NCLAT Stays Rejection Of ARCIL Claim Against JCT Ltd Pending Determination Of Limitation Period

The National Company Law Appellate Tribunal (NCLAT) in New Delhi has placed an order from the National Company Law Tribunal (NCLT) in abeyance, effectively pausing the rejection of a substantial ₹3,482 crore financial claim filed by Asset Reconstruction Company (India) Ltd. (ARCIL) against textile manufacturer JCT Ltd. The appellate bench, comprising Officiating Chairperson Justice Yogesh Khanna and Technical Member Barun Mitra, held that the complex issue of limitation must be addressed definitively before the Committee of Creditors (CoC) proceeds to vote on a resolution plan .

Background of the Dispute

The legal tussle originates from corporate guarantees executed by JCT Ltd. in 1993 , which secured credit facilities for its subsidiary, JCT Electronics Ltd. Following the subsidiary’s default , IFCI Ltd. invoked these guarantees in 2002 and initiated recovery proceedings at the Debts Recovery Tribunal (DRT). In 2015 , IFCI Ltd. assigned these debts to ARCIL.

When JCT Ltd. entered the Corporate Insolvency Resolution Process (CIRP) in October 2024 , ARCIL filed a claim exceeding ₹3,482 crore. The Resolution Professional (RP) initially admitted a provisional claim of ₹56.68 crore, granting ARCIL a 20.09% voting share in the CoC. However, in January 2026 , the RP rejected the entirety of the claim, citing documentary deficiencies and asserting that the claim was time-barred . The NCLT subsequently upheld this rejection in July 2026 .

Conflicting Legal Arguments

ARCIL challenged the NCLT order, arguing that the RP lacked the authority to retrospectively reverse a claim that had already been admitted and acted upon during CoC proceedings. Counsel for the appellant contended that the limitation period was suspended by ongoing proceedings before the DRT and the Board for Industrial and Financial Reconstruction (BIFR). Furthermore, ARCIL asserted that entries in the Corporate Debtor’s balance sheets constituted valid acknowledgments of debt under Section 18 of the Limitation Act .

Conversely, the RP and the CoC maintained that the initial admission was merely a " provisional holding position " under Regulation 14(1) of the CIRP Regulations . They argued that the claimant failed to produce essential documents, that the limitation period expired in 2014, and that the financial statements in question explicitly disputed the liability rather than acknowledging it.

Key Observations from the Tribunal

The NCLAT underscored the necessity of judicial clarity on the timeline of the claim. The tribunal noted:

• "The IRP's admission of Rs.56,68,92,019/- was explicitly provisional under Regulation 14(1)."
• "The resolution professional's rejection of the claim was a lawful exercise of his statutory verification mandate ."
• "Limitation being a mixed question of law and facts, the issues needs to be decided prior to any plan is put to vote, as once the CoC goes ahead, the position as of today could never be restored."

Impact and Next Steps

By keeping the NCLT order in abeyance, the NCLAT has prevented the potential dilution of ARCIL's voting rights until the legal issues regarding limitation are settled. The court recognized that allowing the insolvency process to proceed while the validity of a major claim remains contested could cause irreversible prejudice. The case is now set for further hearing on September 7, 2026 , where the bench will likely provide a final determination on the limitation arguments. This ruling emphasizes the tribunal’s commitment to ensuring that the constitution of the CoC—and consequently, the approval of any resolution plan —rests on a sound and accurate assessment of creditor claims.