The Supreme Court has overturned a NCLAT order that treated a resolution professional’s claim admission as an acknowledgment of debt, thereby resetting the limitation period for filing a CIRP. The apex court clarified that such admission is a purely administrative step and cannot extend the three‑year limitation prescribed by Section 18 of the Limitation Act. As a result, the application filed on 23 September 2024 was held to be barred by limitation.
Key Developments
- Bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe ruled that admission of a claim by an interim or full‑time RP is an administrative act, not an acknowledgment of liability.
- The Court affirmed that the right to initiate a Section 7 application arises on the date of default, here 6 December 2016 when the loan was classified as a non‑performing asset.
- Limitation periods were computed excluding three suspension intervals: the DHFL CIRP (3 Dec 2019 – 7 Jun 2021), the Covid‑19 moratorium ordered by the Court (15 Mar 2020 – 28 Feb 2022 plus 90 days), and a later CIRP (23 Dec 2021 – 29 Jul 2024). Only three days of limitation remained, expiring on 1 August 2024.
- Since the fresh application was filed on 23 September 2024, it fell outside the permissible window and was dismissed.
Important Facts
The dispute originated from two loans advanced by DHFL in 2014, amounting to Rs 12 crore and Rs 11 crore respectively. After default, the loans were assigned to Omkara Asset Reconstruction Pvt Ltd, which sought CIRP initiation. The earlier CIRP involving DHFL was set aside, prompting Omkara to file fresh applications in 2024.
The appellant, former director Shankar Khandelwal, argued that the limitation period should restart from the dates when the RP admitted the creditor’s claim (2 May 2022 and 21 Feb 2024). The NCLAT accepted this view, but the Supreme Court rejected it, emphasizing the statutory role of the RP under Section 18 of the IBC.
Exam Relevance
- Understanding the interplay between the IBC and the Limitation Act is essential for GS 2 and GS 3.
- The judgment clarifies the statutory limits of a RP, a key actor in corporate insolvency, highlighting the separation of administrative and adjudicatory functions.
- It illustrates how courts interpret “acknowledgment of liability,” a concept often examined in legal and policy analysis.
- The case underscores the impact of extraordinary periods (e.g., Covid‑19 moratorium) on procedural timelines, relevant for contemporary governance questions.
Way Forward
Stakeholders must recognize that merely recording a claim does not reset limitation periods; explicit, timely acknowledgment is required. Creditors should monitor the three‑year limitation from the default date and be vigilant about statutory suspensions. Legislators may consider clarifying the effect of RP actions on limitation to avoid future litigation. For aspirants, mastering the procedural nuances of the IBC and Limitation Act will aid in answering both factual and analytical UPSC questions.