Neelkanth Township and Construction Pvt. Ltd. Vs Urban Infrastructure Trustees Limited (NCLAT Mumbai)
Summary: In Neelkanth Township and Construction Pvt. Ltd. vs Urban Infrastructure Trustees Ltd. (NCLAT Mumbai), the issue was whether the Limitation Act, 1963 applied to insolvency applications under the IBC. Urban Infrastructure, holding optionally convertible debentures (OCDs) of Neelkanth maturing in 2011–2013, filed a Section 7 application in 2017 after default in repayment. Neelkanth argued the claim was time-barred, but the NCLAT held that the IBC is not a debt recovery law but a mechanism to initiate the Corporate Insolvency Resolution Process, and that where default on debt (including interest) is continuous, limitation cannot be used to defeat the claim. The tribunal found that matured debentures with interest qualify as “financial debt” under Section 5(8)(c) IBC, being disbursed for the time value of money, and procedural gaps in regulations could not bar proceedings as the IBBI Regulations, 2016 already address proof of claims. Upholding NCLT’s admission of the application, the appeal was dismissed. Notably, the Supreme Court has later clarified that the Limitation Act applies to IBC proceedings from inception, with a three-year period from default unless delay is condoned under Section 5, a position now codified in the IBC (Second Amendment) Act, 2018.
