Banking & NBFCs · Daily brief
A fresh loan recall notice in 2019 could not restart the three-year limitation clock on a default dated August 2012, the Mumbai NCLT bench ruled.
The Mumbai bench of the National Company Law Tribunal has dismissed Unity Small Finance Bank's insolvency petition against Awas Developers, not on the merits of the default but on timing.
Awas Developers' account was classified as a Non-Performing Asset on August 31, 2012. Under the Insolvency and Bankruptcy Code, lenders have a three-year limitation window from the date of first default to file for insolvency.
Unity Small Finance Bank issued a fresh loan recall notice in 2019, arguing this reset the limitation clock. The tribunal rejected that argument outright.
The NCLT held that a borrower's default date is fixed at the moment of the original default, and a later demand or recall notice does not legally revive an expired claim. It also noted the bank's own filings cited multiple conflicting default dates, which weakened its position.
Sources
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