By Aaryaan Sadanand

Introduction

The Hon’ble Supreme Court in the case of National Spot Exchange Ltd. Vs. Anil Kohli, Resolution Professional of Dunar Foods Limited has held that the NCLAT has no power to condone the delay (of more than 30 + 15 days) in an appeal made to it beyond the prescribed limit provided under Section 61(2) of the Insolvency and & Bankruptcy Code, 2016. The relevant provision reads as follows:

Section 61(2) – 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.

The Civil Appeal in the Supreme Court was filed against the order dated 05.07.2019 passed by the Ld. NCLAT wherein it rejected the condonation of delay application filed by the National Spot Exchange Limited (NSEL) filed along with its Company Appeal against the NCLT order dated 06.03.2019 The Ld. Adjudicating Authority had confirmed the decision of the IRP of Dunar Foods Ltd. (“Corporate Debtor”) rejecting the claim of NSEL.

Background

The litigation was initiated at the behest of State Bank of India which filed a Section 7 application against Dunar Foods Ltd on the ground that Corporate Debtor had taken credit limits by hypothecating the commodities kept in the warehouses of the appellant – National Spot Exchange Limited. Accordingly, CIRP was initiated against the Corporate Debtor, and claims were invited by the then IRP.

On 17.01.2018, NSEL submitted its claim in FORM-F. The claim of NSEL was based on unpaid amount for warehouse services which are provided on credit limits. The goods of the Corporate Debtor kept in the warehouses of NSEL were hypothecated in their favour by the Corporate Debtor. NSEL filed its claim on the strength of a decree passed by the Hon’ble High Court of Bombay in favour of NSEL and against PD Agro Processors Pvt. Ltd. (“PD Agro”), an alleged sister concern of the Corporate Debtor. This decree was passed in a money suit filed by NSEL before the Hon’ble High Court of Bombay in which the court restrained PD Agro Processors from alienating its assets. After investigation on basis of the FIR filed, the Directorate of Enforcement (“ED”) revealed that PD Agro had siphoned off Rs. 455 Crores in the year 2011-12 and Rs. 289 Crores in the year 2012-13 to the Corporate Debtor. On basis of the ED report and other circumstances, the Hon’ble High Court of Bombay passed a money decree in favour of the NSEL amounting to Rs. 633,66,98,350.40/- with 9% p.a.

However, the claim was rejected by the IRP on the grounds that no privity of contract existed between NSEL and the Corporate Debtor. The Ld. NCLT affirmed the decision of the IRP, accordingly NSEL challenged this decision of the Ld. NCLT in appeal but the same was delayed by 44 days above and beyond the 30+15 days limitation prescribed in section 61(2). 

Appellant’s Contentions before the Hon’ble Supreme Court

Appellant/ NSEL argued that the management of PD Agro and Dunar foods are the same and sister concerns. The management is handled by two individuals, namely Ranjeev Agarwal, director and shareholder of PD Agro and CFO Dunnar Foods Limited and Surendar Gupta, whose wife Sheetal Gupta was the other director and shareholder of PD Agro and who himself was the Managing director and promoter of Dunar Foods limited. During the ED investigation, the statement of Surender Gupta under Section 50 of the PMLA revealed he was managing PD Agro as well and that PD agro owned an 8.25% stake in the Corporate Debtor Company. Furthermore, regarding the claim, PD Agro had admitted to the debt in its letter dated 01.08.2013 and had assured to clear its outstanding in 20 weeks in the said letter, therefore, based on the above, the IRP ought to have lifted the corporate veil. Thus, considering the above circumstances, the claim should never have been rejected for these reasons. The Appellant prayed that the Hon’ble Supreme Court exercises its powers under Article 142 to condone the delay of the appeal due to peculiar circumstances as the case involves a huge amount and the Appellant is a public body.  

Respondent’s Contentions before the Hon’ble Supreme Court

On the other hand, heavy reliance was placed by the Respondent/ RP on the case of Union of India vs Popular Construction[1] and New India Assurance Co. vs Hilli Multipurpose Cold Storage[2], wherein the Hon’ble Supreme Court reiterated the principle that where a special law provides specific limitation, delay cannot be condoned in accordance with Section 4, 5 & 12 of the Limitation Act. The IRP contended that the appeal was barred by limitation, the language of Section 61(2) is clear on the scope of delay that can be condoned, and the present case is clearly beyond the upper limit prescribed. The IRP contended that even if the matter is taken up on merits, NSEL is not a creditor of the Corporate Debtor, and the claim has been rejected correctly by the RP.

Decision

The Hon’ble Supreme Court accepted the arguments made on behalf of the Respondent/ RP and affirmed the decision of the NCLAT, and held that there was no error by the Ld NCLAT in not condoning the delay in filing the of Company Appeal. [3] The Court observed that an identical question of law arose in Popular Construction (supra) with regard to section 34 of the Arbitration and Conciliation Act and also in Hilli Multipurpose Cold Storage (supra) with regard to Section 13(2)a of the Consumer Protection Act, 1986. In both these cases, the Hon’ble Supreme Court had held that where the special act provides for a specific limitation period, there would be no power to condone such a delay under Limitation Act. [4]. The Court contemplated that there might be a genuine reason for the delay in filing, however, as no such exception exists in the law, the Court cannot create and such a function would fall in the realm of the legislature. [5]

The Court further held that the Supreme Court could not condone delay using its powers under Article 142 of the Constriction, where the limitation is provided within the act. The Court cited the case of Oil & Natural Gas Company vs Gujrat Electricity Transmission Corporation Ltd.[6], where a delay of 120 days beyond the prescribed limitation in the Electricity Act was not condoned by the Appellate Tribunal. The Court held that the delay could not be condoned by using its powers under Article 142 as it would be in direct contravention of the law to do so. Therefore, considering that Section 61(2) expressly provides for an extension 15 days beyond the 30-day limit, the Court held that it cannot interfere with the decision passed by the Ld. NCLAT and hence the appeal was dismissed. [7]

Conclusion

The ratio laid down in this decision has clarified that legal position on two important proposition of law:-

1. Ld. NCLAT does not have the power to condone the delay in appeal beyond the limit given in Section 61(2),
2. The Hon’ble Supreme cannot use its powers under Article 142 to condone delay beyond the prescribed period in a special statute and to do so as it would be direct contravention with the law and the intention of the legislature.

[1] (2001) 8 SCC 470

[2] (2020)5 SCC 757

[3] Para 7.1

[4] Para 8

[5] Para 9

[6] AIR 2017 SC 1352

[7] Para 11