RP's Admission Of Claim In CIRP Not Acknowledgment Of Debt, Cannot Extend Limitation: Supreme Court

The Supreme Court on Wednesday held that admission of a claim by a Resolution Professional during insolvency proceedings is merely an administrative act and does not amount to an acknowledgment of liability under Section 18 of the Limitation Act, 1963.

The court said such admission is only a recital or entry of debt and cannot extend the limitation period for initiating proceedings.

“RP performs its administrative duties under Section 18 of the Code. The admission of a claim by RP is merely an administrative/clerical task performed as part of its statutory duties under Section 18 of the Code and, therefore, admission of claim by RP only means induction/entry of a claim. An admission of a claim by RP is akin to mere recital/reference of debt, which does not amount to an acknowledgment under Section 18 of the 1963 Act.”

A Division Bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe set aside orders of the NCLAT and NCLT which had held a financial creditor's insolvency application to be within the limitation on the basis of such admission, ruling instead that the claim was time-barred.

The court was dealing with appeals filed by Shankar Khandelwal, former director of Shrinathji Business Ventures Private Limited and Samaria Business Ventures Private Limited, the corporate debtors, against Omkara Asset Reconstruction Pvt. Ltd.The dispute arose from loan facilities granted in September 2014, which were classified as non-performing assets on December 6, 2016.

The financial creditor filed a CIRP plea on September 23, 2024. The NCLT admitted the plea on January 22, 2025. When the matter reached the NCLAT, it affirmed that decision on October 15, 2025, treating the Interim Resolution Professional's admission of the creditor's claim during an earlier CIRP in May 2022, along with its update in January 2024, as acknowledgments sufficient to extend limitation.

Khandelwal took issue with that reasoning. He maintained that limitation began on the date of default, December 6, 2016, and ran out in December 2019. Even after accounting for periods excluded under the statute, he argued, the Section 7 application filed in 2024 was too late. In his telling, the admission of a claim by an IRP or RP is no more than an administrative step, and cannot be elevated to an acknowledgment under Section 18.

The creditor pressed a different view. It relied on the same acts, the admission and subsequent update of its claim in the earlier insolvency process, to say these were clear acknowledgments of liability that kept the claim alive.

The Supreme Court of India did not accept that line. It reiterated that an acknowledgment under Section 18 must show a conscious and unequivocal admission of a subsisting liability by the party against whom the claim is made.

A mere reference to a debt or past transaction, without such intention, is insufficient.

The bench emphasised that a Resolution Professional has no adjudicatory powers and performs only administrative duties under the Code, including collation and verification of claims.

On limitation, the court reiterated that an application under Section 7 of the Code is governed by Article 137 of the Limitation Act and must be filed within three years from the date of default, which occurs when the corporate debtor first fails to discharge its repayment obligations. The court said:

“It is well-settled in law that the limitation for filing an application under Section 7 of the Code is three years and is governed by Article 137 of 1963 Act. An application under Section 7 of the Code is governed by Article 137 of the 1963 Act. The accrual of such right has been consistently interpreted by this Court to arise on the date of the default, that is, when the corporate debtor first fails to discharge its repayment obligations.”

Applying this principle, the court held that limitation commenced on December 6, 2016. Even after excluding periods during which limitation stood suspended, including the CIRP of the lender and COVID-19 related extensions, only three days remained after July 29, 2024, expiring on August 1, 2024. Since the application was filed on September 23, 2024, it was beyond limitation.

The court also clarified that an acknowledgment under Section 18 can extend limitation only if it is made within the subsisting limitation period. In any event, the IRP's admission of the claim in May 2022 could not revive a time-barred debt.

Accordingly, the court set aside both the tribunals' orders and allowed the appeals, holding the insolvency application to be barred by limitation.