NCLT rejects Unity Small Finance Bank insolvency plea over Rs 140 crore debt
On July 4, 2026, the National Company Law Tribunal (NCLT) in Mumbai rejected an insolvency application filed by Unity Small Finance Bank Ltd. against Awas Developers and Constructions Pvt. Ltd. to recover outstanding dues of over Rs 140 crore. The tribunal dismissed the petition because it was filed after the statutory limitation period had expired. The underlying dispute involves credit facilities secured by mortgaged properties situated in Thane, Palghar, and Kerala.
The financial dispute originated from a mortgage overdraft facility first sanctioned to Awas Developers by the erstwhile Punjab and Maharashtra Cooperative (PMC) Bank on March 31, 2007. Initially set at Rs 15 crore, the facility was progressively enhanced over the years, eventually reaching Rs 135 crore in 2019.
To secure the borrowing, Awas Developers mortgaged properties in Thane, Palghar, and Kerala. The credit facilities were also backed by personal guarantees executed by Rakesh Kumar Wadhawan and Sarang Wadhawan, alongside a corporate guarantee furnished by Privilege Power & Infrastructure Pvt. Ltd.
Following a repayment default by Awas Developers, PMC Bank issued a demand notice on October 7, 2019, claiming outstanding dues of Rs 140.12 crore. A subsequent demand notice issued on January 15, 2021, stated that the outstanding liability had increased to Rs 170.29 crore. PMC Bank was later amalgamated with Unity Small Finance Bank under a 2022 reconstruction scheme, after which the successor bank initiated the insolvency proceedings.
Awas Developers resisted the petition, arguing that the insolvency proceedings were delayed. The developer pointed out that its loan account had been classified as a non-performing asset (NPA) on August 31, 2012, meaning the limitation period had commenced much earlier than the bank claimed.
After examining the records, the NCLT observed that the last valid acknowledgment of liability by Awas Developers was made on August 16, 2018. Even after accounting for the exclusion period granted by the Supreme Court during the Covid-19 pandemic, the tribunal determined that the limitation period expired on August 1, 2023.
Because Unity Small Finance Bank filed the petition on December 4, 2023, the tribunal ruled it was time-barred. The NCLT rejected the bank's arguments that the limitation period should start from the date of PMC Bank's amalgamation or the discovery of the PMC Bank fraud, reiterating that subsequent developments cannot alter the statutory limitation period.
