1. A financial creditor initiated a corporate insolvency process against a corporate debtor; the debtor alleged the application was time-barred under the Limitation Act. (Para 2 , 3 , 4 , 5 , 6 )
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2026 Supreme(SC) 167
SUPREME COURT OF INDIA
P.S. NARASIMHA, MANOJ MISRA, JJ.
B. Prashanth Hegde – Appellant
Versus
State Bank of India & Anr. – Respondents
Civil Appeal No. 477 of 2022
Decided On : 12-02-2026
Important Points
Acknowledgment of debt through balance sheets and restructuring efforts extends limitation under Section 18 of the Limitation Act; thus, a Section 7 application under IBC remains valid even if initially perceived as time-barred.
Subject
Insolvency and Bankruptcy - Corporate Insolvency Resolution Process
Act Referred
INSOLVENCY AND BANKRUPTCY CODE: S.10, S.14, S.238, S.3, S.4, S.62, S.7, S.8, S.9
LIMITATION ACT: Art.137, Art.62, S.14, S.18, S.6
SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT: S.13(2), S.14, S.17
LIMITATION ACT: Art.137, Art.62, S.14, S.18, S.6
SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT: S.13(2), S.14, S.17
Headnote
(A) Insolvency and Bankruptcy Code, 2016 - Section 62 and 7 - Limitation and acknowledgment of debt - Corporate insolvency resolution process initiated by financial creditor for default of Rs. 280 crores. Application under Section 7 was contended to be time-barred; however, it was found that restructuring acknowledgments in balance sheets extended limitation. Ratification of liability in working capital agreements preserved debt from becoming time-barred under Section 18 of Limitation Act. (Paras 1, 26, 50-52)
(B) Insolvency Process - Applicability of Sections - Essential ingredients for initiating corporate insolvency include acknowledgment of debt and default above the threshold limit. Court ruled that pendency of counterclaims does not preclude invocation under IBC if basic eligibility is satisfied. (Paras 4, 28, 55)
Facts of the case:
The State Bank of India filed a Section 7 application to initiate corporate insolvency resolution against the Corporate Debtor citing defaults on loans over several years. The Corporate Debtor challenged the validity of the application based on limitations but was ultimately found to have acknowledged its debts effectively through various restructuring efforts (Paras 2, 5, 9).
Findings of Court:
The NCLAT found the Section 7 application within limits due to repeated acknowledgments in various formal agreements and balance sheets. Recognition of the debts in required formalities confirmed the viability of the claim (Paras 14, 15).
Issues: (i) Was the application under Section 7 barred by limitation? (ii) Did the NCLAT err in its acknowledgment of the validity of debts acknowledged by the Corporate Debtor? (Paras 26, 53).
Ratio Decidendi: The court affirmed that acknowledgments made in balance sheets and restructuring documents extended the period of limitation under Section 18, allowing the application to proceed despite the counterclaims of the Corporate Debtor (Paras 46, 49).
Result: Appeal dismissed.
(B) Insolvency Process - Applicability of Sections - Essential ingredients for initiating corporate insolvency include acknowledgment of debt and default above the threshold limit. Court ruled that pendency of counterclaims does not preclude invocation under IBC if basic eligibility is satisfied. (Paras 4, 28, 55)
Facts of the case:
The State Bank of India filed a Section 7 application to initiate corporate insolvency resolution against the Corporate Debtor citing defaults on loans over several years. The Corporate Debtor challenged the validity of the application based on limitations but was ultimately found to have acknowledged its debts effectively through various restructuring efforts (Paras 2, 5, 9).
Findings of Court:
The NCLAT found the Section 7 application within limits due to repeated acknowledgments in various formal agreements and balance sheets. Recognition of the debts in required formalities confirmed the viability of the claim (Paras 14, 15).
Issues: (i) Was the application under Section 7 barred by limitation? (ii) Did the NCLAT err in its acknowledgment of the validity of debts acknowledged by the Corporate Debtor? (Paras 26, 53).
Ratio Decidendi: The court affirmed that acknowledgments made in balance sheets and restructuring documents extended the period of limitation under Section 18, allowing the application to proceed despite the counterclaims of the Corporate Debtor (Paras 46, 49).
Result: Appeal dismissed.
Legal Category Hierarchy
- insolvency and bankruptcy law
- practice and procedure
Advocates appeared:
For the Appellant(s) : Dr. Abhishek Manu Singhvi, Sr. Adv. Mr. Amit Bhandari, Adv. Mr. Avishkar Singhvi, Adv. Ms. Madiya Mushtaq, Adv. Mr. Nagarjun Sahu, Adv. Mr. Pranjal Kishore, AOR
For the Respondent(s): Mr. Sanjay Kapur, AOR Mr. Surya Prakash, Adv. Ms. Shubhra Kapur, Adv. Ms. Mansi Kapur, Adv. Ms. Santha Smruthi, Adv. Mr. Anurag Mishra, Adv. Mr. Mukund P. Unny, AOR Mr. Rajiv Shakdher, Sr. Adv. Mr. Atul Shankar Vinod, AOR
For the Appellant(s) : Dr. Abhishek Manu Singhvi, Sr. Adv. Mr. Amit Bhandari, Adv. Mr. Avishkar Singhvi, Adv. Ms. Madiya Mushtaq, Adv. Mr. Nagarjun Sahu, Adv. Mr. Pranjal Kishore, AOR
For the Respondent(s): Mr. Sanjay Kapur, AOR Mr. Surya Prakash, Adv. Ms. Shubhra Kapur, Adv. Ms. Mansi Kapur, Adv. Ms. Santha Smruthi, Adv. Mr. Anurag Mishra, Adv. Mr. Mukund P. Unny, AOR Mr. Rajiv Shakdher, Sr. Adv. Mr. Atul Shankar Vinod, AOR
Table of Contents
2. The debtor argued the insolvency application was time-barred, lacked material particulars, and was initiated with mala fide intent to prejudice unrelated proceedings; the creditor cited debt acknowledgments. (Para 16 , 17 , 18 , 19 , 20 , 21 , 24 )
3. The creditor substantiated debt default through restructuring agreements and balance sheet acknowledgments; procedural inaccuracies were cured through permissible amendments and did not warrant dismissal. (Para 14 , 15 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 )
4. A debt restructuring agreement and an acknowledgment of debt in a signed balance sheet constitute a valid acknowledgment of liability, extending the limitation period under the Limitation Act. (Para 30 , 31 , 38 , 46 , 47 , 49 , 51 )
5. The appeal is dismissed, upholding the admission of the insolvency application as the proceedings were within the period of limitation. (Para 56 , 57 )
6. Can an application for corporate insolvency resolution process be admitted if it contains initial procedural shortcomings?
Yes. An application is not liable for rejection due to insignificant omissions or errors if it substantially conforms to the prescribed form and provides necessary materials to substantiate the existence of a debt and default. (Para 36 , 37 , 40 )
7. Does an acknowledgment of debt in a company's balance sheet extend the limitation period under the Limitation Act?
Yes. An acknowledgment of liability in a signed balance sheet, even if containing caveats, constitutes a valid acknowledgment under Section 18 of the Limitation Act, provided it is signed by an authorized person, thereby granting a fresh period of limitation. (Para 34 , 38 , 46 , 47 , 48 )
8. Does the pendency of a counterclaim or other litigation bar a financial creditor from initiating insolvency proceedings?
No. The existence of a counterclaim or the pendency of other legal proceedings, including criminal complaints, does not bar the initiation of insolvency proceedings under the Code, provided the threshold for a financial debt and default is met. (Para 53 , 54 , 55 )
9. How should the 'date of default' be determined for the purposes of limitation in insolvency applications?
The date of default is determined by the specific facts of the case. When debt restructuring occurs, the date of default may be established by the failure to adhere to subsequent agreements or relevant accounting norms, rather than an initial date of NPA classification used for provisioning. (Para 42 , 43 , 50 )
JUDGMENT :
MANOJ MISRA, J.
1. This appeal, under Section 62 of the Insolvency and Bankruptcy Code, 20161[IBC], impugns judgment and order of the National Company Law Appellate Tribunal, Principal Bench at New Delhi2[NCLAT], dated 17.12.2021, passed in Company Appeal (AT) (Ins) No. 68 of 2019 and I.A. No. 1078 of 2021.
FACTS
2. A brief narration of facts in a chronological order would be apposite. The first respondent (State Bank of India3[SBI]), claiming itself to be the Financial Creditor4[FC] of M/s. Metal Closure Pvt. Ltd. (i.e., the Corporate Debtor5[CD]), filed an application under Section 7 6[ Section 7 . Initiation of corporate insolvency resolution process by financial creditor. – (1) A financial creditor either by itself or jointly with other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government, may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.
…..xxx….
Explanation. --- For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor.
(2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed.
(3) The financial creditor shall, along with the application furnish -
(a) record of the default recorded with the information utility or such other record or evidence of default as may be specified;
(b) the name of the resolution professional proposed to act as an interim resolution professional; and
(c) any other information as may be specified by the Board.
(4) The Adjudicating Authority shall, within 14 days of the receipt of the application under sub- section (2), ascertain the existence of default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3):
Provided that if the Adjudicating Authority has not ascertained the existence of default and passed an order under sub-section (5) within such time, it shall record its reasons in writing for the same.
(5) Where the Adjudicating Authority is satisfied that -
(a) a default has occurred and the application under sub-section (2) is complete and there is no disciplinary proceedings pending against the proposed professional, it may, by order admit such application; or
(b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order reject such application
Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.
(6) The corporate insolvency process shall commence from the date of admission of the application under sub-section (5).
(7) …xxxx..] of IBC on behalf of self and on behalf of a consortium of banks comprising SBI, Punjab National Bank7[PNB], Corporation Bank and UCO Bank against CD for initiating Corporate Insolvency Resolution Process8[CIRP], inter alia, alleging that CD is a defaulter of dues, exceeding Rs. 280 crores, payable against various credit facilities extended from time to time by members of the consortium.
3. CD contested the application, inter alia, on the ground that the same was filed beyond 3 years from the date when the right to apply had accrued and therefore, the application under Section 7 was liable to be dismissed on the ground of limitation.
4. On 14.12.2018, the National Company Law Tribunal, Bangalore Bench9[NCLT] admitted the CIRP petition and declared a moratorium under Section 14 of IBC.
5. Aggrieved by the order of NCLT dated 14.12.2018,
