Whether The Limitation Period For Filing Appeals Under The IBC Begins From The Date Of Order Pronouncement And Whether Intervenors Can Claim Ignorance To Justify A Delay In Filing

Summary:

[1]The recent ruling by a Bench of the Hon’ble National Company Law Appellate Tribunal (NCLAT), consisting of Hon’ble Justice Rakesh Kumar Jain dealt with the issue of whether the limitation period for filing appeals under the Insolvency and Bankruptcy Code (IBC) starts from the date of order pronouncement and whether intervenors can claim ignorance to justify a delay in filing the appeal. The Tribunal held that the limitation period under Section 61 of the IBC begins from the date of the order’s pronouncement, not from the date of knowledge. It emphasized that intervenors cannot plead ignorance to extend the limitation period, especially when public announcements about the Corporate Insolvency Resolution Process (CIRP) were made. It was found that the appellant had intervened in the proceedings and had deemed knowledge of the order, thus rejecting the appeal for being filed beyond the statutory period of 45 days. The application for condonation of delay was dismissed.

Facts:

In this case, Brijesh Haridas Nagar Cooperative Housing Society Ltd. filed an appeal against the order dated March 11, 2024, passed by the National Company Law Tribunal (NCLT), Mumbai Bench. The NCLT had admitted a company petition filed by Canara Bank under Section 7 of the Insolvency and Bankruptcy Code (IBC) for the initiation of the Corporate Insolvency Resolution Process (CIRP) against VAS Infrastructure Ltd., due to a default amount of Rs. 301,06,84,507.23. In this appeal, the society alleged that the corporate debtor had mortgaged the land on which its residential flats were built. The National Company Law Appellate Tribunal (NCLAT) was approached by the society, due to a delay of 51 days in filing, which exceeded the 45-day limit prescribed under Section 61(2) of the IBC.

The issue of limitation arose when the society arguing that it became aware of the CIRP order only on May 10, 2024, when Form G was published. However, the respondents contended that the appellant had knowledge of the proceedings earlier and that the limitation period must be counted from the order date of March 11, 2024.

Issues:

Whether the limitation period for filing appeals under Section 61 of the Insolvency and Bankruptcy Code (IBC) begins from the date of order pronouncement, and whether intervenors can claim ignorance of the order to justify a delay in filing the appeal.

Judgement:

The Hon’ble NCLAT held that “the limitation has to be counted from the date of pronouncement of the order,” emphasizing the importance of adhering to procedural timelines in insolvency matters. This ruling was based on the premise that the appellant, as an intervenor in the original proceedings, had sufficient knowledge regarding the ongoing case and its developments. The Court pointed out that ignorance of the order could not be claimed, especially since public announcements concerning the initiation of the Corporate Insolvency Resolution Process (CIRP) were made shortly after the order was issued. These announcements served as a formal notification to all interested parties, including the appellant, thereby creating a deemed knowledge of the proceedings. Consequently, the NCLAT dismissed the application for condonation of delay due to its exceeding the permissible period outlined in Section 61 of the Insolvency and Bankruptcy Code.

The court stated, “there is hardly any merit in the present application for considering the application for condonation of delay as it is totally barred by time.” This dismissal underscored that procedural timelines are not merely guidelines but essential components of the legal framework governing insolvency proceedings. As a result, both the application for condonation and the main appeal were dismissed, reinforcing the principle that strict adherence to these timelines is crucial for maintaining order and efficiency within insolvency processes. The ruling highlighted that any delays beyond statutory limits undermine the integrity and predictability of insolvency proceedings, which are designed to be time-bound and efficient.

Analysis:

The court, while deciding the case, relied upon the observations made in prior judgments, particularly from the Supreme Court, regarding the strict interpretation of limitation periods under the Insolvency and Bankruptcy Code (IBC). It stressed that under Section 61(2) of the IBC, the period of 30 days, with a possible extension of 15 days, is final and cannot be further condoned. It was highlighted that the facts and circumstances of each case must be examined to determine whether there were valid reasons for condoning the delay, but in this case, the appeal was found to be time-barred beyond the statutory period.

[1] BEFORE THE HON’BLE NATIONAL COMPANY LAW APPELLATE TRIBUNAL (NCLAT)

Brijesh Haridas Nagar Co-op. Hsg Soc. Ltd. vs VAS Infrastructure Ltd. & Anr.

Comp. App. (AT) (Ins) No. 1201 of 2024 & I.A. No. 4295, 4296, 4297, 4298 of 2024

Judgement dated 9th September 2024