limits, and delays beyond the condonable period will not be excused.