2026 (1) TMI 400 - SC - Companies Law

CLB power to condone delay in company share-transfer refusal appeals u/s58(3), before s.433 began-rejected

The dominant issue was whether the CLB, while exercising jurisdiction under s.58(3) of the Companies Act, 2013 between 12.09.2013 and 01.06.2016, had ... Condonation of delay of 249 days in filing the appeal under Section 58(3) of the Companies Act, 2013 - power of CLB, being a quasi-judicial body to condone the delay in filing an appeal under Section 58(3) of the Act, 2013 - Section 433 of the Act, 2013 which was brought into force on 01.06.2016 in order to empower the NCLT and NCLAT respectively, to apply the provisions of the Act, 1963, could be given retrospective effect such that it applied to the CLB as well. The implementation of the provisions of the Act, 2013 in phases and the powers conferred upon the CLB in the period between 12.09.2013 and 01.06.2016 - HELD THAT:- It is deemed necessary to reemphasize that there was no provision either akin to or corresponding to Section 433 of the Act, 2013 which empowered the CLB to apply the Act, 1963 during this period between 12.09.2013 and 01.06.2016. The legislature had very consciously timed the coming into force of Section 433 of the Act, 2013 with that of the creation of the NCLT and NCLAT respectively, which unambiguously revealed their intention to not confer the CLB with any power insofar as the issue of limitation was concerned. Whether the CLB, being a quasi-judicial body, could be said to have the power to condone the delay in filing an appeal under Section 58(3) of the Act, 2013? - HELD THAT:- Section 433 of the Act, 2013 which specifically empowers the NCLT and the NCLAT respectively to apply the provisions of the Act, 1963 to proceedings or appeals before itself, must be given retrospective effect such that it applies to the CLB as well. Decisions of this Court as regards the application of Section 5 of the Act, 1963 to quasi-judicial bodies or tribunals - HELD THAT:- In the light of the ratio of Officer on Special Duty [1996 (2) TMI 538 - SUPREME COURT] and Prakash H. Jain [2003 (9) TMI 771 - SUPREME COURT] it can be seen that the CLB was also to be treated as a court but for very limited purposes which were enumerated under Section 10E(4C) of the Erstwhile Act. Therefore, the powers conferred under Section 10E(4C) must neither be conflated with nor extended to encompass the powers which a court would otherwise exercise under Section 5 of the Act, 1963. Whether the principles underlying certain provisions of the Act, 1963 could be made applicable to quasi-judicial bodies or tribunals? - HELD THAT:- Although the provisions of the Act, 1963 per say have been made inapplicable to applications or appeals before quasi-judicial bodies, yet the principles underlying the provisions of the Act, 1963, more specifically Section 14 thereof, have been made applicable to applications or appeals made before quasi-judicial bodies. This aspect of applying the principles underlying Section 14 of the Act, 1963 was discussed in Parson Tools [1975 (2) TMI 86 - SUPREME COURT] - Although the decision in Parson Tools did not apply the principles underlying Section 14 of the Act, 1963 to the facts of their case, based on how the concerned provision i.e., Section 10 of the U.P. Sales Tax Act, 1948, was phrased, yet it left open the possibility for future decisions to apply the said principles where a contrary intention could not be inferred or culled out from the provision to which the principles underlying Section 14 was sought to be applied. The difference between the principles underlying Sections 5 and 14 of the Act, 1963 respectively - HELD THAT:- The term “sufficient cause” under Section 5 must not be subject to undue rigidity and must be construed in a manner such that it can be contextualised in the facts and circumstances of each case. In other words, it must be kept sufficiently flexible and not be subject to an exhaustive set of circumstances or reasons. Courts must adopt a liberal and justice-oriented approach in assessing whether sufficient cause is made out. While there exists some outer boundaries within which the term “sufficient cause” must be construed, yet it is no doubt true that a significant amount of leeway is given to courts which are faced with an application under Section 5 of the Act, 1963 to ascertain whether the reasons assigned qualify the subjective test of the words “sufficient cause”. There are certain well-defined pre-requisites that must be satisfied for a party to take benefit of Section 14. Section 14(2) deals with computing the period of limitation for an application and the following are its requisite conditions – First, both the earlier and the subsequent proceedings must be civil proceedings; Secondly, both the earlier and the subsequent proceedings must be before a court; Thirdly, they must be between the same parties; Fourthly, they must be for the same relief; Fifthly, the previous proceedings must have been incapable of being entertained owing to a defect of jurisdiction or any other cause of a like nature; Lastly, the earlier proceedings must have been prosecuted with good faith and due-diligence. The argument that the principles underlying Sections 6 or 14 of the Act, 1963 respectively, could be applied to quasi-judicial bodies is not sufficient reason to hold the same insofar as Section 5 of the Act, 1963 is concerned. Whether the CLB Regulations confer any discretionary power to the CLB to extend time or condone delay under Section 5 of the Act, 1963? - HELD THAT:- Regulation 25 deals with the discretion given to the CLB to grant additional time on an altogether different aspect. It deals with granting time, upon showing that sufficient cause existed, for the ‘adjournment’ of a hearing of the petition or application, as the case may be. One must not conflate this with the power to enlarge or extend time for the filing of the petition or application itself with is dealt with by the Act, 2013 - when the question is as regards the “extension of time” in the filing of an appeal or application itself, before a quasi-judicial body, we must be careful to not overread between the silences and instead, must look at whether there is any express indication to that effect. Whenever and wherever the legislature deemed it fit, it has granted either a limited or an unlimited power to extend time. How Section 58(3) of the Act, 2013 which is a simpliciter provision prescribing a limitation period, must be construed? - HELD THAT:- Section 58(3) of the Act, 2013 uses the expression “The transferee may appeal to the Tribunal”. As elucidated in Fairgrowth [2004 (10) TMI 328 - SUPREME COURT] the use of this word does not directly give rise to any inference that the limitation period prescribed therein is only directory - the respondent herein must have preferred his appeal under Section 58(3) of the Act, 2013 before the CLB, strictly within the time-limit prescribed therein. Whether Section 433 of the Act, 2013 must be made retrospectively applicable or the change in law during the pendency of the appeal must be taken into account in the facts and circumstances of the present case? - HELD THAT:- Section 433 of the Act, 2013 was brought into force w.e.f 01.06.2016 i.e., from the same date on which the NCLT and the NCLAT respectively came to be constituted. In the phased manner of implementation of the provisions of the Act, 2013, such a decision to time the coming into force of Section 433 in a way that coincides with the creation of the NCLT and NCLAT respectively, was clear and conscious. This, by itself, is a good indication to steer away from the retrospective application of Section 433 in favour of the CLB. It is concluded that the High Court could be said to have committed an error in dismissing the statutory appeal filed under Section 10F of the Erstwhile Act and thereby, affirming the order of the CLB condoning the delay of 249 days in filing the appeal under Section 58(3) of the Act, 2013. The impugned judgement and order of the High Court is set-aside - appeal allowed. Issues: (i) Whether the Company Law Board (CLB), being a quasi-judicial body, had power to condone the delay in filing an appeal under Section 58(3) of the Companies Act, 2013 and whether the principles underlying Section 5 of the Limitation Act, 1963 could be applied to such proceedings; (ii) Whether Section 433 of the Companies Act, 2013 (bringing the Limitation Act, 1963 into play for NCLT/NCLAT) could be given retrospective effect so as to benefit appeals before the CLB.Issue (i): Whether the CLB could condone delay under Section 58(3) of the Companies Act, 2013 by applying Section 5 of the Limitation Act, 1963 or its principles.Analysis: The Court examined the body-specific rule that the Limitation Act, 1963 applies to courts unless a special law expressly provides otherwise. It reviewed authorities distinguishing the principles underlying Sections 5 and 14 of the Limitation Act, noting Section 5 confers discretionary power to extend prescribed periods (requiring 'sufficient cause') whereas Section 14 provides for mandatory exclusion of time where specific conditions are met. The Court analysed the statutory scheme relevant to the CLB (Section 10E(4C) of the Companies Act, 1956), CLB Regulations (Regulations 25, 43, 44) and precedent (Officer on Special Duty; Prakash H. Jain; M.P. Steel; Ganesan; International Asset Reconstruction Co.). It held that absent express statutory empowerment (either by a proviso allowing enlargement or by express adoption of the Limitation Act) a quasi-judicial body cannot exercise the discretionary power under Section 5 to extend limitation. The CLB's saving of inherent powers and its regulations dealing with adjournments/enlargement under its own rules do not authorise condonation of the statutory filing period under Section 58(3).Conclusion: The CLB did not have the power to condone delay under Section 5 of the Limitation Act, 1963 in relation to appeals under Section 58(3) of the Companies Act, 2013; the principles underlying Section 5 cannot be analogously applied to the CLB in the absence of express statutory empowerment.Issue (ii): Whether Section 433 of the Companies Act, 2013 should be given retrospective effect so as to empower the CLB to apply the Limitation Act prior to 01.06.2016.Analysis: The Court reviewed the phased commencement of the Companies Act, 2013 and the legislative design that Section 433 came into force with constitution of the NCLT/NCLAT on 01.06.2016. It applied principles on retrospective application of procedural law, noting exceptions where retrospective application would impair vested rights or revive dead remedies. The respondent's remedy under the erstwhile Companies Act (Sections 111/111A) had become time-barred before Section 58 and long before Section 433 came into force; applying Section 433 retrospectively to vest powers in the CLB would revive a dead remedy and affect vested rights. Distinctions with cases permitting retrospective application (where no vested right would be impaired) were explained and applied.Conclusion: Section 433 cannot be given retrospective effect to confer on the CLB powers to apply the Limitation Act prior to 01.06.2016; the change in law does not benefit an appeal already time-barred before the relevant provisions came into force.Final Conclusion: The High Court erred in upholding the CLB's condonation of 249 days' delay; the appeal is allowed, the High Court order is set aside and the CLB's order condoning delay is displaced, with pending applications disposed of.Ratio Decidendi: In the absence of express statutory empowerment (either by specific provision permitting extension or by adoption of the Limitation Act for that forum), a quasi-judicial body cannot invoke Section 5 of the Limitation Act, 1963 to condone delay in filing appeals; retrospective application of a provision empowering a different tribunal cannot be used to revive a remedy already time-barred prior to its commencement.