The National Company Law Tribunal (NCLT) Kolkata has dismissed UCO Bank's insolvency petition against Nicco Uco Alliance Credit Limited, dealing a significant blow to the bank's debt recovery efforts. The petition, filed under Section 7 of the Insolvency and Bankruptcy Code (IBC) 2016, sought recovery of ₹846.47 crores from the corporate debtor.

Case Background and Financial Details

The insolvency petition was filed by UCO Bank as the financial creditor against Nicco Uco Alliance Credit Limited as the corporate debtor. The case details reveal a complex financial relationship dating back over two decades.

Nicco Uco Alliance Credit Limited was originally incorporated as Furmanite Nicco Investment Limited in 1984. The company later became a Non-Banking Financial Company (NBFC) with UCO Bank holding a 30% shareholding. The Reserve Bank of India issued the NBFC certificate on April 28, 1998, but subsequently cancelled it on April 6, 2005, due to the company's deteriorating financial condition.

Limitation Grounds for Dismissal

The NCLT's primary reason for dismissing the petition was the limitation bar. The tribunal ruled that the 2025 petition was time-barred for a 2004 default, creating a substantial time gap that could not be adequately bridged.

UCO Bank's Argument on Debt Acknowledgments

The bank argued that multiple One-Time Settlement (OTS) proposals submitted by the corporate debtor constituted acknowledgments of debt, thereby extending the limitation period under Section 18 of the Limitation Act, 1963.

NCLT's Legal Analysis

The tribunal identified a critical flaw in UCO Bank's limitation argument. Despite the series of OTS proposals, there was a crucial 9-year gap between the original 2004 default and the first OTS proposal in 2013. The NCLT emphasized that acknowledgments of debt can only extend limitation if made within the prescribed three-year limitation period from the date of default.

Key Legal Findings

• The original default occurred in 2004, making the limitation period expire in 2007
• The first OTS proposal was made only in 2013, well beyond the limitation period
• OTS proposals can constitute acknowledgment of debt only if made within the subsisting limitation period
• Once a debt becomes time-barred, subsequent acknowledgments cannot revive it for IBC proceedings

The tribunal relied on established legal precedents, including judgments in Dena Bank vs. C. Shivakumar Reddy and Sesh Nath Singh cases, which clearly establish that acknowledgments must be made before the limitation period expires.

Corporate Debtor's Defense

Nicco Uco Alliance Credit Limited raised multiple defenses against the petition:

Financial Service Provider Exclusion

The company argued that as a former NBFC, it was excluded from IBC proceedings under Section 3(7). However, the NCLT did not need to decide this issue given the limitation bar.

Procedural Objections

The corporate debtor challenged the petition's validity, pointing out that the date of default was handwritten in the revised petition after initial filing, questioning the document's authenticity.

Timeline Disputes

The company maintained that if any default occurred, it was in 2004 when it was declared a Non-Performing Asset (NPA), not in 2023 as claimed by the bank.

Final Ruling and Implications

The NCLT concluded that the petition was "hopeless and palpably time-barred." The tribunal noted that UCO Bank failed to explain how to bridge the 9-year gap between the 2004 default and the 2013 OTS proposal to bring the petition within the prescribed limitation period.

The dismissal represents a significant legal precedent regarding the application of limitation laws in IBC proceedings. It reinforces that financial creditors cannot indefinitely delay insolvency proceedings and then rely on subsequent acknowledgments to revive time-barred debts.

This ruling may impact other pending cases where financial creditors are attempting to recover old debts through the IBC route, emphasizing the importance of timely action within prescribed limitation periods.