CIRP u/s 7 Can Be Initiated if Default Occurs on a Valid Written Contract to Repay Time-Barred Debt | NCLAT

Case Details: Ravi Raman vs. RR Info Park (P.) Ltd. - [2025] 172 taxmann.com 277 (NCLAT-Chennai)

Judiciary and Counsel Details

• Sharad Kumar Sharma, Judicial Member & Jatindranath Swain, Technical Member
• Arvindh Pandian, Sr. Adv., Kumar Anurag Singh, Zain A. Khan & Shailendran, Advs. for the Appellant.
• E. Omprakash, Srinath Sridevan, Sr. Advs., Abitha Banu, Surya Teja Nalla, Advs. & Sujata Chattopadhyay, RP for the Respondent.

Facts of the Case

In the instant case, the financial creditor had granted a term loan to corporate debtor. Since corporate debtor had committed default in repayment of said loan, financial creditor filed an application under section 7 seeking to initiate Corporate Insolvency Resolution Process (CIRP) against corporate debtor, which was admitted by NCLT.

Later, the appellant (suspended director of corporate debtor), had challenged NCLT’s order. It was noted that corporate debtor himself had acknowledged debt and, settlement had been arrived at on 21-12-2020. Thus, initiation of proceeding under section 7 on 27-6-2019 had not been barred by limitation, which had been argued by corporate debtor.

NCLAT Held

The NCLAT observed that a written contract to pay a time barred debt is a valid contract and constitutes as to be basis, giving a cause of action for initiation of proceedings under section 7, when default is committed.

For financial creditor, limitation period for filing CIRP application would be reckoned from date of debt due i.e. date of settlement not from date of issuance of Recovery Certificate.

Also, the balance sheet entries from 2014 to 2018 in respect of due to be paid to consortium of banks, thereafter participation in One Time Settlement (OTS) Proposal and participation in Memorandum of Compromise, would constitute acknowledgment in writing by corporate debtor.

Since, appellant himself had acknowledged debt, till settlement was arrived at and date of settlement was taken as cut off date for drawing CIRP proceedings, the NCLAT held that the CIRP application filed was to be admitted as it was within limitation period.

List of Cases Reviewed

• Order of NLCT(chennai) in IBA/930 (CHE)/2019, dated 12.12.2023 [2025] 172 taxmann.com 221 (para 43) affirmed.
• Kotak Mahindra Bank, Dena Bank Judgment in 2021 (Vol. X) SCC 330(para 33) followed.