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Informist, Wednesday, Jul. 30, 2025

 

NEW DELHI – The Supreme Court Wednesday set aside orders of the National Company Law Appellate Tribunal and the National Company Law Tribunal rejecting IL&FS Financial Services Ltd.'s insolvency plea against Adhunik Meghalaya Steels Pvt. Ltd., a subsidiary of Adhunik Metaliks Ltd. Both the tribunal and the appellate tribunal had held that the insolvency plea was barred by limitation.

 

The court, however, said the period of limitation for filing the insolvency petition against Adhunik Meghalaya Steels would commence on Mar. 1, 2022, and continue till Feb. 28, 2025. Since the insolvency petition was filed on Jan. 15, 2024, it was within the time period, the court ruled and sent the matter back to the National Company Law Tribunal. The tribunal will have to decide on the petition in accordance with the law, treating it as filed within the limitation period.

 

The court noted that the balance sheet of the debt-ridden company for the financial year 2019-20 (Apr-Mar) had stated the debt and it was signed by the board of directors on Aug. 12, 2020. Since the acknowledgment of debt came into effect on Aug. 12, 2020, the period of limitation would have been extended till Aug. 11, 2023. However, because of the COVID-19 pandemic that year and the following year, the court had passed a series of orders extending the period of limitation. Therefore, the period from FY21 to FY22 stood excluded, which meant the period of limitation would begin from Mar. 1, 2022, and end on Feb. 28, 2025, it said.

 

In 2015, IL&FS Financial Services and Adhunik Meghalaya Steels had entered into an agreement for a term loan facility of INR 300 million. The loan was secured by way of a pledge of 810,804 shares of its parent Adhunik Metaliks in favour of IL&FS by virtue of a pledge agreement. 

 

The respondent company's account was declared a non-performing asset in 2018 as Adhunik Meghalaya Steels was unable to meet its debt obligations. In its insolvency petition filed before the National Company Law Tribunal, IL&FS Financial Services said Adhunik Meghalaya Steels had not paid dues amounting to INR 554.6 million.

 

However, Adhunik Meghalaya Steels said IL&FS Financial Services had declared its account a non-performing asset on Mar. 1, 2018, and issued a notice to recall facilities on Aug. 10, 2018. Hence, the limitation period of three years under the Limitation Act, 1963, to initiate action against the company had expired on Aug. 9, 2018.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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