Resolution Professional's Rejection of Rs. 3,482 Crore Claim Upheld; Balance Sheet Entries Found Inadequate for Limitation Extension
In a significant ruling, the National Company Law Tribunal (NCLT) Chandigarh Bench dismissed the claim filed by Asset Reconstruction Company (India) Limited (ARCIL) against JCT Limited as time-barred under the Insolvency and Bankruptcy Code (IBC), 2016. The tribunal, comprising Sh. Khetrabasi Biswal and Sh. Shishir Agarwal, upheld the rejection by the Resolution Professional of ARCIL's financial claim amounting to Rs. 3,482.31 crores, citing the expiration of the statutory limitation period.
The case centered on corporate guarantees executed by JCT Limited in favor of IFCI Limited, which were invoked in January 2002. ARCIL, having acquired the debt from IFCI, filed a substantial claim in the ongoing Corporate Insolvency Resolution Process (CIRP) of JCT Limited. However, the Resolution Professional rejected the claim, arguing it was barred by the limitation period prescribed under Article 137 of the Limitation Act, 1963.
The tribunal emphasized the Resolution Professional's duty to verify claims diligently, noting that the claim was supported by inadequate documentation. The tribunal reiterated that the role of the Resolution Professional is not adjudicatory but involves the collation and verification of claims against available records, and that claims barred by limitation cannot be admitted under the IBC.
Further, the NCLT found that ARCIL's reliance on balance sheet entries as acknowledgments of debt under Section 18 of the Limitation Act was misplaced. It ruled that the entries were consistently accompanied by board-approved caveats disputing the sustainability of the claim, thereby negating any acknowledgment of liability.
The tribunal also addressed the issue of provisional admission by the Interim Resolution Professional (IRP), clarifying that such admissions are subject to revision upon the discovery of new information, which does not equate to an impermissible reversal of decision.
This judgment underscores the importance of adhering to statutory limitation periods within insolvency proceedings and highlights the careful scrutiny required of claims by resolution professionals to ensure compliance with the IBC framework.
Bottom line:-
Insolvency and Bankruptcy Code - Resolution Professional has the statutory mandate to verify claims without adjudicating disputed rights but must exercise due diligence. Claims barred by limitation cannot be resurrected under the IBC.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016; Limitation Act, 1963; CIRP Regulations, 2016
