Mumbai: NCLT Rejects Canara Bank’s ₹742 Crore Insolvency Plea Against NSD Nirman Over Limitation
· Free Press Journal
Mumbai, August 26, 2026: The National Company Law Tribunal (NCLT), Mumbai has rejected the Bandra-based Canara Bank’s insolvency plea of Rs 742.06-crore against Uttar Pradesh-based N.S.D. Nirman Private Limited, holding that the bank’s claim against the corporate guarantor was barred by limitation.
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The bank had filed the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), seeking initiation of Corporate Insolvency Resolution Process (CIRP) against N.S.D. Nirman, which had stood as a corporate guarantor for Frost International Ltd., the principal borrower. Canara Bank claimed an outstanding amount of Rs 742.06 crore as on March 31, 2025, besides future interest, costs and charges.
Limitation Period Examined
The main point of discussion before the tribunal was centred on the date from which limitation for enforcing the corporate guarantee began. Canara Bank had relied on a subsequent notice dated January 20, 2025, contending that the guarantee was invoked through that notice.
However, the Tribunal examined an earlier notice issued on September 1, 2018 and concluded that the guarantee had already been invoked at that stage.
“From the language of the said notice, it is clear to us that the guarantee has been invoked by the Applicant (bank) on 01.09.2018…Coming to the second issue, whether the invocation dated 20.01.2025 is within the limitation, we note that the limitation for filing an application under Section 7 of the Code is three years and is governed by Article 137 of the Limitation Act, 1963,” the bench observed.
The Tribunal noted that the guarantee was an on-demand guarantee and that the September 1, 2018 notice gave five days to make payment. Consequently, limitation against the corporate guarantor commenced from September 6, 2018.
Fresh Notice Cannot Revive Claim
Under Article 137 of the Limitation Act, an application under Section 7 of the IBC is subject to a three-year limitation period. The Tribunal found that Canara Bank had not produced any valid acknowledgement by N.S.D. Nirman that could have extended this period after the 2018 invocation.
The Tribunal also rejected the bank’s reliance on the January 20, 2025 demand notice. It held that once the guarantee had been invoked in 2018 and the limitation period had begun, a fresh demand notice issued years later could not create a new cause of action.
“The subsequent demand notice dated 20.01.2025 cannot revive a time-barred claim,” the bench held.
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Mumbai: NCLT Admits Insolvency Proceedings Against Landmark Motels Over ₹46.62 Crore DefaultThe Tribunal clarified that although insolvency proceedings against a corporate guarantor can be initiated independently of proceedings against the principal borrower, such proceedings must themselves be filed within the prescribed limitation period.
Concluding that the January 2025 notice was beyond the permissible limitation period, the bench held that the application was “hopelessly barred by limitation.”
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