Subhash Chander vs Veena Devi - From the aforesaid finding, we find that after analysing all the provisions and having noticed the different decisions rendered by this Court, the three-judge Bench arrived at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning a company as an accused is imperative.

  HC HP (2026.07.06) in Subhash Chander vs Veena Devi [2026:HHC:26711, Cr. Revision No. 630 of 2024] held that;

• Applying the doctrine of strict construction, we are of the considered opinion that the commission of the offence by the company is an express condition precedent to attract the vicarious liability of others.

• Thus, the words "as well as the company" appearing in the section make it unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence, subject to the averments in the petition and proof thereof.

• In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative.

• From the aforesaid finding, we find that after analysing all the provisions and having noticed the different decisions rendered by this Court, the three-judge Bench arrived at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning a company as an accused is imperative.

• Therefore, the complaint against the Managing Director, without impleading the Company, was not maintainable as per the binding precedents of the Hon'ble Supreme Court of India

Excerpts of the Order; 

The present revision is directed against the judgment dated 01.07.2024 passed by the learned Sessions Judge, Kangra, at Dharamshala, H.P. (learned Appellate Court) vide which the judgment of conviction and order of sentence dated 29.12.2022, passed by the learned Chief Judicial Kangra, at Dharamshala, H.P. (learned Trial Court) were upheld. (The parties shall hereinafter be referred to in the same manner as they were arrayed before the learned Trial Court for convenience.)

# 2. Briefly stated, the facts giving rise to the present revision are that the complainant filed a complaint before the learned trial Court against the accused for the commission of an offence punishable under Section 138 of the Negotiable Instruments Act (NI Act). It was asserted that the accused is running a business of insurance/finance in the name and style of "SM Krishi Housing and Agricultural Ltd". He opened a new branch at Slate Godam, Yol Cantt, Tehsil Dharamshala, District Kangra, H.P. He appointed one Pinky Devi as Advisor. PinkiDevi convinced the poor people of the locality to take the insurance plans of the accused and issued 60-70 policies in the locality. The accused closed the branch from Slate Godam, Yol Cant, Tehsil Dharamshala, District Kangra, H.P. The complainant, other policy holders and Pinky Devi visited the registered office of the accused, and the accused assured to return the amount. A compromise was effected between the parties. The accused issued a cheque of ₹19,650/- in favour of the complainant to repay the amount. The complainant presented the cheque at the bank, but it was dishonoured. The accused failed to repay the money despite the receipt of a valid notice of demand. Hence, the complaint was filed to take action against the accused as per the law.

# 3. Learned Trial Court found sufficient reasons to of summon the accused. When the accused appeared, a notice of acquisition was put to him for the commission of an offence rt punishable under Section 138 of the NI Act, to which he pleaded not guilty and claimed to be tried.

# 4. The complainant examined herself (CW-1) to prove her complaint.

# 5. The accused, in his statement recorded under Section 313 of the Code of Criminal Procedure (CrPC), admitted that he was running a business of insurance /finance and had opened a branch office at Slate Godam, Yol Cantt, Tehsil Dharamshala, District Kangra, H.P. He admitted that a notice was issued to him and he had not repaid the money. He claimed that he was innocent. He did not produce any evidence in his defence.

# 6. Learned Trial Court held that the complainant had succeeded in proving her case that the cheque was issued in discharge of a legally enforceable debt and the accused had failed to rebut the presumption attached to the cheque. The cheque was dishonoured with the endorsement, 'insufficient funds'. The notice was served upon the accused, but he failed to of pay the money. All the ingredients of the commission of an offence punishable under Section 138 of the NI Act were duly rt satisfied. Hence, the learned Trial Court convicted the accused of the commission of an offence punishable under Section 138 of the NI Act and sentenced him to undergo simple imprisonment for 3 months, and pay a compensation of ₹29,650/- to the complainant.

# 7. Being aggrieved by the judgment and order passed by the learned trial Court, the accused filed an appeal, which was decided by the learned Sessions Judge, Kangra at Dharamshala, District Kangra, H.P. (learned Appellate Court). The Appellate Court concurred with the findings recorded by the learned Trial Court that there is a presumption that a cheque was issued for consideration to discharge the debt/liability. The complainant failed to produce any evidence to rebut the presumption. The complainant was the Managing Director of the company and was liable for the acts of the company. All the ingredients of the commission of an offence punishable under Section 138 of the NI Act were duly satisfied. There was no infirmity in the judgment and order passed by the learned Trial Court. Consequently, the appeal was dismissed.

# 8. Being aggrieved by the judgments and order passed by the learned Courts below, the accused has filed the present rt revision asserting that the learned courts below erred in appreciating the material placed before them. The complainant was required to prove that the accused was responsible for the day-to-day affairs of the company at the time of issuing the cheque; mere designation as a Managing Director does not make a person liable. The complainant was required to prove the existence of the consideration/liability, which she had failed to do. The complainant's statement was not corroborated by any other evidence. Therefore, it was prayed that the present revision be allowed and the judgments and order passed by the learned Courts below be set aside.

# 9. I have heard Mr Mukul Sood, learned counsel for the petitioner and Mr Goldy Kumar, learned counsel for the respondent.

# 10. Mr Mukul Sood, learned counsel for the petitioner/accused, submitted that there was no averment in the complaint that the petitioner/accused was in charge and of responsible for the company for its day-to-day affairs. A person cannot be held liable because he holds the position of a rt Managing Director. The complainant had not arrayed the company as an accused, and the prosecution against the Director without impleading the company was not maintainable. Therefore, he prayed that the present revision be allowed and the judgments and order passed by the learned Courts below be satisfied.

# 11. Mr Goldy Kumar, learned Counsel for the respondent, submitted that the petitioner was liable by virtue of his position as a Managing Director of the company, and there is no infirmity in the judgments and order passed by the learned courts below. He relied upon a judgment of the Hon'ble Supreme Court in Shankar Padam Thapa vs. Vijay Kumar Dineshchandra Agarwal 2025 INSC 1210 in support of his submission.

.

# 12. I have given a considerable thought to the submissions made at the bar and have gone through the records carefully.

# 13. It was laid down by the Hon'ble Supreme Court in of Malkeet Singh Gill v. State of Chhattisgarh, (2022) 8 SCC 204:(2022) 3 SCC (Cri) 348: 2022 SCC OnLine SC 786 that a revisional  court is not an appellate court and it can only rectify the patent defect, errors of jurisdiction or the law. It was observed at page 207: -

• "10. Before adverting to the merits of the contentions, at the outset, it is apt to mention that there are concurrent findings of conviction arrived at by two courts after a detailed appreciation of the material and evidence brought on record. The High Court in criminal revision against conviction is not supposed to exercise the jurisdiction like the appellate court, and the scope of interference in revision is extremely narrow. Section 397 of the Criminal Procedure Code (in short "CrPC") vests jurisdiction to satisfy itself or himself as to the correctness, legality or propriety of any finding, sentence or order, recorded or passed, and as to the regularity of any proceedings of such inferior court. The object of the provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well- founded error that is to be determined on the merits of individual cases. It is also well settled that while considering the same, the Revisional Court does not dwell at length upon the facts and evidence of the case to reverse those findings.

# 14. This position was reiterated in State of Gujarat v. Dilipsinh Kishorsinh Rao, (2023) 17 SCC 688: 2023 SCC OnLine SC 1294, wherein it was observed at page 695:

• "14. The power and jurisdiction of the Higher Court under Section 397 CrPC, which vests the court with the of power to call for and examine records of an inferior court, is for the purposes of satisfying itself as to the legality and regularities of any proceeding or order made in a case. The object of this provision is to set right a rt patent defect or an error of jurisdiction or law or the perversity which has crept in such proceedings.

• 15. It would be apposite to refer to the judgment of this Court in Amit Kapoor v. Ramesh Chander, (2012) 9 SCC 460: (2012) 4 SCC (Civ) 687: (2013) 1 SCC (Cri) 986, where the scope of Section 397 has been considered and succinctly explained as under: (SCC p. 475, paras 12-13) 

• "12. Section 397 of the Code vests the court with the power to call for and examine the records of an inferior court for the purposes of satisfying itself as to the legality and regularity of any proceedings or order made in a case. The object of this provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well-founded error, and it may not be appropriate for the court to scrutinise the orders, which, upon the face of it, bear a token of careful consideration and appear to be in accordance with law. If one looks into the various judgments of this Court, it emerges that the revisional jurisdiction can be invoked where the decisions under challenge are grossly erroneous, there is no compliance with the provisions of law, the finding recorded is based on no evidence, material evidence is ignored, or judicial discretion is exercised arbitrarily or perversely. These are not exhaustive classes, but are merely indicative. Each case would have to be determined on its own merits.

• 13. Another well-accepted norm is that the revisional jurisdiction of the higher court is a very limited one and cannot be exercised in a routine manner. One of the inbuilt restrictions is that it should not be against an interim or interlocutory order. The Court has to keep in mind that the of exercise of revisional jurisdiction itself should not lead to injustice ex facie. Where the Court is dealing with the question as to whether the charge has been rt framed properly and in accordance with law in a given case, it may be reluctant to interfere in the exercise of its revisional jurisdiction unless the case substantially falls within the categories aforestated. Even the framing of the charge is a much-advanced stage in the proceedings under CrPC."

# 15. It was held in Kishan Rao v. Shankargouda, (2018) 8 SCC 165: (2018) 3 SCC (Cri) 544: (2018) 4 SCC (Civ) 37: 2018 SCC OnLine SC 651 that it is impermissible for the High Court to re-appreciate the evidence and come to its conclusions in the absence of any perversity. It was observed at page 169:

• "12. This Court has time and again examined the scope of Sections 397/401 CrPC and the grounds for exercising the revisional jurisdiction by the High Court. In State of Kerala v. Puttumana Illath Jathavedan Namboodiri, (1999) 2 SCC 452: 1999 SCC (Cri) 275], while considering the scope of the revisional jurisdiction of the High Court, this Court has laid down the following: (SCC pp. 454-55, para 5) 

• 5. ... In its revisional jurisdiction, the High Court can call for and examine the record of any proceedings to satisfy itself as to the correctness, legality or propriety of any finding, sentence or order. In other words, the jurisdiction is one of supervisory jurisdiction exercised by the High Court for correcting a miscarriage of justice. But the said revisional power cannot be equated with the power of an appellate court, nor can it be treated even as a second appellate jurisdiction. Ordinarily, therefore, it would not be appropriate of for the High Court to reappreciate the evidence and come to its conclusion on the same when the evidence has already been appreciated by the rt Magistrate as well as the Sessions Judge in appeal, unless any glaring feature is brought to the notice of the High Court which would otherwise amount to a gross miscarriage of justice. On scrutinising the impugned judgment of the High Court from the aforesaid standpoint, we have no hesitation in concluding that the High Court exceeded its jurisdiction in interfering with the conviction of the respondent by reappreciating the oral evidence. ..."

• 13. Another judgment which has also been referred to and relied on by the High Court is the judgment of this Court in Sanjaysinh Ramrao Chavan v. Dattatray Gulabrao Phalke, (2015) 3 SCC 123: (2015) 2 SCC (Cri) 19]. This Court held that the High Court, in the exercise of revisional jurisdiction, shall not interfere with the order of the Magistrate unless it is perverse or wholly unreasonable or there is non-consideration of any relevant material, the order cannot be set aside merely on the ground that another view is possible. The following has been laid down in para 14: (SCC p. 135) 

• "14. ... Unless the order passed by the Magistrate is perverse or the view taken by the court is wholly unreasonable or there is non-consideration of any relevant material or there is palpable misreading of records, the Revisional Court is not justified in setting aside the order, merely because another view is possible. The Revisional Court is not meant to act as an appellate court. The whole purpose of the revisional jurisdiction is to preserve the power in the court to do justice in accordance with the principles of criminal jurisprudence. The revisional power of the court under Sections 397 to 401 CrPC is not to be equated with that of an appeal. Unless the finding of the court, whose decision is sought to be revised, is of shown to be perverse or untenable in law or is grossly erroneous or glaringly unreasonable or where the decision is based on no material or where the material rt facts are wholly ignored or where the judicial discretion is exercised arbitrarily or capriciously, the courts may not interfere with the decision in exercise of their revisional jurisdiction."

# 16. This position was reiterated in Bir Singh v. Mukesh Kumar, (2019) 4 SCC 197: (2019) 2 SCC (Cri) 40: (2019) 2 SCC (Civ) 309: 2019 SCC OnLine SC 13, wherein it was observed at page 205:

• "16. It is well settled that in the exercise of revisional jurisdiction under Section 482 of the Criminal Procedure Code, the High Court does not, in the absence of perversity, upset concurrent factual findings. It is not for the Revisional Court to re-analyse and re-interpret the evidence on record.

• 17. As held by this Court in Southern Sales & Services v. Sauermilch Design and Handels GmbH, (2008) 14 SCC 457, it is a well-established principle of law that the Revisional Court will not interfere even if a wrong order is passed by a court having jurisdiction, in the absence of a jurisdictional error. The answer to the first question is, therefore, in the negative."

17. A similar view was taken in Sanjabij Tari v. Kishore S. Borcar, 2025 SCC OnLine SC 2069, wherein it was observed:

• "27. It is well settled that in exercise of revisional jurisdiction, the High Court does not, in the absence of perversity, upset concurrent factual findings [See: Bir Singh (supra)]. This Court is of the view that it is not for the Revisional Court to re-analyse and re-interpret the evidence on record. As held by this Court in Southern Sales & Services v. Sauermilch Design and Handels GMBH, of (2008) 14 SCC 457, it is a well-established principle of law that the Revisional Court will not interfere, even if a wrong order is passed by a Court having jurisdiction, in the absence of a jurisdictional error.

• 28. Consequently, this Court is of the view that in the absence of perversity, it was not open to the High Court in the present case, in revisional jurisdiction, to upset the concurrent findings of the Trial Court and the Sessions Court.

# 18. The present revision has to be decided as per the parameters laid down by the Hon'ble Supreme Court.

# 19. It was submitted that the complainant had not mentioned in the complaint that the accused was in charge and responsible to the company for its affairs, and the complaint was not maintainable. This submission is not acceptable. It was laid down by the Hon'ble Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89, that a Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible for the company for the conduct of its business. Therefore, he becomes liable by virtue of the position held by him. It was observed:

• (c) The answer to Question (c) has to be in the affirmative. The question notes that the managing director or joint managing director would be admittedly in charge of the company and responsible to the company for the conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they of hold as managing director or joint managing director, these persons are in charge of and responsible for the conduct of the business of the company. Therefore, they get covered under Section 141. So far as the signatory of a cheque rt which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under sub-section (2) of Section 141 of N.I. Act."  (Emphasis supplied)

# 20. In the present case, the accused is the Managing Director of the company, and he would be liable by virtue of his position. Therefore, the submission that the accused cannot be held liable in the absence of the necessary averments cannot be accepted.

# 21. The cheque (CW-1/D) has been issued by SM Krishi Housing and Agricultural Ltd. It was asserted in para. 1 of the complaint that the accused is running the business of insurance/finance in the name of SM Krishi Housing and Agricultural Ltd. The accused has been described as the Managing Director of SM Krishi Housing and Agricultural Ltd. However, the company was not arrayed as an accused, and only the accused Subhash Chander was arrayed as a party. It was laid down by the Hon'ble Supreme Court in Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661, that it is not permissible to prosecute the Directors in the absence of the Company. It was observed:

• "58. Applying the doctrine of strict construction, we are of the considered opinion that the commission of the offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in the section make it unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence, subject to the averments in the petition and proof thereof. One cannot be oblivious to the fact that the company is a juristic person and it has its respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted.

• 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative."

# 22. This judgment was followed by the Hon'ble Supreme Court in Charanjit Pal Jindal v. L.N. Metalics, (2015) 15 SCC 768: 2015 SCC OnLine SC 1033, and it was held:

• "11. From the aforesaid finding, we find that after analysing all the provisions and having noticed the different decisions rendered by this Court, the three-judge Bench arrived at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning a company as an accused is imperative. Hence, in this case, we find no reason to refer the matter to the larger Bench.

• 12. In the present case, only the appellant was impleaded as an accused. In that view of the matter, we are of the view that the complaint with respect to the offence under of Section 138 read with Section 141 of the Act was not maintainable following the decision in Aneeta Hada [Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661: (2012) 3 SCC (Civ) 350: (2012) 3 SCC (Cri) 241].  We set aside the judgment dated 17-4-2010 passed by the trial court, the order dated 27-5-2011 passed by the appellate court and the impugned judgment dated 9-11- 2012 passed by the High Court of Orissa, Cuttack, in Charanjit Pal Jindal v. L.N. Metalics [Charanjit Pal Jindal v. L.N. Metalics, Criminal Revision No. 467 of 2011, decided on 9-11-2012 (Ori)]. The appellant stands acquitted."

# 23. This position was reiterated in Himanshu v. B. Shivamurthy, (2019) 3 SCC 797: 2019 SCC OnLine SC 83, and it was held:

• "13. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused."

# 24. This position was reiterated in Pawan Kumar Goel v. State of U.P., 2022 SCC OnLine SC 1598, and it was held:

• "31. This Court has been firm with the stand that if the complainant fails to make specific averments against the company in the complaint for the commission of an offence under Section 138 of the NI Act, the same cannot be rectified by taking recourse to general principles of criminal jurisprudence. Needless to say, the provisions of Section 141 impose vicarious liability by deeming a of fiction which presupposes and requires the commission of the offence by the company or firm. Therefore, unless the company or firm has committed the offence as a principal accused, the persons mentioned in sub- rt sections (1) and (2) would not be liable to be convicted based on the principles of vicarious liability."

# 25. It was laid down by the Hon'ble Supreme Court in Dilip Hariramani v. Bank of Baroda, 2022 SCC OnLine SC 579, that where the offence has been committed by a company, the company is primarily liable and its office bearers are vicariously liable. Therefore, it is not permissible to prosecute the office bearers vicariously without prosecuting the company:

• 15. The judgment in Dayle De'souza v. Government of India through Deputy Chief Labour Commissioner (C) answered the question of whether a director or a partner can be prosecuted without the company being prosecuted. Reference in this regard was made to the views expressed by this Court in State of Madras v. C.V. Parekh on the one hand, and the divergent view expressed in Sheoratan Agarwal v. State of Madhya Pradesh and Anil Hada v. Indian Acrylic Ltd. This controversy was settled by a three-judge Bench of this Court in Aneeta Hada (supra), in which, interpreting and expounding the difference between the primary/substantial liability and vicarious liability under Section 141 of the NI Act, it held:

• "51. We have already opined that the decision in Sheoratan Agarwal runs counter to the ratio laid down in C.V. Parekh, which is by a larger Bench and hence, is a binding precedent. On the aforesaid ratiocination, the decision in Anil Hada has to be treated as not laying down the correct law as far as it states that the Director or any other officer can be prosecuted without impleadment of the company. Needless to emphasise, the matter would of stand on a different footing where there is some legal impediment and the doctrine of lex non cogit ad impossibilia gets attracted.

•  Xxxxxxxxx

• 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh, which is a three-judge Bench decision. Thus, the view expressed in Sheoratan Agarwal does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada is overruled with the qualifier as stated in para 51. The decision in Modi Distillery has to be treated to be restricted to its own facts as has been explained by us hereinabove."

• 16. The provisions of Section 141 impose vicarious liability by deeming a fiction which presupposes and requires the commission of the offence by the company or firm. Therefore, unless the company or firm has committed the offence as a principal accused, the persons mentioned in subsection (1) or (2) would not be liable and convicted as vicariously liable. Section 141 of the NI Act extends vicarious criminal liability to officers associated with the company or firm when one of the twin requirements of Section 141 has been satisfied, and that person(s) is then, by deeming fiction, made vicariously liable and punished. However, such vicarious liability arises only when the company or firm commits the offence as the primary offender. This view has been subsequently followed in Sharad Kumar Sanghi v. Sangita Rane, Himanshu v. B. Shivamurthy, and Hindustan Unilever Limited v. State of Madhya Pradesh. The exception carved out in Aneeta Hada (supra), which applies when there is a of legal bar for prosecuting a company or a firm, is not felicitous for the present case. No such plea or assertion is made by the respondent."

# 26. Therefore, the complaint against the Managing Director, without impleading the Company, was not maintainable as per the binding precedents of the Hon'ble Supreme Court of India.

# 27. A heavy reliance was placed upon the judgment of the Hon'ble Supreme Court in Sankar Padam Thapa (supra), the Hon'ble Supreme Court specifically held that the Trust is not a Company within the meaning of Section 141 of the NI Act, and the complaint is maintainable against the trustee, who had signed the cheque without impleading the Trust as an accused. In the present case, the accused no. 1 is a Company and not the trust; hence, the cited judgment does not apply to the present case.

# 28. Learned Courts below failed to appreciate the significance of the fact that the cheque was issued by a Company, and the accused, being the Managing Director, could not have been held liable without impleading the Company. Thus, they committed a jurisdictional error while convicting and sentencing the accused.

# 29. In view of the above, the present revision is allowed, and the judgment of conviction and order of sentence dated rt 29.12.2022, passed by the lea rned Chief Judicial Magistrate, Kangra at Dharamshala in Complaint No.54-III/2019 as affirmed by the learned Appellate Court vide judgment dated 01.07.2024 in criminal Appeal No.7-D/X/2023 are ordered to be set aside, and the accused is acquitted of the commission of an offence punishable under Section 138 of the NI Act. The fine/compensation amount, if deposited by the petitioner/accused be refunded to him after the expiry of the statutory period of limitation in case of no further appeal, and in case of appeal, it shall be dealt with as per the orders of the Hon'ble Apex Court.

# 30. In view of the provisions of Section 437-A of the Code of Criminal Procedure (Section 481 of Bhartiya Nagarik Suraksha Sanhita, 2023) the petitioner is directed to furnish bail bonds in the sum of ₹50,000/- with one surety of the like amount to the satisfaction of the learned Trial Court which shall be effective for six months with a stipulation that in the event of of a Special Leave Petition being filed against this judgment or on grant of the leave, the petitioner on receipt of notice thereof rt shall appear before the Hon'ble Supreme Court.

# 31. The present revision stands disposed of, so also the pending miscellaneous application(s), if any.

# 32. A copy of the judgment, along with records of the learned Courts below, be sent back forthwith.

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Asset Reconstruction Company (India) Ltd. Vs. Umesh Garg, RP of JCT Ltd. and Anr. - A time-barred debt does not constitute an admissible claim in CIRP, and the RP was correct to reject it on this ground.

 NCLT Chd. (2026.07.10) in Asset Reconstruction Company (India) Ltd. Vs. Umesh Garg, RP of JCT Ltd. and Anr. [(2026) ibclaw.in 2621 NCLT, I.A. No. 83 of 2026 in CP(IB) No. 325/Chd/PB/2023] held that;

• Where the materials produced by the claimant do not enable the RP to verify the claim, and where the claim appears ex facie unsupported or barred on the basis of the claimant’s own documents, the RP is not bound to collate the claim mechanically.

• Furthermore, as settled by the Hon’ble NCLAT in M/s SMS Foundation & Investment LLP v. Harsha Exito Engineering Pvt. Ltd., the mere rejection of a claim by the RP does not in itself amount to an impermissible adjudication.

• The Resolution Professional’s subsequent rejection of the claim upon a comprehensive review of this defective record cannot be termed a prohibited reversal of a concluded decision. Rather, in our view, it constitutes the strict discharge of a mandatory statutory duty under Regulation 14(2) of the CIRP Regulations, which obligates the Resolution Professional to revise provisional estimates made under Regulation 14(1) as soon as additional information, or the lack thereof, warrants such revision.

• The Hon’ble NCLAT, in Gradient Nirman Private Limited v. IFCI Ltd. (CA (AT) (Insolvency) No. 1491 of 2019), has conclusively held that the time spent pursuing recovery under the SARFAESI Act cannot be excluded for the purposes of computing the limitation period under the Code.

•  A time-barred debt does not constitute an admissible claim in CIRP, and the RP was correct to reject it on this ground.

Blogger’s Comments; NCLT Mumbai-V (2024.04.24) in Gokul Anilkumar Aggarwal Vs. Shailesh Bhalchandra Desai (IRP) and Anr. [ (2024) ibclaw.in 468 NCLT, I.A. 3272 of 2023 in C.P. No. (IB) 115 of 2021 ] held that;  

• # 23. This Bench relies on the Judgement of Hon’ble Supreme Court of India (20.04.1992) Punjab National Bank And Ors vs Surendra Prasad Sinha (Criminal Appeal No. 254 of 1992.) wherein it has been held that,

• "The rules of limitation are not meant to destroy the rights of the parties. Section 3 of the Limitation Act only bars the remedy, but does not destroy the right which the remedy relates to. The right to the debt continues to exist notwithstanding the remedy is barred by the limitation. Only exception in which the remedy also becomes barred by limitation is the right is destroyed. Though the right to enforce the debt by judicial process is barred, the right to debt remains. The time barred debt does not cease to exist by reason of s.3. That right can be exercised in any other manner than by means of a suit. The debt is not extinguished, but the remedy to enforce the liability is destroyed. What SC.3. refers only to the remedy but not to the right of the creditors. Such debt continues to subsists so long as it is not paid. It is not obligatory to file a suit to recover the debt."

• Therefore, the Claim under CIRP, cannot be rejected on the grounds that it is time barred. NCLAT (31.07.2019) in Sunil Kumar Aggarwal Vs. New Okhla Industrial Development Authority & Ors.[Company Appeal (AT) (Insolvency) No. 775 of 2019] held that the Interim Resolution Professional will examine the claim submitted by the Applicant and the same will not be rejected on the basis that it is time barred or filed by an entity other than Financial Creditor. The Adjudicating Authority had already made it crystal clear that “the claim can’t be rejected because it is time barred or it is claimed by an entity other than financial creditor.”

Excerpts of the Order; 

The present Application has been filed by Asset Reconstruction Company (India) Limited, acting in its capacity as trustee of Arcil-JCT III Trust (hereinafter referred to as “ARCIL” or “the Applicant”) with the following prayers:

• “(a) Quash and set aside the Letter/Order dated 07.01.2026 issued by the Resolution Professional rejecting the Applicant’s financial claim in the CIRP of JCT Limited, being illegal, arbitrary and without jurisdiction;

• (b) Admit and recognise the Applicant’s financial claim of Rs. 34,82,31,36,084/- (Rupees Three Thousand Four Hundred and Eighty Two Crores Thirty-One Lakhs Thirty Six Thousand and Eighty-Four only) as a Financial Debt of the Corporate Debtor under Sections 5(7) and 5(8) of the Insolvency and Bankruptcy Code, 2016, and treat the Applicant accordingly as a Financial Creditor with all consequential rights under the Code. And/Or

• (c) Alternatively, direct the Resolution Professional to forthwith admit and recognise the Applicant’s financial claim of Rs. 34,82,31,36,084/- (Rupees Three Thousand Four Hundred and Eighty Two Crores Thirty-One Lakhs Thirty Six Thousand and Eighty-Four only) as a Financial Debt of the Corporate Debtor under Sections 5(7) and 5(8) of the Insolvency and Bankruptcy Code, 2016;

• (d) Direct re-constitution and correction of the voting share of the Applicant in the Committee of Creditors (CoC) on the basis of the full admitted claim amount;

• (e) Restrain the Resolution Professional from taking any further material steps in the CIRP, including conducting CoC meetings, placing any resolution for voting, evaluating resolution plans, (including any distribution-affecting decisions) or acting upon any decisions of the CoC, based on the present defective constitution of the CoC, till the Applicant’s claim is duly admitted and voting share is correctly determined;

• (f) Pass such other and further orders as this Hon’ble Tribunal may deem fit and proper in the interest of justice, equity and good conscience.”

BRIEF FACTS

# 2. The brief facts of the case, as submitted by the Applicant, are summarised as follows:

(i) The Applicant acting as Trustee of ARCIL-JCT III Trust, is a company incorporated under the erstwhile Companies Act, 1956 and registered as an Asset Reconstruction Company under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter SARFAESI). The present Application has been filed before this Tribunal in the Corporate Insolvency Resolution Process of JCT Limited (the “Corporate Debtor”), being conducted under CP(IB) No. 325/2023.

(ii) JCT Electronics Limited (“JCTEL”), a subsidiary of the Corporate Debtor, availed three distinct credit facilities from IFCI Limited between 1993 and 1998: (a) Equipment Credit Scheme of Rs.400 Lakhs vide agreement dated 01.09.1993; (b) Foreign Currency Loan of DM 16,566,406 (equivalent to Rs.3,580 Lakhs), vide agreement, dated 27.03.1998; and (c) Rupee Term Loan of Rs.1,248 Lakhs vide agreement dated 21.07.1998. To secure these facilities, the Corporate Debtor executed irrevocable, unconditional and continuing corporate guarantees in favour of IFCI Limited, rendering itself jointly and severally liable for repayment of the entire debt upon default by JCTEL. The guarantees expressly provided that they would remain in full force until repayment in full of all moneys due, and were unaffected by any change in the constitution or status of the borrower or guarantor.

(iii) Upon JCTEL’s persistent default, IFCI classified the loan account as a Non-Performing Asset (NPA) on 14.10.2001, issued a loan recall notice on 26.11.2001, and on 25.01.2002 invoked the corporate guarantee of JCT Limited demanding repayment of the entire outstanding dues. On 31.01.2002, IFCI filed Original Application No. 23 of 2002 before the Debts Recovery Tribunal, Chandigarh, claiming a consolidated recovery of Rs.220,16,75,188.63/-, of which Rs.56,68,92,019/- was specifically claimed from the Corporate Debtor as corporate guarantor in respect of the two guaranteed facilities, together with pendente lite interest at a weighted average rate of 18.13% per annum.

(iv) In 2005, JCTEL’s accumulated losses exceeded its net worth and it was declared a sick industrial undertaking by the BIFR on 12.12.2005. The Board for Industrial and Financial Reconstruction (hereinafter BIFR) sanctioned Rehabilitation Scheme SS-07 on 12.03.2007. Pertinently, Clause IV, Paragraph 21 of the sanctioned scheme expressly preserved all existing loan agreements, securities and guarantees, stipulating that they shall “remain in full force and binding between the parties. Clause IV(2) further stipulated that the right to revoke the rehabilitation package and revert to original loan terms could be exercised only with the prior approval of the BIFR.

(v) Vide Assignment Agreement dated 13.05.2015, IFCI Limited assigned the loan account of JCTEL, together with all underlying rights, securities and guarantees including the corporate guarantee of the Corporate Debtor, to ARCIL in accordance with the SARFAESI Act, 2002. The ARCIL thereby stepped into the shoes of IFCI as the rightful creditor, with co-extensive rights of enforcement. The ARCIL was also substituted as the Applicant in the pending DRT proceedings.

(vi) The BIFR, vide Orders dated 08.07.2015 and 14.10.2015, declared the Rehabilitation Scheme as failed and recommended winding up of JCTEL under Section 20(1) of Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter SICA). Hon’ble Punjab and Haryana High Court admitted the winding-up petition on 01.02.2016 and ordered winding up on 26.08.2016. The Applicant contends that upon failure of the scheme, by operation of Section 22(4)(b) of SICA, all concessions and modifications stood automatically withdrawn and original rights and liabilities revived. Accordingly, the ARCIL issued a statutory demand notice under Section 13(2) of the SARFAESI Act on 04.11.2015 demanding repayment of Rs.4,651,65,58,436/-. In its reply dated 11.02.2016, the Corporate Debtor did not dispute the execution or validity of the corporate guarantee but raised objections only to the computation of the claimed amount.

(vii) The Corporate Insolvency Resolution Process against the Corporate Debtor was commenced vide Order of this Tribunal dated 25.10.2024, and Mr. Hasti Mal Kachhara was appointed as the Interim Resolution Professional (for short IRP). In response to the public announcement, the ARCIL filed its claim in Form C on 21.01.2025 for a total of Rs.34,82,31,36,084/-, comprising principal, contractual interest, penal charges, liquidated damages and other recoverable components under the facility agreements, supported by comprehensive documentation including loan agreements, corporate guarantees, the assignment deed, DRT pleadings, and a detailed computation of outstanding dues.

(viii) The IRP provisionally admitted only the principal component of Rs.56,68,92,019/- while keeping the interest and other components under verification, citing inability to access the Corporate Debtor’s SAP accounting system which had been deactivated with effect from 01.04.2025. The ARCIL was inducted into the Committee of Creditors (for short CoC) on the basis of this provisional admission and participated in CoC meetings, exercised voting rights, and was called upon to make CIRP cost contributions as a Financial Creditor.

(ix) Having been unable to secure complete verification, the Applicant filed IA No. 1422 of 2025 before this Tribunal seeking directions for verification, whereafter Mr. Umesh Garg was appointed as the Resolution Professional (For short RP). Subsequently, IA No. 1712 of 2025 was filed seeking time-bound verification, and this Tribunal vide order dated 18.11.2025 directed the RP to complete verification within two weeks. Pursuant to this direction, the RP raised successive queries between 20.11.2025 and 07.01.2026 relating to the validity and invocation of the guarantee, limitation, interest computation, the BIFR scheme, and the requirement of a BIFR revocation order all of which were comprehensively answered by the Applicant with supporting documentation, including the loan agreements, guarantee deeds, assignment deed, DRT pleadings, SARFAESI notices, BIFR orders, winding-up orders, annual reports, and detailed interest workings.

(x) Notwithstanding the Applicant’s complete and prompt compliance, the RP vide letter dated 07.01.2026 issued just four days before the scheduled resolution plan submission date of 11.01.2026 rejected the Applicant’s entire claim including the principal amount already admitted by the erstwhile IRP, without identifying any specific documentary deficiency and without addressing the detailed clarifications placed on record. It is this rejection that is the subject matter of the present application.

ANALYSIS AND FINDINGS

# 7. We have heard the learned counsel for the parties and perused the material available on record carefully.

# 8. The present Application raises the following issues for our determination:

• Issue No. 1

• Whether, in the facts and circumstances of the present case, the Resolution Professional acted within the scope of his statutory mandate under Section 18(1)(b) of the Code read with Regulations 13 and 14 of the CIRP Regulations while rejecting/revising the Applicant’s claim vide letter dated 07.01.2026, or whether such rejection amounted to an impermissible adjudication of disputed rights?

• Issue No. 2

• Whether the Applicant’s claim, founded upon corporate guarantees invoked in 2002, was within limitation as on the insolvency commencement date, having regard to the invocation of guarantee, the effect of the BIFR rehabilitation scheme, the admitted default from April 2011, subsequent SARFAESI/DRT proceedings, and the alleged acknowledgments relied upon by the Applicant?

• Issue No. 3

• Whether the Corporate Debtor’s balance sheet disclosures of the corporate guarantee as a contingent liability, accompanied by an express board-approved caveat disputing the legal sustainability of the Applicant’s claim, constitute valid and unequivocal acknowledgements of liability under Section 18 of the Limitation Act, 1963?

Issue No. 1

# 9. At the outset, we deem it necessary to go through the statutory framework. Under Section 18(1)(b) of the Code, the RP is obligated to receive and collate all claims submitted by creditors. Regulation 13 of the CIRP Regulations, 2016, requires the RP to verify the claims so received, while Regulation 14 empowers revision of the amount admitted, including provisional estimates, upon coming across additional information warranting such revision. In our considered view, these provisions are relevant to the facts of the present case and vest the RP with a duty of a substantive character, and it is not a mere ministerial exercise of affixing a rubber stamp. The RP is required to satisfy himself that the claimant has demonstrated entitlement as a creditor, that the documents furnished establish a prima facie debt, and that the claim is supported by an adequate documentary record.

# 10. The role of a Resolution Professional in the claim verification process, though administrative in character, is not a passive or ministerial function. Under the CIRP Regulations, 2016, the RP is mandated to receive, collate and verify claims, to call for such evidence as may be necessary, and to revise admitted amounts upon receipt of additional information. The Hon’ble NCLAT in Umesh Kumar v. Narendra Kumar Sharma (CA (AT) (Insolvency) No. 100 of 2024) has unequivocally held that the RP is not expected to rubber-stamp claims without exercising due diligence, and that a failure to conduct basic verification would render the Information Memorandum defective with adverse consequences for the CIRP process. The RP is accordingly required to examine whether the claim is supported by sufficient documentary material for collation and whether any defect is apparent on the face of the record, without undertaking adjudication of disputed contractual rights or finally determining the validity of contractual arrangements between the parties.

# 11. To hold that the RP must admit a claim notwithstanding ex facie defects in the documents would defeat the purpose of the verification exercise entirely. The relevant paras of Umesh Kumar (supra) are reproduced for ready reference: –

• “16. If we look at the statutory construct and the regulatory framework of the IBC, broadly speaking, we find that the mandate of the RP includes receiving, collating, and verifying the claims received by him during CIRP. It is also settled law that the RP is not vested with adjudicatory powers as decided in the Swiss Ribbons judgement of the Hon’ble Apex Court. The RP is required to prepare a list of creditors on the basis of the proofs of claim submitted before it. Basis these claims, it is the responsibility of the RP to publish the Information Memorandum so that a genuine resolution applicant gets an accurate idea about the amount that has to be settled in order to take over and revive the business of the Corporate Debtor.

• 17. Given this mandate, the role of the RP becomes vital to the efficient and transparent conduct of the CIRP process. When claims are submitted to the RP, even though there are no adjudicatory powers vested on the RP in respect of the claims filed before him, it remains undisputed that there is an express provision in the CIRP Regulations which enables RP to seek information towards establishment of the correctness of a claim. The RP is entitled to seek substantiation of claims under Regulation 10 of CIRP Regulations. The duty to verify the claims by the IRP/RP has also been expressly provided under Regulation 13 of the CIRP Regulations. This verification exercise entails upon the RP the responsibility to go through the supporting proof/documents to establish the truth and accuracy of information contained therein in support of the claim so filed. On verification, if the RP finds that the evidence given in support of a claim is weak and unconvincing, the RP can always ask for more proof to substantiate the claim. Towards substantiating a claim, a creditor is ordinarily expected to provide proof to make it solid or believable. If credible and satisfactory evidence is not forthcoming from the creditor in spite of adequate opportunity made available to provide the same, the RP can always keep in abeyance the decision to accept/reject the said claim.”

• ….XXX….

• “24. After going through the invoices, the RP was of the view that there were no underlying records and hence undertook to verify the genuineness of the claims. We are of the considered opinion that the RP is not expected to rubber stamp the claims filed by the creditors without exercising due diligence while examining the invoices. By merely filing their claims, the creditor cannot rest on its oars and refrain from providing further evidence if it so sought by the RP by taking shelter on the ground that the RP lacks adjudicating powers. If such basic verification is not done, the logical corollary is that the Information Memorandum is likely to be defective and flawed thereby having consequential adverse impact on the CIRP process. Allowing such perfunctory submission of invoices without proper examination has the potential to defeat the objectives of the IBC. At this juncture it may however not be out of place to mention here that the observations made by the RP regarding the Agreement basis which the Adjudicating Authority has termed the Agreement as nebulous is not in order. We are of the considered opinion that examining the validity/sustainability of any contractual agreement including its formatting etc lies outside the purview of the charter of duties and responsibilities of the RP. In fact, determination of the tenability/validity of a contractual agreement falls in the realm of a civil dispute and therefore outside the scope and jurisdiction of both the Adjudicating Authority and the Appellate Tribunal. Be that as it may, this does not prevent the RP from seeking additional information from any creditor to substantiate his claims.”

• ….XXX….

• “26. The IBC framework has endowed the RP with the cardinal responsibility as facilitator of the CIRP process. This obligates the RP to take reasonable care and diligence while performing his duties. That being so the RP is very much required to undertake appropriate verification and analysis of the claims filed. RP cannot afford to be unmindful of the fact that he is expected to assist in the CIRP process in a fair and objective manner in the best interest of all stakeholders. As an officer of the court vested with administrative powers, the RP is expected to conduct the CIRP process with fairness, diligence, forthrightness and highest sense of responsibility. It is quite clear from the sequence of events in the present facts of the case that the RP had been consistently pointing out that he is not in a position to verify the claims due to want of documents substantiating the claims.”

# 12. Turning to the facts of the present case, the Applicant filed its claim in Form-C on 21.01.2025 claiming a total amount of Rs. 34,82,31,36,084/-. To substantiate this figure, the Applicant failed to produce an authenticated Statement of Account of the principal borrower (JCTEL) maintained in the ordinary course of business by IFCI or ARCIL. Instead, the Applicant submitted a self-calculated ‘Total Dues Calculation Work Sheet’. This worksheet was flawed as it improperly consolidated the principal outstanding across seven distinct loan facilities, producing a combined principal figure of Rs. 116.10 Crores as on 12.03.2007. Crucially, the Corporate Debtor, JCT Limited, had executed corporate guarantees in respect of only two of those specific facilities. The RP was therefore confronted with a claim computation that failed to distinguish between guaranteed and unguaranteed exposures. This documentary deficiency persisted despite repeated and specific requests made by the RP vide emails dated 03.11.2025, 11.11.2025, 21.11.2025, 29.12.2025, and 31.12.2025. Moreover, this failure continued despite this Tribunal’s express Order dated 18.11.2025 in IA No. 1712 of 2025, wherein the Applicant’s Counsel had explicitly assured the Bench that the requisite details for claim verification would be provided expeditiously. The discrepancy and documentary deficiency went to the very foundation of the claimed amount, making it administratively impossible for the RP to accurately verify or admit the claim in the fundamentally defective form presented.

# 13. The Applicant contended that the RP’s grounds for rejecting the claim, namely, limitation, the unenforceability of the guarantee, and the effect of the BIFR scheme, were adjudicatory in character and were thus beyond the RP’s statutory jurisdiction. This submission, however, fails to appreciate the fundamental distinction between adjudicating a disputed question of law and discharging the administrative duty of verifying claims against admitted facts and foundational documents. The RP was bound by the express contractual terms of the Guarantee Agreement dated 01.09.1993, specifically Clause 12, which dictates the strict commencement of limitation and reads verbatim as follows:

• “12. Any demand for payment or notice under this guarantee shall be sufficiently given if sent by post to or left at the last known addresses of the guarantor or their successors or assigns, as the case may be, and such demand or notice is to be made or given, and shall be assumed to have reached the addressee in the course of post, if given by post, and no period of limitation shall commence to run in favour of the guarantor until after demand for payment in writing shall have been made or given as aforesaid and in proving such notice when sent by post it shall be sufficiently proved that the envelope containing the notice was posted and a certificate by any of the responsible officers of IFCI that to the best of his knowledge and belief, the envelope containing the said notice was so posted shall be conclusive as against the guarantor, even though it was returned unserved on account of refusal of the guarantors or otherwise.”

# 14. Where the materials produced by the claimant do not enable the RP to verify the claim, and where the claim appears ex facie unsupported or barred on the basis of the claimant’s own documents, the RP is not bound to collate the claim mechanically. Such refusal, when based on apparent defects, insufficiency of proof, and the claimant’s own foundational documents, falls within the verification function and does not, by itself, amount to adjudication of disputed civil rights. Identifying such defects from the face of the record is consistent with the due diligence mandate recognised by the Hon’ble NCLAT in Umesh Kumar (supra). Furthermore, as settled by the Hon’ble NCLAT in M/s SMS Foundation & Investment LLP v. Harsha Exito Engineering Pvt. Ltd., the mere rejection of a claim by the RP does not in itself amount to an impermissible adjudication.

# 15. The Applicant has relied upon L&T Finance Ltd. v. Divyesh Desai (RP) (I.A. No. 4404 of 2024, NCLT Mumbai, decided 10.09.2025) and Hitesh Hasmukhlal Damania v. Manish Lalji Dawda (RP) (IA/942/2024, NCLT Mumbai, decided 18.07.2025) to contend that the RP, having once admitted the principal claim, became functus officio and was barred from reversing it. The legal proposition that a Resolution Professional cannot suo-motu overturn a finally admitted claim is well-settled and is not in dispute. What is in dispute is whether that proposition has any application to the facts of this case.

# 16. The ratio in both cited decisions rests on one indispensable factual premise that the claims therein had been verified and unequivocally admitted, without any such qualification or reservation. In L&T Finance (supra), the admission email of 23.04.2024 was unconditional; the reversal three days later was a pure suo-motu review of a concluded decision. In Hitesh Damania (supra), the IRP had admitted the claim after examining the allotment letter, MOU and registered agreement for sale, and the claim stood duly reflected in the IBBI portal’s list of creditors. In both cases, there was a final, acted-upon admission, which is the sine qua non of the protection these decisions afford. That premise, in our considered view, is wholly absent here as the IRP’s email dated 07.07.2025, explicitly records that the Corporate Debtor’s SAP system had been deactivated, making verification of books of account impossible, and formally caveats: “The claim is provisionally admitted of all the creditors as information/details/clarification/documents from the books of accounts and/or the respective creditor is pending.” This is not a final admission but is a temporary holding position squarely constituting a best estimate under Regulation 14(1) of the CIRP Regulations, 2016.

# 17. The subsequent RP’s rejection, upon a thorough review of the foundational documents, was therefore not a prohibited reversal of a concluded decision. It was the discharge of a mandatory duty under Regulation 14(2) of the CIRP Regulations, 2016, which obligates the RP to revise provisional estimates as soon as additional information warrants such revision. The cited decisions have no application to the present facts.

# 18. We observe that the Resolution Professional’s rejection of the claim was a lawful exercise of his statutory verification mandate. The rejection was grounded not merely in legal conclusions but in demonstrable documentary deficiencies and the failure of the Applicant to produce foundational documents despite repeated requests and a Tribunal direction. The impugned rejection does not, in the circumstances, amount to an impermissible exercise of adjudicatory power.

# 19. Accordingly, on Issue No. 1, we find that the Resolution Professional’s rejection of the Applicant’s claim vide letter dated 07.01.2026 was in exercise of powers conferred under the provisions of the Code and the Regulations made thereunder. The impugned rejection does not amount to an impermissible exercise of adjudicatory power.

# 20. Furthermore, vide Order dated 18.11.2025, this Tribunal disposed of IA No. 1712 of 2025 upon recording the Resolution Professional’s assurance to complete the verification process within two weeks, explicitly making it subject to the Applicant providing the required details.

# 21. While the Applicant did furnish a voluminous set of correspondence, BIFR orders and original deeds, it did not furnish an authenticated Statement of Account of the borrower sufficient to segregate the guaranteed debt from the unguaranteed debt. Further, the Applicant did not satisfactorily address the effect of the sanctioned BIFR scheme, particularly the clause concerning revocation of the rehabilitation package and reversion to original loan terms with prior approval of BIFR. These deficiencies were material to the verification exercise and could not be treated as merely technical.

# 22. The Resolution Professional’s subsequent rejection of the claim upon a comprehensive review of this defective record cannot be termed a prohibited reversal of a concluded decision. Rather, in our view, it constitutes the strict discharge of a mandatory statutory duty under Regulation 14(2) of the CIRP Regulations, which obligates the Resolution Professional to revise provisional estimates made under Regulation 14(1) as soon as additional information, or the lack thereof, warrants such revision.

Issue No. 2

# 23. The question of limitation is determinative of the admissibility of the Applicant’s claim. For a proper appreciation of the issue of limitation, it would be useful to first set out the material dates and events.

Date	Event
01.09.1993	Guarantee Deed executed by JCT Limited in favour of IFCI Limited.
14.10.2001	Loan account of the principal borrower, JCTEL, classified as a Non-Performing Asset.
25.01.2002	IFCI Limited issued a written demand notice invoking the corporate guarantee of JCT Limited and demanding payment of Rs.42,06,16,763/-.
31.01.2002	IFCI Limited filed Original Application No. 23 of 2002 before the Debts Recovery Tribunal, Chandigarh, against the principal borrower and the Corporate Debtor.
12.12.2005	JCTEL declared a sick industrial undertaking by the Board for Industrial and Financial Reconstruction under SICA, 1985.
12.03.2007	BIFR sanctioned the Rehabilitation Scheme SS-07, modifying the repayment terms of the outstanding facilities.
March 2011	Last repayment made by JCTEL under the sanctioned BIFR Rehabilitation Scheme SS-07.
April 2011	JCTEL commenced defaulting on repayment obligations under the Rehabilitation Scheme, as recorded in the Applicant’s own application before the BIFR dated 20.03.2015, Annexure A-11.
13.05.2015	IFCI Limited assigned the loan account of JCTEL and the benefit of the corporate guarantees furnished by JCT Limited to ARCIL vide Assignment Agreement.
08.07.2015 and 14.10.2015	BIFR passed orders declaring the Rehabilitation Scheme as failed, formed an opinion that revival of JCTEL was not viable, and recommended winding up.
04.11.2015	ARCIL issued a demand notice to the borrower and the Corporate Debtor under Section 13(2) of the SARFAESI Act, 2002.
11.02.2016	JCT Limited replied to the SARFAESI demand notice, formally disputing the claim.
01.02.2016 and 26.08.2016	Hon’ble Punjab and Haryana High Court passed orders for the winding up of JCTEL and appointed an Official Liquidator.
25.10.2024	Corporate Insolvency Resolution Process commenced against JCT Limited vide order of this Tribunal in CP(IB) No. 325/2023.
21.01.2025	ARCIL submitted its claim in Form C before the Resolution Professional claiming a total of Rs.34,82,31,36,084/-.

# 24. The Applicant has relied upon the judgment of the Hon’ble Supreme Court in China Development Bank v. Doha Bank Q.P.S.C., (2024) ibclaw.in 340 SC. In that case, the issue was whether an obligation contained in the Deeds of Hypothecation, read with the Master Security Trustee Agreement, could amount to a guarantee and therefore constitute “financial debt” under Section 5(8)(i) of the Code. The Hon’ble Supreme Court held that the nomenclature of a document is not decisive, and that if a corporate debtor undertakes to discharge the liability of a third party in case of default, such obligation may amount to a guarantee. It was further held that, for filing a claim in CIRP, actual default is not a pre-condition.

3 25. However, the said judgment does not assist the Applicant on the issue of limitation. China Development Bank (supra) did not deal with a case where a corporate guarantee had already been invoked long before commencement of CIRP and the question was whether the claim based on such invoked guarantee had become time-barred. In the present case, Clause 12 of the Guarantee Deed dated 01.09.1993 explicitly dictates the trigger for the limitation period in the following terms: “…no period of limitation shall commence to run in favour of the guarantor until after demand for payment in writing shall have been made or given as aforesaid…”.

# 26. IFCI Limited, the Applicant’s assignor, admittedly invoked the Corporate Debtor’s guarantee by written demand dated 25.01.2002. Therefore, limitation commenced from that date.

# 27. Thus, the principle laid down in China Development Bank (supra) that actual default is not necessary for filing a claim cannot be read to mean that a time-barred claim can be admitted in CIRP. Since the guarantee in the present case was invoked on 25.01.2002, the three-year limitation period under Article 137 of the Limitation Act, 1963 expired on 24.01.2005, unless saved by any valid acknowledgment, payment, statutory exclusion, or other legally recognised ground.

# 28. The legal position governing the commencement of limitation against a corporate guarantor under a demand guarantee stands authoritatively settled by the Hon’ble NCLAT in Pooja Ramesh Singh v. State Bank of India & Ors. (2023 SCC OnLine NCLAT 193). The Hon’ble NCLAT, upon an exhaustive examination of the IBC and the Indian Contract Act, placed reliance upon the Hon’ble Supreme Court’s decision in Syndicate Bank v. Channaveerappa Beleri & Ors. ((2006) 11 SCC 506) and extracted the following passage at Paragraph 15 of Pooja Ramesh Singh:

• “9. A guarantor’s liability depends upon the terms of his contract. A ‘continuing guarantee’ is different from an ordinary guarantee. There is also a difference between a guarantee which stipulates that the guarantor is liable to pay only on a demand by the creditor, and a guarantee which does not contain such a condition. Further, depending on the terms of guarantee, the liability of a guarantor may be limited to a particular sum, instead of the liability being to the same extent as that of the principal debtor. The liability to pay may arise, on the principal debtor and guarantor, at the same time or at different points of time. A claim may be even time-barred against the principal debtor, but still enforceable against the guarantor. The parties may agree that the liability of a guarantor shall arise at a later point of time than that of the principal debtor. We have referred to these aspects only to underline the fact that the extent of liability under a guarantee as also the question as to when the liability of a guarantor will arise, would depend purely on the terms of the contract.

• 11. But in the case on hand, the guarantee deeds specifically state that the guarantors agree to pay and satisfy the bank on demand and interest will be payable by the guarantors only from the date of demand. In a case where the guarantee is payable on demand, as held in the case of Bradford (supra) and Hartland (supra), the limitation begins to run when the demand is made and the guarantor commits breach by not complying with the demand.”

# 29. Consequently, the claim presented by the Applicant was ex-facie time-barred. As authoritatively settled by the Hon’ble Supreme Court in B.K. Educational Services Pvt. Ltd. v. Parag Gupta & Associates ( (2019) 11 SCC 633), the Insolvency and Bankruptcy Code cannot be employed as a vehicle to resurrect dead claims. The Apex Court unequivocally laid down that “the intent of the Code could not have been to give a new lease of life to debts which are time-barred. It is settled law that when a debt is barred by time, the right to a remedy is time-barred.” Therefore, in the facts of the present case, the rejection of the claim was undertaken in the course of the RP’s statutory duty to verify claims, and cannot, on that basis alone, be characterised as an adjudicatory overreach..

# 30. The Applicant invoked the suspension of proceedings under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) during the pendency of BIFR proceedings to claim an exclusion of the limitation period. However, even if the sanctioned Rehabilitation Scheme (SS-07) dated 12.03.2007 suspended or reset the limitation clock, such an interpretation fails to assist the Applicant’s case. The evidentiary record, specifically the Applicant’s own application filed before the Hon’ble BIFR on 20.03.2015, contains an admission regarding the date of default. In Paragraphs 3 and 4 of the said application, the Applicant categorically stated that the sick company made repayments under the scheme only until March 2011 and “started defaulting on making repayment to lenders thereafter. Since April 2011 sick company has not made any repayment to lenders”. Consequently, computing the three-year limitation period from this admitted default of April 2011, the limitation inexorably expired in April 2014. The demand notice under Section 13(2) of the SARFAESI Act subsequently issued by ARCIL on 04.11.2015 was, therefore, issued well after the expiry of this statutory period.

# 31. Furthermore, the Applicant cannot derive any legal benefit from the pendency of proceedings before the Debts Recovery Tribunal (DRT) or the issuance of the belated SARFAESI notice to extend the limitation period under the IBC. The Hon’ble NCLAT, in Gradient Nirman Private Limited v. IFCI Ltd. (CA (AT) (Insolvency) No. 1491 of 2019), has conclusively held that the time spent pursuing recovery under the SARFAESI Act cannot be excluded for the purposes of computing the limitation period under the Code. Similarly, the Hon’ble NCLAT in Bimal Kumar Manubhai Savalia v. Bank of India & Anr. (2020 SCC OnLine NCLAT 400) has settled that the pendency of proceedings before the DRT under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 does not interrupt or extend the limitation period for the purposes of the IBC, as the Code is a complete and self-contained enactment overriding other laws by virtue of Section 238. These binding authorities are directly applicable to the present facts. The claim, even if computed from the original invocation in January, 2002 or the subsequent default in April, 2011, it is barred by limitation.

# 32. The Applicant has also contended that upon failure of the BIFR Rehabilitation Scheme SS-07, all original rights and liabilities revived automatically by operation of Section 22(4)(b) of SICA, 1985, without requirement of a separate BIFR revocation order. Even assuming, that upon failure of the BIFR Rehabilitation Scheme SS-07 the original rights and liabilities stood revived, such revival would not by itself create an indefinite or fresh period of limitation. The effect of Section 22(5) of SICA is confined to exclusion of the period during which the remedy remained suspended under Section 22(1). It does not wipe the slate clean or shift the commencement of limitation from the original date of default to the date of failure of the scheme.

# 33. This legal position is firmly anchored in the decision of the Hon’ble Supreme Court in Sabarmati Gas Limited v. Shah Alloys Ltd. ((2023) 3 SCC 229), wherein the Apex Court clarified that while the period of statutory disability under Section 22(1) of SICA is excludable under Section 22(5), the limitation period is otherwise to be strictly reckoned from the date of default and is extendable only by application of section 5 of the Limitation Act, 1963.

# 34. The Applicant’s own application before the BIFR dated 20.03.2015 expressly records that the borrower made regular repayments under the sanctioned scheme until March 2011 and commenced defaulting from April 2011. Accordingly, even treating the cause of action as having crystallised afresh upon this admitted default, the three-year period under Article 137 of the Limitation Act, 1963 ran from April 2011 and expired in April 2014. The argument of automatic revival thus does no more than confirm a fresh limitation period that has itself long since expired.

# 35. The Applicant’s plea of automatic revival is, in any event, further weakened by the express written terms of the sanctioned Scheme itself. Clause IV(2) of the Rehabilitation Scheme SS-07 stipulates in unambiguous terms that the right to revoke the rehabilitation package and revert to the original loan terms could be exercised only “with the prior approval of BIFR.” No such order was produced by the Applicant. Clause IV(2) (under “Other Conditions”) of the Rehabilitation Scheme SS-07, is reproduced for reference:

• “If the company commits default towards repayment of principal installment or payment of interest as per the sanctioned scheme or any combination, FIs / Banks reserve the right to charge interest on the defaulted amount at top of the band together with liquidated damages of 2% p.a. thereon till the date of clearance of default or FIs/Banks shall have the right to convert entire overdues into fully paid up equity shares of JCTEL at par during the currency of the loans as per SEBI guidelines, or otherwise but with the permission of BIFR, FIs/Banks also reserve the right to revoke the package of rehabilitation with the prior approval of BIFR and in such event of revocation the decision of Fis/Banks shall be final and binding on the borrower and or guarantors. In case of Fis/Banks exercising the right of revocation, the financial rehabilitation sanctioned or granted to JCTEL shall be treated as withdrawn and the terms and conditions of the original loan agreements or documents shall come into force as if no such financial rehabilitation were ever granted to JCTEL. Further, Fis/Banks shall have the right to adjust payment received under the present package of financial rehabilitation against outstanding due in terms of original loan agreements/ documents.”

# 36. The Applicant’s position is further undermined by its own conduct under the Scheme. Clause III(b) of SS-07 mandated that secured creditors shall withdraw pending DRT recovery suits within three months of the scheme’s sanction, i.e., by 11.06.2007. The Applicant’s assignor IFCI never withdrew those proceedings, yet continued to receive and accept repayments under the Scheme until March 2011 availing the financial benefits of the very instrument whose mandatory obligations it chose to disregard.

# 37. On Issue No. 2, we thus find that the Applicant’s claim is barred by limitation. The three-year period under Article 137 of the Limitation Act, running from the Applicant’s own admitted date of default in April 2011, expired in April 2014. The SARFAESI notice, DRT proceedings, and COVID-19 exclusion do not interrupt or extend this period for the purposes of IBC proceedings in the facts of the case. A time-barred debt does not constitute an admissible claim in CIRP, and the RP was correct to reject it on this ground.

Issue No. 3

# 38. The Applicant has relied upon the Corporate Debtor’s audited annual reports from FY 2007-08 to 2022-23, submitting that the continuous disclosure of the corporate guarantee as a contingent liability constitutes a valid acknowledgment of debt under Section 18 of the Limitation Act, 1963, thereby refreshing the period of limitation. To substantiate this, reliance is placed upon the decision of the Hon’ble Supreme Court in Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal ((2021) 6 SCC 366), which settled that balance sheet entries may amount to acknowledgments of liability under Section 18. The Applicant further draws upon the decision of the Hon’ble NCLAT in Asset Reconstruction Company (India) Ltd. v. Uniworth Textiles Ltd. to contend that acknowledgment of liability in financial statements preserves the enforceability of the debt under the IBC.

# 39. The Resolution Professional, on the other hand, has also relied upon the same decision in Bishal Jaiswal (supra) to emphasise its crucial and express caveat “that an entry in a balance sheet does not amount to a valid acknowledgment where it is accompanied by a qualification or denial placed by the management in the Director’s Report or Notes to Accounts.” Both parties thus draw from the same authority, and the outcome of this issue turns entirely upon the present facts. Paragraph 22 of Bishal Jaiswal (supra) is reproduced for reference:

• “22. A perusal of the aforesaid Sections would show that there is no doubt that the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7). Equally, the auditor’s report may also enter caveats with regard to acknowledgements made in the books of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills (supra), that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law as it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgement of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act.”

# 40. The broad legal propositions advanced by both sides regarding Section 18 are the correct propositions of law. However, neither of the Applicant’s relied-upon judgments assists its case on the present facts. The essential framework emerging from Bishal Jaiswal (supra), as subsequently applied by the Hon’ble Supreme Court in IL&FS Financial Services Limited v. Adhunik Meghalaya Steels Pvt. Ltd. (Civil Appeal No. 5787 of 2025, decided on 30.07.2025) 2025 INSC 911. In this judgment, the Hon’ble Supreme Court held that the balance sheet constituted a valid acknowledgment primarily because the corporate debtor had failed to enter any substantive, contemporaneous caveats regarding the debt, relying instead on a belated, general denial during pleadings. The Apex Court explicitly noted this fatal deficiency in Paragraph 42 of the judgment, observing:

• “42. In addition to the above, it is significant to note that in this case in the reply filed to the Section 7 application, apart from a general objection as to the application being barred by limitation only a bare denial was made in the following terms:- “(sic) deny that Balance Sheet of CD can be treated as acknowledgment of debt as wrongfully alleged or at all.”

# 41. The facts of the present case stand in contrast to the matrix in IL&FS (supra). The Corporate Debtor herein did not resort to a mere ‘bare denial’ as an afterthought in its pleadings. Rather, the disclosures relied upon by the Applicants are accompanied by express, board-approved caveats disputing the legal sustainability of ARCIL’s claim. The Director’s Reports for FY 2014-15, 2015-16, and 2016-17 explicitly record: “The Company has disputed the repayment of due… Under these facts and circumstances, the figures of the borrowed amount in this balance sheet cannot be considered as admission, if any, of the claim of lender(s).” From FY 2016-17 onwards, Note 31.2/39.2 of the financial statements contains a further direct board-approved declaration: “The Company had executed a Corporate guarantee of Rs. 400 lakhs towards Equipment Credit Scheme on 01.09.1993 and another towards foreign currency loan of DM 166,566,406 equivalant to Rs.3,580 lakhs as on 27.03.1998 for the term loan availed by JCT Electronics Ltd. (an erstwhile Associate Company) from IFCI Ltd. Subsequently, IFCI Ltd. assigned their debt to Asset Reconstruction Company (India) Limited (ARCIL) who had issued notice to the Company on 07.11.2015 for winding up under the then existing sections of the Companies Act, 1956. The Company has disputed the notice with ARCIL, thereafter no response has been received from ARCIL. Further, the Company has been legally advised that the demand raised by them is not sustainable.”

# 42. These are not categorical acknowledgments of liability as claimed by the Applicant. They are categorical statements disputing the legal validity and sustainability of the Applicant’s claim, placed repeatedly on the face of the statutory disclosures themselves. Therefore, applying the caveat exception recognised in Bishal Jaiswal (supra), read with the reasoning in IL&FS (supra), such disputed financial entries cannot qualify as valid acknowledgments of debt under Section 18 of the Limitation Act.

# 43. The Corporate Debtor here has done precisely what Bishal Jaiswal contemplates as negating acknowledgment. The caveats go well beyond routine qualification and constitute an outright, board-level denial of the Applicant’s claim.

# 44. Section 18 of the Limitation Act requires an acknowledgment of a subsisting liability in relation to a property or right. An acknowledgment of the existence of a dispute, accompanied by a denial of the legal sustainability of the claim, is not an acknowledgment of the liability itself. The unequivocal jural relationship of debtor and creditor which is the sine qua non of a valid acknowledgment is negated, in our view, by the presence of a board-level denial of liability in the same document.

# 45. There is a further and independent legal impediment to the Applicant’s acknowledgment argument. Section 18 of the Limitation Act, 1963 mandates, as an express statutory condition, that an acknowledgment must be made before the expiration of the prescribed limitation period. An acknowledgment made after expiry is a nullity and cannot revive a time-barred debt, as consistently affirmed by the Hon’ble NCLAT in Bijay Kumar Agarwal v. State Bank of India (CA (AT) (Insolvency) No. 105 of 2022).

# 46. In the present case, the admitted default under the BIFR scheme having occurred in April 2011, the three-year period under Article 137 stood exhausted by April 2014. The balance sheet entries from FY 2014-15 onwards were accordingly made after the expiry of the limitation period and are incapable in law of constituting valid acknowledgments. The entries predating this expiry, even if treated as valid acknowledgments, would extend limitation only up to a period well short of the date of filing of the present claim in January 2025.

# 47. On Issue No. 3, we hold that the balance sheet entries relied upon by the Applicant do not constitute valid acknowledgments under Section 18 of the Limitation Act.

CONCLUSION

# 48. In light of the foregoing analysis, the following findings are recorded:

• (i) The rejection of the Applicant’s claim vide letter dated 07.01.2026 was a lawful exercise of the Resolution Professional’s statutory verification mandate;

• (ii) The IRP’s admission of Rs.56,68,92,019/- was explicitly provisional under Regulation 14(1). The RP’s revision under Regulation 14(2) was a discharge of a mandatory statutory duty;

• (iii) The Applicant’s claim is barred by limitation, the three-year period having expired in April 2014. The SARFAESI proceedings, DRT pendency, and COVID-19 exclusion do not bridge this gap for IBC purposes;

• (iv) The balance sheet entries relied upon do not constitute valid acknowledgments under Section 18 of the Limitation Act.

# 49. Accordingly, IA No. 83 of 2026, is dismissed and disposed of.

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