The Supreme Court set aside the NCLAT ruling which held that admission of a creditor’s claim by a resolution professional gives a fresh limitation period for filing a Section 7 IBC application.
The Supreme Court has held that an interim resolution professional or resolution professional does not acknowledge debt merely by admitting a creditor’s claim.
The Court said such admission cannot extend limitation under Section 18 of the Limitation Act.
A Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe set aside the NCLAT judgment. The NCLAT had treated admission of claim as acknowledgment of liability for a Section 7 IBC application.
RP Only Performs Administrative Duties
The Court said a resolution professional performs an administrative role.
It explained that the RP receives and collates claims under Section 18 of the IBC.
Therefore, admission of a claim only means entry of that claim in the records.
The Court added that such entry does not amount to acknowledgment of debt.
RP Has No Power To Adjudicate Claims
The Bench said an RP cannot adjudicate claims.
It relied on Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta and Prabhakaran v. M. Azhagiri Pillai.
Accordingly, the Court held that an RP’s act of admitting a claim cannot bind the corporate debtor as an acknowledgment of liability.
Appeals Challenged NCLAT Order
The Supreme Court heard appeals filed by Shankar Khandelwal.
He was the erstwhile director of Shrinathji Business Ventures Pvt. Ltd. and Sanwariyaji Business Ventures Pvt. Ltd.
The appeals challenged the NCLAT decision in favour of Omkara Asset Reconstruction Pvt. Ltd.
Dispute Arose From DHFL Loans
The dispute arose from two loans advanced by Diwan Housing Finance Corporation Ltd. in September 2014.
DHFL advanced one loan of ₹12 crore and disbursed ₹11.50 crore.
It advanced another loan of ₹11 crore and disbursed ₹9.50 crore.
After default, DHFL classified the accounts as non-performing assets on December 6, 2016.
Loans Later Reached Omkara ARC
DHFL later entered CIRP.
Thereafter, the authorities approved its resolution in favour of Piramal Capital and Housing Finance Ltd.
Subsequently, the loans were assigned to Omkara Asset Reconstruction Pvt. Ltd.
Earlier CIRP Led To Admission Of Claim
Meanwhile, a third party initiated another CIRP against the corporate debtor.
During that process, Piramal filed its claim for the loans.
The RP admitted the claim on May 2, 2022. Later, the RP updated it on February 21, 2024.
However, the earlier CIRP was eventually set aside.
Omkara Filed Fresh CIRP Applications
Omkara filed fresh CIRP applications on September 23, 2024.
It mentioned December 6, 2016 as the date of default.
Before the NCLT and NCLAT, the appellant raised limitation as the only defence.
Appellant Said Claim Was Time-Barred
The appellant argued that Article 137 of the Limitation Act governs Section 7 applications.
Under Article 137, a party must file such an application within three years.
According to the appellant, limitation began in November or December 2016 and expired in 2019.
The appellant further argued that even after excluding suspended periods, the 2024 applications remained time-barred.
Creditor Relied On RP’s Admission
Omkara argued that limitation stood extended.
It said the RP’s admission of its claim in the earlier CIRP amounted to acknowledgment of debt.
The NCLAT accepted this argument.
NCLAT Treated Admission As Liability
The NCLAT held that the RP takes over management of the corporate debtor after CIRP begins.
It also said the RP receives, collates, maintains and updates claims under the IBC.
Therefore, the NCLAT concluded that the RP’s admission of claim amounted to admission of liability by the corporate debtor.
Supreme Court Rejects NCLAT Reasoning
However, the Supreme Court disagreed.
The Court said Section 18 of the Limitation Act requires a conscious and clear acknowledgment of subsisting liability.
Such acknowledgment must come from the debtor or an authorised person.
The Court added that an RP does not make such acknowledgment while admitting a claim.
Limitation Began From Date Of NPA
The Supreme Court held that the right to apply for CIRP arose on December 6, 2016.
That was the date on which DHFL classified the accounts as NPAs.
The Court then excluded the periods covered by DHFL’s CIRP, the Covid-19 limitation extension, and the earlier CIRP of the corporate debtor.
Application Filed After Limitation Period
After these exclusions, the Court found that only three days of limitation remained as on July 29, 2024.
Therefore, limitation expired on August 1, 2024.
However, Omkara filed the CIRP application only on September 23, 2024.
The Court therefore held that the application was time-barred.
Admission In 2022 Could Not Save Limitation
The Court also said an acknowledgment can extend limitation only when it occurs during the subsisting limitation period.
Here, the RP admitted the claim on May 2, 2022.
By then, the original three-year limitation period had already expired.
Therefore, the Court held that the 2022 admission could not extend limitation.
