Written Acknowledgment Of Debt Extends Limitation Period For Insolvency Application: NCLAT New Delhi

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, consisting of Justice Yogesh Khanna (Member-Judicial) and Mr. Ajai Das Mehrotra (Member - Technical), disposed of an appeal arising from an order passed by the NCLT New Delhi. The bench held that by virtue of Section 18 of the Limitation Act, the written acknowledgment of debt extends the limitation period for initiating the CIRP under Section 9 of the IBC, 2016. The bench observed that the limitation will be observed from the last written acknowledgment of the debt. Background The operational creditor supplied and installed ventilation, fire alarms, and a fire-fighting system in the residential project developed by the corporate debtor. The corporate debtor failed to make payment for the work done, as a result of which the operational creditor issued the demand notice under Section 8 for the payment of the due. The operational creditor filed an application under Section 9 seeking initiation of CIRP against the corporate debtor. The adjudicating authority directed the initiation of CIRP against the corporate debtor and appointed the interim resolution professional. Aggrieved by the decision of the adjudicating authority, the corporate debtor has approached the NCLAT, New Delhi. Contention of the Parties The appellant contended that the operational creditor issued the last invoice on November 07, 2017, and on July 26, 2017, the last payment was made to them. And the application under Section 9 was filed by the operational creditor in February 2024, which is beyond the limitation of 3 years. The respondent argued that the corporate debtor has acknowledged its liability on multiple occasions in writing, which includes their letters dated April 16, 2018, January 03, 2019, and December 22, 2021. In those letters, the corporate debtor has admitted the due amount and has cited reasons for non-payment of dues. The respondent contended that the written acknowledgment of debt extends the period of limitation and the Section 9 petition is within the three years of the last acknowledgment of debt. Judgment of the NCLAT The NCLAT upheld the decision of the adjudicating authority admitting the corporate debtor into the CIRP and disposed of the appeal. The NCLAT ruled that the application under Section 9 filed by the operational creditor before the adjudicating authority was within the limitation period. The bench observed that it is trite law that acknowledgment of debt in writing extends the limitation period per Section 18 of the Limitation Act. Case Title: Ajay Singal v. Mr. Ranjan Chakraborti & Anr. Case Number: Company Appeal (AT) (Insolvency) No. 1285 and 1272 of 2024 Tribunal: National Company Law Appellate Tribunal, Principal Bench, New Delhi Judge: Justice Yogesh Khanna (Member-Judicial) and Mr. Ajai Das Mehrotra (Member - Technical) For Appellant: Mr. Sandeep Bhuraria, Ms. Vaishnavi Prakash, Ms. Surbhi Bhuraria, Advocates. For Respondent: Mr. Lokesh Bhola, Mr. Abhishek Singh Chauhan, Advocates for Applicant in IAs No. 4624 and 8487 of 2024. Mr. Atul Bhatia, Mr. Ranjan Chakraborti, Advocates for RP. Mr. Sameer Abhyankar, Mr. Ripul Swati, Mr. Krishna Rastogi, Advocates for R-2. Date of Judgment: 09.04.2025 Click here to download Order/Judgement

Written Acknowledgment Of Debt Extends Limitation Period For Insolvency Application: NCLAT New Delhi

Mohd.Rehan Ali

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