IBC: DELAY NOT CONDONABLE BEYOND MAXIMUM STIPULATED PERIOD

[Dr. Sanjiv Agarwal]

Supreme Court of India recently held that a delay of 21 days in filing appeal before Supreme Court against order of National Company Law Appellate Tribunal (NCLAT) beyond maximum condonable period would result in dismissal of appeal on the ground of limitation.

In PEC LTD VERSUS M/S PHULCHAND EXPORTS PRIVATE LIMITED - 2023 (5) TMI 984 - SC ORDER, the appellant entered into a foreign contract with N. (a foreign Co.) for the supply of iron ore fines. Thereafter, the appellant and respondent (associate supplier) entered into ‘associate supplier contract’ for procurement, shipping and export of iron ore to the N.

The appellant company advanced Rs. 63.57 crores in the form of packing credit to respondent for the procurement of iron ore to be exported to a foreign buyer, retaining a trade margin at 1 percent of the Free On Board (FOB) value of the shipment. However, due to the Supreme Court order imposing ban on export iron ore, shipments could not be done.  The appellant issued a letter to respondent for making payment of outstanding amount under contract and in reply to the letter, the respondent admitted that the said amount was due and proposed to repay outstanding dues in installments. The respondent failed to make outstanding payment as promised.

The respondent company submitted that the main contract for supply or iron ore fines was executed between the N Ltd. and appellant, as a buyer and seller, and in connection with the supply to the foreign party, the appellant entered into the agreement as an associate supplier to fulfil, perform and discharge obligations and responsibilities of the appellant, as per contract and, therefore, the relationship between the appellant and respondent was that of principle and agent and not of financial creditor and corporate debtor.

The mater reached before National Company Law Tribunal (NCLT) which held that advanced amount had not been made for the time value of money, but for the procurement of iron ore and shipping it to the foreign buyer as per foreign contract and, therefore, the application filed under section 7 of IBC Code was not maintainable and was dismissed.

When the matter reached NCLAT, the order of NCLT was upheld and appeal rejected PEC LTD. VERSUS M/S. PHULCHAND EXPORTS PVT. LTD. - 2022 (8) TMI 881 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHI. Being aggrieved appeal was preferred before Supreme Court.

Under IBC 2016, appeal to Supreme Court is governed by section 62 of the Code which provides that any person aggrieved by an order of the National Company Law Appellate Tribunal may file an appeal to the Supreme Court on a question of law arising out of such order under this Code within forty-five days from the date of receipt of such order. The Supreme Court may, if it is satisfied that a person was prevented by sufficient cause from filing an appeal within forty-five days, allow the appeal to be filed within a further period not exceeding fifteen days.

Section 238A of IBC 2016 (w.e.f. 06.06.2018),  deals with limitation according to which The provisions of the Limitation Act, 1963 shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be.

The Apex Court observed that there is a delay of 21 days in filing the appeal under section 62 of the Insolvency and Bankruptcy Code, 2016. The delay is beyond the maximum period which is condonable in terms of the statute.

The appeal was therefore, dismissed on the ground of limitation in terms of section 62 read with section 238A of IBC Code, 2016. It held that since there was a delay of 21 days in filing instant appeal under section 62 and delay was beyond maximum period, which was condonable in terms of statute, appeal was to be dismissed of ground of limitation.