Applicability of Section 14 of the Limitation Act to Pending DRT Proceedings: An Analysis of NCLAT’s Judgment
NCLAT holds that time spent in pending Debt Recovery Tribunal proceedings cannot be excluded under Section 14 of the Limitation Act; exclusion applies only if prior proceedings fail due to jurisdictional defect.
INTRODUCTION
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, in its judgment dated 7th October 2025 in the case of United Bank of India (Now Punjab National Bank) vs. Concast Morena Road Projects Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 805 of 2025, clarified the scope of Section 14 of the Limitation Act, 1963, in relation to proceedings under the Recovery of Debts and Bankruptcy Act, 1993 (RDBA) and the Insolvency and Bankruptcy Code, 2016 (IBC). The Bench, comprising Justice Ashok Bhushan (Chairperson) and Mr. Arun Baroka (Technical Member), held that recovery proceedings before the Debt Recovery Tribunal (DRT) cannot be excluded for computing limitation under Section 14 of the Limitation Act, 1963 (LA). The NCLAT adopted a literal interpretation of Section 14, holding that exclusion is available only when prior proceedings have failed due to a defect of jurisdiction or a similar cause, and not merely because they are pending before another forum. This article analyses the NCLAT’s decision and the implications it carries for creditors initiating parallel insolvency proceedings under IBC.
CASE BACKGROUND:
The appeal before the NCLAT arose from an order of the National Company Law Tribunal (NCLT), Kolkata Bench, which had rejected the appellant’s application under Section 7 of the IBC seeking initiation of corporate insolvency resolution proceedings. The appellant, United Bank of India (now Punjab National Bank), contended that it had disbursed funds amounting to Rs 46.16 crores, with the date of default recorded as 19th September 2015. Subsequently, the appellant initiated recovery proceedings under Section 19 of the RDBA, which remained pending. Thereafter, on 10thDecember 2019, the appellant applied Section 7 of the IBC to initiate insolvency proceedings. The NCLT, however, dismissed the application on two primary grounds: first, that the disbursement of funds had not been satisfactorily established; and second, that the application was barred by limitation under Article 137 of the Limitation Act, 1963, which prescribes three years for filing such applications, and that the appellant could not seek exclusion of time under Section 14 of the LA.
The appellant challenged this order of the NCLT via an appeal to the NCLAT. The main contention of the appellant was that the tribunal had erroneously held that there was no disbursement of funds, as the NeSL certificate had shown that the debt was not disputed, and the tribunal ought to have held this as valid proof of debt provided. Additionally, the appellant argued that it was entitled to the benefit of exclusion under Section 14 of the LA, since the recovery proceedings before the Debt Recovery Tribunal (DRT) were still pending. In support of this contention, the appellant relied on the Supreme Court’s landmark judgment in Sesh Nath Singh & Anr. v. Baidyabati Sheoraphuli Co-operative Bank Ltd. & Anr. wherein the Supreme Court held that Section 14 of the LA applies to proceedings under Section 7 of the IBC.
ANALYSIS OF SUPREME COURT’S JUDGMENT IN SESH NATH SINGH:
In Sesh Nath Singh & Anr. v. Baidyabati Sheoraphuli Co-operative Bank Ltd. & Anr., the corporate debtor had availed a cash credit facility of ₹1 crore in February 2012 and defaulted in May 2012. The financial creditor initiated SARFAESI proceedings, which were stayed by the High Court on 24 July 2017 for want of jurisdiction. Subsequently, the creditor filed an application under Section 7 of the IBC on 10th July 2018 before the NCLT, Kolkata. The NCLAT upheld the application, holding that the time spent in bona fide Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) proceedings could be excluded while computing the limitation period under Article 137 of the Limitation Act. This order was challenged before the Supreme Court, which analysed the issue of whether Section 14 of the Limitation Act applied to IBC proceedings under Section 7 of the LA, and whether exclusion of the limitation period is only available if the prior proceedings had been formally terminated. The Supreme Court held that Section 5 of the LA allows the courts to admit an application if the applicant can show that it had “sufficient cause” not to file an application within the prescribed time period. This discretion has been upheld in Ramlal, Motilal & Chhotelal v. Rewa Coalfields Ltd, wherein the Supreme Court held that Section 5 of the Limitation Act gives the court a discretion to admit an application beyond the limitation period and the expression “sufficient cause” should be construed liberally to advance substantial justice. The court then analysed the application of Section 14 of the LA and held that Section 14(2) allows the court to exclude the limitation period for any application, provided that:
(1) Both the prior and subsequent proceedings are civil proceedings prosecuted by the same party;
(2) The prior proceeding had been prosecuted with due diligence and in good faith;
(3) The failure of the prior proceeding was due to a defect of jurisdiction or other cause of like nature;
(4) The earlier proceeding and the latter proceeding must relate to the same matter in issue and;
(5) Both the proceedings are in a court.
The court held that IBC does not exclude the application of Section 14 of the LA, and the provision of Section 238A of IBC, which states that provisions of the LA, as far as may be applied to proceedings before the Adjudicating authority and NCLAT, should be purposively and liberally interpreted to include the application of basic principles of Section 14 of the LA. Further, the court clarified that it is not necessary that the earlier proceedings should be ‘officially terminated’ for exclusion of the limitation period, so long as the essentials of Section 14 have been fulfilled.
WHY THE NCLAT REFUSED TO APPLY THE SUPREME COURT RULING:
The NCLAT first held that the NeSL certificate and the accompanying bank statements, which were not disputed by the corporate debtor, constituted valid and sufficient evidence of the debt. Accordingly, the Tribunal observed that the NCLT had erred in concluding that there was no disbursement of funds. However, with respect to the issue of limitation, the NCLAT held that the Supreme Court’s decision in Sesh Nath Singh did not apply to the facts of the present case. In the present case, the benefit of exclusion under Section 14 was claimed on the basis of recovery proceedings initiated under Section 19 of the RDBA; however, the proceedings were still ‘pending’ before the Debt Recovery Tribunal (DRT), and the facts did not indicate that there was any defect of jurisdiction or a cause of similar nature to extend the benefit of Section 14 of the LA. The tribunal applied a textual interpretation of the provisions of Section 14 of the LA and held that the benefit of exclusion can only be applied if there is a defect of jurisdiction or a cause of like nature due to which earlier proceedings had come to a halt. The ‘default’ in the present case occurred on 19th September 2015, and application under Section 7 of the IBC was filed on 10th December 2019, thus clearly exceeding the limitation period of 3 years, and the NLCT did not commit any error in dismissing the application under Section 7. The NCLAT thus dismissed the appeal of the financial creditor.
CONCLUSION
The NCLAT judgment has clearly reinforced a strict and textual interpretation of Section 14 of the LA and the essentials that must be met to seek the benefit of exclusion of limitation under the said provision. By refusing to exclude the time spent in ongoing DRT proceedings, the NCLAT has clarified that Section 14 is only applicable where earlier proceedings had failed due to a lack of jurisdiction or a cause of a similar nature, and its application cannot be extended to proceedings that are pending and have no defect of jurisdiction. Further, it can be inferred that merely because an applicant was pursuing another remedy under a different statute would not constitute “sufficient cause” under section 5 of the LA, and the courts would generally not apply their discretion to allow such an application to be admitted beyond the limitation period. This decision thus serves as a cautionary precedent for creditors who have taken recourse to different statutes for debt recovery before invoking the IBC, as recourse to another statute or mechanism would not grant the creditors the right to delay invocation of proceedings under the IBC and exclude the limitation period to file such an application.
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