NCLT Mumbai: Secured Creditors Can’t Invoke 12-Year Mortgage Limitation in Insolvency Claims

NCLT Mumbai: Secured Creditors Can’t Invoke 12-Year Mortgage Limitation in Insolvency Claims

Introduction

The National Company Law Tribunal (NCLT), Mumbai Bench, has clarified that secured creditors cannot invoke the 12-year limitation period applicable to mortgage enforcement while filing claims in a CIRP. The Tribunal held that insolvency claims are governed by a three-year limitation period, regardless of whether the underlying debt is secured by a registered mortgage.

Factual Background

The decision arose in the insolvency proceedings of Gigeo Construction Company Private Limited. BSEL Algo Limited, claiming to be a secured creditor by virtue of a registered mortgage, filed a claim of ₹22.94 crore including interest. The Resolution Professional rejected the claim as time-barred.

Challenging this decision, the claimant argued that since the debt was secured by a mortgage, the applicable limitation period was 12 years under Article 62 of the Limitation Act, which governs enforcement of mortgage rights.

Issues

1. Whether a secured creditor can rely on the 12-year limitation period for mortgage enforcement while filing a claim in CIRP.

2. Whether filing a claim in insolvency amounts to enforcement of mortgage rights.

Reasoning and Analysis

The NCLT drew a clear distinction between enforcement of security and filing of claims in insolvency proceedings. It held that submission of a claim in CIRP is merely a procedural step to place the creditor’s dues before the Resolution Professional and does not amount to enforcing mortgage rights.

The Tribunal noted that enforcement of security interests is expressly barred during the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC). Consequently, Article 62 of the Limitation Act, which applies to suits for enforcement of mortgages, has no application to claims filed in CIRP.

Instead, the Tribunal held that such claims are governed by Article 19 of the Limitation Act, prescribing a three-year limitation period for recovery of money.

The Tribunal observed that the last repayment and acknowledgment by the corporate debtor occurred in November 2018. Even after accounting for the exclusion of limitation during the COVID-19 period as directed by the Supreme Court, limitation expired in October 2023. Since the claim was filed in January 2025, it was clearly time-barred.

The Tribunal also clarified that the existence of a registered mortgage deed cannot be ignored merely because the debt was reflected as unsecured in the company’s financial statements. However, this clarification did not aid the claimant, as the claim itself was barred by limitation.

Decision

The NCLT Mumbai upheld the rejection of the claim, holding that insolvency claims even when secured by mortgage are subject to a three-year limitation period. The Tribunal ruled that the 12-year limitation period for enforcing mortgage rights cannot be invoked in CIRP proceedings and dismissed the application as time-barred.

In this case the appellant was represented by Mr. Rohit Gupta and Ms. Somya, Advocates. Meanwhile the respondent was represented by Mr. Saksham Ahuja, Mr. Mayukh Roy, Mr. Shivam Mehra and Mr. Utsav Mukherjee, Advocates.