ADMISSION OF DEBT BY IRP IS NOT ACKNOWLEDGMENT: SUPREME COURT CLARIFIES LIMITATION UNDER IBC
INTRODUCTION
In Shankar Khandelwal v. Omkara Asset Reconstruction Pvt. Ltd. & Anr., 2026 INSC 429, decided on 29 April 2026, the Supreme Court of India, comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe, delivered a significant ruling on limitation under the Insolvency and Bankruptcy Code, 2016 (IBC). The Court held that admission of a claim by an Interim Resolution Professional (IRP) does not amount to acknowledgment of liability under Section 18 of the Limitation Act, 1963 and therefore cannot extend the limitation period.
BRIEF FACTS
The case arose from loans granted in 2014 to two Corporate Debtors, which were classified as Non-Performing Assets (NPA) on 6 December 2016. Following a series of proceedings, including CIRP against the Lender itself and later against the Corporate Debtor, the Respondent, an asset reconstruction company, filed an Application under Section 7 of the IBC on 23 September 2024.
The NCLT admitted the Application and the NCLAT affirmed this decision, holding that acknowledgment of debt by the Resolution Professional during an earlier CIRP extended the limitation period. This finding was challenged before the Supreme Court.
ISSUES OF LAW
The Supreme Court examined three core issues: whether limitation begins from the date of NPA or a later stage, whether the Section 7 application was filed within limitation after accounting for statutory exclusions and whether admission of a claim by an IRP constitutes acknowledgment under Section 18 of the Limitation Act.
ANALYSIS OF THE JUDGMENT
The Court reaffirmed the settled position that limitation for filing an application under Section 7 of the IBC is governed by Article 137 of the Limitation Act and begins from the date of default, which is ordinarily the date of classification of the account as NPA. In the present case, the Court held that limitation commenced on 6 December 2016 and not from any subsequent recovery proceedings or actions under the SARFAESI Act.
The Court then undertook a detailed computation of limitation by considering intervening events such as CIRP proceedings and the exclusion of limitation during the COVID-19 period pursuant to the Supreme Court’s suo motu Orders. It also considered the statutory exclusion under Section 60(6) of the IBC during the period of Moratorium. After accounting for all such exclusions, the Court concluded that only three days of limitation remained as on 29 July 2024, which expired on 1 August 2024. Since the Section 7 Application was filed on 23 September 2024, it was clearly barred by limitation.
A crucial aspect of the Judgment is the Court’s analysis of whether admission of a claim by the IRP could amount to acknowledgment of liability under Section 18 of the Limitation Act. The Court clarified that for a valid acknowledgment, there must be a conscious and unequivocal admission of liability by the debtor or an authorised person. In contrast, the IRP performs a purely administrative function of collating and verifying claims under the IBC. The admission of a claim by the IRP is merely an entry or recognition for procedural purposes and does not reflect any intention on the part of the corporate debtor to admit liability.
The Court held that such an act is akin to a mere reference to a debt, which does not satisfy the requirements of Section 18. It further noted that even otherwise, an acknowledgment must be made within the limitation period, and in the present case, the alleged acknowledgment occurred after expiry of limitation and could not revive a time-barred claim.
CONCLUSION
The Supreme Court allowed the Appeal and set aside the Orders of the NCLT and NCLAT, holding that the Section 7 Application was barred by limitation and not maintainable.
This Judgment reinforces two important principles: first, that limitation under the IBC is strictly computed from the date of default, subject only to statutorily recognized exclusions; and second, that administrative acts such as admission of claims by an IRP cannot be elevated to the status of legal acknowledgment of debt. The ruling provides much-needed clarity on the interplay between insolvency proceedings and limitation law, ensuring that procedural steps within CIRP are not misused to revive stale claims.
SARTHAK KALRA
Senior Legal Associate
The Indian Lawyer & Allied Services
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