In a significant ruling, the Supreme Court of India has set aside an order by the National Company Law Appellate Tribunal (NCLAT) that rejected an application for condonation of delay in filing an appeal under the Insolvency and Bankruptcy Code (I.B. Code). The case, titled Power Infrastructure India vs. Power Finance Corporation Ltd. & Anr. (Civil Appeal Nos. 8240-8241/2023), was heard by a bench comprising Justice Abhay S. Oka and Justice Ujjal Bhuyan. The court criticized the NCLAT for adopting a “hyper-technical” approach, which led to unnecessary delays in the resolution process.
Background of the Case
The dispute arose when Power Infrastructure India, a company based in a foreign country, filed an appeal before the NCLAT against an order passed by the National Company Law Tribunal (NCLT). Under Section 61(2) of the I.B. Code, the period of limitation for filing an appeal is 30 days, with a proviso allowing for a condonation of delay of up to 15 days if sufficient cause is shown.
In this case, the appeal was e-filed on the 15th day of the limitation period, which was November 11, 2022. However, the next two days were holidays for the NCLAT, and the hard copy of the appeal was filed on November 14, 2022. The NCLAT rejected the application for condonation of delay, citing the strict timelines under the I.B. Code as crucial to its objectives. The NCLAT’s order, running into 17 pages, was passed on November 7, 2023, and the matter eventually reached the Supreme Court.
Key Legal Issues
- Condonation of Delay under I.B. Code: The primary issue was whether the NCLAT was justified in rejecting the application for condonation of delay, especially when the delay was only 15 days and was adequately explained by the appellant.
- Strict Timelines vs. Liberal Approach: The respondents argued that the timelines under the I.B. Code are of extreme importance and that a liberal approach should not be adopted in condoning delays, as it would defeat the very object of the Code.
- Hyper-Technical Approach of NCLAT: The Supreme Court had to decide whether the NCLAT’s refusal to condone the delay, despite the appellant’s explanation, was overly technical and led to unnecessary delays in the resolution process.
Supreme Court’s Observations and Decision
The Supreme Court, in its order dated February 11, 2025, made several important observations:
- Criticism of NCLAT’s Approach: The court noted that the NCLAT had spent considerable time and energy in writing a 17-page order for what was essentially a simple application for condonation of delay. The court remarked, “We wonder why the NCLAT, which has a high pendency, should devote so much time and energy in writing an order running into 17 pages for considering the application for condonation of delay.” The court also pointed out that lengthy submissions by lawyers often lead to verbose orders, which could be avoided.
- Importance of Timelines but Need for Flexibility: While acknowledging the importance of timelines under the I.B. Code, the court emphasized that a hyper-technical approach should not be adopted. The court observed that the NCLAT’s refusal to condone the delay had resulted in the appeal remaining pending in the Supreme Court for over 13 months, further delaying the resolution process.
- Delay Adequately Explained: The court found that the appellant had adequately explained the delay of 15 days, and given that the appellant was a foreign-based company, the NCLAT should have been more lenient. The court stated, “Instead of adopting a hyper-technical approach, the NCLAT ought to have condoned the delay as it was filed on the 15th day provided in the proviso to sub-section 2 of Section 61 of the I.B. Code.”
- Setting Aside NCLAT’s Order: The Supreme Court set aside the NCLAT’s order dated November 7, 2023, and allowed the application for condonation of delay. The court directed the NCLAT to proceed with hearing the appeal (Company Appeal (AT) (Ins) Nos. 1405-1406 of 2022) in accordance with the law.
