NCLT Upholds Limitation Based on OTS and Financial Statements, Initiates CIRP In ₹45 Cr Default against Corporate Guarantor [Read Order]

The National Company Law Tribunal (NCLT) Mumbai Bench has commenced the Corporate Insolvency Resolution Process (CIRP) on account of defaulting an amount of ₹45.41 Crores. The Bench comprising Nilesh Sharma (Judicial Member) and Sameer Kakar (Technical Member) held that if the debt is repeatedly acknowledged through One Time Settlement (OTS) schemes and financial statements it cannot be said to be barred by time.

The Bank of Maharashtra who is the financial creditor had granted a cash credit facility of ₹9.75 Crores to the principal borrower Brainer Impex Limited in 2011.

READ MORE:₹5.86 Crore DefaultTriggers CIRP Over Unpaid Operational Dues: NCLT Admits Insolvency Plea

However,Omega Premises Private Limited had given the guarantee as the corporate guarantor and had mortgaged its property in Pune as security. The account of the borrower had been declared a Non Performing Asset (NPA) on February 28, 2015.

The principal borrower was already in liquidation as the CIRP against the borrower had commenced in 2019, but the present Section 7 application against the corporate guarantor had been filed in August 2025.

Further,the Corporate Debtor argued that the petition was time barred as the default had occurred in 2015 which was more than three years ago. The Corporate Debtor further argued that they were merely mortgagors and not guarantors and that the bank had fraudulently used their signatures on blank papers to claim a debt that was beyond the authorized limit of ₹6 Crores.

Moreover,the Bank of Maharashtra argued that the limitation period was continuously extended under the Limitation Act of 1963 as several OTS proposals were presented including the most recent one in March 2024 as well as audited balance sheets of FY 2016-17, 2019-20 and 2021-22 showing the loan as a liability on their balance sheets.

The NCLT rejected the debtor’s blank paper contention as an afterthought and made it clear that the liability of the guarantor is co-extensive with that of the borrower.The Tribunal held that the entries in the adopted balance sheets and OTS offers constitute valid acknowledgments of debt.

The Bench observed that the application was made within the fresh period of limitation as notified by the OTS offer of 2024. It is in this context that the Tribunal admitted the petition and appointed Mr. Prashant Jain as the IRP for initiating the CIRP.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates