Amendment Of Default Date In IBC Pleadings Is Permissible Before Final Adjudication: NCLT Mumbai

The National Company Law Tribunal (NCLT) Mumbai bench of Sushil Mahadeorao Kochey (Judicial Member) and Prabhat Kumar (Technical Member) admitted an insolvency petition against Vibrant Content Pvt. Ltd.(Corporate Debtor) filed by Central Bank of India holding that acknowledgment of debt in the balance sheet constitutes a valid acknowledgement under section 18 of the Limitation Act thereby extending the limitation. The Tribunal further held that “Since, a decision rendered by larger constitution has higher precedence, accordingly, we are bound to follow the decision in case of Puneet P Bhatia. Accordingly, we do not find any merit in the contention of the Corporate Debtor that the insertion of date of default could not have been permitted by this Tribunal.” Background: The Petition was filed under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by Central Bank of India seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the corporate debtor. The bank claimed outstanding loan amounts aggregating to Rs. 47 crore arising out of three term loans. The account of the corporate debtor was classified as Non-Performing Assets (NPA) on 29th August 2018 and thereafter a demand notice was also issued on 14th July 2020. The corporate debtor objected to the petition stating that it was time barred having been filed more than six years after the NPA classification. It was further submitted that the bank initially failed to specify the date of default and later sought to amend the date which was impermissible; it altered the foundation of the case. Relying on Vasavai Power Services (P) Ltd., it was contended that amendment of default date could not be permitted as it would alter the maintainability of the petition. Lastly, it was submitted that the balance sheets only disclosed the NPA classification and did not constitute a valid acknowledgment of liability. Per contra, the Bank submitted that the audited financial statements of the corporate debtor constituted a valid acknowledgement of debt under section 18 of the Limitation Act thereby extending the limitation. Findings: The Tribunal relied on IL&FS Financial Services Ltd where it was held that entries in the balance sheets constitute a valid acknowledgment even if the creditor's name is not expressly mentioned. “The balance sheets for FY 2018–19, FY 2019–20, and FY 2022–23 clearly indicate acknowledgment of a subsisting liability and renewal of a jural relationship,” the Tribunal observed. Applying section 18 of the Limitation Act, the Tribunal held that acknowledgment of debt in the balance sheet of FY 2022-23 constituted a valid acknowledgement which extended the limitation period therefore the petition filed on 27.07.2024 was within the limitation period. On amendment of date of default date, the Tribunal observed that procedural flexibility under the IBC permits the amendment before final adjudication. It cited Puneet P. Bhatia v. ASREC (India) Ltd. & Anr where it was held that “as per the provisions of the Code, the NCLT is empowered to allow the parties to amend the pleadings before the final orders in CIRP proceedings are passed..” The Tribunal distinguished Vasavai Power Services on the ground that it was delivered by a bench of two members whereas Puneet Bhatia was a three members bench decision therefore the latter will prevail. “Since, a decision rendered by larger constitution has higher precedence, accordingly, we are bound to follow the decision in case of Puneet P Bhatia. Accordingly, we do not find any merit in the contention of the Corporate Debtor that the insertion of date of default could not have been permitted by this Tribunal,” the Bench held. Accordingly, the Tribunal admitted the petition holding that debt and default stood established, petition was filed within limitation and the amendment of default date did not prejudice the corporate debtor. Case Title: Central Bank of India Ltd. v. Vibrant Content Pvt. Ltd. Case No.: C.P. (IB)/907(MB)/2024 Date of Order: 30/10/2025 Counsel for Financial Creditor: Adv. Mily Ghoshal a/w Adv. Aditya Mishra Counsel for Corporate Debtor: Adv. Pallav Pakale i/b Anjali S. Click Here To Read/Download The Order

Amendment Of Default Date In IBC Pleadings Is Permissible Before Final Adjudication: NCLT Mumbai

Mohd Malik Chauhan

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