The Mumbai bench of the National Company Law Tribunal (NCLT) has dismissed an insolvency petition filed by Unity Small Finance Bank (Unity SFB) against Awas Developers and Constructions Pvt Ltd, claiming the application was filed beyond the limitation period prescribed under the Insolvency and Bankruptcy Code (IBC).
In its order on June 29, the tribunal refused to admit the lender's application under Section 7 of the IBC which sought the initiation of the Corporate Insolvency Resolution Process (CIRP) against the real estate company over an alleged default exceeding ₹140 crore.
The dispute originates from credit facilities provided by the erstwhile Punjab and Maharashtra Cooperative (PMC) Bank. In addition, the bank’s acquisition by the RBI-approved merger of PMC Bank with Unity Small Finance Bank was the main reason for the loan exposure in PMC Bank.
According to Unity SFB, PMC Bank had first sanctioned a ₹15 crore mortgage overdraft facility to Awas Developers in 2007. The credit limit was increased several times and reached ₹135 crore by 2019. The bank claimed that the borrower's outstanding dues had risen to ₹140.12 crore as of October 7, 2019, and relied on demand notices issued by PMC Bank while seeking insolvency proceedings.
But Awas Developers opposed the plea claiming in court that the loan account was already classified as a Non-Performing Asset (NPA) on August 31, 2012. The insolvency application was made on December 4, 2023, far beyond the 3-year window under which IBC proceedings can begin.
After reading the documents and the submission, the NCLT bench of Hariharan Neelakanta Iyer and Lakshmi Gurung agreed to the borrower’s case. Unity SFB had misread a demand notice dated October 7, 2019 as the date of default, the tribunal observed.
The bench concluded that a demand or recall notice cannot be treated as the date of default as such notices are issued only after a borrower has already failed to meet repayment obligations. In August 2012 the account had already become an NPA and subsequent renewals or enhancement of the credit facilities did not automatically create a fresh cause of action for insolvency proceedings.
The tribunal also reviewed the company’s financial statements and other records presented before it. Awas Developers admitted liability for audited balance sheets and had also admitted dues of ₹75.25 crore excluding interest by the letter dated August 16, 2018.
However, the bench said there was no documentary evidence of any further acknowledgment of debt after August 16, 2018, which could have extended the limitation period under applicable law.
The NCLT also noted that even with the benefit of the exclusion period set out by the Supreme Court during the Covid-19 pandemic, the limitation period expired on August 1, 2023. Since the insolvency petition was filed more than four months later, on December 4, 2023, the tribunal found that it was barred by limitation and therefore not maintainable.
Unity SFB argued that the extraordinary circumstances surrounding PMC Bank including financial irregularities, RBI intervention and its eventual merger with Unity Small Finance Bank should be considered while calculating the limitation period.
In rejecting the argument, the tribunal decided statutory limitation under the IBC must be determined strictly on the date of default and legally valid acknowledgments of debt. It noted that regulatory action, changes in ownership or management or corporate restructuring of the lender cannot extend the time available for initiating insolvency proceedings.
The tribunal also declined to rely on an arbitral award obtained by the bank in November 2025, stating that the award was passed after the insolvency petition had already been filed. It ruled that a subsequent arbitral award could not revive a petition that had already become time-barred.
While dismissing the insolvency application, the NCLT said the order would not prevent Unity Small Finance Bank from pursuing other legal remedies under law including proceedings based on subsequent developments such as the arbitral award, or any other legally sustainable recovery mechanism.
