Time Spent In DRT Recovery Proceedings Cannot Be Excluded U/S 14 Of Limitation Act: NCLAT

The National Company Law Appellate Tribunal (NCLAT) held that the benefit of section 14 of the Limitation Act cannot be extended to the creditor who had initiated recovery proceedings before the Debt Recovery Tribunal (DRT) under the Recovery of Debt and Bankruptcy Act, 1993. The Tribunal held that the benefit under section 14 of the Act can be given only when the forum before which the proceedings were initiated lacked jurisdiction or suffered from a defect of similar nature. A bench comprising Justice Ashok Bhushan and Mr. Arun Baroka (Technical Member) dismissed an appeal filed against an order passed by National Company Law Tribunal (NCLT) Kolkata by which it had rejected an application under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) on grounds of limitation and failure to prove disbursement. The Tribunal held that “Present is a case, where benefit of Section 14 of Limitation Act is claimed on the basis of proceedings initiated under Section 19 of the Recovery of Debt and Bankruptcy Act, 1993, which was filed for recovery. It is not the case of the Bank that the proceedings initiated before the DRT were without jurisdiction or that there was any defect of jurisdiction or cause of like nature to extend benefit under Section 14 of the Limitation Act.” The Appellant submitted that the NCLT erred in holding that there was no disbursement despite availability of NeSL certificate confirming the debt. It was further submitted that DRT proceedings constitute civil proceedings under section 14 of the Limitation Act and therefore the time spent therein should be excluded. Relying on Sesh Nath Singh & Anr., it was argued that benefit under section 14 can be extended to proceedings initiated under the SARFAESI Act or DRT laws. Findings: The Tribunal at the outset observed that the Appellant had proven the disbursement through the NeSL certificate. Therefore, the NCLT erred in holding that no evidence was produced to show the disbursement. However, the present application is clearly time barred. The date of default was 19.09.2015 and the present application was filed on 10.12.2019 which is clearly beyond the limitation period of 3 years as prescribed under Article 137 of the Limitation Act. The Tribunal rejected the Bank's reliance on deposits made in 2016. It held that “The deposit on 25.11.2016 does not aid the Appellant since the Section 7 application was filed more than three years after this date. The ₹1,000 deposit of 17.12.2016, being a mere cash deposit, cannot be treated as an acknowledgment of debt under the Limitation Act.” The bench further observed that the DRT proceedings were filed for the purpose of recovery and it was not shown that they were filed before the forum which lacked jurisdiction. The benefit of section 14 of the Limitation Act cannot be given unless it is shown that earlier proceedings suffered from want of jurisdiction or defects of the similar nature. It held that “Present is a case, where benefit of Section 14 of Limitation Act is claimed on the basis of proceedings initiated under Section 19 of the Recovery of Debt and Bankruptcy Act, 1993, which was filed for recovery. It is not the case of the Bank that the proceedings initiated before the DRT were without jurisdiction or that there was any defect of jurisdiction or cause of like nature to extend benefit under Section 14 of the Limitation Act.” The Tribunal distinguished Sesh Nath Singh on the ground that in that case proceedings under the SARFAESI were stayed by the High Court for want of jurisdiction which is not the case in the present matter. Accordingly, the present appeal was dismissed. Case Title: United Bank of India (Now Punjab National Bank) v. Concast Morena Road Projects Pvt. Ltd. Case Number: Company Appeal (AT) (Insolvency) No. 805 of 2025 Order Date: 07.10.2025 Click Here To Read/Download The Order

Time Spent In DRT Recovery Proceedings Cannot Be Excluded U/S 14 Of Limitation Act: NCLAT

Mohd Malik Chauhan

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