Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), has held that the limitation period for filing an application under the Insolvency and Bankruptcy Code, 2016 (IBC) remains three years, even if such application is based on a court’s decree or a Debt Recovery Tribunal (DRT) recovery certificate. The Tribunal clarified that the 12-year period under Article 136 of the Limitation Act, which applies to execution of decrees, does not govern IBC proceedings. Instead, such applications are covered by Article 137, which prescribes a limitation period of three years from the date the right to apply accrues.

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Factual Background

Both appeals before the NCLAT were filed by IDBI Bank against identical orders dated 5 May 2025 passed by the National Company Law Tribunal (NCLT), Indore Special Bench, Court-I, dismissing Section 95 IBC applications as time-barred. The respondents in both appeals, Hemangi Patel and Noopur Patel, were personal guarantors of Great Logistic and Parking Services Pvt. Ltd., a corporate debtor to which IDBI Bank had extended credit facilities.

The personal guarantees were executed on 28 October 2010. The corporate debtor defaulted in repayment on 31 March 2016, leading to classification of the account as a Non-Performing Asset (NPA). The bank invoked the guarantees on 24 October 2016 and initiated recovery proceedings before the Debt Recovery Tribunal (DRT) by filing Original Applications on 31 March 2017.

On 25 January 2019, the DRT issued recovery certificates in favour of IDBI Bank. Subsequently, on 19 March 2024, the bank issued demand notices to the personal guarantors under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019. Section 95 applications were filed before the NCLT on 2 September 2024.

NCLT’s Finding on Limitation

The Adjudicating Authority calculated that the three-year limitation period from the date of the recovery certificates (25 January 2019) expired on 25 January 2022. Even after granting the benefit of the Supreme Court’s orders in Suo Motu Writ Petition (Civil) No. 3 of 2020 regarding extension of limitation due to the COVID-19 pandemic, the extended period ended on 11 January 2024. As the applications were filed on 2 September 2024, they were held to be beyond the permissible period.

Appellant’s Contention Before NCLAT

Before the Appellate Tribunal, IDBI Bank advanced a singular contention: that in Tottempudi Salalith v. State Bank of India & Ors. [(2024) 1 SCC 24], the Supreme Court held that a decree passed by a court remains valid for 12 years, and within that period, a claim under the IBC could be filed. On this basis, it was argued that the limitation for the Section 95 applications should be computed as 12 years, rendering the filings within time.

NCLAT’s Analysis of Case Law

The NCLAT examined the Supreme Court’s decision in Tottempudi Salalith in detail. That case arose from a Section 7 application filed on the basis of multiple DRT recovery certificates. Referring to its earlier decision in Kotak Mahindra Bank Ltd. v. A. Balakrishnan [(2022) 9 SCC 186], the Supreme Court had held that issuance of a recovery certificate gives rise to a fresh cause of action, and an IBC application must be filed within three years from the date of such issuance under Article 137 of the Limitation Act.

The NCLAT noted that Tottempudi Salalith reaffirmed this position, also relying on B.K. Educational Services Pvt. Ltd. v. Parag Gupta & Associates [(2019) 11 SCC 633], where the apex court had held that the Limitation Act applies to IBC proceedings from inception and the period is three years. The Tribunal extracted portions of Tottempudi Salalith emphasising that while recovery certificates are deemed decrees under Section 19(22A) of the Recovery of Debts and Bankruptcy Act, 1993, the limitation period for IBC applications is not 12 years but three years.

The Appellate Tribunal further cited the three-judge bench ruling in Gaurav Hargovindbhai Dave v. Asset Reconstruction Ltd. & Anr. [(2019) 10 SCC 572], where the Supreme Court rejected the application of Article 62 (twelve years for enforcing mortgages) to IBC applications, holding instead that Article 137 applies. The Court in Gaurav Dave clarified that limitation begins from the date of default and there is no equitable extension of limitation periods under the Act.

NCLAT’s Conclusion

The NCLAT categorically rejected the appellant’s interpretation of Tottempudi Salalith, stating: “Submission of the appellant relying on the above judgment that Hon’ble Supreme Court held that limitation will be 12 years with respect to a decree is wholly incorrect and is not borne out from the judgment.” Finding that the Section 95 applications were filed after expiry of the three-year limitation period from the date of the recovery certificates, even after applying the Supreme Court’s COVID-19 extension orders, the Tribunal upheld the NCLT’s dismissal orders.

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Both appeals were dismissed as devoid of merit, with the NCLAT affirming that for IBC applications, including those based on decrees or recovery certificates, the limitation period is governed by Article 137 of the Limitation Act and is three years from the accrual of the cause of action.

Appearance

For Appellant: Mr. Vaibhav Gaggar and Shreedhar Gaggar, Advocates. 

For Respondents:   - 

Cause Title: IDBI Bank Ltd. V. Hemangi Patel

Case No: Company Appeal (AT) (Insolvency) No. 991 of 2025

Coram: Ashok Bhushan [Chairperson], Mr. Barun Mitra [Technical Member]