The Supreme Court (“the tribunal”) the 23rd March 2020 taking suo motu knowledge of the COVID-19 pandemic extended the limitation period under the Limitation Act, 1963 (“Limitation Act”) for filing motions/demands/lawsuits/appeals/any other proceedings until further notice. This sowed confusion in the calculation of the limitation period and gave the opportunity to unscrupulous litigants to take unfair advantage of this extension.
One such limitation issue was addressed by the Supreme Court in V Nagarajan v. SKS Ispat and Power Limited and others in which it was held that the limitation period for bringing an action under Section 61 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) begins to run from the date of pronouncement of the order.
The Appellant, V. Nagarajan, was appointed liquidator of Cethar Limited (“debtor company”) pursuant to which, he commenced proceedings under Sections 43 and 45 of the IBC against Respondents Nos. 1-4 and further filed a Miscellaneous Motion seeking an injunction against the Respondents to invoke guarantee of certain performance until the conclusion of the liquidation procedure.
National Company Law Court, Chennai (“NCLT”) refused to grant the injunction and issued the order in open court. However, the order was uploaded to the NCLT website on the 12the March 2020 which was later corrected and finally uploaded on 20e March 2020. The appellant requested a free copy of the order on March 23rd March 2020 but I have not received it. The 8the June 2020, the Appellant appealed this order to the National Court of Appeal for Company Law (“NCLAT”) accompanied by a request for exemption from filing a certified copy of the NCLT order.
The NCLAT held that the appeal was barred by statute of limitations because the statutory 30-day time limit, extendable by 15 days, had elapsed and a request for an excuse for delay had not been filed. Moreover, the Appellant has provided no evidence that a certified or free copy was not issued to him. Aggrieved by the NCLAT order, the Appellant brought a civil action before the Honorable Supreme Court on the issue of limitation.
Findings of the Court
- Applicability of the Limitation Act to BAC
The Court held that the IBC is a complete code in itself and overrides any inconsistencies that may arise in the application of other statutes and that, for the issue of limitation on the filing of appeals, the provisions of the IBC would have an overriding effect on the Limitation Act. as in the case of Kalpraj Dharamshi and another v. Kotak Investment Advisors Limited and other. The Court also relied on the judgment BK Educational Services (P) Limited v Parag Gupta and Associates in which it was held that the Limitation Act is applicable to proceedings under the IBC under Section 238-A of the IBC.
The Court observed that Article 29(2) contained three important aspects –
– the prescription of a limitation period under a special law or a local law may differ from the period prescribed by the schedule of the limitation law;
– in such a case, the limitation period prescribed by special or local law shall be deemed to be the prescribed period for the purposes of Article 3 of the Limitation Law; and
– Article 3 of the statute of limitations applies accordingly.
- Limitation from the date of delivery
The Court held that Sections 61(1) and (2) of the IBC consciously omit the requirement of limitation from the moment when “the order is made available to the aggrieved party”, contrary to the Section 421(3) of the Companies Act. in which the limitation period runs from the date on which a copy of the order is made available. Such an omission could not be supplemented by a right to a free copy under section 420(3) of the Companies Act for the purposes of calculating the limitation, as this would ignore the context of the provisions of the IBC . Rather, it should be seen as a signal for the parties to be proactive and facilitate a speedy resolution.
It was further noted that the power to tolerate delay under the BAC is narrowly circumscribed and conditional on showing sufficient cause, even where the delay can be tolerated. Therefore, it would be counter-intuitive to read the requirement of “provision of a prescription”.
- Certified true copy requirement
Rule 22(2) of the NCLAT rules requires that a certified copy of the order be filed with an appeal. With regard to a legal requirement, the Court observed that the parties cannot automatically dispense with their obligation to request and obtain a certified true copy in order to lodge an appeal, and request such an exemption as of right. Once a request for a certified copy of the order is filed, the time required to obtain the order is excluded from the calculation of the limitation under Section 12 of the Limitation Act. Thus, if no request for a certified true copy has been made, no exclusion of the limitation period can result.
The Court held that the limitation period began from the date the order was made and therefore the appeal was time barred. Moreover, the suo motu order of the Supreme Court of 23rd The month of March 2020 would not help the Appellant’s case because the extension of the limitation period was only available in cases where this period had not ended before the 15e March 2020.
This judgment helps to clarify not only the application of the Limitation Act to proceedings under the IBC, but also the applicability of the extension of the statute of limitations granted by the Supreme Court suo motu for the benefit of litigants during the COVID-19 pandemic. This is a good measure to prevent the misuse of the extension granted and would ensure the diligence of litigants. An indiscriminate extension in all areas would defeat the purpose of a time-limited process as envisaged under the IBC.
The judgment also reiterated the overriding effect of the IBC on general statutes, such as the Limitation Act and the need for its strict interpretation for the effective and expeditious implementation of its provisions to achieve its intended objectives.