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Date of Default Will Always Be the Date of Declaration of Account as an NPA: NCLAT

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In the case of Jagdish Prasad Sarada vs Allahabad Bank, the Appellant filed an appeal against the Order dated 27th August 2019. This was passed by National Company Law Tribunal (NCLT), Hyderabad wherein the adjudicating authority admitted the application and initiated a Corporate Insolvency Resolution Process (CIRP). The Appellant filed an appeal under Section 61 read with Section 7 of the Insolvency and Bankruptcy Code, 2016.

Facts of the Case

According to the balance sheet as on 31st March 2015 provided by the Appellant, the company or the corporate debtor made losses from the financial year 2014-15. The Order in front of Debt Recovery Tribunal Hyderabad was filed wherein the DRT quashed the possession notice of the bank but allowed the bank to take measurements according to Section 13(4), SARFAESI Act, 2002. There were continuous notices issued by the adjudicating authority but the Appellant did not turn up. NCLT admitted the case based on the last payment made in the current account on 19.02.2016 for an amount of Rs 49, 50,000.



  1. It was contested by the Appellant that even after the alleged payment of 19.02.2016, the corporate debtor remained to be an NPA and was not regularized by the Respondents.


  1. It was agreed by the Appellant that the only issue which needed consideration was regarding the limitation period.
  2. Appellant had sanctioned a cash credit facility of Rs 20 Crore, Term Loan of Rs 14 Crore, and a Letter of a creditor of Rs 65 Crore dated 31.05.2012.
  3. The Appellant was irregular in payments and the account was therefore declared as a Non-Performing Asset (NPA) on 30.09.2015.
  4. Section 19 of the Limitation Act, 1963 whenever to read with Article 137 of the Schedule to the said act, a fresh limitation period started from 19.02.2016 for the tenure of 3 years.

Court’s Analysis

  • A limitation period under Section 7 of the code is 3 years which is provided by Article 137 of the Schedule to the Limitation Act, 1963 which always starts from the date of default.
  • The date of default would always be the date of declaration of account as NPA and such date would not shift.
  • Provisions of the Limitation Act, 1963 vide Section 238 of IBC would apply to all NPA cases if they meet the criterion of Article 137 of the Schedule.
  • To extend the limitation period, it can only be extended if any case for the condonation of delay is made out.


The appeal was allowed and the Judgment passed by National Company Law Tribunal, Hyderabad dated 27.08.2019 was set aside. Orders appointing IRP, declaring moratorium, freezing of accounts, etc and all other consequential actions were declared illegal and were also set aside. The appellant Tribunal also closed the CIRP proceedings and also fixed the fee for the IRP and the Appellant would also pay the fees of IRP and also some of the other costs incurred by him. is now on Telegram. Follow us for regular legal updates and judgment from courts. Follow us on Google News, InstagramLinkedInFacebook & Twitter. You can subscribe to our Weekly Email Updates. You can also contribute stories like this and help us spread awareness for a better society. Submit Your Post Now.

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