National Company Law Appellate Tribunal dismisses appeal by suspended director of AS Infracon Pvt. Ltd., affirms due process and extension of limitation period based on acknowledgments by principal borrower
In a significant ruling dated August 21, 2026, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, upheld the admission of a corporate insolvency resolution process (CIRP) petition filed by the Small Industries Development Bank of India (SIDBI) against AS Infracon Private Limited, a corporate guarantor, under Section 7 of the Insolvency and Bankruptcy Code, 2016.
The appeal was filed by Ms. Renu Lalit Agarwal, the suspended director of AS Infracon Pvt. Ltd., challenging the National Company Law Tribunal (NCLT), Kolkata Bench's order dated October 30, 2024, which admitted the insolvency petition filed by SIDBI. Ms. Agarwal contended that the corporate debtor was never served the invocation notice of the corporate guarantee, leading to a breach of natural justice and that the petition was barred by limitation. She argued that the registered office of AS Infracon had been non-functional for over five years and that SIDBI had failed to provide proper notice, proceeding ex parte in violation of fundamental principles of fair hearing.
The NCLAT bench comprising Mr. Justice Mohammad Faiz Alam Khan and Mr. Naresh Salecha meticulously analyzed the service of notice and limitation issues. The tribunal found that the Adjudicating Authority (NCLT) had made sustained and repeated efforts over seven months to serve the corporate debtor through speed post and e-mail, including obtaining fresh particulars to ensure proper service. It rejected the appellant's claim of denial of natural justice, noting that the corporate debtor's failure to maintain a functional registered office was a statutory default under Section 12 of the Companies Act, 2013, and that a party cannot claim prejudice arising from its own default.
On the limitation issue, the tribunal observed that the corporate debtor had executed an unconditional Deed of Corporate Guarantee dated February 26, 2014, securing a term loan of Rs. 7 crores sanctioned to Kosas Exports Limited by SIDBI. Although the corporate debtor argued non-receipt of the invocation notice dated July 27, 2016, the tribunal emphasized a binding clause in the Deed which treated acknowledgment of debt by the principal borrower as binding on the corporate guarantor for limitation purposes. The principal borrower had submitted One Time Settlement (OTS) proposals in June 2019 and November 2020, acknowledging the outstanding liability. These acknowledgments extended the limitation period under Section 18 of the Limitation Act, 1963, effectively rendering the insolvency petition filed on May 12, 2023, well within time.
The tribunal further clarified that the appeal did not dispute the existence of the financial debt or the default by the principal borrower. The appellant’s objections were confined to procedural grounds without challenging the substantive debt. Consequently, the NCLAT concluded there was no error in the NCLT’s satisfaction regarding the financial debt and default.
Summarizing its findings, the tribunal dismissed the appeal, affirming that the insolvency proceedings complied with principles of natural justice and were not barred by limitation. It also observed no mala fide intent on the part of SIDBI in serving notices and found the appellant’s allegations unsubstantiated.
This judgment reinforces the importance of adherence to procedural diligence in insolvency matters and recognizes contractual clauses extending limitation periods through acknowledgments by principal borrowers binding on guarantors. It also underscores the responsibility of corporate entities to maintain functional registered offices to receive communications.
Bottom Line:
Insolvency and Bankruptcy Code - Proceedings under Section 7 - Principles of natural justice and bar of limitation - Held, adequate opportunities for service were provided, and repeated notices were issued - Limitation period extended due to acknowledgment of liability by the principal borrower, which is binding on the corporate guarantor under the terms of the Deed of Guarantee.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Section 7, Section 3(12), Section 5(8); Companies Act, 2013 Section 12; Limitation Act, 1963 Section 18; National Company Law Tribunal Rules, 2016 Rule 37(2), Rule 38(1), Rule 38(4)
