Refund Of Security Amount Can't Be Considered As Acknowledgment Of Debt U/S 19 Of Limitation Act: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan and Mr. Barun Mitra (Technical Member) has held that refund of security amount which was given by Operational Creditor for carrying out the work contract cannot be considered as an acknowledgement of debt under section 19 of the Limitation Act. The present appeal has been filed under section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against an order passed by National Company Law Tribunal (NCLT) by which it dismissed an application under section 9 of the IBC. The Appellant submitted that the adjudicating authority erroneously treated the submission of the appellant that appellant is praying for shifting/change of the date of default. Appellant has never asked for change of date of default which was 15.01.2016 rather by extending the benefit of Section 19 of the Limitation Act, 1963. The appellant will have a fresh period of three years from 16.10.2017. Per contra, the Respondent submitted that in the Section 9 application there was no pleading for extension of limitation on any ground including any payment by the corporate debtor. The corporate debtor has filed its ledger 3 of 14 Comp. App. (AT) (Ins.) No. 1054 of 2023 which mentioned payment of security cheque on 16.10.2017 on the basis of which no benefit of Section 19 of the Limitation Act, 1963 can be extended by the appellant. The Tribunal noted that the Supreme Court in 'Shanti Conductors Pvt. Ltd.' Vs. 'Assam State Electricity Board & Ors.' held that two conditions were essential for extending the benefit of Section 19 of the Limitation Act, 1963 they are: (i) payment must be made within the prescribed period of limitation; (ii) and it must be acknowledged by some form of writing either in handwriting of payer himself or signed by him. The Apex Court in the above also held that there need to be specific pleading claiming for the benefit of Section 19. In the said case, the Court held that even without pleading all facts for claiming the start of a fresh period of limitation, the plaintiff is not entitled for benefit of Section 19. It held that “Out of the said defaulted amount, it is not the case of the appellant that he received any payment out of the bills which was raised by the operational creditor for work done. There being no pleading by the appellant regarding nature of payment on 16.10.2017 there was no occasion for respondent to give a reply or make any acknowledgment, essential conditions for extending the benefit of Section 19 as laid down by the Hon'ble Supreme Court in 'Shanti Conductors Pvt. Ltd.' (supra) is not fulfilled.” It further held that refund of the security amount which was extended by the Operational Creditor for carrying out the work cannot be considered as an acknowledgment. The Tribunal concluded that since there was no acknowledgement of debt by the Corporate Debtor and the Appellant has also admitted that no payment was received from the Corporate Debtor, the application was rightly dismissed.Accordingly, the present appeal was dismissed. Case Title: Protech Impex Pvt. Ltd. & Anr. Versus Uttar Pradesh Rajkiya Nirman Nigam Ltd. Case Number: Company Appeal (AT) (Insolvency) No. 1054 of 2023 Judgment Date: 25/08/2025 Click Here To Read/Download The Order

Refund Of Security Amount Can't Be Considered As Acknowledgment Of Debt U/S 19 Of Limitation Act: NCLAT

Mohd Malik Chauhan

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