India: Breathing Fresh Life Into Old Debts

Last Updated: 10 November 2017
Article by Mohammad Kamran, Ashish Kabra and Nishith Desai
  • Limitation for initiation of insolvency proceedings on pre-existing claims to commence from December 2016
  • A window of 3 years may be available for all time barred debts
  • Still no finality on whether Limitation Act is applicable to the Code

The National Company Law Appellate Tribunal ("NCLAT") has recently ruled that even if one were to apply the Limitation Act, 1963 ("Limitation Act") to the Insolvency & Bankruptcy Code, 2016 ("Code"), the limitation period for initiating proceedings under the Code for all claims existing prior to the commencement of the Code, begins from December 1, 2016 (i.e. from the date the Code came into force). Thus, suggesting that a window of opportunity now exists for initiating insolvency proceedings for debts which otherwise could not have been recovered due to expiry of the limitation period.

This piece is in continuation of our previous hotline on Neelkanth Township and Construction Pvt. Ltd. vs. Urban Infrastructure Trustee Ltd.1 ("Neelkanth Judgement") wherein the NCLAT had ruled that the Limitation Act, 1963 does not apply to the Code at all. The same can be accessed here.


The present judgment of Black Pearl Hotels Pvt. Ltd. v. Planet M Retail Ltd.2 has come in pursuit of an appeal filed by an operational creditor against the order of National Company Law Tribunal ("NCLT") which dismissed its application under the Code. The NCLT was of the view that the "...debt [in the present case] is time barred and unenforceable...", and hence disposed-off the application of the operational creditor.

The operational creditor i.e. Black Pearl Hotels Pvt. Ltd. had entered into a Business Conducting Agreement ("BCA") with the corporate debtor i.e. Planet M Pvt. Ltd. in February 2008. The operational creditor claimed that the corporate debtor failed to pay a certain monthly minimum guarantee fee that was required to be paid under the BCA.

On such ground, the operational creditor issued a demand notice under section 8(1) of the Code to the corporate debtor. The said notice was responded to by the corporate debtor denying all the claims. Thereafter, the operational creditor after waiting for a period of 10 days and having received such a reply, filed an application before NCLT, Mumbai under Section 9 of the Code for initiation of corporate insolvency resolution process against the corporate debtor.

The NCLT dismissed the application of the operational creditor holding that the whole debt as claimed by the creditor is time barred as it pertained to years 2011-12.


The question before NCLAT, once again, was whether the application preferred by operational creditor was barred by limitation.

Earlier, the NCLAT in the Neelkanth Judgment had held that there is nothing in the Code to suggest that the law of Limitation Act, is applicable to Code. Accordingly, the application of Limitation Act was barred completely. The NCLAT referred to the Supreme Court order3 passed in the Special Leave Petition challenging the Neelkanth Judgment ("Neelkanth Judgment Appeal"). In the said order, the Supreme Court opined that there were no reasons to interfere with the Neelkanth Judgment and dismissed the appeal. However, the Supreme Court specifically kept the question of law i.e. whether the Limitation Act would apply to proceedings under the Code, open.

The NCLAT in the present judgment did not address the issue of applicability of Limitation Act to the Code. It rather proceeded on the basis that even if the Limitation Act, 1963 was applied, the application of the creditor was within the prescribed limitation period.

NCLAT noted that Article 137 of the Schedule to the Limitation Act would apply. Article 137 prescribes a limitation period of 3 (three) years from the period when such right to apply accrues to the applicant.

The Tribunal observed that Code came into force on December 1, 2016. Therefore, the right to apply under the Code accrued only on December 1, 2016 and not before the said date. It thus held that the application filed much prior to the expiry of three years from December 1, 2016 is not barred by limitation. Accordingly, the order of NCLT was set aside. It should however be noted that the Respondent had not appeared before the NCLAT.


The NCLAT without ruling on the issue of applicability of Limitation Act, opined that even if Limitation Act applied to the Code, the application of the creditor would still not get hit by limitation. Such approach was specifically adopted by NCLAT after recognizing that the question of applicability of Limitation Act to proceedings under the Code has specifically been kept open by the Supreme Court. In fact, the Supreme Court order may have encouraged the NCLAT to assess the facts on the touchstone of Limitation Act also.

However, the way NCLAT has applied the Limitation Act, suggests that a window to initiate insolvency proceedings for time barred debts opened on the day the Code was brought into force. This window would close on November 30, 2019 i.e. three years from the day the Code was brought into force. Thus, the NCLAT has still retained the possibility for initiation of action under the Code on the basis of time barred debts.

It should also be noted that in the present ruling NCLAT did not consider whether a debt which is otherwise time barred could be considered as due and payable such that it satisfies the definition of 'debt' and 'default' under the Code.

Also, it remains to be seen whether such implementation of the Code could be considered as taking away the vested substantive right (if any) of a corporate debtor, to bar initiation of insolvency proceedings on basis of time barred debts. This is a larger debate that whether without any express provision covering past rights or obligations, can a new legislation be made applicable to breathe fresh life in an old cause of action.

Therefore, the present ruling does not remove the ambiguity surrounding the applicability of the Limitation Act and the manner thereof. However, it does encourage parties to initiate actions under the Code for time barred debts.


1 Company Appeal (AT) (Insolvency) No. 44 of 2017

2 Company Appeal (AT) (Insolvency) No. 91 of 2017

3 Order dated August 23, 2017 in Civil Appeal No. 10711 of 2017

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Mohammad Kamran
Ashish Kabra
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.