Authority: National Company Law Tribunal, Mumbai Bench - Court II

Order Date: 23 June 2026

Case Overview

JM Financial Asset Reconstruction Company Limited (the Financial Creditor or FC) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (CP (IB) No. 3500/MB/2019) on 26 September 2019 against Shubh Hospitality Private Limited (the Corporate Debtor or CD). The petition sought to initiate a Corporate Insolvency Resolution Process (CIRP) over an alleged default of Rs. 121,48,83,840.76. This amount comprised an outstanding principal of Rs. 57,49,90,407 and simple interest of Rs. 63,98,93,433.76 calculated at 12% per annum from 07 June 2013 to 30 August 2019.

The debt originated from a Term Loan of Rs. 43,00,00,000 sanctioned by Bank of India to the CD on 10 October 2006 and disbursed on 21 December 2006. The CD's account was declared a Non-Performing Asset (NPA) on 30 June 2008. Bank of India assigned the debt to JM Financial ARC via a registered Assignment Agreement dated 18 August 2009. The FC subsequently obtained a judgment from the Debt Recovery Tribunal-II, Mumbai (DRT) on 07 June 2013 (OA 143/2010) for recovery of the principal amount. The FC later filed a Review Application (No. 8/2013) to correct factual inaccuracies in this DRT Judgment, particularly concerning the declaration of a valid mortgage over the CD's property, 'Shelly's Estate'. The DRT allowed this review and issued a corrected order on 12 May 2021.

The CD contested the petition primarily on the grounds that it was barred by limitation, as it was filed in 2019 for defaults dating back to 2008 and 2013. The CD was represented by two factions of its management during the proceedings, one led by Jai Jiwat Lalwani (current management) and another by the late Atul Bisaria (erstwhile management). An intervenor, Strufcon Engineers, also filed a petition (IVNP No. 9/MB/2024) claiming possessory title over 'Shelly's Estate', which was dismissed as infructuous.

Final Outcome

The NCLT Bench rejected the FC's petition. The tribunal held that the application was barred by limitation under Article 137 of the Limitation Act, 1963. It ruled that the date of default remained 07 June 2013 (the date of the original DRT Judgment) and was not reset to 12 May 2021 (the date of the Review Order). The tribunal found that the Review Order was merely a rectification of errors in the original judgment and did not constitute a new decision that would invoke the 'doctrine of merger' to extend the limitation period. Furthermore, a One-Time Settlement (OTS) proposal of Rs. 7 Crore made by the CD's director on 18 July 2025 (and rejected by the FC on 29 July 2025) was made on a 'without prejudice' basis and was deemed insufficient to constitute an acknowledgment of debt under Section 18 of the Limitation Act or a promise to pay under Section 25 of the Indian Contract Act, 1872. The bench clarified that its observations would not prejudice the FC's right to recover the debt through other judicial forums.

Topics: Insolvency Petition, Limitation Law, Debt Recovery