NCLAT: Time Spent In DRT Proceedings Cannot Be Excluded Under Section 14 Of Limitation Act
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT) has held that the benefit of Section 14 of the Limitation Act, 1963 cannot be extended to a creditor who had initiated recovery proceedings before the Debt Recovery Tribunal (DRT) under the Recovery of Debt and Bankruptcy Act, 1993, as such proceedings are not before a forum lacking jurisdiction. A Bench comprising Justice Ashok Bhushan (Chairperson) and Mr. Arun Baroka (Technical Member) dismissed an appeal filed by United Bank of India (now Punjab National Bank) challenging the order of the NCLT, Kolkata Bench, which had rejected its Section 7 IBC application on the grounds of limitation and failure to prove disbursement.
Background
The Appellant Bank claimed to have disbursed ₹46.16 crores to Concast Morena Road Projects Pvt. Ltd. in 2013. The default occurred on 19.09.2015, and the Bank subsequently filed recovery proceedings under Section 19 of the Recovery of Debt and Bankruptcy Act, 1993, before the DRT in 2016. Later, on 10.12.2019, the Bank filed a Section 7 application under the Insolvency and Bankruptcy Code, 2016, before the NCLT Kolkata. However, the NCLT dismissed the application, holding it time-barred and finding no proof of disbursement.
Appellant’s Submissions
The Appellant argued that the NCLT erred in holding that no disbursement had been proved, as the NeSL certificate and bank statements clearly demonstrated the existence of the debt. It further contended that the time spent in the DRT proceedings should be excluded under Section 14 of the Limitation Act, as such proceedings are “civil proceedings” and fall within its ambit.
Relying on the Supreme Court’s decision in Sesh Nath Singh & Anr. v. Baidyabati Sheoraphuli Cooperative Bank Ltd. & Anr., (2021) 7 SCC 313, the Appellant argued that exclusion under Section 14 can be extended to proceedings initiated under the SARFAESI Act or DRT laws, since both are recovery mechanisms pursued in good faith.
Tribunal’s Observations
At the outset, the NCLAT noted that the Bank had indeed established proof of disbursement through the NeSL certificate, which was not disputed. It therefore held that the NCLT erred on that aspect. However, the Tribunal emphasized that the application was clearly barred by limitation. The date of default was 19.09.2015, while the Section 7 application was filed on 10.12.2019, well beyond the three-year limitation period prescribed under Article 137 of the Limitation Act.
The Tribunal also rejected the Bank’s reliance on two deposits made in 2016 — ₹89,11,116 on 25.11.2016 and ₹1,000 on 17.12.2016 — noting that the first was beyond the three-year window, and the second, being a mere cash deposit, could not be treated as an acknowledgment of debt.
No Benefit Under Section 14
The Bench clarified that Section 14 of the Limitation Act can only apply where the previous proceedings were bona fide pursued before a court lacking jurisdiction or suffering from a similar defect. Since the DRT proceedings were validly instituted before a competent forum, the benefit of Section 14 could not be extended. The Tribunal held: “Present is a case where benefit of Section 14 of the Limitation Act is claimed on the basis of proceedings initiated under Section 19 of the Recovery of Debt and Bankruptcy Act, 1993, which was filed for recovery. It is not the case of the Bank that the proceedings initiated before the DRT were without jurisdiction or that there was any defect of jurisdiction or cause of like nature to extend benefit under Section 14 of the Limitation Act.” The NCLAT distinguished the Sesh Nath Singh judgment, observing that in that case, the SARFAESI proceedings had been stayed by the High Court due to lack of jurisdiction — a fact situation not present here.
While noting that the NCLT erred in its finding on disbursement, the Appellate Tribunal nonetheless held that the Section 7 application was time-barred and that the Bank was not entitled to exclusion under Section 14 of the Limitation Act. Accordingly, the appeal was dismissed.
Appearance
For Appellant: Mr. Rajesh Kumar Gautam, Mr. Deepanjal Choudhary, Mr. Azal Aekram, Ms. Likivi Jakhalu, Advocates.
Cause Title: United Bank of India (Now Punjab National Bank) v. Concast Morena Road Projects Pvt. Ltd.
Case No: Company Appeal (AT) (Insolvency) No. 805 of 2025
Coram: Justice Ashok Bhushan, Mr. Arun Baroka (Technical Member)
