Admission Of Claim By RP Not Acknowledgement Of Debt Under Section 18 Of Limitation Act: NCLAT Delhi

The National Company Law Appellate Tribunal (NCLAT), Delhi, on 27 October held that a Resolution Professional (RP)'s admission of a creditor's claim during corporate insolvency proceedings does not amount to an acknowledgement of debt under Section 18 of the Limitation Act, 1963, to extend the limitation period for initiating insolvency proceedings against a personal guarantor.

A Bench of Officiating Chairperson Justice Yogesh Khanna with Technical Member Barun Mitra Mehrotra allowed an appeal filed by Poonam Anoop Wadhera, a personal guarantor to Frost International Limited, and set aside the order admitting insolvency proceedings against her. It held:

“Thus we admit the appeal and set aside the impugned order by saying the petition filed was much beyond the period of limitation and the admission of a claim by the Resolution Professional shall not amount to an acknowledgement of debt per Section 18 of the Limitation Act.”

Canara Bank had extended working capital facilities to Frost International under a consortium arrangement in 2014. Guarantee documents were executed in connection with these facilities. The corporate debtor's account was subsequently classified as a Non-Performing Asset (NPA) on 17 July 2018.

Subsequently, the Bank filed an application under Section 95 of the Insolvency and Bankruptcy Code (IBC), 2016, on 8 November 2024, seeking to initiate insolvency proceedings against Wadhera as a personal guarantor.

Before the NCLAT, Wadhera argued that the application was barred by limitation. She contended that the National Company Law Tribunal (NCLT), Mumbai, had failed to independently examine the limitation issue and had instead relied on the RP's report to admit the application.

She also argued that limitation goes to the root of maintainability and cannot be bypassed in insolvency proceedings.

The Tribunal noted that the NCLT had held that the limitation period against Wadhera commenced upon expiry of 60 days from the SARFAESI demand notice dated 19 January 2019.

It had also held that the RP's admission of the creditor's claim amounted to an acknowledgement of debt, thereby extending the limitation period. For this conclusion, it had relied on the NCLAT's judgment in Shankar Khandelwal v. Omkara Asset Reconstruction Pvt. Ltd.

However, the Bench noted that the Supreme Court had subsequently set aside the judgment relied upon by the NCLT. The Supreme Court had clarified that an RP performs only administrative functions while collating and verifying claims and does not possess adjudicatory powers.

Further, the Tribunal noted that even according to the NCLT's own computation, the limitation period had expired on 12 March 2024. However, Canara Bank filed the Section 95 application only on 8 November 2024. It reiterated that an RP's admission of a creditor's claim cannot be treated as an acknowledgement of liability under Section 18 of the Limitation Act, 1963.

Accordingly, the NCLAT allowed the appeal and set aside the NCLT's order admitting insolvency proceedings against Wadhera.