RP’s Admission of Claim Amounts to Debt Acknowledgement u/s 18 of Limitation Act: NCLAT holds S. 7 CIRP Petitions Within Limitation [Read Order]
The appellant’s sole defence was that the petitions were barred by limitation, but the tribunal ruled that admission of claims by the Resolution Professional (RP) in earlier CIRP proceedings constituted a valid acknowledgement under Section 18 of the Limitation Act, thereby saving limitation. Consequently, the CIRP proceedings under Section 7 were held to be maintainable
NCLAT New Delhi, RP’s Admission, RP’s Admission of Claim Amounts, CIRP Petitions
NCLAT New Delhi, RP’s Admission, RP’s Admission of Claim Amounts, CIRP Petitions
The National Company Law Appellate Tribunal (NCLAT), principal bench, New Delhi, in a recent case, had held CIRP under section 7 of the Insolvency and Bankruptcy Code (IBC) 2016 within the limitation period as the Resolution Professional’s (RP) admission of claim amounted to debt acknowledgement under section 18 of the Limitation Act, thus initiating a new limitation period
The appeals arose from orders of the National Company Law Tribunal (NCLT), Jaipur Bench, dated 22 January 2025, admitting two separate petitions under Section 7 of the Insolvency and Bankruptcy Code (IBC) filed by Omkara Asset Reconstruction Pvt Ltd, the assignee of loans originally advanced by Dewan Housing Finance Corporation Limited (DHFL).
The corporate debtors had availed two loans in 2014 from DHFL, which were recalled in November 2016 and classified as Non-Performing Assets (NPA) in December 2016. DHFL itself entered CIRP in December 2019, culminating in approval of Piramal Capital’s resolution plan in June 2021.
Piramal subsequently assigned the loans to Omkara Asset Reconstruction in January 2023. Meanwhile, the corporate debtors faced a separate CIRP in December 2021, which was later set aside in July 2024. Omkara filed fresh Section 7 petitions in September 2024, citing default dates of 2016.
The appellant contended that the petitions were time-barred. According to him, the limitation commenced either on 23 November 2016 (expiry of recall notice) or 6 December 2016 (NPA classification), and expired by 2019.
Even after excluding moratorium periods and Covid extensions, he argued that the limitation ended by July 2024, whereas the petitions were filed only in November-December 2024. He further submitted that admission of claims by the RP in earlier CIRP proceedings could not extend the limitation, as acknowledgement under Section 18 must occur before expiry of the limitation and cannot be made by the RP without CoC approval.
The financial creditor countered that the limitation should be reckoned from February 2017, after expiry of the SARFAESI notice period. It relied on Section 60(6) IBC to exclude moratorium periods of both DHFL and the corporate debtors.
Crucially, it argued that admission of claims by the RP in the earlier CIRP proceedings amounted to an acknowledgement of debt under Section 18 of the Limitation Act, thereby giving a fresh starting point. The creditor also invoked Supreme Court precedents affirming exclusion of Covid-related periods and recognition of RP’s statutory authority.
The two-member bench comprising N. Seshasayee (Judicial Member) and Arun Baroka (Technical Member) clarified that limitation is a mixed question of law and fact, and tribunals must compute limitation independently under Section 3 of the Limitation Act.
It distinguished between “date of default” in Part IV of the petition (cause of action) and computation of limitation (remedy). Importantly, the tribunal held that once CIRP is admitted, the RP assumes full authority to act on behalf of the corporate debtor under Sections 17–25 IBC. Admission of claims by the RP therefore constitutes an acknowledgement of liability, which qualifies under Section 18 of the Limitation Act.
Section 18 of the Limitation Act says, If, before the expiry of the prescribed limitation period, a person against whom a right is claimed acknowledges the liability in writing and signs it, then a fresh limitation period begins from the date of such acknowledgement
The tribunal further emphasised that while the limitation for initiating CIRP is three years under Article 137, the limitation for recovery claims is twelve years under Article 62. Thus, even if the initial default occurred in 2016, the creditor’s claim was still alive when admitted by the RP in 2022, and such admission provided a fresh terminus a quo for limitation.
On this reasoning, the NCLAT upheld the Jaipur Bench’s orders admitting CIRP against both Sanwariyaji and Shrinathji Business Ventures. It ruled that RP’s admission of claims amounted to a valid acknowledgement of debt, thereby saving limitation and rendering the Section 7 petitions maintainable.
The appeals were dismissed, reinforcing the principle that RP’s statutory functions include the acknowledgement of debt, which can extend the limitation for insolvency proceedings.
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