12 Years Mortgage Limitation Under Article 62 Not Applicable to CIRP Claims: NCLT Applies 3 Years Limitation [Read Order]

In a recent ruling, the National Company Law Tribunal (NCLT) Mumbai Bench has held that the 12‑year limitation period under Article 62 of the Limitation Act for mortgage enforcement does not apply to claims filed in a Corporate Insolvency Resolution Process (CIRP).

The case arose from the rejection of BSEL Algo’s claim of ₹22.94 crore by the Resolution Professional, who had declined admission on grounds of limitation. The claim was based on funds advanced under a 2006 tripartite development agreement and secured by a registered mortgage deed dated 25.04.2014.

Although partial repayments were made until November 2018, defaults followed. When BSEL filed its claim in January 2025, the Resolution Professional rejected it as time‑barred, leading to the present application before the NCLT.

The appellant, BSEL Algo Limited, argued that its claim of ₹22.94 crore was a valid secured debt backed by a registered mortgage deed dated 25.04.2014, and therefore fell under the 12‑year limitation period of Article 62 of the Limitation Act. It contended that repayments made by the Gigeo Construction Company Pvt Ltd (corporate debtor) until November 2018 extended the limitation, and the debt was further acknowledged in the company’s audited financial statements for FY 2017‑18.

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The appellant also argued that the resolution Professional wrongly applied the shorter 3‑year limitation under Article 19, ignoring the secured nature of the debt, and sought directions to admit its claim as secured financial debt and quash the rejection order.

The respondent, resolution professional, rejected the claim based on tat it was barred by limitation and included that the only acknowledgment of debt was a letter dated 06.06.2015, which extended the limitation only until 06.06.2018.

It is also argued that subsequent payments made by the corporate debtor in 2018, including on 05.11.2018, were beyond this limitation period and therefore irrelevant for extending time, and the corporate debtor had not prepared financial statements after FY 2017‑18, leaving no further acknowledgment of debt on record.

The tribunal noted that filing claims in CIRP is not the enforcement of mortgage rights, but an act of debt recovery, and therefore, the applicable limitation is three years under Article 19. It is also noted that the last repayment was made on 05.11.2018, so the limitation expired on 05.11.2021. With the Supreme Court’s COVID‑19 exclusion order, the period extended until 22.10.2023. Since the claim was filed on 24.01.2025, it was held to be beyond limitation.

The bench of Sushil Mahadeorao Kochey (judicial member), Prabhat Kumar (Technical member) observed that The applicant had sought admission of its claim as secured financial debt, supported by a registered mortgage deed dated 25.04.2014 and that even though both the applicant and the corporate debtor had incorrectly disclosed the debt as unsecured in their audited financial statements, such disclosure could not override the substantive rights arising from a legally enforceable registered mortgage deed unless set aside by a competent court.

The Tribunal held that neither the Tripartite Agreement nor the Mortgage Deed contained any clause obligating the corporate debtor to pay interest, and therefore the claim for interest had no merit.

Accordingly, IA was disposed of.

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