CIRP Claims Cannot Rely On 12-Year Limitation Period For Enforcing Mortgage Rights: NCLT Mumbai

The National Company Law Tribunal (NCLT) at Mumbai has recently ruled that secured creditors cannot rely on the 12-year limitation period for enforcing mortgage rights when filing claims in a corporate insolvency resolution process. For insolvency claims, the Tribunal said, the applicable limitation period is three years.

The decision was delivered by a coram of Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar.

The tribunal drew a clear distinction between enforcing a mortgage and filing a claim in insolvency.

It said, “Indubitably, the Applicant has the right to enforce mortgage within 12 years, however, the filing of claims by the creditors in CIRP is not an act enforcing mortgage, but to claim the amounts due from the corporate debtor under CIRP for the money payable which were lent earlier. This is further reinforced from the specific bar under Section 14 of the IBC restricting the enforcement of security enforcement on proclamation of moratorium. Accordingly, we are of considered view that the limitation period under Article 62 is not applicable to the claims filed in CIRP of a Corporate Debtor even if such claim is secured by mortgage, as filing of the claims is not in nature of the enforcement of mortgage.”

The issue arose during the insolvency of Gigeo Construction Company Private Limited. BSEL Algo Limited, which held a registered mortgage, filed a claim of Rs 22.94 crore, including interest. The Resolution Professional rejected the claim on the ground of limitation. BSEL challenged that decision, arguing that its claim was covered by the 12-year limitation period available for mortgage-backed debts.

The tribunal rejected this argument. It said Article 62 applies to suits seeking enforcement of rights over immovable property. Filing a claim in a CIRP is different. It is a procedural step to place dues before the resolution professional. It does not involve enforcement of security. In any event, enforcement is barred once the insolvency moratorium comes into effect.

The tribunal held that insolvency claims, even when secured by a mortgage, are governed by Article 19 of the Limitation Act, which provides a three-year limitation period.

On the facts, the tribunal noted that the last repayment and acknowledgement by the corporate debtor took place in November 2018. After accounting for the exclusion of limitation during the COVID-19 period as directed by the Supreme Court, the limitation expired in October 2023. Since the claim was filed in January 2025, it was held to be time-barred.

The tribunal also clarified that merely because the debt was shown as unsecured in the company's financial statements, a registered mortgage deed could not be ignored.

The tribunal observed, “Simply because the same has been disclosed as unsecured by applicant as well as corporate debtor, a registered mortgage deed cannot be given go by unless said registered deed is set aside by a competent court.”

This, however, did not assist the claimant in this case , as the claim itself was barred by limitation.

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