An application to the IBC should not amount to resurrection of time-barred debts which would have been dismissed on the ground of limitation, says SC

Last updated: 05 May 2021

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The Supreme Court has ruled that an application under the Insolvency and Bankruptcy Code (IBC) cannot be used to revive a debt that is time-barred by the Limitation Act. The court clarified that the IBC is not a mechanism to bring back debts that would otherwise be dismissed due to the expiry of the limitation period. This decision addresses the crucial issue of when a debt is considered legally recoverable in insolvency proceedings.

Court :
Supreme Court of India

Brief :
In 2009, Corporate Power Ltd. [“the corporate debtor”] set up a thermal power project in Jharkhand, and for so doing, availed of loan facilities from various lenders, including the State Bank of India [“SBI”]. The account of the corporate debtor was declared as a non-performing asset by SBI on 31.07.2013. On 27.03.2015, SBI issued a loan-recall notice to the corporate debtor in its capacity as the lenders’ agent. On 31.03.2015, some of the original lenders of the corporate debtor, namely, India Infrastructure Finance Company Limited, SBI, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Patiala, and State Bank of Travancore assigned the debts owed to them by the corporate debtor to the appellant, the Asset Reconstruction Company (India) Limited.

Citation :
CIVIL APPEAL NO.323 OF 2021

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