Debt Acknowledgement Overcomes Limitation Defence: NCLT Admits CIRP u/s 7 on ₹147 Cr Claim of Punjab National Bank [Read Order]

The New Delhi Bench of the National Company Law Tribunal (NCLT) admitted a Section 7 petition filed by Punjab National Bank against M/s Shriram Skill and Education Ltd., initiating the corporate insolvency resolution process (CIRP) over a financial debt of ₹147.31 crore.

The present application was filed by Mr Pawan Singh Yadav, Chief Manager of Punjab National Bank (Financial Creditor), under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), seeking initiation of CIRP against M/s Shriram Skill and Education Ltd. (Corporate Debtor) for default of ₹1,47,31,49,400.91 as on 31.12.2024.

The Financial Creditor, a bank constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970, had extended multiple financial facilities to the Corporate Debtor, including fund-based and non-fund-based working capital limits, term loans, and bank guarantees since 2008. These facilities were secured through hypothecation of movable assets, book debts, and equitable mortgage of properties in Gurgaon and other locations.

The Corporate Debtor executed various loan agreements and a Guarantee Agreement in favour of the Financial Creditor and requested periodic enhancement of credit facilities between 2009 and 2014. The Financial Creditor sanctioned these enhancements after the due execution of security documents. A term loan account was opened in 2011 for ₹9.59 crore, to be repaid in 60 monthly instalments along with interest at BPLR + Term Premia + 1% (12.5% monthly rests).

However, the Corporate Debtor failed to make repayments, leading the bank to classify the loan accounts as Non-Performing Assets (NPA) on 31.03.2017. Several proposals for One Time Settlement (OTS) submitted by the Corporate Debtor between 2017 and 2021 were considered and rejected by the bank. The last payment made by the Corporate Debtor was on 08.03.2024, amounting to ₹17.47 lakh.

The Corporate Debtor contested the Section 7 petition on the ground that it was barred by limitation under the Limitation Act, 1963. According to Article 137 of the Limitation Act, the period for filing a Section 7 petition is three years from the date of default.

Since the NPA classification occurred on 31.03.2017, the corporate debtor argued that the limitation expired on 30.03.2020. Alternatively, considering the last OTS proposal acknowledgement on 09.03.2021, the limitation would expire on 09.03.2024. The petition, filed on 24.01.2025, was therefore argued to be time-barred.

The Financial Creditor rebutted this argument by producing correspondence from the Corporate Debtor dated 08.09.2023, 25.10.2023, and 09.05.2024, requesting extensions and consideration of OTS proposals. The bank submitted that the 09.05.2024 letter constituted an acknowledgement of debt, thereby resetting the limitation period.

The tribunal observed that the Corporate Debtor had not disputed the sanction and disbursal of credit facilities or the fact of default. Also, the balance confirmation letters and the last payment reflected the acknowledgement of debt. The 09.05.2024 letter by the Corporate Debtor constituted a valid acknowledgement of debt.

Relying on the Supreme Court judgments in Innovative Industries Ltd. v. ICICI Bank (2018) and E.S. Krishnamurthy v. Bharath Hi-Tech Builders Pvt. Ltd. (2022), the Tribunal held that once debt and default are established, the Section 7 application must be admitted.

The two-member bench of Dr Sanjeev Ranjan (Technical Member) and Bachu Venkat Balram Das (Judicial Member) admitted the Section 7 application and initiated CIRP against M/s Shriram Skill and Education Ltd. under the IBC. A moratorium was imposed under Section 14,

Mr. Prabhakar Kumar was appointed as the Interim Resolution Professional (IRP). The IRP was directed to take charge of the corporate debtor’s management, assets, and records, and to report periodically to the NCLT. The Financial Creditor was ordered to deposit ₹2 lakh to meet IRP expenses, recoverable through adjustment by the Committee of Creditors.

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