The NCLAT confirmed the validity of a debt acknowledgement by a personal guarantor in resetting the limitation period.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench led by Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Arun Baroka reviewed an appeal and observed that a letter acknowledging debt under Section 18 of the Limitation Act resets the limitation period for filing a claim, and such acknowledgement extends the limitation period even if the claim is filed after the original limitation period has expired, provided that the claim is filed within the extended period.
The Appeal filed by the Personal Guarantor challenged the order dated June 7, 2024, from the National Company Law Tribunal (NCLT), Mumbai Bench, which admitted the Section 95 application under the Insolvency and Bankruptcy Code, 2016 (IBC). The appeal contested the admission of the application on the grounds that it was barred by the statute of limitations.
The case involved STCI Finance Ltd., which had sanctioned a ₹10 crore short-term loan to Man Tubinox Ltd. and Man Infraprojects Ltd. The Personal Guarantor, Jagdish Mansukhani, had executed a deed of guarantee for the loan on December 1, 2015. After the borrowers defaulted, the financial creditor issued notices demanding repayment. The Personal Guarantor responded to one of these notices on June 12, 2017, requesting more time for repayment and asserting that discussions with lenders were ongoing.
The core issue was whether the letter dated June 12, 2017, constituted an acknowledgement of liability under Section 18 of the Limitation Act, thereby extending the limitation period. The Appellant argued that the application was barred by the limitation period, which should have expired on January 16, 2020. The Respondent contended that the acknowledgement extended the limitation period, and the application was filed within the extended time frame.
The NCLAT upheld the NCLT’s decision, finding that the letter did indeed acknowledge the debt and reset the limitation period under Section 18 of the Limitation Act. The period of limitation was further extended by the Supreme Court's directive in Suo Motu Writ Petition (Civil) No. 03/2020. Consequently, the application was deemed to be within the prescribed time limit. The NCLAT found no error in the NCLT's ruling and dismissed the appeal, concluding that the application was properly admitted and the appeal lacked merit.
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