Acknowledged Debt in Balance Sheets and OTS Proposal Saves Limitation Objection: NCLT Admits Insolvency Petition u/s 7 IBC [Read Order]

The National Company Law Tribunal, Mumbai Bench‑II, held that continuous acknowledgement of debt in the company’s audited balance sheets and its One‑Time Settlement proposal constituted valid recognition of liability, thereby defeating the limitation objection and admitted the insolvency petition under Section 7.

In May 2013, Central Bank of India sanctioned a term property loan of ₹15 crore to Deepak Education Limited, which was confirmed by a board resolution authorising execution of loan and security documents. The company availed the facility but defaulted on repayments by 31 March 2015, leading the bank to classify the account as Non‑Performing Asset (NPA). Partial payments continued until January 2016, after which no further remittances were made.

The bank issued a legal notice on 22 March 2017 demanding repayment from the company and its guarantors, but no payment followed. Later, the bank discovered that one of the mortgaged properties was being redeveloped without its consent and obtained an injunction from DRT‑II, Mumbai, on 15 November 2022 restraining third parties from handing over possession of the new premises.

In January 2023, the debtor proposed an OTS of ₹5 crore, which the bank rejected as inadequate. The bank then filed the present petition on 7 October 2023, supported by an authenticated default report from the Information Utility (NeSL).

The Financial Creditor, the central bank, contended that the corporate debtor had failed to honour repayment obligations despite repeated notices and continued to acknowledge the debt in its audited financial statements. It argued that such acknowledgement, along with the OTS proposal, extended the limitation period and proved the existence of default.

The corporate creditor, Deepak Education Ltd, was served notices but remained unrepresented during proceedings. Though it later sought to set aside the ex‑parte order, its application was defective and not considered. Consequently, the matter proceeded ex parte.

The Bench comprising judicial member Ashish Kalia and technical member Sanjiv Dutt observed that while the default dated back to 31 March 2015, the audited balance sheets from FY 2013‑14 to FY 2021‑22 disclosed the outstanding term loan, thereby acknowledging a debt under law. The OTS proposal dated 25 January 2023 further reinforced this acknowledgement, rendering the petition within limitation.

The Tribunal noted that despite multiple opportunities, the corporate debtor failed to contest the claim or demonstrate any repayment after 2016. It held that the bank had “successfully demonstrated and proved the debt and default,” satisfying all requirements under Section 7(5)(a) of the Code.

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