Limitations on Condonation: NCLAT Clarifies Inapplicability of Holiday Exclusion to Discretionary Period under Section 61(2) IBC

The NCLAT clarified that the exclusion of holidays under the Limitation Act does not apply to the discretionary 15-day condonation period under Section 61(2) of the Insolvency and Bankruptcy Code (IBC).

In a significant ruling on the issue of limitation and its condonation under the Insolvency and Bankruptcy Code, 2016 (IBC), the National Company Law Appellate Tribunal (NCLAT), comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), held that the 15-day condonable period under the proviso to Section 61(2) of the IBC constitutes a discretionary extension and does not form part of the 'prescribed period' of limitation. Consequently, Rule 3 of the NCLAT Rules, 2016, and Section 4 of the Limitation Act, 1963—which allow exclusion of holidays—are applicable only to the initial 30-day limitation period and not to the additional condonable period. As a result, holidays falling within or at the end of the 15-day condonable window cannot be excluded for the purpose of extending or deferring the limitation period.

In a recent decision, the National Company Law Appellate Tribunal (NCLAT) addressed two appeals filed by BSE Ltd. and National Stock Exchange of India Ltd., challenging the order dated 31.07.2024, passed by the NCLT, Mumbai Bench, Court-III. The central issue before the Tribunal was the maintainability of these appeals, both of which had been filed beyond the 30-day prescribed limitation period under Section 61(2) of the Insolvency and Bankruptcy Code, 2016 (IBC), with accompanying applications for condonation of delay. The appeals—Company Appeal (AT)(Insolvency) Nos. 1862 and 1883 of 2024—were supported by IA Nos. 6846 and 6950 of 2024, respectively.

In the case of BSE Ltd., an amended application (IA No. 7409/2024) clarified that the actual delay was only 14 days, as the certified copy of the impugned order was applied for on 07.08.2024 and received on 08.08.2024. It was contended that the delay in filing the appeal, which was lodged on 17.09.2024, fell within the condonable period when holidays were accounted for under Rule 3 of the NCLAT Rules, 2016. Similar grounds were taken by the NSE in its application for condonation of delay. Both appellants emphasised that the 15-day condonable period, although discretionary, should be interpreted in conjunction with Rule 3, especially when holidays fell at the end of the limitation period. The delays were further attributed to internal approval procedures.

The Liquidator opposed the applications, relying on the precedent set in State Bank of India v. Darwin Platform Infrastructure Limited and Others, REEDLAW 2024 NCLAT Del 02625, asserting that neither Rule 3 of the NCLAT Rules nor Section 4 of the Limitation Act could extend the condonable period of 15 days beyond what Section 61(2) of the IBC explicitly allows. It was contended that only the initial 30-day prescribed period could benefit from such exclusions, and the additional 15-day grace period was rigid and immune to such interpretive extensions.

The Tribunal, after considering arguments from all sides, analyzed the scope of the "prescribed period" under Section 61(2) of the IBC and clarified that while the initial 30 days could be extended under Section 4 of the Limitation Act and Rule 3 of the NCLAT Rules if the last day fell on a holiday, the same principle could not be applied to the discretionary condonable period of 15 days. Citing binding precedents, including Assam Urban Water Supply & Sewerage Board and Bhimashankar Sahakari, the Tribunal reaffirmed its earlier view in State Bank of India v. Darwin Platform Infrastructure Limited and Others, REEDLAW 2024 NCLAT Del 02625, holding that the 15-day condonable window is not subject to the exclusionary principles of Rule 3.

Nevertheless, the Tribunal did apply Rule 3 in favour of the appellants for the 30-day prescribed period, noting that since 31st August and 1st September 2024 were holidays, the last date to file the appeal was effectively pushed to 2nd September 2024. This clarified that Rule 3 was applicable only to the initial limitation period and not to the condonable extension. On this basis, it concluded that the appeal filed on 17th September 2024—15 days from 2nd September—was within the permissible extended time, as the appellants had provided sufficient cause for the delay. Consequently, IA No. 6846 of 2024 was allowed, and the appeal by BSE Ltd. was treated as filed within time.

This judgment reinforces the position that while procedural rules like Rule 3 can supplement the statutory framework, they cannot override the express limitations imposed by substantive law. It also draws a clear boundary between "prescribed" and "condonable" periods under the IBC, offering clarity on how courts interpret delay condonation in insolvency appeals.

Mr. Abhishek Puri, Ms. Surbhi Gupta, Mr. Sahil Grewal and Mr. Manish Chhangani, Advocate, represented the Appellant.

Mr. Naveen Hegde, Mr. Akshay Puri and Mr. Mayank Samuel, Advocates, appeared for the Respondent No. 1.

Mr. Sidharth Sehti and Mr. Kunal Saini, Advocates, appeared for the Respondent No. 3 (NSDL).

Mr. Neeraj Malhotra, Sr. Advocate with Mr. Mohit Kumar, Bafna, Mr. Abhishek Baid, Mr. Praneet Das and Mr. Nimish Kumar, Advocates, represented the Respondent No. 5 (SEBI).

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