Case: V Nagarajan Vs. SKS Ispat and Power Ltd.&amp; Ors

2. Cethar Ltd(Corporate Debtor), a corporate entity which is engaged in engineering and project consultancy, is undergoing liquidation. The appellant was appointed as its interim resolution professional and resolution professional. After an unsuccessful attempt at resolution, the appellant was appointed as its liquidator on 25 April 2018. The appellant instituted proceedings(CA/38/IB/2018 (NCLT, Chennai Bench)) under Sections 43 and 45 of the IBC to avoid preferential and undervalued transactions of the Corporate Debtor in favour of Respondent Nos 1-4 with respect to a contract dated 15 March 2011. No relief was sought against Respondent No 10. The appellant claims to have subsequently discovered that SKS Ispat and Power Ltd (Respondent No 1) and its subsidiary- SKS Power Generation Chhattisgarh Ltd (Respondent No 10) had colluded with the promoters of the Corporate Debtor and defrauded the latter of over INR 400 crores by entering into a fraudulent settlement of only INR 4.58 crores. The appellant also alleges that these transactions form a part of the ongoing investigation by the Central Bureau of Investigations and the Enforcement Directorate. Respondent No 10, allegedly at the behest of Respondent No 1, sought to invoke certain bank guarantees issued by the Corporate Debtor for its failure to perform its engineering services. The appellant filed a Miscellaneous Application to resist the invocation of this performance guarantee until the liquidation proceedings are concluded.3. On 31 December 2019, the NCLT held that the performance guarantees were not a part of Security Interest, as defined under Section 3(31) of the IBC and refused to grant an injunction against the invocation of the bank guarantee until the liquidation proceedings are complete. The appellant has not disputed his presence before the NCLT when this order was pronounced in open court. However, the appellant states that a copy of the NCLTs order dated 31 December 2019 was uploaded on the NCLT website only on 12 March 2020. However, the uploaded order set out the incorrect name of the Judicial member who had passed the order. The corrected order was uploaded on 20 March 2020. Subsequent to the corrected order being uploaded, the appellant claims to have awaited the issue of a free copy and allegedly sought the free copy on 23 March 2020, under the provisions of Section 420(3) of the Companies Act, 2013(Companies Act) read with Rule 50 of the National Company Law Tribunal Rules, 2016(NCLT Rules). According to the appellant, the free copy has not been issued till date. The appellant has stated that owing to the lockdown on account of the COVID-19 pandemic, the appeal before the NCLAT was filed on 8 June 2020 with an application for exemption from filing a certified copy of the order as it had not been issued.4. The NCLATS impugned order dated 13 July 2020, relied on Section 61(2) of the IBC which mandates a limitation period for appeals to be thirty days, extendable by fifteen days, to hold that the appeal filed under Section 61(1) was barred by limitation. It noted that the statutory time limit of thirty days had expired and an application for condonation of delay had not been filed. Rule 22 of the National Company Law Appellate Tribunal Rules(NCLAT Rules) provides that every appeal must be accompanied with a certified copy of the impugned order, which had not been annexed in this case. The NCLAT observed that the appellant had not provided any evidence to prove that a certified or free copy had not been issued to him. In any event, the IBC circumscribes the discretion to condone delays up to fifteen days, which had elapsed in this case. Further, it noted that even on merits, there were no grounds for interference since a performance guarantee is explicitly excluded from the ambit of a Security interest which is subject to a moratorium under Section 14 of the IBC. The appellant filed a Civil Appeal against this order of the NCLAT on the question of limitation.

Reasoning: 10. For determining the present appeal, the question of limitation for filing appeals would have to be answered by construing the provisions of the IBC and the Limitation Act, with the former enactment having an overriding effect. This position has also been adopted by a three judge bench of this Court in Kalpraj Dharamshi v. Kotak Investment Advisors Ltd 2021 SCC OnLine SC 204 in considering the applicability of Section 14 of the Limitation Act to the reckoning of limitation for an appeal filed under Section 61(1) of the IBC.12. In B K Educational Services (supra) a two judge bench of this Court considered the interplay of the IBC, Limitation Act and the Companies Act constituting the NCLT and held that the Limitation Act is applicable to proceedings under the IBC by virtue of Section 238-A of the IBC. In the context of the NCLT, Justice R F Nariman observed:12. The Report of the [Insolvency Law] Committee [Report, March 2018] would indicate that it has applied its mind to judgments of NCLT and NCLAT. It has also applied its mind to the aspect that the law is a complete Code and the fact that the intention of such a Code could not have been to give a new lease of life to debts which are time-barred.21. Given the fact that the procedure that would apply to NCLT would be the procedure contained inter alia in the Limitation Act, it is clear that NCLT would have to decide applications made to it under the Code in the same manner as it exercises its other jurisdiction under the Companies Act. This being the position in law, it is clear that when various provisions of the Companies Act were amended by the Eleventh Schedule to the Code, it was unnecessary to apply and adapt Section 433 of the Companies Act to the Code, as was done to various other sections of the Companies Act.14. In Sagufa Ahmed (supra) a three judge Bench of this Court dealt with the interpretation of Section 421(3) of the Companies Act and whether limitation would start running once a free certified copy is made available to the party, sans an application from the aggrieved party. It held, in the context of a winding up petition under the Companies Act, that the aggrieved party could wait till it received its free copy under Section 420(3) of the Companies Act 2013 read with Rule 50 of the NCLT Rules, and was not obligated to file an application for a certified copy for the purposes of the computation of limitation. Justice V Ramasubramanian held:12. Therefore, it is true, as contended by the appellants, that the period of limitation of 45 days prescribed in Section 421(3) would start running only from the date on which a copy of the order of the Tribunal is made available to the person aggrieved. It is also true that under Section 420(3) of the Act read with Rule 50, the appellants were entitled to be furnished with a certified copy of the order free of cost.13. Therefore if the appellants had chosen not to file a copy application, but to await the receipt of a free copy of the order in terms of Section 420(3) read with Rule 50, they would be perfectly justified in falling back on Section 421(3), for fixing the date from which limitation would start running…..However, the Court clarified that this would no longer apply once an application for a certified copy is made and the order has been received. Irrespective of when the free certified copy is received, the limitation period would then be computed from the date of receipt of the certified copy.13….. But the appellants in this case, chose to apply for a certified copy after 27 days of the pronouncement of the order in their presence and they now fall back upon Section 421(3).14. Despite the above factual position, we do not want to hold against the appellants, the fact that they waited from 25-10- 2019 (the date of the order [Sagufa Ahmed v. Upper Assam Plywood Products (P) Ltd., 2019 SCC OnLine NCLT 749] of NCLT) up to 21-11-2019, to make a copy application. But at least from 19-12-2019, the date on which a certified copy was admittedly received by the counsel for the appellants, the period of limitation cannot be stopped from running. From 19- 12-2019, the date on which the counsel for the appellants received the copy of the order, the appellants had a period of 45 days to file an appeal. This period expired on 2-2-2020.Therefore in a field which is not covered by a special law which invests the NCLT with jurisdiction, the general principle for the computation of limitation for filing an appeal against an order of the NCLT is governed by the statutory mandate of Section 420(3) of the Companies Act read with Rule 50 of the NCLT Rules, which enables a party to compute limitation from the date of receipt of the statutorily mandated free certified copy, without having to file its own application. However, the decision of this Court in Sagufa Ahmed (surpa) clarifies that the statutory mandate of a free copy is not to enable litigants to take two bites at the apple where they could compute limitation from either when the certified copy is received on the litigants application or received as a free copy from the registry - whichever is later.16. The law on limitation with respect to the IBC is settled and emphatic in its denunciation of delays(Essar Steel (supra), paras 119-123, 127; Innoventive Industries Ltd v. ICICI Bank, (2018) 1 SCC 407,  para 13; Gujarat Urja Vikas Nigam Ltd v. Amit Gupta, (2021) SCC OnLine 194, para 71). The power to condone delay is tightly circumscribed and conditional upon showing sufficient cause, even within the period of delay which is capable of being condoned. The IBC is a watershed legislation which seeks to overhaul the previous bankruptcy regime which was afflicted by delays and indefinite legal proceedings. The IBC sought to structure and streamline the entire process of insolvency, right from the initiation of insolvency to liquidation, as a one-stop mechanism. Section 12(3) of the IBC prescribes a strict time-line for the completion of the corporate insolvency resolution process of one hundred and eighty days which is extendable by ninety days. The proviso to Section 12(3) imposes an outer-limit of three hundred and thirty days, including time taken in legal proceedings. While a three-judge bench of this Court in Essar Steel India Ltd v. Satish Kumar Gupta (2020) 8 SCC 531  held such a time-limit on court proceedings as violative of Article 14, only the word mandatorily was struck down and a narrowly defined extension to the outer-limit was allowed in exceptional circumstances if the process is at a near conclusion and serves the ends of the IBC. Regulation 40A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides for a detailed model timeline for the corporate insolvency resolution process, including extensions that are granted as discretionary powers under the procedural eventualities of the IBC framework. The Resolution Professional is responsible for ensuring the timeliness of the process and has to file several forms, as detailed under Regulation 40B, and explain all delays that occur in the intervening period, when filing the final Form H(Regulation 39(4)(b), Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016) upon submitting a successful resolution plan under Section 30 of the IBC. Notably, Section 64 of the IBC imposes an obligation on the NCLT and NCLAT to expeditiously dispose applications pending before it, along with recording of reasons for any delay from the prescribed limit to the President of the NCLT/NCLAT, who can then extend the period, not exceeding ten days. The decision in Mobilox Innovations (supra), took note of this provision and stressed on the importance of timelines in the following terms:35. Another thing of importance is the timelines within which the insolvency resolution process is to be triggered. The corporate debtor is given 10 days from the date of receipt of demand notice or copy of invoice to either point out that a dispute exists between the parties or that he has since repaid the unpaid operational debt. If neither exists, then an application once filed has to be disposed of by the adjudicating authority within 14 days of its receipt, either by admitting it or rejecting it. An appeal can then be filed to the Appellate Tribunal under Section 61 of the Act within 30 days of the order of the adjudicating authority with an extension of 15 further days and no more.36. Section 64 of the Code mandates that where these timelines are not adhered to, either by the Tribunal or by the Appellate Tribunal, they shall record reasons for not doing so within the period so specified and extend the period so specified for another period not exceeding 10 days. Even in appeals to the Supreme Court from the Appellate Tribunal under Section 62, 45 days time is given from the date of receipt of the order of the Appellate Tribunal in which an appeal to the Supreme Court is to be made, with a further grace period not exceeding 15 days. The strict adherence of these timelines is of essence to both the triggering process and the insolvency resolution process. As we have seen, one of the principal reasons why the Code was enacted was because liquidation proceedings went on interminably, thereby damaging the interests of all stakeholders, except a recalcitrant management which would continue to hold on to the company without paying its debts. Both the Tribunal and the Appellate Tribunal will do well to keep in mind this principal objective sought to be achieved by the Code and will strictly adhere to the time-frame within which they are to decide matters under the Code.Recently, a two judge Bench of this Court in Ebix Singapore (supra) interpreted the legislative background of the IBC, its provisions and subsequent reports from Parliamentary committees to stress on the predictability and timeliness that is woven into the design of the IBC. Speaking through one of us (Justice D Y Chandrachud), the Court observed:96 The BLRC report noted that the insolvency regime was due for a major overhaul as the recovery rates in India were among the lowest in the world58 and a revamped, coherent code was envisaged with speed and predictability woven into its underlying design to ensure higher recovery rates and immediate liquidation, in the event of a failed resolution. As noted by this Court in Essar Steel (supra), the insolvency regime in India was overhauled after the provisions of SICA, SARFAESI and Recovery of Debts Act, in spite of providing for expeditious determination, were used by defaulting companies to enjoy extended moratorium periods and failure to enforce timelines meant legal proceedings would drag on for years and not result in recovery of stressed assets In identifying the sources of delay, adjudicating mechanisms were identified as one of the two important sources of delay which need to be equipped with the right resources. In order to respond to the rapid changes in the economy, the BLRC report recommended the formation of an IBBI which would function as a regulator and formulate regulations that dynamically detail the procedural norms of the working of the IBC with the necessary immediacy. It is also important for this Court, as a constitutional authority which determines questions of law concerning the IBC framework, to note that a rapid liquidation may sometimes be preferable to a protracted CIRP.17. In this background, when timelines are placed even on legal proceedings, reading in the requirement of an order being made available under a general enactment (Companies Act) would do violence to the special provisions enacted under the IBC where timing is critical for the workability of the mechanism, health of the economy, recovery rate of lenders and valuation of the corporate debtor. The IBC, as a prescriptive mechanism, affecting rights of stakeholders who are not necessarily parties to the proceedings, mandates diligence on the part of applicants who are aggrieved by the outcome of their litigation. An appeal, if considered necessary and expedient by an aggrieved party, is expected to be filed forthwith without awaiting a free copy which may be received at an indefinite stage. Hence, the omission of the words from the date on which the order is made available for the purposes of computation of limitation in Section 61(2) of the IBC, is a consistent signal of the intention of the legislature to nudge the parties to be proactive and facilitate timely resolution.The import of Section 12 of the Limitation Act and its explanation is to assign the responsibility of applying for a certified copy of the order on a party. A person wishing to file an appeal is expected to file an application for a certified copy before the expiry of the limitation period, upon which the time requisite for obtaining a copy is to be excluded. However, the time taken by the court to prepare the decree or order before an application for a copy is made cannot be excluded. If no application for a certified copy has been made, no exclusion can ensue. In fact, the explanation to the provision is a clear indicator of the legal position that the time which is taken by the court to prepare the decree or order cannot be excluded before the application to obtain a copy is made. It cannot be said that the right to receive a free copy under Section 420(3) of the Companies Act obviated the obligation on the appellant to seek a certified copy through an application. The appellant has urged that Rule 14 of the NCLAT Rules empowers the NCLAT to exempt parties from compliance with the requirement of any of the rules in the interests of substantial justice, which has been typically exercised in favour of allowing a downloaded copy in lieu of a certified copy. While it may well be true that waivers on filing an appeal with a certified copy are often granted for the purposes of judicial determination, they do not confer an automatic right on an applicant to dispense with compliance and render Rule 22(2) of the NCLAT Rules nugatory. The act of filing an application for a certified copy is not just a technical requirement for computation of limitation but also an indication of the diligence of the aggrieved party in pursuing the litigation in a timely fashion. In a similar factual scenario, the NCLAT had dismissed an appeal(Prowess International Pvt Ltd v. Action Ispat & Power Pvt Ltd, Company Appeal (AT) (Insolvency) 223 of 2017 (NCLAT, 26 March 2018)) as time-barred under Section 61(2) of the IBC since the appellant therein was present in court, and yet chose to file for a certified copy after five months of the pronouncement of the order.However it is important to note that this Court had only extended the period of limitation applicable in the proceedings, only in cases where such period had not ended before 15 March 2020. In this case, owing to the specific language of Section 61(1) and 61(2), it is evident that limitation commenced once the order was pronounced and the time taken by the Court to provide the appellant with a certified copy would have been excluded, as clarified in Section 12(2) of the Limitation Act, if the appellant had applied for a certified copy within the prescribed period of limitation under Section 61(2) of the IBC. The construction of the law does not import the absurdity the appellant alleges of an impossible act of filing an appeal against an order which was uploaded on 12 March 2020. However, the mandate of the law is to impose an obligation on the appellant to apply for a certified copy once the order was pronounced by the NCLT on 31 December 2019, by virtue of Section 61(2) of the IBC read with Rule 22(2) of the NCLAT Rules. In the event the appellant was correct in his assertion that a correct copy of the order was not available until 20 March 2020, the appellant would not have received a certified copy in spite of the application till such date and accordingly received the benefit of the suo motu order of this Court which came into effect on 15 March 2020. However, in the absence of an application for a certified copy, the appeal was barred by limitation much prior to the suo motu direction of this court, even after factoring in a permissible fifteen days of condonation under Section 61(2). The Court is not empowered to condone delays beyond statutory prescriptions in special statutes containing a provision for limitation(Union of India v. Popular Construction Co., (2001) 8 SCC 470 ; Singh Enterprises v. Commissioner of Central Excise, Jamshedpur, (2008) 3 SCC 70 ; Chhattisgarh State Electricity Board v. Central Electricity Regulatory Commission, (2010) 5 SCC 23 ; Bengal Chemists and Druggists Association v. Kalyan Chowdhury, (2018) 3 SCC 41) .