Claims collated/admitted by IRP/RP constitute ack. under S.18 of the Limitation Act. & extend limitation.
Hon’ble NCLAT (2025.10.15) in Shankar Khandelwal Vs. Omkara Asset Reconstruction Pvt. Ltd. and Anr. [(2025) ibclaw.in 845 NCLAT, Company Appeal (AT) (Ins) No. 293 of 2025 with Company Appeal (AT) (Ins) No. 294 of 2025] held that;
This tribunal, therefore, holds that while the date of default in payment of the debt as mentioned in Part IV of the petition under Sec.7 IBC deserves to be factored in for the purpose of computation of limitation in instituting the petition, yet it is not always bound by it, as it has a statutory duty to perform under Sec.3 of the Limitation Act.
This would signify the keenness of both the Court and the legislature to preserve the right to repayment of debt- dues when the latter included Sec.238A of the Code and the former did not attempt to stretch the effect of Article 137 of the Limitation Act to obliterate the effect of its other provisions.
In the instant case, if the date of default is reckoned as 16.11.2016 or 23.11.2016, the SRA of the creditor has still made its Claim before the IRP or the RP in the first CIRP against the CD within 12 years, when the right to enforce the right to recover secured debt is still alive and not barred by limitation.
Admission of a Claim either by the IRP or the RP would amount to admission of a liability of the CD to repay the creditor, to emphasis, based on a pre-existing and enforceable right of payment. And, acknowledgement of a debt within the meaning of Sec.18 of the Limitation Act in essence is but an admission of the liability to repay.
A mere choice of expression such as ‘acknowledgement’ or ‘admission’ used in different statutory schemes cannot alter the fundamentals: existing of a liability, correlatable to a pre-existing and enforceable right to repayment.
Therefore, where an IRP or a RP has admitted a claim, it does constitute an acknowledgement under Sec.18 of the Limitation Act. To state it differently, if the RP has the authority to admit a claim and if admission of a Claim also constitutes an acknowledgement of liability, it follows that the RP has the authority to acknowledge a liability on behalf of the CD.
There is therefore, little difficulty in holding that the date of admission of a Claim by the IRP grants a fresh date for commencement of limitation and when the Claims are subsequently updated it pushes the date of terminus a quo to that date.
This tribunal holds that that the admission of the Claim by the RP in the first CIRP against the CD on 22.05.2022 constituted a valid acknowledgement and its subsequent updating on 21.02.2024 constituted the second acknowledgement, and if terminus a quo is reckoned from any of these dates, then both the petitions laid by the respondent are validly instituted as the debts are not time barred on the respective dates when they were so instituted.
[ Link Synopsis ]
Contra view;
2. Let’s notice the provisions of the Code & The Limitation Act.
2.1. The Limitation Act.
Sec.3 Bar of limitation:
Subject to the provisions contained in Sec.4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence.”
2.2. Insolvency and Bankruptcy Code, 2016.
Sec. 3. Definitions. –
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(6) “claim” means –
(a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured, or unsecured;
(b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;
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(11) “debt” means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt;
3. Hon’ble Supreme Court in B.K. Educational Services Private Limited Vs. Parag Gupta and Associates [Civil Appeal No.23988 of 2017] noticed the proposition that debts “due and payable” must be differentiated from debts “due and recoverable”.
“ In the case of Bombay Dyeing & Mfg. Co. Ltd. v. State of Bombay [AIR 1958 SC 328] it has been held that when the debt becomes time-barred the amount is not recoverable lawfully through the process of the court, but it will not mean that the amount has become not lawfully payable. Law does not bar a debtor to pay nor a creditor to accept a barred debt.”
4. The claims (a right to payment) as defined under section 3(6) are admitted/collated by IRP and updated by RP are governed by the “Doctrine of Debts due & Payable” whereas the limitation is looked into while filing insolvency application following the “Doctrine of Debts Due and Recoverable”. Thus, admitting or collating the claims by IRP and or updating of the claims by RP, does not have any nexus with extension or fresh start of limitation of the underlying debt.
5. Hon’ble SCI (1992.04.20) Punjab National Bank And Ors vs Surendra Prasad Sinha (Criminal Appeal No. 254 of 1992.) held that;
"The rules of limitation are not meant to destroy the rights of the parties. Section 3 of the Limitation Act only bars the remedy, but does not destroy the right which the remedy relates to. The right to the debt continues to exist notwithstanding the remedy is barred by the limitation. Only exception in which the remedy also becomes barred by limitation is the right is destroyed. Though the right to enforce the debt by judicial process is barred, the right to debt remains. The time barred debt does not cease to exist by reason of s.3. That right can be exercised in any other manner than by means of a suit. The debt is not extinguished, but the remedy to enforce the liability is destroyed. What s.3. refers only to the remedy but not to the right of the creditors. Such debt continues to subsists so long as it is not paid. It is not obligatory to file a suit to recover the debt."
6. In the above mentioned judgement Hon’ble Appellate Authority has merged the identity of IRP/RP with the identity of Corporate Debtor. Now the following question arise;
Whether IRP/RP can create any liability for CD ?
IRP/RP works as custodian of CD for the specific purpose of Resolution of insolvency of the corporate debtor. He is neither authorised to create any liability of CD, nor acknowledge any liability of the CD during CIRP. Insolvency Resolution Process Cost (IRPC) is neither treated as liabilities of CD, nor mentioned in Information Memorandum as part of assets & liabilities of the CD. Even the cost of operation of the CD, of a going concern during CIRP is part of IRPC, along with other expenses & fees etc. [section 5(13)], treated separately under the resolution plan.
Disclaimer: The sole purpose of this blog is to create awareness on the subject and must not be used as a guide for taking or recommending any action or decision, commercial or otherwise. One must do his own research and seek professional advice if he intends to take any action or decision in the matters covered in this blog.
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