NCLAT Upholds Admission of CIRP Petitions Against Corporate Debtor, Clarifies Limitations and Acknowledgment of Debt

Tribunal Affirms Resolution Professional’s Authority to Admit Claims, Extending Limitation Period for Initiating CIRP

In a landmark judgment, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has dismissed appeals challenging the initiation of Corporate Insolvency Resolution Process (CIRP) against a corporate debtor, thereby clarifying significant aspects of the Insolvency and Bankruptcy Code (IBC), 2016, concerning the acknowledgment of debt and the computation of limitation periods.

The appeals, filed by Shankar Khandelwal, the erstwhile director of the corporate debtor, were against the orders of the National Company Law Tribunal (NCLT), Jaipur, which had admitted two separate petitions under Section 7 of the IBC, initiated by Omkara Asset Reconstruction Pvt. Ltd. The petitions were filed for two distinct loans advanced by Diwan Housing Finance Corporation Ltd. (DHFL) to the corporate debtor, which were later assigned to the respondent.

The core issue revolved around whether the admission of a claim by a Resolution Professional (RP) in a previous CIRP constitutes an acknowledgment of debt, thereby granting a fresh commencement of the limitation period under Section 18 of the Limitation Act, 1963. The appellant argued that the debts were time-barred, as the default occurred in November 2016, and the limitation period had expired before the filing of the CIRP petitions.

However, the NCLAT held that the RP's admission of claims does constitute acknowledgment of debt, providing a fresh terminus a quo for computing the limitation period. The Tribunal emphasized that the RP has the statutory authority to act on behalf of the corporate debtor, including admitting claims, which extends the limitation period for initiating CIRP under Section 7 of the IBC.

The judgment also clarified that while the date of default mentioned in the CIRP petition is crucial, it is not the sole determinant for computing limitation. The Tribunal underscored the distinction between the limitation for initiating a CIRP and making a claim under different articles of the Limitation Act.

The NCLAT's decision reaffirms the statutory duty of tribunals to independently compute limitation periods and highlights the nuanced interplay between the IBC and the Limitation Act, providing clarity for future insolvency proceedings.

Bottom Line:

Admission of a claim by the Resolution Professional in an earlier Corporate Insolvency Resolution Process (CIRP) amounts to valid acknowledgment of debt under Section 18 of the Limitation Act, granting a fresh commencement of the limitation period for initiating a CIRP under Section 7 IBC.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 7, 18, 60(6), 238A; Limitation Act, 1963 Sections 3, 18, Article 137, Article 62

Shankar Khandelwal v. Omkara Asset Reconstruction Pvt. Ltd., (NCLAT)(Principal Bench, New Delhi) : Law Finder Doc Id # 2801470