NCLT Delhi Admits Cedar Hospitality Into CIRP, Holds Borrower's OTS Extends Limitation

On 11 May, the Delhi Bench of the National Company Law Tribunal (NCLT) admitted a Section 7 petition filed by Bank of India against Cedar Hospitality Pvt. Ltd. and initiated the Corporate Insolvency Resolution Process (CIRP) over a default of Rs. 140.49 crore.

Judicial Member Jyotsna Sharma and Technical Member Anu Jag Mohan Singh appointed Shailesh Chandra Ojha as the Interim Resolution Professional (IRP). The Bench observed:

“It is settled law that the acknowledgement of debt made by the Principal Borrower also extends the period of limitation against Corporate Guarantor. In the present case, the Principal Borrower has submitted OTS on 01.09.2015, 14.07.2020, 21.09.2023, and 12.03.2024 and also acknowledgement of debt in the Balance sheet of the Principal Borrower clearly extends the limitation for the Corporate Guarantor as well.”

The dispute arose from financial assistance extended by Bank of India to Golf Technologies Pvt. Ltd. in 2013. Cedar Hospitality Pvt. Ltd. executed a corporate guarantee deed on 8 January 2013 securing the borrower's obligations. The borrower defaulted on 31 March 2013, and the account was classified as a non-performing asset on 18 January 2014.

The Bank later issued a notice under Section 13(2) of the SARFAESI Act on 5 February 2014 invoking the guarantee. The Debt Recovery Tribunal issued a Recovery Certificate in favour of the Bank on 29 August 2017. The outstanding debt claimed as on 30 January 2025 stood at Rs. 140.49 crore.

Bank of India argued that Cedar Hospitality continued to remain liable as a corporate guarantor. It submitted that the OTS proposals and balance sheet entries constituted acknowledgements of debt extending limitation.

Cedar Hospitality argued that the petition was barred by limitation because the default occurred in 2013 and the NPA classification took place in 2014. It contended that the OTS proposals did not amount to admissions of liability sufficient to extend limitation. The company also claimed that encashment of a Rs. 25 lakh cheque in August 2025 amounted to acceptance of its OTS proposal.

On limitation, the Tribunal relied on the Supreme Court's ruling in Dena Bank v. C. Shivakumar Reddy and held that issuance of the Recovery Certificate in 2017 gave rise to a fresh cause of action. It noted that the OTS proposal dated 14 July 2020 further extended the limitation period.

The Tribunal also applied the COVID-19 exclusion period from 15 March 2020 to 28 February 2022, extending limitation until 10 September 2024. Subsequent acknowledgements in 2023 and 2024 reinforced continuity of liability.

The Bench relied on Asset Reconstruction Co. v. Bishal Jaiswal and held that entries in audited balance sheets constitute valid acknowledgements under Section 18 of the Limitation Act. It also held that temporary encashment of the cheque, followed by refund and express rejection, did not amount to acceptance of the OTS proposal.

Further, the Tribunal held that the petition was complete in all respects and that Cedar Hospitality had committed a default exceeding the threshold prescribed under Section 4(1) of the IBC.

Accordingly, the NCLT admitted the petition under Section 7 of the IBC and declared a moratorium under Section 14, prohibiting institution of suits, transfer of assets, enforcement of security interests, and recovery proceedings against the corporate debtor.

For Appellants: Advocates Karan Gandhi, Vidhika Kapoor and Sikhar Tiwari

For Respondents: Senior Advocate Ashim Vachher and Advocate Saiba M Rajapl