RP's Admission Of Claim In Earlier CIRP Amounts To Acknowledgement U/S 18 Limitation Act For Commencement Of Fresh Limitation Period: NCLAT
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice N. Seshasayee (Judicial Member) and Arun Baroka (Technical Member), has held that when a Resolution Professional (RP) admits a financial creditor’s claim during an earlier Corporate Insolvency Resolution Process (CIRP), such admission amounts to an acknowledgment of debt under Section 18 of the Limitation Act, 1963. This acknowledgment, the Tribunal observed, commences a fresh period of limitation for initiating a new CIRP under the Insolvency and Bankruptcy Code (IBC).
Background
The case arose from a Section 7 application filed by Omkara Assets Reconstruction Company (ARC) before the NCLT, Jaipur Bench, against the corporate debtor. The petition was admitted, prompting the erstwhile director of the corporate debtor to challenge the order before the NCLAT. The facts revealed that DHFL (Dewan Housing Finance Limited) had advanced two loans to the corporate debtor in 2014. In 2016, the accounts were declared Non-Performing Assets (NPA), and notices were issued under Section 13(2) of the SARFAESI Act. Subsequently, DHFL itself underwent CIRP, and its assets were acquired by a successful resolution applicant, who in turn assigned the corporate debtor’s loans to Omkara ARC in 2023. The corporate debtor too underwent CIRP in 2021, which was later set aside in 2024. Thereafter, Omkara ARC initiated a fresh Section 7 petition, which was admitted by the NCLT.
Contentions
The Appellant, represented by the corporate debtor’s director, argued that the default occurred in 2016, and hence the limitation expired in 2019. It was contended that the admission of the claim by the RP during the earlier CIRP could not extend the limitation period since the RP was not authorized to make such acknowledgment on behalf of the corporate debtor.
The Respondent (Omkara ARC) contended that the date of default should be taken as February 7, 2017, i.e., 60 days after the SARFAESI notice. It was further argued that the moratorium periods during DHFL’s and the corporate debtor’s CIRPs must be excluded under Section 60(6) of the IBC. The respondent emphasized that the RP’s admission of the claim during the earlier CIRP in 2022 and again in 2024 constituted valid acknowledgment under Section 18 of the Limitation Act.
Observations of the Tribunal
The NCLAT first clarified that the limitation period must be examined by the adjudicating authority even if not raised by either party, as mandated by Section 3 of the Limitation Act. It reiterated that proceedings under Section 7 of the IBC are governed by Article 137, which provides a limitation of three years from the date of default. However, in cases involving secured creditors and mortgages, Article 62 allows a limitation period of twelve years.
The Tribunal observed that the loans advanced in 2014 and the classification of accounts as NPA in 2016 were not in dispute. However, it found that the claim had been admitted by the RP during the earlier CIRP of the corporate debtor within twelve years of the default, which prevented the claim from becoming time-barred. Significantly, the bench held that during the CIRP, the entire management of the corporate debtor vests with the Interim Resolution Professional (IRP) or Resolution Professional (RP), who are legally empowered to admit or reject claims. Therefore, such admission constitutes a valid acknowledgment of debt on behalf of the corporate debtor.
The bench observed:“A mere choice of expression, such as ‘acknowledgment’ or ‘admission,’ used in different statutory schemes cannot alter the fundamentals. Therefore, where an IRP or RP has admitted a claim, it does constitute an acknowledgment under Section 18 of the Limitation Act.” It further clarified that neither the Supreme Court’s ruling in Dena Bank v. C. Shivakumar Reddy [(2021) 10 SCC 330] nor the NCLAT’s ruling in SBI v. Krishidhan Seeds Pvt. Ltd. had examined whether an RP’s admission of a secured creditor’s claim would amount to acknowledgment under Section 18 read with Article 62 of the Limitation Act. The present case, therefore, provided clarity on that point.
Holding that the RP’s admission of the creditor’s claim during the earlier CIRP constituted a valid acknowledgment of debt, the NCLAT ruled that a fresh limitation period commenced from that date. Consequently, the Section 7 petition filed by Omkara ARC before the NCLT was within limitation. The Tribunal concluded: “In such circumstances, where the IRP or RP has admitted a claim during an earlier CIRP, it amounts to acknowledgment of debt under Section 18 of the Limitation Act, giving rise to a fresh period of limitation for initiating CIRP.” Accordingly, the NCLAT dismissed the appeal and upheld the NCLT’s admission of the Section 7 petition filed by Omkara ARC.
Appearance
For Appellant: Mr. Sunil Fernandes, Sr. Advocate with Mr. Prakul Khurana and Mr. Gourav Asati, Advocates
For Respondent: Mr. Gaurav Agarwal, Sr. Counsel and Mr. Ayush J. Rajani, Advocate for R-1
Cause Title: Shankar Khandelwal Vs. Omkara Asset Reconstruction Pvt. Ltd. and Anr.
Case No: Company Appeal (AT) (Ins) No.293 of 2025
Coram: Justice N. Seshasayee (Judicial Member), Arun Baroka (Technical Member)
