Strict Enforcement of Appeal Deadlines under Insolvency & Bankruptcy Code: Insights from M.K. Resely v. Union Bank of India

Introduction

The case of M.K. Resely v. Union Bank of India - Erattupetta Branch adjudicated by the National Company Law Appellate Tribunal (NCLAT) on November 24, 2022, underscores the judiciary's stringent approach towards adherence to procedural timelines under the Insolvency and Bankruptcy Code, 2016 (IBC). The appellants, dissatisfied with an order passed by the National Company Law Tribunal (NCLT), sought to exclude a significant period of delay in filing their appeal, invoking provisions of the Limitation Act, 1963.

Summary of the Judgment

In this case, the appellants filed a Company Appeal (Comp. App.) under Section 61 of the IBC, challenging an order by the NCLT dated January 21, 2022. They contended that a delay of 147 days, accrued due to litigation in the High Court of Kerala, should be excluded from the limitation period for filing their appeal. The appellants referenced Section 14 of the Limitation Act, 1963, asserting that their engagement in bonafide litigious activities justified the exclusion of the delay.

The NCLAT meticulously examined the timeline of events, including the filing and dismissal of writ petitions and appeals in the High Court. Despite acknowledging the appellants' efforts to seek relief through higher courts, the Tribunal emphasized the importance of strict compliance with the IBC's procedural deadlines. Ultimately, the NCLAT dismissed the appeal on the grounds of procedural lapses and the minimal excess of one day beyond the stipulated deadline, reinforcing the imperative of timely filing.

Analysis

Precedents Cited

The Tribunal extensively referenced several key judicial precedents to reinforce its stance on the strict observance of procedural timelines:

• Kalparaj Dharamshi and another v Kotak Investment Advisors Limited and another (2021): Emphasized that provisions of Section 14 of the Limitation Act apply to proceedings before tribunals, underscoring that failure to comply can result in dismissal of appeals.
• V. Nagarajan vs Sks Ispat and Power Limited and others (2022): Highlighted the sanctity of procedural rules under the IBC, advocating for minimal exceptions to deadline adherence to maintain the code's efficacy.
• Johnson Lifts Pvt. Ltd. V Tracks & Towers Infratech Pvt. Ltd. (2022): Reinforced that delays in filing appeals without substantial cause would lead to dismissal, aligning with the Tribunal's emphasis on procedural rigor.
• Exide Industries Ltd. v. Jitender Kumar Jain (2022): Supported the notion that even minor delays in filing can jeopardize appeals, aligning with the Tribunal's decision to reject late submissions.

These precedents collectively establish a jurisprudential framework that prioritizes procedural compliance over substantive merits, particularly under the IBC.

Legal Reasoning

The core legal issue revolved around the appellants' request to exclude 147 days from the limitation period based on Section 14 of the Limitation Act, 1963, citing their engagement in legitimate litigation activities. Section 14 allows for the exclusion of time lost in obtaining a remedy to prevent the limitation period from running during litigation.

However, the Tribunal dissected the appellants' timeline, noting that while significant time was indeed spent in High Court proceedings, the actual filing of the Comp. App. was delayed by one day beyond the extended deadline set by the High Court's interim order. The Tribunal held that:

• The IBC is a specialized statute with its own procedural exigencies, necessitating strict adherence to timelines to ensure swift insolvency resolution.
• Section 14 of the Limitation Act requires demonstrable bonafide litigious activity, which, although present, did not rationalize a delay beyond the minimal one-day excess.
• The absence of proactive measures, such as securing a certified copy of the impugned order promptly, compounded the procedural lapses.

Consequently, the Tribunal concluded that the appellants failed to convincingly establish sufficient cause for the delay, leading to the dismissal of their appeal.

Impact

This judgment serves as a stern reminder to litigants and practitioners about the imperative of adhering to procedural deadlines under the IBC. The strict stance adopted by the NCLAT emphasizes:

• The limited scope for excusing procedural delays, even in scenarios involving prolonged litigation.
• The necessity for proactive compliance with procedural rules, such as timely filing of appeals and securing necessary documentation.
• Potential deterrence against strategic delays designed to prolong insolvency proceedings, thereby contributing to economic efficiency.

Future cases under the IBC will likely reference this judgment to justify dismissals where procedural lapses are evident, reinforcing the judiciary's commitment to the IBC's core objective of expeditious insolvency resolution.

Complex Concepts Simplified

Section 61 of the Insolvency & Bankruptcy Code, 2016

This section outlines the procedure for filing appeals against orders of the Adjudicating Authority (NCLT). It specifies that an appeal must be filed within 30 days from the date of the order, with a provision for an additional 15 days in cases of sufficient cause.

Section 14 of the Limitation Act, 1963

This section allows for the exclusion of a period lost due to the plaintiff's bonafide litigious activities. It ensures that the limitation period does not hinder access to justice when the applicant is genuinely engaged in legal proceedings.

Bonafide Litigious Activity

Refers to legitimate legal processes pursued in good faith to protect one's rights. In this context, it pertains to the appellants' engagement in High Court litigation to challenge the NCLT's order.

Conclusion

The judgment in M.K. Resely v. Union Bank of India reaffirms the National Company Law Appellate Tribunal's unwavering commitment to upholding procedural integrity under the Insolvency & Bankruptcy Code. By dismissing the appellants' appeal due to a mere one-day delay, the Tribunal underscores that while the law accommodates legitimate delays through provisions like Section 14 of the Limitation Act, such accommodations are not blanket exemptions. Litigants must exercise due diligence and adhere strictly to procedural deadlines to ensure their appeals are entertained. This decision not only sets a precedent for future cases but also fortifies the IBC's framework aimed at expeditious and efficient insolvency resolutions.