2025 (11) TMI 536 - AT - Companies Law

Appeal dismissed as time-barred; Section 14 exclusion denied after applicant pursued suit and Section 59 limitation expired

Shri. Hasmukh Kanubhai Shah Versus Aurobindo Pharmaceuticals Ltd. And KFin Technologies Private Limited, Hyderabad

NCLAT held the appeal dismissed as barred by limitation. The appellant, having knowledge of the alleged wrongful transfer on 11.05.2016, instituted a ... Entitlement for the grant of benefit of provisions contained under Section 14 of the Limitation Act - Rightful shareholder of the 500 shares of Respondent No. 1 Company - Shares wrongfully transferred to a third party - no Share Certificate was actually issued or handed over to the Appellant till the date of filing of the proceedings under Section 59 of the Companies Act, 2013 - HELD THAT:- This Appellate Tribunal is of the view that, the Appellant cannot take the benefit of the exclusion of the period, which was used up by him in instituting and pursuing the proceedings of the Commercial Suit that is from 14.09.2019, till it was decided i.e. on 05.10.2021, because, he had instituted the proceedings and pursued the same. The issue of the judgment and the judgment was rendered on merits. There is yet an another important feature, which is to be taken into consideration, that in the finding, which has been recorded by the Ld. Tribunal in Para 10 of the Impugned Order, it has been observed that, the Appellant had the knowledge of the transfer of the said shares as back as on 11.05.2016, that the suit before the Commercial Court was instituted much beyond the period of limitation as prescribed under Article 137 of the Limitation Act, 1963, that the Commercial Court dismissed the said Suit as barred by limitation, and that seeking a condonation of delay which has already been rejected by a competent Court on 05.10.2021, would be tantamount to settling on Appeal over the order of the Civil Court which is not provided in law. The period of limitation as prescribed u/s 433 of the Companies Act, 2013, to be read with Section 3 & Section 5 of the Limitation Act, 1963, has to be determined from the date when the knowledge was attributed to the Appellant, about the so called wrongful transfer of shares, which apparently in the instant case is 11.05.2016, if that be so, the period of limitation for the purposes of an Appeal under Section 59 of the Companies Act, 2013, would have expired long back and the Appeal would too be barred by limitation. Hence, the findings that has been recorded by the Ld. Tribunal, dismissing the Appeal holding it to be barred by limitation does not suffer from any apparent error, because, the Appellant under no set of circumstances would be entitled for the extension of benefit under Section 14 of the Limitation Act, 1963. The Appellant by his own conduct would be bound by the Judgment and Decree rendered on 05.10.2021 by the Commercial Court which will always operate as a constructive res judicata against the Appellant. Thus, holding the Appeal to be barred by limitation by Ld. NCLT does not call for any interference and the instant Company Appeal would stand dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether an appeal under Section 59 of the Companies Act, 2013 is barred by limitation where the appellant had knowledge of the alleged wrongful transfer on a known date and filed the appeal after the prescribed period under Section 433 read with the Limitation Act. 2. Whether the period spent by the appellant pursuing a civil/ commercial suit (instituted and decided) in respect of the same controversy can be excluded from computation of limitation under Section 14 of the Limitation Act, 1963. 3. Whether a judgment dismissing a civil/ commercial suit as barred by limitation and rendered on merits operates as a bar (constructive res judicata) to a later statutory appeal arising from the same controversy, when the earlier judgment has not been challenged. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Limitation for appeal under Section 59 read with Section 433 and Limitation Act Legal framework: The period of limitation for an appeal under Section 59 is governed by Section 433 of the Companies Act, 2013 read with the Limitation Act, 1963 (notably Sections 3 and 5 for computation and Article 137 for the applicable period as applied by the Tribunal). Precedent Treatment: No external precedent was relied upon or cited in the judgment for altering the statutory prescription of limitation; the Court applied statutory provisions to the facts. Interpretation and reasoning: The Court treated the date when the appellant first became aware of the alleged wrongful transfer (11.05.2016) as the accrual date for limitation. Computing limitation from that date, the appeal instituted much later was time-barred. The Tribunal's finding that the Company Appeal was barred by limitation was upheld as not suffering from any apparent error. Ratio vs. Obiter: Ratio - the limitation for an appeal under Section 59 is computed from the date of knowledge of the cause of action and an appeal filed after expiry of that period is barred; the Tribunal's dismissal on that ground is sustainable. Conclusion: The appeal was barred by limitation and the impugned order dismissing the appeal on that ground was affirmed. Issue 2 - Exclusion of period spent pursuing a civil/ commercial suit under Section 14 of Limitation Act Legal framework: Section 14 of the Limitation Act permits exclusion of time during which the party was prosecuting in good faith another proceeding in respect of the same cause of action, provided certain conditions are met; relevant interplay with Section 433 (Companies Act) and Articles of Limitation considered. Precedent Treatment: The Court did not accept the appellant's contention that Section 14 exclusion applies where the appellant himself instituted and pursued the civil proceedings and obtained a decision thereon; no additional authority was invoked to expand the scope of Section 14. Interpretation and reasoning: The Tribunal concluded that Section 14 could not be invoked to exclude the period spent by the appellant in prosecuting the Commercial Suit because (a) the appellant himself instituted and pursued that suit; (b) the suit was dismissed as time-barred by the Commercial Court after being contested by the appellant; and (c) the dismissal constituted a decision on merits (rejection of plaint under limitation) which the appellant did not challenge. Consequently, the period spent was not excludable as per Section 14. Ratio vs. Obiter: Ratio - a party who institutes, prosecutes and obtains an adjudication (including dismissal as time-barred) in prior proceedings cannot subsequently claim exclusion of the time spent in those proceedings under Section 14 to extend limitation for a later statutory appeal based on the same controversy. Conclusion: Section 14 did not afford the appellant exclusion of the period spent in the Commercial Suit; therefore, the appeal remained time-barred. Issue 3 - Preclusive effect of earlier judgment dismissing suit as time-barred (constructive res judicata) on later statutory appeal Legal framework: Principles of finality of judgments and res judicata apply where earlier adjudication on the same controversy has been rendered and not challenged; a decision on limitation by a competent court operates against the party unless overturned. Precedent Treatment: The Court treated the earlier dismissal as operative against the appellant, without citing or distinguishing any contrary authority; it relied on classical principles that a litigant who invokes jurisdiction and accepts the resulting judgment cannot later re-litigate the same controversy in another forum to evade limitation consequences. Interpretation and reasoning: The Tribunal observed that the Commercial Court's order rejecting the plaint as time-barred (and treating it as a decree) was a decision on merits for present purposes and, since it was not challenged, it constitutes constructive res judicata against the appellant. Seeking condonation of delay in a later forum after such a judgment would amount to effectively appealing or collaterally challenging the earlier decision, which is not permissible. Ratio vs. Obiter: Ratio - an unchallenged judgment dismissing a suit as barred by limitation, rendered after contested proceedings, operates as a bar to subsequent proceedings on the same cause of action and cannot be circumvented by seeking condonation of delay in a later statutory appeal. Conclusion: The earlier judgment operates as a preclusive bar; the appellant is bound by it and cannot succeed in a later time-barred appeal. Additional interrelated findings and disposition Cross-reference: Issues 1-3 are interlinked: accrual of knowledge (Issue 1) established the limitation trigger; prosecution and dismissal of the civil suit (Issue 2) precluded exclusion of time; and the unchallenged dismissal (Issue 3) established a preclusive effect against re-litigation. Court's conclusion and order: For the combined reasons on limitation, non-availability of Section 14 exclusion, and the preclusive effect of the prior dismissal, the Tribunal found no infirmity in the impugned order dismissing the appeal as barred by limitation and dismissed the Company Appeal. All pending interlocutory applications were closed.