Can an ARC Revive a Time-Barred Loan Claim Before DRT?

A borrower gets served with a recovery application by an ARC. Years have passed since his bank account was declared irregular. The loan had been sold by assignment deed, interest has accrued on the outstandings and now the ARC wants its money. Before DRT. The first question that springs to mind is: Can an ARC resurrect a time barred loan claim before DRT simply by buying the debt?

Not in the normal course. An assignment only transfers the lender’s existing rights to the ARC; it does not give rise to a new limitation period or breathe new life into an otherwise time barred claim. The ARC generally takes the place of the assignor bank and acquires the financial asset subject to any existing legal limitations, defences and documentary weaknesses.

But the answer may change if there is a valid acknowledgment, part payment qualifying as a written revival, written revival document, existing mortgage, decree, recovery certificate or other legally significant act affecting limitation. Dates become important. So do specific words.

Borrowers often think that an old loan goes away automatically after three years. Sometimes banks and ARCs think exactly the opposite and treat assignment as a new cause of action. Both are wrong. Limitation depends on the nature of the relief claimed, the underlying security (if any), the repayment terms, the history of defaults and subsequent acknowledgments or part payments.

For example, a borrower may have signed statements confirming the balance during restructuring negotiations. An acknowledgment might be found in a company’s financial statements. Perhaps a part payment was made anytime before the currently running period of limitation expired. On the other hand, while internal bank entries or the later date of an assignment deed may restart the clock for purposes of limitation between bank and ARC, they usually do not extend time as against the borrower.

Why Does an ARC Limitation Dispute Matter Across India in 2026?

An ARC limitation dispute is important because an otherwise time barred claim can generate significant practical stress. A borrower can be summoned by the DRT / served with SARFAESI possession notice or auction notice despite the age of the loan. Ignoring the notice can lead to a crucial defence getting ignored.

Assignment receivables cover accounts from multiple cities. A loan could be sanctioned in Delhi against a property in Noida, to a borrower in Gurugram and assigned to an ARC office in Mumbai. I have had similar cases from Ghaziabad, Faridabad, Jaipur, Chandigarh, Pune, Bengaluru, Hyderabad, Chennai, Kolkata and Ahmedabad.

With old files come unique issues. People move on. Emails ids get changed. Original statements are hard to locate. It gets even trickier for borrowers to recall if they signed a balance confirmation, settlement request or loan modification during the years gone by.

Stakes are higher if the debt is secured against a family residence, factory or shop. Borrowers sometimes make partial payments or get panicked into signing settlement agreements without reading if those documents have an acknowledgment or new promise. In the meanwhile, an ARC may simply act at face value of documents transferred from the bank, which may itself have limited knowledge of the original facts.

The DRT Lawyer approaches limitation from a document & date perspective, rather than as a catchphrase. Just because a debt is old, the DRT will not dispose of the case. Similarly, assignment is not a magic bullet to overcome delay. BK Singh Advocate can help determine if the ARC’s timeline shows an enforceable claim or a attempt to assert rights after limitation has passed.

Quick Facts About ARC and DRT Limitation

• An assignment deed transfers existing rights. It does not renew limitation against the borrower.
• S. 24 Recovery of Debts and Bankruptcy Act. Applies Limitation Act, 1963 to applications before the DRT.
• Under S. 18. A written acknowledgment must ordinarily be signed before expiration of the current limitation period.
• As well, qualifying part payment under Section 19 must occur before expiry and meet statutory standards.
• Section 36 SARFAESI Act bars secured-creditor remedies where the underlying claim is time-barred.
• But a mortgage-related claim may be subject to a different analysis than a simple unsecured money claim.
• As would be the case if there is a decree, recovery certificate, written promise to pay, or valid acknowledgment.

Can Assignment to an ARC Start a Fresh Limitation Period?

Usually no, assignment by itself cannot resurrect an already time barred claim. The ARC steps into no better enforceable right than what the bank had at the time of assignment.

Under Section 5 of SARFAESI Act, an ARC can take over financial assets from a bank / financial institution. Post-acquisition, ARC can enforce certain rights as the secured creditor. But the Act does not grant any magical transfer mechanism to override Limitation Act or ipso facto generate fresh borrower’s acknowledgement.

Assignment deed is executed between bank and ARC. The borrower is not a party to this deed. So ordinarily the deed cannot itself become the borrower’ s acknowledgement under Section 18, just because it mentions the outstanding amount due.

Same would be the case with internal account statements. Neither bank nor ARC can put limitation against borrower at bay by merely continuing the debt in its internal books with or without addition of interest or change in loan- account number.

According to DRT Lawyer, the key difference is that acquisition only changes the person to whom the original cause of action arose and not the date when it accrued. For a more detailed discussion borrowers can click whether ARC can revive time barred loan claim before DRT.

Which Documents Can Decide the Limitation Question?

Date of documents decides limitation pleas. Borrowers should maintain entire files, instead of depending on recollection or singular WhatsApp forwards.

Loan Documents and Security Instruments

• Sanction letter and facility/loan agreement
• Loan sanction and account opening papers
• Schedule of repayment
• Promissory note & guarantee deed
• Mortgage/deposit of title deeds document
• Hypothecation agreement
• Modification/restructuring agreements

Accounts of Default and Recovery Actions

• Loan-account statements
• NPA notice, if issued
• Recall and demand letters
• Notice under SARFAESI 13(2)
• Notice of possession/auction
• Previous civil/DRT/Insolvency cases
• Orders, decrees and certificates of recovery

Documents proving acknowledgements/payments

• Balance confirmations
• Revival correspondence
• OTS applications and settlement offers
• Restructuring requests
• Payment vouchers and bank statements evidencing payments
• Acknowledgements emails/letters
• Company annual profit and loss statements
• Board minutes or resolutions allowing debtor to make an acknowledgement

Assignment Documents

• Notice of assignment
• ARC demand letter
• Copy or extracted clause of assignment deed stating account has been assigned.
• Documents evidencing the account has been assigned.
• Proof of ARC mandate produced before DRT, if ARC was relied upon

If borrowers sense documents may favour lenders, they tend to hide, destroy or produce same partially. Entire email chain would illustrate if a letter accepted liability, contested the amount or offered to settle without accepting liability.

BK Singh Advocate analyses the timeline and cross verifies with the limitation clause being invoked. Advocates and litigators practicing before DRT can spot if dates mentioned in loan statement, assignment schedule, ARC demand are different from what is pleaded before Tribunal.

When Should a Borrower Consult a DRT Lawyer?

You should take legal advice at the earliest opportunity. Once you receive an ARC demand, DRT summons, possession notice or auction notice , depending on the facts of your case. Delay can lead to procedural risk even if you believe that the underlying limitation defence is strong.

Legal advice is especially helpful if:

• It took longer than three years to file the Original Application.
• The ARC is relying on an assignment deed as its main recent document.
• Your customer supposedly executed balance confirmations, but these are not produced.
• Your customer made part payments, indicated in the statement but denied by him.
• Your loan was secured by way of mortgage or personal guarantee and this affects the limitation period.
• There were earlier proceedings that were withdrawn, dismissed or transferred.
• The account was assigned more than once.
• Your customer requested an OTS after the alleged limitation period expired.
• Notice of possession or auction has already been issued.
• There is a decree/recovery certificate from previous proceedings.

Actively defending a claim will often be better than taking no action. Do not ignore a DRT notice just because you think a time-barred claim will be rejected as a matter of course. Limitation is usually a legal issue that has to be pleaded alongside supporting facts.

Similarly, customers should not sign a new compromise letter just to avoid further phone calls. The language used could have legal consequences. DRT Lawyer can review the compromise terms and ensure that they are suitable before you sign, and BK Singh Advocate will advise whether or not the letter appears to acknowledge a debt that already existed or constitute a new promise.

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