Insolvency and Bankruptcy Code prevails over apex court rules in case of conflict: Supreme Court

THe sublime margaret court has held that where the provisions of the Insolvency and failure encrypt (IBC) infringe with the Supreme Court Rules (SCR), the IBC must prevail, underlining that procedural rules cannot be used to dilute the strict timelines prescribed by Parliament for insolvency proceedings.A bench of justices Dipankar Datta and Satish Chandra Sharma ruled that litigants cannot circumvent the rigid limitation regime under the IBC by filing defective appeals merely to save limitation and then curing defects at their convenience. Holding that the insolvency law is a “complete code in itself”, the court dismissed as time-barred an appeal filed by a liquidator after finding delays both in filing and re-filing the matter.“The SCR is the subordinate legislation in the field and whenever the IBC and the SCR clash, the latter cannot override the express provisions of the former. The IBC must prevail being the statutory edict,” held the bench in a judgment released on Monday.The judgment came in an appeal filed by a liquidator challenging an order of the National Company Law Appellate Tribunal (NCLAT). The appeal before the Supreme Court itself was filed beyond the prescribed timelines and was also accompanied by substantial delay in curing defects pointed out by the registry. The court was called upon to decide whether such re-filing delays could be condoned by invoking the more flexible approach generally adopted under the Supreme Court Rules.Rejecting that contention, the bench said an appeal under Section 62 of the IBC must be treated as having been properly instituted only when it is filed in a defect-free form capable of being acted upon by the registry. A defective appeal, the court said, remains defective for all practical and legal purposes and cannot be used as a device to preserve limitation.Court's warningThe court warned that permitting litigants to cure defects long after the stipulated period would defeat the very objective of the IBC, which was enacted to ensure expedition and finality in insolvency proceedings. It observed that allowing such a practice would enable parties to drag re-filing for months while continuing to seek indulgence on the ground that procedural rules should advance substantive justice.Accordingly, the bench held that once the statutory period of 45 days for filing an appeal, the additional condonable period of 15 days under Section 62 of the IBC, and the 28-day period available for curing defects under the Supreme Court Rules are exhausted, the right to appeal stands extinguished.Explaining the rationale, the court said that while courts ordinarily adopt a more liberal approach towards re-filing delays than filing delays in civil and criminal matters, the same principle cannot apply to insolvency litigation because the IBC prescribes a self-contained and special limitation framework. “Section 62, IBC is a complete code in itself for filing of appeals and is different from other laws,” the judgment said.The bench also refused to invoke its extraordinary powers under Article 142 of the Constitution merely because the appellant was a court-appointed liquidator acting for the benefit of stakeholders. It held that the IBC does not prescribe a different standard for such officers and courts cannot read into the statute exceptions not contemplated by Parliament.Appearing for the liquidator, senior advocate Sunil Fernandes argued that the appellant was a neutral officer functioning under the aegis of the Supreme Court for the benefit of all stakeholders and the corporate debtor under liquidation. He contended that the delay was insignificant and ought to be viewed liberally, particularly since courts traditionally treat re-filing delays more leniently than delays in initial filing. He further submitted that the Supreme Court’s power to condone re-filing delay was not fettered by any outer limit and that once sufficient cause was shown, even a lengthy delay could be condoned. Fernandes also relied on a previous Supreme Court decision involving the same parties where delay in re-filing an appeal under the IBC had been condoned in the interests of justice.