Suspended Director Cannot Challenge Bank's Insolvency Claim After Self-Initiating CIRP on Same Debt: NCLAT Delhi Rules
Introduction
In a significant ruling addressing the issue of approbation and reprobation in insolvency proceedings, the National Company Law Appellate Tribunal, Delhi Bench, has categorically held that a suspended director who voluntarily initiates Corporate Insolvency Resolution Process (CIRP) by acknowledging specific financial debt cannot subsequently challenge the same creditor's claim on grounds of limitation. The case of Rakeshkumar Hariram Agarwal Vs State Bank of India & Ors. brings to light crucial principles governing the conduct of parties within the Insolvency and Bankruptcy Code, 2016 framework.
The Appellate Tribunal dismissed multiple appeals filed by the suspended director, upholding the orders passed by the Adjudicating Authority. These orders had validated the admission of State Bank of India's financial claim and rejected objections raised against such admission. The judgment underscores the principle that a party cannot be permitted to take contradictory positions—first invoking insolvency on the basis of an admitted debt and subsequently denying the validity of that very same debt.
Factual Background of the Case
Initiation of Insolvency Proceedings
The proceedings originated when the Corporate Debtor itself moved an application under Section 10 of the Insolvency and Bankruptcy Code, 2016. This application was filed by the suspended director on behalf of the Corporate Debtor, seeking commencement of the insolvency resolution process. The Adjudicating Authority admitted this Section 10 application on 09.09.2025, thereby formally initiating the CIRP against the Corporate Debtor.
In the Section 10 application, specifically in Part III of the form, the suspended director had explicitly disclosed the existence of a default amounting to ₹116,11,26,634.56. Significantly, the application identified State Bank of India as the sole financial creditor to whom this substantial debt was owed. It was on this precise foundation—acknowledging SBI's financial debt—that the insolvency resolution process was set in motion.
Constitution of Committee of Creditors
Following the admission of the Section 10 application, an Interim Resolution Professional (IRP) was appointed as mandated under the statutory framework. The IRP nominated by the applicant proceeded to constitute the Committee of Creditors (CoC) in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016. Given that State Bank of India was identified as the only financial creditor in the Section 10 application, the CoC was constituted with SBI as its sole member, vesting it with the statutory powers to decide the future course of the resolution process.
Subsequent Applications and Disputes
The situation took a contentious turn when State Bank of India filed an interlocutory application seeking replacement of the Interim Resolution Professional. Around the same period, the suspended director filed I.A No. 5265 of 2025, seeking multiple reliefs from the Adjudicating Authority.
The suspended director's application contained the following prayers:
- Direction to the respondent to furnish all clarifications and supporting documents concerning the admission of claims filed by State Bank of India
- Upon receipt of such documents, an order rejecting the claims of State Bank of India that had been admitted by the Resolution Professional
- An interim stay on the ongoing Corporate Insolvency Resolution Process of the Corporate Debtor pending hearing and final disposal of the application
- Any other relief deemed appropriate by the Tribunal
Orders of the Adjudicating Authority
The Adjudicating Authority examined both applications and passed orders on 17.11.2025 and 03.12.2025. By the order dated 17.11.2025, the Authority allowed State Bank of India's application in I.A No. 5266 of 2025 for replacement of the Resolution Professional. By the subsequent order dated 03.12.2025, the Adjudicating Authority dismissed the suspended director's application I.A No. 5265 of 2025, rejecting the challenge to SBI's admitted claim.
The Adjudicating Authority found no merit in the suspended director's contentions and refused to entertain the prayer for rejection of SBI's claim or for staying the insolvency proceedings.
Appeals Before NCLAT
Appeals Filed
Aggrieved by the orders of the Adjudicating Authority, the suspended director filed three appeals before the National Company Law Appellate Tribunal:
- CA (AT) (Ins) No. 1992 of 2025 challenging the order dated 03.12.2025 dismissing I.A No. 5265 of 2025
- CA (AT) (Ins) No. 1914 of 2025 challenging the order dated 17.11.2025 in I.A No. 5266 of 2025 allowing replacement of Resolution Professional
- CA (AT) (Ins) No. 1915 of 2025 challenging the same order dated 17.11.2025 in I.A No. 5265 of 2025
Contentions Advanced by the Appellant
The primary ground advanced by the suspended director before the Appellate Tribunal was that State Bank of India's claim was barred by limitation and therefore could not have been lawfully admitted in the insolvency proceedings. The appellant contended that SBI had issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) on 31.12.2013.
Based on this timeline, the appellant argued that since more than a decade had elapsed, the financial debt had become time-barred and unenforceable. According to the appellant, the Adjudicating Authority committed a jurisdictional error in refusing to reject SBI's claim on limitation grounds and should have accepted the challenge raised in I.A No. 5265 of 2025.
The appellant also made a supplementary submission that in the Section 7 application (though the case proceeded under Section 10), a tabular chart was annexed indicating that various amounts owed to SBI had become time-barred.
Submissions by State Bank of India
Mr. Harshit Khare, learned counsel appearing for State Bank of India, opposed the appeals vehemently. He submitted that the suspended director was seeking to blow hot and cold simultaneously—first invoking the insolvency process by admitting a debt of ₹116,11,26,634.56 owed to SBI, and then turning around to deny the validity of that very debt.