Financial Creditor's Claim of Over Rs. 40 Crore Default Upheld; Acknowledgment of Debt via OTS Proposals Validates Petition Within Limitation Period
In a significant development in insolvency law, the National Company Law Tribunal (NCLT), Kochi Bench, has admitted the petition filed by Indian Bank under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against M/s. AKS Cold Storage Ltd. The tribunal ordered the initiation of the Corporate Insolvency Resolution Process (CIRP) on grounds of financial default amounting to over Rs. 40 crore.
The petition, filed on 10th September 2026, alleged that the Corporate Debtor, engaged in cold storage operations across Tamil Nadu and Kerala, defaulted on multiple credit facilities sanctioned by Indian Bank under a consortium banking arrangement. The original default date was recorded as 31st December 2019, with the account formally classified as Non-Performing Asset (NPA) on 31st March 2022.
Indian Bank, acting as the Lead Bank in the consortium, demonstrated that despite restructuring and rescheduling of the loan facilities - including bifurcation into Working Capital Term Loans (WCTL), Fixed Term Loans (FTL), and rephased loans - the Corporate Debtor failed to meet repayment obligations. The bank also pointed out that even after sale of secured properties and recovery proceedings under SARFAESI Act, outstanding dues remained unpaid.
The Corporate Debtor contested the petition on multiple grounds: disputing the date of default, the quantum of debt, the effect of restructuring on the default date, and the limitation period for filing the petition. It was argued that the restructuring arrangements, including sanction letters dated 31st December 2019 and 23rd March 2020, reset the default timeline and that the petition was barred by limitation. The Corporate Debtor also raised concerns about the alleged unilateral restructuring by Indian Bank without full consortium concurrence and inconsistencies in records with National E-Governance Services Limited (NeSL) and Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI).
However, the tribunal analyzed the matter comprehensively, focusing on several key legal points:
1. Existence of Financial Debt and Default:
The Corporate Debtor did not dispute the existence of the financial facilities or the debt owed. The petitioner successfully established the debt and default through sanction letters, acknowledgment of debt documents, audited financial statements, and account statements.
2. Effect of Restructuring on Default Date:
The tribunal upheld the principle, aligned with RBI guidelines and recent NCLAT precedents, that failure of restructuring arrangements causes the default date to "relate back" to the original default date. Hence, the default date of 31st December 2019 remains operative.
3. Limitation Period and Acknowledgment of Debt:
Applying the Limitation Act, 1963, and the Supreme Court's COVID-19 limitation exclusion orders, the tribunal found the petition to be within the prescribed limitation period. Crucially, the Corporate Debtor's submission of One-Time Settlement (OTS) proposals in 2023, 2025, and October 2025 were held to constitute valid acknowledgments of debt under Section 18 of the Limitation Act, thereby triggering a fresh limitation period.
4. Consortium Arrangement and Unilateral Restructuring:
The tribunal noted that inter-se disputes between consortium members cannot be used by the Corporate Debtor to evade or delay insolvency proceedings. The Corporate Debtor's objections based on unilateral restructuring without full consortium approval were not considered valid grounds to dismiss the petition.
5. Quantum of Debt and Procedural Requirements:
It was observed that at the admission stage under Section 7, detailed reconciliation of accounts or quantum disputes are not to be adjudicated. Since the debt exceeded the statutory threshold, the petition met the requirement for admission.
Consequently, the NCLT admitted the petition and declared a moratorium on the Corporate Debtor's assets under Section 14 of the IBC. Mr. Mahalingam Suresh Kumar was appointed as the Interim Resolution Professional (IRP) to oversee the CIRP proceedings. The tribunal directed the IRP to take immediate charge of the Corporate Debtor's assets and documents and initiate public announcements and claim invitations as mandated by law.
This judgment reiterates the principle that restructuring failures do not extinguish defaults and that acknowledgment of debt via settlement proposals can revive limitation periods. It also clarifies that consortium disputes among financial creditors do not impede insolvency petitions under Section 7 filed by a lead bank for its own exposure.
Bottom Line:
Insolvency and Bankruptcy Code - Petition under Section 7 of the Code - Financial Creditor successfully established the existence of financial debt and default - Acknowledgment of liability through OTS proposals amounts to acknowledgment under Section 18 of the Limitation Act, 1963 - Petition filed within limitation period - Corporate Insolvency Resolution Process initiated.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 - Section 7, Section 14, Section 18 of the Limitation Act, 1963, Section 238A of the IBC, SARFAESI Act, 2002 - Section 13(2)
Indian Bank v. M/s. Aks Cold Storage Ltd., (NCLT)(Kochi Bench) : Law Finder Doc Id # 2978082
