Limitation Act Cannot Extend Time To Appeal Against Liquidator's Rejection Of Claim Under IBC: NCLAT

The National Company Law Appellate Tribunal (NCLAT), Chennai, has recently held that the 14-day limitation period for filing an appeal against a liquidator's decision under Section 42 of the Insolvency and Bankruptcy Code, 2016, is a self-contained time limit and cannot be extended by invoking Section 5 of the Limitation Act through Section 238A of the Code.

A bench of Judicial Member Justice Sharad Kumar Sharma and Technical Member Indevar Pandey held that Section 238A applies only where the Code does not itself prescribe a specific limitation period and that Section 42 contains a self-contained time limit for filing an appeal.

The tribunal observed,

“In that eventuality, the provision contained under Section 5 of the Limitation Act cannot be made to be attracted to be applied for preference of an appeal under Section 42 of the I & B Code, by reading of Section 238A, as it would be a distorted reading, leading to distorted application of law of limitation, which is even not intended by statute.”

The appeal was filed by Sansar Investment & Finance Company Private Limited after the liquidator of Atlantic Spinning and Weaving Mills Ltd. rejected its claim. Under Section 42 of the IBC, a creditor may appeal to the adjudicating authority within 14 days of receipt of the liquidator's decision.

The company did not file an appeal within the prescribed period. More than four years later, it moved the NCLT, Hyderabad, seeking condonation of a delay of 1,616 days in filing an appeal under Section 42. The tribunal declined to entertain the request and dismissed the application, holding that the appeal was clearly barred by limitation.

Before the appellate tribunal, the appellant pointed out that proceedings relating to the corporate debtor were already pending before the NCLAT in connection with the CIRP. On that basis, it was argued that the time limit for filing an appeal under Section 42 should not be applied rigidly and ought to be extended by invoking Section 238A of the IBC along with Section 5 of the Limitation Act.

Rejecting the contention, the tribunal held that the Limitation Act applies only where the IBC does not itself prescribe a specific limitation period and that the expression “as far as may be” in Section 238A excludes its application where the Code contains a self-contained limitation provision.

The tribunal also rejected the appellant's plea that it was ignorant of its right to file an appeal, observing that the appellant was conscious of its legal rights and had already been pursuing proceedings under the IBC before different forums available under law.

Holding that the delay was far beyond the statutory framework and that the limitation prescribed under Section 42 cannot be extended, the appellate tribunal found no error in the NCLT order and dismissed the appeal