Back
2025 Supreme(Online)(NCLT) 6553
NATIONAL COMPANY LAW TRIBUNAL
JYOTSNA SHARMA, J, MS. ANU JAGMOHAN SINGH, ACJ
Central Bank of India – Appellant
Versus
M/S. JS Designer Limited – Respondent
COMPANY PETITION IB (IBC) NO. 510/ND/2024
For the Petitioner: Adv. B.K. Mishra, Adv. Ambuj Maurya, Adv. Tushar Mishra
For the Respondent: -
The court established that One Time Settlement proposals revive time-barred debts under Section 25(3) of the Indian Contract Act, enabling initiation of the Corporate Insolvency Resolution Process.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 7 and Rule 4 - Corporate Insolvency Resolution Process - Petition initiated by Financial Creditor against Corporate Debtor for defaulting payment of INR 20,46,15,294 - One Time Settlement proposals acknowledged Corporate Debtor’s liability, effectively reviving the time-barred debt under Section 25(3) of Indian Contract Act - Criteria for admitting application met. (Paras 9-15)
(B) Moratorium - Section 14 - Imposed prohibitions on legal actions against Corporate Debtor, including collection of dues, protects business activities during insolvency process. (Paras 17-19)
Facts of the case:
The Financial Creditor filed an application to initiate CIRP against the Corporate Debtor for failing to repay a significant outstanding debt. The Corporate Debtor defaulted on payment obligations and was deemed NPA in 2018. The application was supported by documents evidencing defaults and proposals for repayment plans.
Findings of Court:
The petition was admitted as the criteria under Section 7 regarding ‘Debt’ and ‘Default’ were established, and the proposal constituted a fresh promise to pay the time-barred debt.
Issues: Whether the One Time Settlement constituted a valid promise under the Indian Contract Act to revive the time-barred debt? Was there a valid default warranting the initiation of CIRP?
Ratio Decidendi: The court opined that the One Time Settlement was a valid contract which revived the right to recover after the limitation period due to clear written acknowledgment of debt by the Corporate Debtor, thereby satisfying the requirements of Section 7 for admission of the application.
Result: The application for initiating Corporate Insolvency Resolution Process against the Corporate Debtor is admitted.
| Table of Content |
|---|
| 1. initiation of cirp under section 7. (Para 1 , 2) |
| 2. submission of documents and acknowledgment of debt. (Para 3 , 4 , 5) |
| 3. reviving limitation period through one time settlement. (Para 9 , 10) |
| 4. observation of court on established debt and default. (Para 12 , 15) |
| 5. imposition of moratorium and legal protections. (Para 17 , 18 , 19) |
| 6. outcome of the application. (Para 26) |
ORDER
1. This is a Company Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity “the Code”) read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, by Central Bank of India (hereinafter referred to as ‘Financial Creditor’), seeking to initiate Corporate Insolvency Resolution Process (“CIRP”) against M/s. JS Designer Limited (“Corporate Debtor”).
2. The present application was filed on 13.05.2024 before this Adjudicating Authority on the ground that the Corporate Debtor has defaulted to make a payment of an amount of Rs. 20,46,15,294 /- (Rupees Twenty Crore Forty-Six Lakh Fifteen Thousand Two Hundred Ninety-Four Only) along with future interest and expenses. The Account Closure Enquiry dated 30.04.2024 (Annexure P-8) evidences the outstanding liability.
3. Submission made by Financial Creditor:
I. That the Petitioner Central Bank of India is a financial institution constituted under The Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970, having its Head Office at Chander Mukhi Nariman, Mumbai-400021 and a Branch interalia at Stressed Assets Management (SAM) Branch, Jeevan Tara Building, 5 Parliament Street, New Delhi-110001.
II. That the Corporate Debtor herein, M/s J S Designer Ltd. is a company incorporated under the Companies Act, 1956 having its registered office (as Per MCA Data) at 178, F.I.E, Industrial Area Patparganj, East Delhi, Delhi, India, 110092 with CIN No. U51311DL1997PLC087099.
III. The Corporate Debtor availed certain working capital credit facilities under a consortium arrangement comprising Punjab National Bank (PNB) as the lead bank, Oriental Bank of Commerce (OBC), and Central Bank of India (the present applicant).
IV. That the Corporate Debtor executed various financing and security documents including: Working Capital Consortium Agreement dated 17.01.2012; Joint Deed of Hypothecation dated 17.01.2012, creating a pari passu first charge on stock-in-trade, book debts, receivables and other current assets; Inter-se Agreement among consortium banks and letters recognizing PNB as the lead bank. The charges created by Corporate Debtor in favour of Applicants were duly registered under Section 125 of the Companies Act, 1956 .
V. That the Corporate Debtor has defaulted on 30.12.2017 on its payment obligations in terms of the said loan documents. The Loan of the Corporate Debtor was declared as NPA on 30.03.2018.
VI. That the Corporate Debtor has been in continuous default of its payment obligations in terms of the said loan documents and has failed to discharge its liability towards the Applicant Bank.
VII. That the Corporate Debtor defaulted in repayment, and the consortium- initiated recovery proceedings before the Debt Recovery Tribunal-II, New Delhi, in O.A. No. 496/2019.
VIII. The Financial Creditor has also placed on record an Additional Affidavit dated 07.10.2025, wherein it has annexed the One Time Settlement (OTS) Proposals offered by the Corporate Debtor to the consortium of lenders. It is submitted that the first OTS proposal was submitted by the Corporate Debtor on 02.03.2024, and subsequently, a revised OTS proposal was submitted on 01.05.2024, both of which were addressed to the lead bank, Punjab National Bank (PNB).
IX. That the Respondent vide its OTS Proposal has unequivocally admitted its liability and has promised to discharge the said debt. Such OTS proposal constitutes a fresh promise to pay within the meaning of Section-25(3) of Indian Contract Act; 1872, Which makes even a time-barred debt legally enforceable,
