NCLT admitted Union Bank’s insolvency petition holding that revival letters and audited balance sheets acknowledging debt extended the limitation period for filing under IBC.
NCLT Admits ₹223.82 Crore Insolvency Plea; Recognizes Revival Letters and Balance Sheets as Extenders of Limitation
The National Company Law Tribunal (NCLT) admitted an insolvency petition filed by Union Bank of India for ₹223.82 crore, ruling that the statutory limitation under Section 5 of the Insolvency and Bankruptcy Code, 2016 (IBC) was extended by revival letters and audited financial statements acknowledging the debt. The acknowledgment of liability by the corporate debtor in these documents was sufficient to restart the limitation period under Section 18 of the Limitation Act, 1963.
The tribunal emphasized that revival letters issued by the corporate debtor, particularly those signed by directors and accompanied by updated balance sheets, constituted clear acts of acknowledgment of debt under Section 18. These acts prevented the claim from becoming time-barred, enabling the financial creditor to maintain the application under Section 7 of the IBC. The NCLT relied on settled precedents affirming that acknowledgment in balance sheets qualifies as sufficient under law.
For practitioners, this ruling reinforces the importance of meticulously reviewing financial disclosures and correspondence issued by defaulting corporate debtors. Even informal revival commitments, when signed and reflected in audited accounts, can sustain time-barred claims. Financial creditors should actively monitor such acknowledgments to preserve their enforcement remedies under IBC.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 5
- Limitation Act, 1963, Section 18
