Suspended Director Cannot Dispute Admitted Claim After Company Initiates CIRP On Same Debt: NCLAT

The National Company Law Appellate Tribunal has held that when a company itself triggers insolvency proceedings on the basis of a bank's debt, its suspended directors cannot later turn around and claim that the lender's dues are time-barred.

“When the Appellant itself claim that insolvency resolution process be initiated against the CD on the basis of debt of SBI which application was filed in the year 2025, it is not open for the Appellant to turn around and say that there is no valid claim of the SBI within limitation and it should be rejected,” the tribunal said

The ruling was delivered by a bench led by Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra while dismissing appeals filed by Rakeshkumar Hariram Agarwal, a suspended director of the corporate debtor

The name of the corporate debtor is not recorded in the tribunal's order.

The insolvency process was initiated on the company's own plea. Agarwal, as a suspended director, had filed an application seeking initiation of insolvency based on a default of Rs 116.11 crore owed to State Bank of India.

The amount was expressly admitted in the application. The application was admitted in September 2025. An interim resolution professional was appointed and the committee of creditors was constituted. State Bank of India was the sole financial creditor

Agarwal later moved the Mumbai bench of the NCLT seeking documents relating to the bank's claim. He also sought rejection of the claim on the ground that it was time-barred and asked for a stay on the insolvency process

That application was dismissed, leading to the present appeals.

Before the appellate tribunal, Agarwal argued that State Bank of India's claim was barred by limitation since a recovery notice had been issued in December 2013. He contended that a time-barred claim could not have been admitted

State Bank of India opposed the appeal, arguing that once the corporate debtor itself sought insolvency on the basis of its dues, the suspended director could not deny the existence of that debt

The tribunal agreed. It held that since insolvency was initiated by the suspended director himself on the basis of the same debt, the claim could not later be challenged as invalid or time-barred

The bench also noted that a recovery decree had been passed by the debt recovery tribunal in 2023, which was not disputed by the appellant.

“In view of the decree there is no question of claim of the SBI admitted in insolvency of the CD being barred by time,” the tribunal said

The appeals were thus dismissed.

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