One-Time Settlement Proposal Made After Expiry Of Limitation Does Not Extend Period U/S 18 Of Limitation Act: NCLT Indore

The National Company Law Tribunal (NCLT), Indore Bench, has held that the one-time settlement (OTS) proposal submitted after the expiry of the limitation period doesn't extend the limitation period under section 18 of the Limitation Act, 1963. The bench of Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta observed that if a party makes an acknowledgment in terms of Section 18 beyond the period of limitation, then such a case would not be covered by Section 18, and the debt would be time-barred. The NCLT discussed the ruling of Sri Kapaleswarar Temple v. T. Tirunavukarasu (AIR 1975 MADRAS 164, 1987 MADLW 647), where it was held that the acknowledgment under section 18 of the Limitation Act must be made on or before the date of expiry of the limitation period to give effect to a fresh lease of life to the enforceability of the debt. It also relied on the case of Sampuran Singh and Ors. v. Niranjan Kaur and Ors. (1999) 2 SCC 6798, in which the Supreme Court held that the acknowledgment has to be prior to that of the prescribed limitation. SIDBI provided the credit facility of Rs. 440 lakhs to Bagree Alloys Limited, backed by personal guarantees executed by Krishnakant Bagree. Subsequently, the loan account was declared as NPA, and the guarantee was invoked. The present personal insolvency application was filed, relying on a One-Time Settlement (OTS) proposal as acknowledgment of the debt to extend limitation. The applicant, SIDBI, submitted that its claim of Rs. 13.55 Cr. was due from the personal guarantors. It was argued that the OTS proposal serves as an acknowledgment of the debt and also extends the limitation period. Per contra, the respondent pleaded that the application is barred by limitation, as it was filed eight years after the invocation of guarantee. It also highlighted the fact that the applicant's section 7 application was dismissed for being time-barred. The NCLT observed that Article 137 of the Limitation Act provides for a 3-year time for filing the Section 95 IBC application, and the Supreme Court in B.K. Educational Services Pvt. Ltd. v. Parag Gupta & Associates (2019) 11 SCC 633 has held that the limitation for insolvency is governed by Article 137 and begins from the date of default. Accordingly, the bench observed that the present application is beyond the limitation period. Case Name: Small Industries Development Bank of India through RP Megha Jain v. Krishnakant Bagree (Personal Guarantor of M/s Bagree Alloys Ltd.) Case No.: CP(IB) N0. 62/MP/IND/2023 Coram: Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta For Applicant: Ms. Bharti Nawlani, Adv. For PG: Mr. G. Adhin, Adv Order Date: 29.10.2025Click Here To Read/Download The Order

One-Time Settlement Proposal Made After Expiry Of Limitation Does Not Extend Period U/S 18 Of Limitation Act: NCLT Indore

Mohd.Rehan Ali

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