NCLAT New Delhi Rules, Absence Of Assignee Name In Balance Sheet Of Corporate Debtor Does Not Negate Applicability Of Section 18 Of Limitation Act
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Ashok Bhushan (Judicial Member) and Mr. Barun Mitra (Technical Member), has held that the absence of the assignee’s name (Pegasus Assets Reconstruction Company) in the corporate debtor’s balance sheet does not invalidate the benefit of acknowledgment under Section 18 of the Limitation Act, 1963. The Tribunal dismissed an appeal challenging the admission of a Section 7 IBC application and confirmed that such omission does not affect the extension of limitation where debt acknowledgment is otherwise evident.
Background
M/s. Fairdeal Supplies Ltd. (Corporate Debtor) had obtained a financial facility of ₹34.5 crores from Allahabad Bank in 2010 to purchase property in Coimbatore via auction conducted by the Madras High Court. The account was declared Non-Performing Asset (NPA) on 30.09.2011. On 27.09.2013, Allahabad Bank executed a registered assignment deed transferring the debt to Pegasus Assets Reconstruction Company.
Subsequently, in 2017, the corporate debtor filed a civil suit (Suit No. 195/2017) challenging the validity of the assignment. On 18.08.2022, Pegasus filed a Section 7 application before NCLT Kolkata, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) and claiming an amount of ₹145.74 crores as on 04.08.2022.
The Adjudicating Authority admitted the application on 19.03.2024, relying on acknowledgments of debt found in the balance sheets from 2013–14 to 2019–20, and further recorded that the debt was also reflected in the default information of NeSL. The appellant—suspended director of the corporate debtor—filed an appeal before the NCLAT challenging the admission.
Appellant's Contentions
The appellant raised two key objections:
Invalid Assignment Deed: It was argued that the assignment deed dated 27.09.2013 was null and void under Section 28(b) of the Registration Act (as amended in Tamil Nadu), as the document affected immovable property situated in Coimbatore but was registered in Kolkata.
Bar of Limitation: The appellant contended that the balance sheets acknowledged Allahabad Bank, not Pegasus, and therefore Pegasus could not claim an extension of limitation under Section 18 of the Limitation Act.
Respondent's Submissions
Pegasus argued that:
The assignment deed covered multiple loans and was a valid registered document under SARFAESI provisions.
Even if the assignment deed was void qua the Coimbatore property, it did not render the entire assignment void.
The debt was acknowledged continuously in the corporate debtor’s financial statements, which suffices for the purpose of Section 18, regardless of whether the assignee (Pegasus) was specifically named.
Observations by the NCLAT
On the validity of the assignment, the Tribunal noted that Section 28(b) of the Registration Act (as amended by Tamil Nadu Act 19 of 1997) does render documents affecting Tamil Nadu properties, if registered outside the state, as null and void. Accordingly, the Tribunal held: “The assignment deed dated 27.09.2013 is held void only to the extent it creates equitable mortgage over the Coimbatore property. However, that does not invalidate the entire assignment or the creditor’s rights to file a Section 7 application based on the financial debt.”
The Tribunal treated the assignment of financial assets and security interests as a severable transaction, relying on the Supreme Court’s decision in Mattapalli Chelamayya v. Mattapalli Venkataratnam [(1972) 3 SCC 799].
Regarding limitation, the NCLAT accepted that the corporate debtor’s balance sheets from 2013–14 to 2019–20 acknowledged the debt, even if in the name of Allahabad Bank. It held that: “The mere absence of Pegasus’s name in the balance sheet does not negate the applicability of Section 18. The debt continues to exist, and Pegasus, as assignee, steps into the shoes of Allahabad Bank.”
The Tribunal also relied on its earlier judgment in Loramitra Rath v. JM Financial ARC Ltd [Comp. App. (AT) (Ins.) No.1359 & 1360/2023], which held that acknowledgment of debt in financial statements referencing the original lender still benefits the assignee for limitation purposes.
Additional Developments
While the appeal was pending, the appellant offered to deposit ₹22.02 crores (principal amount as per the assignment). The Tribunal allowed the deposit but clarified that the relevant outstanding amount was ₹145.74 crores as on 04.08.2022, and mere deposit of the principal amount did not extinguish the debt or default.
Verdict
The NCLAT dismissed the appeal and upheld the NCLT’s order admitting the Section 7 application, with the following directions:
Pegasus’s application under Section 7 is maintainable and not barred by limitation.
The assignment deed is void only in relation to the Coimbatore property, but not otherwise.
The moratorium and CIRP process may continue, and the deposited amount may be returned to the appellant with interest.
Appearance
For Appellant: Mr. Krishnendu Datta and Mr. Abhijit Sinha, Sr. Advocates with Ms. Aditi Sharma and Mr. Kaushik Banerjee, Advocates.
For Respondents: Mr. Amar Dave, Sr. Advocate with Mr. Dinkar Singh and Mr. Rohit Singh, Advocates for R-1.
Mr. Gaurav H. Sethi, Mr. Bijay Murmuria (IRP), Mr. Rahul Panwar and Mr. Rahul Kapoor, Advocates for IRP/R-6.
Mr. Vipin Jai, Mr. Vipul Jai and Mr. Monish Surendran, Advocates for Intervenors in I.A. No. 1058/2025.
Cause Title: Saurabh Jhunjhunwala (Suspended Board of Director of Fairdeal Supplies Limited.) V. Pegasus Assets Reconstruction Company Private Limited & Anr.
Case No: Company Appeal (AT) (Insolvency) No. 648 of 2024
Coram: Justice Ashok Bhushan [Chairperson], Barun Mitra [Member (Technical)]
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