Acknowledgement of Debt of Corporate Debtor by Resolution Professional
The Resolution Professional (“RP”) is a person who is appointed by the adjudicating authority (“Adjudicating Authority” or “NCLT”) as proposed by the Financial Creditor and subsequently approved by the Committee of Creditors (“CoC”) in accordance with the provisions of Insolvency and Bankruptcy Code, 2016 (“IBC”) pursuant to which, inter alia, the management of Corporate Debtor (“Company in Insolvency”) shall vest in the RP during the Corporate Insolvency Resolution Process (“CIRP”). During CIRP, the Board of Corporate Debtor is suspended, and RP performs all function of Corporate Debtor including all statutory duties as required under all applicable laws like Companies Act, Tax laws etc. In fact, RP exercises the power of the board of directors as all such power is vested with the RP (Sections 17,18 and 20 of IBC). Practically, the Corporate Debtor affairs are managed by the RP (having statutory authority) without interference of the suspended directors.
Core Function of RP
One of the most important functions of RP is to collate claim of various entities including financial creditor and operational creditors and after verification accept or reject or modify the same based on records. Such a function of RP is an independent action to determine the liabilities of Corporate Debtor. Such a function of RP is mechanical in nature as all such claims are to be approved by the Adjudicating Authority.
Determination of Liabilities
RP, before accepting the Claim of Creditors, is required to verify the records, contractual documents, invoices, financial contracts/ financing documents/statuary records like balance sheet / ledgers, using information utilities etc.
Pursuant to Regulation 13 of the CIRP Regulations, RP within 7 days from the insolvency commencement date must verify every claim and any such claim should not be rejected solely on the ground of time barred claim as such issue to be determined by NCLT not RP as its function is admirative nature such as collation of claim for formation of CoC.
Legal Status of RP Under Companies Act
Corporate Debtor, being an artificial person, its mind is the members of its board of directors. RP, being a person appointment under the provisions of IBC and takes all actions or decisions subject to recommendation and approval of CoC and Adjudicating Authority (NCLT) in accordance with the provisions of IBC. Now the question is, can RP substitute the suspended directors during CIRP and be treated as the director of the Corporate Debtor under Companies Act. Just accepting the time barred claim is an acknowledgment of debt to creditors? Whether RP is acting as an “authorised agent” of the Corporate Debtor or merely performing its statutory duties subject to provisions of IBC. In other words, is RP performing his / her duties within four corners of provisions of IBC or their actions or decisions may be covered under other applicable laws like the Limitation Act, 1963 (“Limitation Act”) or Companies Act, 2013 (“Companies Act”). This is the most important legal issue being examined by judicial and quasi-judicial authorities and the same is discussed below-
Application of Limitation Act 1963 (“Limitation Act”) & IBC
On 1st December 2016, when IBC was notified, it was presumed that provisions of Limitation Act were not applicable in respect of applications to be filed before NCLT under the provisions of IBC. Later on, the Hon’ble Supreme Court in Sagar Sharma Vs Phoenix ARC Pvt Ltd ( Civil Appeal No. 7673 of 2019) determined the issue of applicability of Limitation Act and clarified that a Section 7 of IBC is an application / petition / to enforce a contractual right under IBC , therefore, Article 137 of Limitation Act, is applicable for filing an application under Section 7 of IBC. Subsequently, Section 238 was introduced in IBC by way of amendment to make applicable the provision of Limitation Act to IBC. Pursuant to the Article 137 of Limitation Act, any application for which no limitation period is provided, shall have a limitation period of 3 years including an application filed under Section 7 of the IBC. Such a period of 3 years shall start from the date of “cause of action” – date of default or date of admission of liabilities or debt by the party against whom action is required to be initiated in the courts or tribunals and the Adjudicating Authority has a power to reject any application filed under the provisions of IBC on the ground of time barred application under the Limitation Act.
On the basis above SC Judgment, the NCLAT again in in the matter of Sagar Sharma Vs Phoenix ARC Pvt Ltd (Company Appeal(AT) (Insolvency) No. 271 of 2020), held that Resolution Professional, lacking adjudicatory powers, cannot conclusively reject claims on the ground of limitation and such determination lies within the exclusive jurisdiction of the Adjudicating Authority under Section 60(5) of the Code. Therefore, time barred claims can be accepted by the Resolution Professional subject determination of its legality under law by the Adjudicating Authority.
Concept of Acknowledgment of Debt under Limitation Act – Judicial Analysis
It is well established judicial principle that underlying doctrine of acknowledgment is based on a legitimate presumption of payment by a promise to pay and an acknowledgment is an admission of the truth of one’s liability. An admission of debt liability whether secured or unsecured or contingent liability in the balance sheet of a company year after year, also amounts to acknowledgment of debt under Article 19 of the Limitation Act.
The Legal issue, before NCLT, Delhi in the matter of Central Bank of India v. Hanung Furnishings Pvt. Ltd. (decided on 20 November 2025) was raised – whether an “admission of a claim”by RP in the CIRP of a principal borrower constitutes an acknowledgement of debt in accordance with the provisions of the Limitation Act and whether such an admission of claim extends the period of limitation for initiating CIRP against a corporate guarantor. In other words, admitted claim of Corporate Debtor by RP “as approved by the Adjudicating Authority”, during CIRP automatically creates fresh limitation period from the date of admission of Claim by RP against a corporate debtor or corporate guarantor who provided the guarantee to the lenders for the security for their financial facilities.
While admitting the petition under section 7 against the corporate guarantor, the NCLT, Delhi has pointed out the legal aspect the liability of a corporate guarantor, being co-extensive with that of the principal borrower under Section 128 of the Indian Contract Act. Partial recovery under a resolution plan does not extinguish the guarantor’s liability. Once CIRP commences, the management of the corporate debtor vests in the RP and any act done by the RP in discharge of statutory duties, including admission of claims binds the corporate debtor.
The NCLT, before reaching the conclusion that the admission of claim against the corporate debtor by RP is equal to an acknowledgement of debt of the corporate debtor, relied on various judgements of NCLT, High court and National Company Law Appellate Tribunal (“NCLAT”), as referred during the proceedings and held that an admission of a claim by the RP is not a mechanical act but a statutory recognition of an existing and enforceable liability.
- NCLT, Delhi Bench-II
In UCO Bank Vs. Smt. Nishu Goel (IB-355/ND/2024), the Hon’ble NCLT held that payment made by a Liquidator towards the dues of a creditor amounts to acknowledgement of debt, thereby extending the period of limitation.
- Kerala High Court
The above principle has been affirmed by the Hon’ble High Court Kerala in Cm P Sreelal Vs District Collector, Thiruvananthapuram & Ors [AIR 2007 KER 13], holding that the repayment of amount of debt to the creditor in any situationwould amount to payment in terms of the provisions of Section 19 of Limitation Act, constitutes a valid acknowledgement for the purpose of Limitation.
- NCLAT
In the matter of Shankar Khandelwal, Erstwhile Director of Sanwariyaji Business Venture Pvt Ltd Vs Omkara Asset Reconstruction Pvt Ltd & Others (Comp.App.(AT)(Ins) Nos. 293 &294 of 2025), the Hon’ble NCLAT framed the question in the appeal that “Does admission of a claim by RP in earlier CIRP would amount to an acknowledgment of the debt”?
Before answering the above question of law, the Hon’ble NCLAT analysed the Regulation 8 & 12 (3) of CIRP Regulation, 2016. Pursuant to Regulation 8 of CIRP Regulation, 2016, a financial creditor is required to submit its claim and in terms of Regulation 12 (3) of CIRP Regulation, 2016, the IRP or RP may not have option but to admit the claim and when the claim is submitted , it only implies that corporate debtor (“CD”) through the office of IRP/RP has admitted the pre-existing liability of the CD to pay the creditor who has an enforceable right to payment. Further, the Regulation 12 (3) of CIRP Regulation, 2016 also mandates that claim of all financial debt shall be admitted without a scrutiny may require a qualification, for ex-facie it seems to suggest that even a claim of a time barred secured financial debt can be admitted.
The Hon’ble NCLAT also observed that it is one thing to say that a claim of a financial creditor shall be admitted without proof of entitlement to make a claim, and it is entirely another thing to say that even a time barred financial debt can be admitted. However, this issue may have to be tested in appropriate cases.
The Hon’ble NCLAT was of the view that if the entire management of the CD is vested with IRP/RP, and if they were statutorily authorised to admit a claim, in the absence of the board of directors to perform any function in relation to the CD , admission of a claim by IRP/RP would amount to admission of a liability of the CD to repay the creditor, to emphasis , based on a pre-existing and enforceable right of payment . And acknowledgment of a debt within the meaning of Section 18 of the Limitation Act in essence is but an admission of the liability to repay. A mere choice of expression such as ‘acknowledgment’ or ‘admission’ used in different statutory schemes cannot alter the fundamentals; existing of a liability, co-relatable pre-existing and enforceable right to repayment. Therefore, where IRP / RP has admitted a claim, it does constitute acknowledgment under Section 18 of the Limitation Act.
The Tribunal further held that admission of a claim by the RP is not a mechanical act but a statutory recognition of an existing and enforceable liability. Such admission squarely falls within the meaning of “acknowledgement” under Section 18 of the Limitation Act. Since the claim of the financial creditor was admitted and reaffirmed multiple times during the CIRP of the principal borrower, fresh acknowledgements arose within the limitation period. Consequently, the Section 7 petition filed in 2024 against the corporate guarantor was held to be within limitation.
Analysis of Section 18 & 19 of Limitation Act
The provisions of Section 18 and 19 of Limitation are the provisions of “saving clauses” to save the limitation period after expiration of the prescribed period for filing the suit or an application before the tribunals and courts in respect of property or right. In other words, an acknowledgment of debt or any payment made by a person who is liable to pay or its agent duly authorised in his behalf, a fresh period of limitation startedfor the purpose of computation of limitation period.
Since the Corporate Debtor is an “artificial person”, the documents which are traditionally treated as an acknowledgement of debt by the Corporate Debtor for the purpose of Limitation Law are: – promissory notes, loan agreement, signed balance sheet or annual accounts showing debt as the liabilities. The most acceptable document is the Letters confirming outstanding dues or “requesting claim verification for payment” or making partial payment. The power of signing such documents vest to the “Authorised Person” of the Corporate Debtor /Company. The legal principle of the corporate jurisprudence is that corporate entities, being artificial person, its mind is the mind of its board of directors. Therefore, the power to sign any such documents vests with the Board of Directors of the Company to authorise any person to sign acknowledgment of debt by way of its board resolution.
The question is whether RP is an “authorised person” or agent of Corporate Debtor under the provisions of IBC to admit the labilities or debt of Corporate Debtor for the purpose of providing an acknowledgement of debt in its capacity as the RP of the Corporate Debtor.
In our view, RP, under the provisions of IBC is neither replacing the board of directors nor acting as an agent of the Corporate Debtor, RP role is merely performing its statutory duties subject to provisions of IBC and all actions and/or decisions of RP are not binding upon the Corporate Debtor as RP is required to function within four corner of IBC and subject to approval of CoC and Adjudicating Authority.
Conclusion
No doubt NCLT reinforces a creditor-friendly interpretation of limitation under the IBC and strengthens the enforceability of corporate guarantees in the Central Bank of India v. Hanung Furnishings Pvt. Ltd as stated in above paras. By recognising the RP’s admission of claims as a valid acknowledgement of debt, the Tribunal has ensured that procedural timelines do not defeat substantive rights and that the liability of the guarantor is co-extensive to that of Principal Borrower. In our view such a liberal interpretation may further be examined by the apex court to equate admission of claim by RP as the “Authorised Person” of the Corporate Debtor for the purposes of acknowledgment of debt to extend the period of limitation from the date of admission of claim under the Section 18 of the Limitation Act or an amendment to be carried out under Section 18 to provide clarity about the definition of authorised person.
-By ISHTIAQ ALI
Managing Partner of Orbit Law Services
The author has more than 4 decades of experience in recovery of debts both as the inhouse lawyer of public financial institution as well as he is a practising lawyer specialized in banking and finance. In case of any clarifications, please feel free to contact the author at ishtiaq.ali@orbitlaw.co.in
Research & Assistance: Roshan Gaud- Senior Associate; Tejas Singh- Trainee Associate
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