The article tries to discuss the vexatious issue of treatment of claims which are barred under the Indian Limitation Act, 1963 and received by Insolvency Professional (IP) within the timelines prescribed for submitting claims under Insolvency and Bankruptcy Code, 2016 (I&B Code) and the Regulations framed thereunder. While there is no controversy about the procedural timelines for submitting claims, there is divergence in opinion regarding the admissibility of claims that are time-barred under the Limitation Act. It may be mentioned here that the Limitation Act has applicability for proceedings before judicial or quasi-judicial authority.

The act is based on the general premise that a person using the judicial machinery of the State to settle his grievance should act diligently and hence bars judicial intervention in cases in which there is abnormal delay in seeking judicial redressal. It is settled law that the act only bars the judicial intervention to enforce the right and does not extinguish it.

Those who favor rejecting or not admitting time barred claims, interalia, argue that if NCLT is not considering such claims for admission u/s 7 or 9, on the same analogy, RP also cannot entertain the claims. Accepting them would open Pandora’s Box and claims that have been deeply buried would be given a new lease of life. Legislation could not have intended that there should be different treatment to claims under different sections.

Another argument in favor of barring claims is, RP takes over the management and is akin to Managing Director (MD) of the Corporate Debtor (CD). If he were to be actually MD, in all probability he would not accept such claims and will certainly refuse to repay the same if the litigation arises. The creditor is sure to fail on this ground alone if he opts for litigation. An additional argument is that such claims generally pertain to Operational Creditors (OCs), who otherwise also do not expect to receive anything under the plan. The aggrieved creditors can always approach the NCLT for relief.

The last argument is also advanced by those in favor of admitting such claims of OCs if barred by limitation but otherwise eligible. Admitting such claims from OCs poses no challenge to Corporate Insolvency Resolution Process (CIRP) as OCs are likely to get next to nothing and they have no place in CoC except under certain extraordinary circumstances.

An attempt is made here to explore through various relevant provisions of the act, their most likely interpretation and the conclusion that follows favoring admissibility of such claims as also the likely consequences if not interpreted so.  Opinion is purely for academic purposes and anyone using it does so at his own risk. Various provisions are referred to by the section and regulation number of the legislation and details provided at the end.

h4>Definitions

  • Section 3(6) (a) of the Code defines claim as “a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured, or unsecured.”

It may be noted that it clearly says that claim need not be legal i.e. claims barred by law of limitation are nevertheless defined as claim under the Code. Such claim may even be disputed. Basic criteria stipulated is whether claimant has right to payment. Please note that Limitation Act does not extinguish the right, it only extinguishes the remedy to enforce the light through courts and judicial tribunals. Right remains perpetually, law does not extinguish it. Time barred debt can be validly paid and discharge obtained. Time barred debt can even be recovered by recourse to courts and tribunals in certain cases, as provided in the Limitation Act.

  • Section 3(8) of the Code defines Corporate Debtor as “a corporate person who owes a debt to any person”
  • Section 3(11) defines Debt as “means a liability or obligation in respect of a claim which is due from any person”.

It may be seen that word debt is not qualified by the word adjudicated or legally enforceable or within limitation or any other adjective. Also, debt is not qualified by any adjective or subject to certain exclusions. Later part of the section even says that it includes both financial debt and operational debt.

  • Section 3(30) defines Secured Creditor as “means a creditor in favour of whom security interest is created”

It may be seen that it does not say security interest should have been created within the time limit prescribed under the Limitation Act. Once a Secured Creditor, continues to be a Secured Creditor if there is no extinguishment of security by other means.

  • Section 5 (7) defines financial creditor as “any person to whom a financial debt is owed and includes…”.

Financial Creditor is defined with reference to the word Financial Debt.

  • Section 5(8) defines Financial Debt as “means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes…”

Here also it speaks of disbursement of money and not when it was disbursed.

Similarly, section 5(21) also does not talk of any specific outline for Operational Debt for it to be barred under CIRP.

Why Debt Has to be Within Limitation for Initiating CIRP U/S 7/9 Of the Code

Section 7 and section 9 refer to process for initiating CIRP by FC or OC respectively. These creditors can initiate CIRP by filing an application before the Adjudicating Authority (NCLT), a quasi-judicial body.

These applications are not entertained by the NCLT, in case default is time barred, as section 3 of the Limitation Act clearly states that except for the exceptions carved out expressly therein, “every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence.”

The NCLT is a tribunal, a quasi-judicial body empowered to decide / judge on merits (Adjudication) application made before it. The Limitation Act clearly enjoins duty on every court (Tribunals included) to consider limitation suo-motu even if no defence is so set up.

Section 238A of the code also states that “provisions of the Limitation Act shall, as far as may be apply to the proceedings or appeal before the Adjudicating Authority.”

The application u/s 7 or 9 is proceeding and NCLT is the Adjudicating Authority. RP does not have powers of tribunal, although he may be treated as officer of the court. Although RP is appointed under the Code, it is settled law that he cannot perform any adjudicatory function. Even the claim submitted is in format prescribed (Form B/C/CA/D/E/F) and do not constitute applications seeking any judicial relief, but rather procedural disclosures to be reviewed and collated by the RP. The Code and the corresponding regulations clearly deal out how they are to be processed. RP is to collate the claims and not usurp adjudicatory function. If decision of the RP is not acceptable to the claimant, he makes an application to the adjudicatory authority and not an appeal against treatment of claim by the RP. Similarly, creditors whose claims are not matured, cannot initiate CIRP but are nevertheless entitled and required to file their claim with RP in CIRP.

Procedure For Calling For Claims By RP And Treatment Thereof

The adjudicating authority after admitting the application admitting CIRP u/S 7 or u/S 9, it has to, interalia, order calling for claims, as enjoined in section 13 of the Code. The definition of claim as given in section 3(6) (a) is only right to payment. Section 13 does not deviate from it nor qualifies that they should be within the limitation.

Section 18 which deals with duties of RP, its clause (b) directs him to receive and collate all the claims. It does not ask him to decide legality or otherwise, for that would be beyond his scope. Supreme Court has also made it clear that RP has administrative role and not quasi-judicial role (Swiss Ribbons case) and is now a settled law.

As against above, section 35(1a) of the Code, the liquidator has both power and duty to verify the claims. Further sections 39, 40 and 41 direct liquidators to verify the claim, find value thereof and admit or reject them. Such power of liquidator can be said to be of adjudication. Hence under section 41 of the Code, creditor aggrieved by above has to make appeal to the adjudicating authority. The CIRP regulation 13 does talk of verification of claims but does not give any power to admit or reject claims as given to liquidator. Further it is a sub-ordinate regulation to the Code, which certainly prevails over it.­­

It may be seen that while section 238 gives overriding powers to the Code in case of inconsistency with the act, section 238A makes express provision of Limitation Act applicable, as far as may be, only for NCLT/ NCLAT/ DRT and DRAT. Word Liquidator or RP do not appear here although liquidator has to decide on claims and his decision can be challenged by preferring appeal to the adjudicating authority. Adjudicating authority cannot give relief to the claimant whose claims are barred by limitation against the decision of the liquidator.

Thus, it may be seen that Resolution Professional during CIRP and Liquidation wears different caps while processing the claims. RP just collates and Liquidator accepts or rejects. Claims accepted by liquidator have to pass the litmus test of limitation indirectly.

So, it appears that intention of the code is not to make Limitation Act applicable for processing claims during CIRP. The RP, in accordance with the Code and relevant regulations, is empowered to collate and verify claims but not to adjudicate on issues such as limitation Such claimants if they are Financial Creditors will be entitled to a seat in CoC. It is left open for the Resolution Applicants in their commercial wisdom to decide how much to offer to such creditors. Obviously if they are in overwhelming number, Resolution Plan to muster necessary votes, will have to make some provision for them.

By making decision of the liquidator in respect of acceptance of the claims appealable before the adjudicating authority, liquidator is mandated to not accept the time-barred claims. Such aggrieved claimants can seek relief from the adjudicating authority it. For the time barred claims accepted by the liquidator, the other successful claimants can also implead themselves as it affects their entitlement under the waterfall mechanism.

Rationale For Above Conclusion

It is not feasible nor advisable for RP to seek acknowledgement of debt to ascertain if limitation stands extended. It is not feasible to check of other circumstances extending limitation, as given in the Limitation act. RP is not MD; he is rather trustee for the stakeholders (not just CoC). The democratic structure giving power to CoC to decide on the resolution plan, pre-implies that decisions are taken by CoC in the interest of all the stake holders. Not admitting time barred claimants to CoC would frustrate the purpose of the act and if such claimants are in substantial in number, may amount to gross illegality. Already scope of adjudicating authority to sanction the plan is getting expanded. In many a case, CIRP initiation proceedings at NCLT may take years.

In such a case, all FCs who are not party to the application, may get barred by limitation. It is settled law that proceedings till initiation of CIRP are proceedings in Rem and not in Persona, reiterated again in Bhushan Steel Case by the Apex court. CD will certainly stop acknowledging debt once he knows that the ship is sinking. There are cases where there are only non-institutional creditors. It may so happen that all the claims, other than of initiator may get time barred. Further mid- size corporate gets good amount of debt whether finance or supplies, through intermediaries with a tacit understanding that they will be paid in priority over other institutional creditors. This ensures liquidity to the CD. Not considering them will not be commercial wisdom of the CoC or the Resolution Applicant.

In a lighter vein, in case Limitation Act is made applicable, it would give good financial start to promoters, who may start giving acknowledgement in back date for cash or kind. It may also be seen that many such OCs are critical to the continuance of the CD. Straightway showing such OCs, an exit gate may make things difficult for the future working of the CD, thus frustrating the very purpose of the act viz. unleashing economic value and equitable distribution to the stakeholders.

Case Laws

  1. SUPREME COURT – Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. (2019) 16 SCC 659
  • “The role of the Resolution Professional is not adjudicatory but administrative in nature. He does not have the power to decide the validity of claims or to adjudicate upon disputes between creditors.”
  • The Supreme Court emphasized that the Resolution Professional (RP) acts as a facilitator, not as a judicial authority. He is tasked with collating and verifying claims, managing the process, and preparing the information memorandum—but not with ruling on the merits of individual claims. This distinction limits the RP’s authority to reject claims on legal grounds such as limitation.
  1. SUPREME COURT – Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. & Ors. (2021) 9 SCC 657
    • “Once a resolution plan is approved by the Adjudicating Authority, all claims that are not part of the plan shall stand extinguished, and no person will be entitled to initiate or continue any proceedings regarding a claim which is not part of the resolution plan.”
    • This judgment firmly established the finality of an approved resolution plan. It underscores the need for all creditors—including those with time-barred or disputed claims—to submit them during the CIRP. Failure to do so results in permanent extinguishment. This case reinforces the necessity of comprehensive claim collation by the RP.
  1. SUPREME COURT – K. Educational Services Pvt. Ltd. v. Parag Gupta & Associates (2019) 11 SCC 633
  • “The Limitation Act, 1963 is applicable to applications filed under Sections 7 and 9 of the IBC from the inception of the Code. Article 137 of the Act would apply, and the period of limitation is three years from the date of default.”
  • This judgment settled the confusion over the retrospective applicability of limitation provisions in IBC and clarified that IBC is not a tool to revive time-barred debts. The Court ruled that limitation is a procedural law and applies to all applications under IBC from the Code’s inception, even before Section 238A was inserted. This case forms the foundational authority on the application of limitation to CIRP.
  1. SUPREME COURT – Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. (2019) 10 SCC 572
    • “An application under Section 7 of the IBC is covered by Article 137 of the Limitation Act, which prescribes a three-year limitation from the date when the right to sue accrues, i.e., the date of default.”
    • This case reaffirmed the ruling in B.K. Educational Services and emphasized that proceedings under SARFAESI Act do not extend or reset the limitation period unless covered under Section 14 of the Limitation Act. It clarified that filing under SARFAESI is not a substitute for proceedings under IBC.
  1. SUPREME COURT – Sesh Nath Singh v. Baidyabati Sheoraphuli Coop. Bank Ltd. (2021) 7 SCC 313
    • “Sections 14 and 18 of the Limitation Act are applicable to proceedings under the IBC. The period of limitation is liable to be extended if the applicant was pursuing remedies in a wrong forum in good faith.”
    • This case expanded the equitable application of limitation laws in IBC proceedings. It held that if a creditor had been diligently pursuing legal remedies in a different forum (e.g., DRT or civil court), the time spent can be excluded when computing limitation. It reinforced the use of Sections 14 and 18 of the Limitation Act within IBC to prevent injustice to genuine creditors.
  1. SUPREME COURT – Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal (2021) 6 SCC 366
    • “An acknowledgment in a balance sheet can amount to acknowledgment under Section 18 of the Limitation Act if such acknowledgment is unqualified and not accompanied by disclaimers.”
    • The Supreme Court resolved a key issue by confirming that balance sheet entries can serve as acknowledgment of debt under Section 18, thereby extending the limitation period. This has major implications for financial creditors, especially in cases where there is no express acknowledgment but consistent recognition in audited statements.
  1. NCLAT – Sunil Kumar Aggarwal v. NOIDA & Ors. (31 July 2019) Company Appeal (AT) (Insolvency) No. 775 of 2019
    • “The IRP is not expected to decide the issue of limitation. The claim submitted by the creditor should not be rejected solely on the ground of limitation. It is for the Adjudicating Authority to take such a view.”
    • This case clarified the non-adjudicatory role of the IRP/RP. It stated that the IRP cannot reject a claim on the sole ground of limitation and must collate all claims submitted within the statutory window, regardless of their status under the Limitation Act. The NCLAT emphasized that the power to determine the applicability of limitation rests with the Adjudicating Authority (NCLT).
  1. IBBI Disciplinary Committee Order: M/s Wianxx Impex Pvt. Ltd. – Claim by Ms. Ekta Khare (26 May 2023)
    • “By admitting a claim previously rejected by the Adjudicating Authority on grounds of limitation, the Insolvency Professional acted negligently and in disregard of the tribunal’s order, violating multiple provisions of the Code and associated regulations.”
    • Ekta Khare filed a Section 7 application against M/s Wianxx Impex Pvt. Ltd., which was dismissed by the NCLT, New Delhi, on 26 February 2019, as the debt was time-barred under Article 137 of the Limitation Act. Subsequently, upon initiation of CIRP against the same corporate debtor by another financial creditor, Ms. Khare submitted her claim as a financial creditor in a class. Mr. Gopal Lal Baser, the appointed IRP, admitted her claim despite the prior NCLT rejection. The IBBI held that this action violated Section 17(2)(e) and Section 208(2)(a) of the Code, Regulation 13(1) of the CIRP Regulations, and Clauses 1, 2, and 14 of the Code of Conduct for Insolvency Professionals. Consequently, the IBBI suspended Mr. Baser’s registration as an Insolvency Professional for two years.

Conclusion

In navigating the complex interplay between the Limitation Act, 1963, and the Insolvency and Bankruptcy Code, 2016, RPs face a critical dilemma regarding time-barred claims. The I&B Code’s broad definition of “claim” under Section 3(6)(a) encompasses rights to payment irrespective of legal enforceability, suggesting that RPs should collate all claims, including those barred by limitation, to uphold the Code’s objectives of maximizing value and ensuring equitable stakeholder participation.

However, the RP must tread cautiously, respecting prior NCLT rulings, as highlighted by the IBBI’s 2023 disciplinary order, to avoid professional misconduct. By collating time-barred claims and transparently disclosing their status, RPs enable the Committee of Creditors and Resolution Applicants to exercise commercial wisdom in crafting inclusive resolution plans. To resolve this ambiguity, regulatory clarification from the IBBI, particularly under Section 238A, is imperative to ensure consistency and fairness in the CIRP process.

Authored by:
Vithal M. Dahake and Jayesh N. Sanghrajka | IBC