In Brief
Kotak Mahindra Bank Limited sought to initiate Corporate Insolvency Resolution Process against a borrower based on a Recovery Certificate issued more than three years after the original default but within three years of the Certificate's issuance. The NCLAT dismissed the application as time-barred. The Supreme Court held that a Recovery Certificate gives rise to a fresh cause of action. The Court affirmed that a liability from a Recovery Certificate is a 'financial debt' and its holder a 'financial creditor' under the IBC. The recovery certificate, when issued, starts a fresh three-year limitation period. The Court rejected arguments that the judgment in Dena Bank was per incuriam, holding that the Code's inclusive definition of financial debt encompasses debts crystallized into judgments or certificates.
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