Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), has held that when there are specific pleadings under Section 9 of the Insolvency and Bankruptcy Code (IBC) regarding part payments made by the corporate debtor, further supported by a written acknowledgment in response to the demand notice, the limitation period for filing the application is reset under Section 19 of the Limitation Act, 1963.

Also Read: NCLAT: Registry Or NCLT Cannot Reject Section 7 IBC Petition Without Allowing Time To Cure Defects In Affidavit

The ruling came in an appeal filed by Paresh K. Mehta Investment Pvt. Ltd., a suspended director of M/s MKM Diamonds Pvt. Ltd., challenging the order of the National Company Law Tribunal (NCLT), Mumbai Bench, admitting a Section 9 application filed by the State Bank of India (SBI). The NCLT had admitted the petition seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor for default in payment of over ₹16.77 crore arising from two invoices dated October 3 and October 5, 2016.

The appellant contended that the NCLT erred in admitting the petition as it was time-barred, since the invoices became due on January 31, 2017, and February 2, 2017, and the application was filed only in July 2022 — well beyond the three-year limitation period. It was further argued that the principal amount had already been paid, and there was no agreement between the parties for payment of interest.

The respondent, SBI, countered that the corporate debtor had made part payments on May 15, 2017, and September 26, 2017, which constituted acknowledgment of the debt, thereby extending the limitation period by three years under Section 19 of the Limitation Act. It was further submitted that when the period excluded by the Supreme Court’s suo motu order in Writ Petition (Civil) No. 3 of 2020 (relating to the COVID-19 pandemic) was taken into account, the application was filed within limitation.

The NCLAT accepted the respondent’s submissions, holding that the part payments made within the prescribed limitation period and the written acknowledgment of such payments satisfied the conditions under Section 19. The Tribunal observed that the corporate debtor had, in its reply to the demand notice dated November 5, 2020, admitted to making part payments directly to the creditor, which fulfilled the statutory requirements for acknowledgment. The Bench referred to the Supreme Court’s judgment in Shanti Conductors Pvt. Ltd. v. Assam State Electricity Board (2020) 2 SCC 677, reiterating that both payment within limitation and acknowledgment in writing are essential conditions for a valid extension of limitation. The Tribunal noted that specific pleadings in the Section 9 application regarding the part payments, coupled with written acknowledgment, extended the limitation period.

The Bench concluded that the Section 9 application filed by SBI was within limitation when the COVID-19 exclusion period was factored in. However, it also held that the operational creditor was not entitled to claim interest, as there was neither an agreement between the parties nor any clause in the invoices providing for interest. Citing M/s SNJ Synthetics Ltd. v. M/s PepsiCo India Holdings Pvt. Ltd. (Company Appeal (AT) (Insolvency) No. 386 of 2025) and Krishna Enterprises v. Gammon India Ltd. (2018 SCC OnLine NCLAT 360), the Tribunal reiterated that in the absence of a contractual provision, interest cannot be included in the operational debt.

Also Read: NCLAT New Delhi: Leasehold Rights Transfer Upon Amalgamation; WBHIDCO Land Validly Included In Concast Steels’ Liquidation Estate

Accordingly, the NCLAT held that the principal amount stood liquidated as it had been paid before the hearing of the appeal and that the CIRP proceedings were no longer necessary. The order admitting the insolvency proceedings was thus set aside, and the corporate debtor was freed from the rigours of CIRP.

Appearance

For Appellant: Mr. Ramji Srinivasan, Sr. Advocate with Mr. Manish Kumar Shekhari, Ms. Anisha Mahajan, Mr. Sanjay Chaturvedi, Ms. Shefali Munde, Mr. Arjun Bhatia, Advocates.

For Respondents: Mr. Girish Utangale, Mr. Saurabh Utangale, Mr. Sarthak Utangale, Advocates for R-1.

Cause Title: Paresh K. Mehta Investment Pvt. Ltd. Versus State Bank of India & Anr.

Case No: Company Appeal (AT) (Insolvency) No.1197 of 2023

Coram: Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member)