Amaravati NCLT Holds Recovery Certificate Triggers Fresh Cause Of Action
The Amaravati Bench of the National Company Law Tribunal on 4 March admitted a Section 7 application filed by ASREC (India) Ltd. against Visakha Prime Properties Constructions Ltd., holding that a recovery certificate issued by the Debt Recovery Tribunal creates a fresh cause of action for initiating insolvency proceedings.
A Bench comprising Judicial Member Kishore Vemulapalli and Technical Member Umesh Kumar Shukla noted that the petition filed in July 2025 was within limitation, being instituted within three years of the recovery certificate dated 19 October 2024.
The Bench held:
“It is hereby clarified that notwithstanding anything contained in any other law for the time being in force, a license, permit, registration, quota, concession, clearance or a similar grant or right given by the Central Government, State Government, local authority, sectoral regulator or any other authority constituted under any other law for the time being in force shall not be suspended or terminated on the grounds of insolvency, subject to the condition that there is no default in payment of current dues arising for the use or continuation of the license, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period.”
The original loan of Rs. 75 lakh was sanctioned in 1998 by UCO Bank and later assigned to ASREC (India) Ltd. in March 2008. The account had been declared a non-performing asset in June 2002.
ASREC pursued recovery before the Debt Recovery Tribunal, and after prolonged proceedings, a final order was passed on 3 August 2024. This culminated in the issuance of a recovery certificate for over Rs. 58 crore on 19 October 2024, creating a fresh cause of action under Section 7 of the Insolvency and Bankruptcy Code. The Section 7 petition was subsequently filed by ASREC in July 2025.
The corporate debtor contended that the petition was barred by limitation because the account had been declared NPA in 2002 and that the DRT order had not attained finality as it was under challenge before the Debt Recovery Appellate Tribunal.
The Bench rejected these contentions, holding that the recovery certificate triggers a fresh three-year limitation period and that the pendency of an appeal does not affect the enforceability of a decree for the purpose of initiating insolvency proceedings.
Relying on Supreme Court precedents in Kotak Mahindra Bank Ltd. v. A. Balakrishnan and Dena Bank v. C. Shivakumar Reddy, the Bench reiterated that a liability crystallised through a recovery certificate constitutes a “financial debt” and enables a financial creditor to initiate corporate insolvency resolution proceedings within three years.
The Bench further observed that while the corporate debtor viewed the proceedings as mere recovery, the Insolvency and Bankruptcy Code is a resolution mechanism, and a decree holder is legally entitled to invoke it once default exceeding the statutory threshold is established.
Finding that a financial debt exceeding the statutory threshold existed and that default had been established, the Bench admitted the petition, declared a moratorium under Section 14, and appointed Mr. Ganesh Venkata Siva Rama Krishna Remani as the Interim Resolution Professional to take over management of the corporate debtor.
Accordingly, the Bench reaffirmed that the NPA declaration in 2002 does not bar the petition, as the recovery certificate triggers a fresh limitation period under Section 7 of the Insolvency and Bankruptcy Code.
For the Financial Creditor: Mr. V.S. Sharma Kollapudi, Advocate.
For the Corporate Debtor: Mr. Arnav Siddigari, Advocate.