2025 (10) TMI 889 - AT - IBC

IRP/RP admission of claims by corporate debtor counts as acknowledgement under Section 18, restarting limitation periods

NCLAT held that an IRP/RP has authority to admit claims on behalf of the corporate debtor and such admission constitutes an acknowledgement under Section ... Admission of two independent petitions for initiating CIRP IBC against the same financial creditor - time barred debts - admission of a Claim by the RP in an earlier CIRP proceeding against the CD would constitute an acknowledgement of debt by a CD to save limitation for the initiation of a fresh CIRP against that very CD - authority of RP to make an acknowledgement on behalf of the CD. Authority of the IRP or the RP - HELD THAT:- When a claim is admitted either by the IRP or by the RP, the suspended Board of Directors cannot stop payment post a successful resolution process irrespective of what is actually paid. Once a CIRP is admitted, neither fraudulently nor maliciously, the former directors of the CD are substantially reduced to mere spectators, and unless the very admission of the CD to CIRP is terminated or the CD is a MSME, these suspended directors do not have any prospects of getting control of the CD again. There is therefore, little difficulty in holding RP and only RP has the authority to act on behalf of the CD. Admission of Claim Vs Acknowledgement of Debt - whether admission of a Claim by the IRP or RP in an earlier CIRP proceeding against the CD which was subsequently terminated can amount to an acknowledgement of liability as to provide the secured financial creditor a fresh terminus a quo for commencing a fresh CIRP proceeding against the CD? - HELD THAT:- If the entire management of the CD is vested with the IRP or the RP, as the case may be, and if they were statutorily authorised to admit a claim, in the absence of the board of directors to perform any function in relation to the CD, admission of a Claim either by the IRP or the RP would amount to admission of a liability of the CD to repay the creditor, to emphasis, based on a pre-existing and enforceable right of payment. And, acknowledgement of a debt within the meaning of Sec. 18 of the Limitation Act in essence is but an admission of the liability to repay. A mere choice of expression such as ‘acknowledgement’ or ‘admission’ used in different statutory schemes cannot alter the fundamentals: existing of a liability, correlatable to a pre-existing and enforceable right to repayment. Therefore, where an IRP or a RP has admitted a claim, it does constitute an acknowledgement under Sec. 18 of the Limitation Act. To state it differently, if the RP has the authority to admit a claim and if admission of a Claim also constitutes an acknowledgement of liability, it follows that the RP has the authority to acknowledge a liability on behalf of the CD. In the instant case, there is no case for the appellant that in the earlier CIRP proceeding against the CD, when the claim of the respondent was admitted, it has already become time barred. Indeed, the facts as have been presented does not even provide any opportunity to the appellant to take any such defence - there is little difficulty in holding that the date of admission of a Claim by the IRP grants a fresh date for commencement of limitation and when the Claims are subsequently updated it pushes the date of terminus a quo to that date. This tribunal holds that that the admission of the Claim by the RP in the first CIRP against the CD on 22.05.2022 constituted a valid acknowledgement and its subsequent updating on 21.02.2024 constituted the second acknowledgement, and if terminus a quo is reckoned from any of these dates, then both the petitions laid by the respondent are validly instituted as the debts are not time barred on the respective dates when they were so instituted. In view of the same, this tribunal does not find any need to consider the other modes of computation of limitation necessary. Both these appeals are liable to be dismissed and are so dismissed, and the Orders of the Adjudicating Authority are hereby confirmed. ISSUES PRESENTED AND CONSIDERED 1. Whether admission of a creditor's claim by the Interim Resolution Professional/Resolution Professional (IRP/RP) in an earlier CIRP that was subsequently terminated constitutes an acknowledgement of debt for the purpose of extending or restarting the period of limitation for initiating a fresh CIRP under Section 7 of the IBC. 2. Whether an IRP/RP has the authority to admit claims and, to that extent, to acknowledge liability on behalf of the corporate debtor such that the admission operates as an acknowledgement within the meaning of Section 18 of the Limitation Act and shifts the terminus a quo for limitation. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether admission of a claim by IRP/RP in an earlier CIRP constitutes an acknowledgement of debt for limitation purposes Legal framework: Limitation for initiating a CIRP under Section 7 is governed by Article 137 (three years) of the Limitation Act; Section 18 of the Limitation Act deals with acknowledgement of liability; Section 238A of the IBC incorporates Limitation Act provisions 'as far as may be'; Regulation 12(3) of CIRP Regulations prescribes admission of financial debt claims. Precedent treatment: The tribunal relied on principles from decisions holding that initiation of CIRP is a class action distinct from an action for recovery (hence Article 137 applies to Section 7), and that acknowledgement before expiry of limitation can extend limitation (as in Dena Bank and other authorities). Prior Supreme Court pronouncements on acknowledgements in balance sheets and on recovery certificates providing fresh terminus a quo were noted; none directly addressed whether IRP/RP admission equals acknowledgement under Section 18. Interpretation and reasoning: A claim before an IRP/RP is a recognition of a pre-existing enforceable right to payment. Admission of such a claim by the IRP/RP, who acts in place of the suspended board, is an admission of the corporate debtor's liability to repay based on that pre-existing right. The tribunal distinguished between (a) a claim (akin to a recovery action for enforcement of repayment rights) and (b) a Section 7 petition (class action for CIRP), holding limitation for these two remedies may differ. The tribunal reasoned that where an IRP/RP admits a claim, that admission is functionally equivalent to an acknowledgement of liability under Section 18 because it manifests the corporate debtor's liability through the office authorized to act on its behalf during CIRP. Ratio vs. Obiter: Ratio - admission of a claim by IRP/RP in an earlier CIRP constitutes an acknowledgement under Section 18 of the Limitation Act and therefore can furnish a fresh date for commencement of limitation for initiating a subsequent Section 7 petition. Obiter - discussion on potential invalidity or scope of Regulation 12(3) insofar as it may mandate admission of time-barred claims, and qualification that Regulation 12(3)'s effect may be limited to the CIRP in which the claim is made. Conclusions: Admission of the creditor's claim by the IRP/RP on 02.05.2022 (and update on 21.02.2024) operated as valid acknowledgements that shifted the terminus a quo; petitions filed in late 2024 were therefore within limitation. The tribunal dismissed the limitation defence insofar as it relied on earlier default dates and held the petitions not time-barred when reckoned from the acknowledgment dates. Issue 2: Whether IRP/RP has authority to admit claims and to acknowledge liability on behalf of the corporate debtor Legal framework: Section 17(1)-(2), Section 18, Section 20, Section 25 and Section 28 of the IBC vest management and specified powers in the IRP/RP once CIRP is admitted; Regulations under CIRP Regulations govern claim submission and admission (Regulation 8 and Regulation 12(3)). Precedent treatment: The tribunal referenced statutory scheme and settled position that once CIRP is admitted, management vests in IRP/RP who act in the name and on behalf of the corporate debtor; precedents confirming that IRP/RP collate and admit claims were cited for statutory support rather than to overrule prior authority. Interpretation and reasoning: The tribunal held that statutory provisions expressly authorise the IRP/RP to act and execute documents in the name of the corporate debtor and to receive and collate claims. Given the suspension of the board and the IRP/RP's role as de facto management, their admission of claims necessarily operates as admission by the corporate debtor. The RP alone (as successor to the IRP and empowered under Sections 25 and 28) is competent to admit claims on behalf of the corporate debtor. Ratio vs. Obiter: Ratio - IRP/RP have authority to admit claims and such admissions, made in their statutory capacity during CIRP, amount to acknowledgements by the corporate debtor for limitation purposes. Obiter - nuances about whether the suspended board can later challenge such admissions on ground that the admitted claims were time-barred, and the suggestion that Regulation 12(3) may require legal testing when it appears to mandate admission of time-barred financial debts. Conclusions: IRP/RP possess statutory authority to admit claims on behalf of the corporate debtor and, by admission, can acknowledge liabilities within the meaning of Section 18 of the Limitation Act; such admissions can move the date from which limitation is computed for a subsequent Section 7 petition. Ancillary determinations and limitations on the holding Legal framework and reasoning: Limitation is a mixed question of law and fact and courts/tribunals have a duty under Section 3 of the Limitation Act (as applied via Section 238A IBC) to compute limitation independently of party concessions. The tribunal emphasised the distinction between cause of action (date of default) and the date relevant for computation of limitation (remedy-based), referring to the statutory form requirement but rejecting any mechanical fixation on the date of default in Part IV of the petition. Precedent treatment and caution: The tribunal noted it was not called upon to determine the validity of Regulation 12(3) where it might compel admission of time-barred claims, and left open the possibility that suspended directors may challenge an IRP/RP admission on the ground of time-barred status in appropriate circumstances. Conclusions: The holding is confined to the proposition that admission of a claim by IRP/RP in an earlier CIRP, where not shown to be time-barred at the time of admission, constitutes an acknowledgement shifting the limitation period; questions about mandatory admission of time-barred claims under regulations and collateral challenges by suspended management remain for future adjudication. Final Disposition The Tribunal dismissed the appeals and confirmed the Adjudicating Authority's orders admitting the Section 7 petitions, concluding that admissions by the RP constituted valid acknowledgements for limitation purposes and rendered the petitions timely when filed.