Vivek Jha Vs. Daimler Financial Services India Private Ltd. & Anr. - An acknowledgement must be made before the expiration of the limitation period as per Section 18 of the Limitation Act, 1963.

NCLAT (13.01.2020) in Vivek Jha Vs. Daimler Financial Services India Private Ltd. & Anr. [Company Appeal (AT) Insolvency No. 756 of 2018] held that ; An acknowledgement must be made before the expiration of the limitation period as per Section 18 of the Limitation Act, 1963

Excerpts of the order;

The Appellant / Director of ‘Corporate Debtor’ has filed the instant appeal being aggrieved against the order dated 3rd October, 2018 passed by the Adjudicating Authority (‘National Company Law Tribunal’) Mumbai Bench whereby and where under the application filed by the Respondent / Applicant (‘Financial Creditor’) (u/s 7 of the ‘I&B’ Code) admitted. Earlier, the Adjudicating Authority (‘National Company Law Tribunal’) Mumbai Bench while passing the impugned order dated 3rd October, 2018 at para 6.4 to 6.6 had observed the following and ultimately admitted the application: -

• “6.4. It is further noticed that despite number of notices and reminders the Debtor has failed to make the payment. It is also noticed that the Financial Creditor has made due efforts to serve the Petition / Application to the Debtor but the Debtor has left its registered office. TheRoC extract does not show any change in Registered Address of the Debtor Company.

• 6.5. Hence, keeping the facts and submissions in mind this Bench has come to conclusion that, the nature of Debt is a “Financial Debt” as defined under section 5(8) of the Code. Further, admittedly there is a “Default” as defined under section 3(12) of the Code on the part of the Corporate Debtor.

• 6.6 On the basis of the evidences on record and statement of account the Financial Creditor has established that the loan was sanctioned and duly disbursed to the Corporate Debtor but there is non-payment of the Balance Debt on the part of the Corporate Debtor.”

# 4. The Learned Counsel for the Appellant contends that the tenure of the Loan was from 30.03.2013 to 30.03.2016 (for three years) and the EMI was of Rs. 1,08,775/-, to be paid in 36 equal instalments. In this connection, it is represented on behalf of the Appellant that the 1st default of the Appellant had occurred on 30.03.2014 and that the 1st Respondent / Applicant had issued a loan recall cum Demand Notice dated 06.05.2014 seeking the principal amount computed with the outstanding interest amount and the future sum upto 27.03.2016. In fact, as per the aforesaid Recall cum Demand Notice dated 06.05.2014, payable outstanding amount by the Appellant was of Rs. 29,29,149.74/-.

# 5. The grievance of the Appellant is that the Learned Adjudicating Authority had passed the Ex-parte impugned order dated 03.10.2018 and that the Appellant assails the impugned order on the ground of (i) Barred by Limitation; and (ii) the Application was never served on the Appellant.

# 8. The Learned Counsel for the Appellant submits the ‘cause of action’ in favour of the Respondent / Applicant in regard to the Appellant’s loan default took place on 6th May, 2014 and that in the Recall cum demand notice the entire principal sum including interest and future interest was recalled upto 27.03.2016

# 9. The Learned Counsel for the Appellant points out that the Hon’ble Supreme Court in the decision “Jignesh Shah & Ors.” Vs. Union of India & Ors.” reported in (2019) SCC Online SC 1254, and in decision Gaurav Hargovind Bhai Dave Vs. Asset Reconstruction Company (India) Ltd. & Ors. (2019)SCC Online SC 1239 had dealt with the aspect of Limitation under ‘I&B’ Code.

# 10. Continuing further, the Learned counsel for the Appellant points out that in the judgement in V.Hotels Ltd. Vs. Asset Reconstruction Company (India) Limited in Company Appeal (AT) (Insolvency) No. 525 of 2019, the observations of the Hon’ble Supreme Court were noted and that similar principles of limitation were laid down in the said judgement.

# 12. The Learned Counsel for the 1st Respondent brings it to the notice of the this Tribunal that in the Loan Recall notice dated 6.5.2014 issued to the Appellant / ‘Corporate Debtor’ a sum of Rs. 28,44,423 as on 02.05.2014 claimed together with accrued interest and expense till the date of realisation within 7 days from the date of receipt of the notice. In reality, it is the case of the 1st Respondent / Applicant that the Appellant /’Corporate Debtor’ paid a sum of Rs. three lakhs on 18.03.2015 (through Cheque No. 51367 and subsequently, the ‘Corporate Debtor’ had not made any payment towards the outstanding sum.

# 13. The Learned Counsel for the 1st Respondent points out that the Demandcum- Insolvency Notice dated 17.08.2017 was sent to the Appellant / ‘Corporate Debtor’ and Co-Borrowers by the 1st Respondent / ‘Financial Creditor’ claiming a sum of Rs. 29,29,149.74/-.

# 14. The Learned Counsel for the 1st Respondent strenuously contends that the application along with the hearing notice was served at the Registered address of the Appellant / ‘Corporate Debtor’, available in the Master Data with ROC but the same was returned with an endorsement “Addressee Left” and to this effect the affidavit of service was also placed on record and these facts were mentioned in the Impugned Order dated 03.10.2018 passed by the Adjudicating Authority. Therefore, because of the non-appearance of the Appellant / ‘Corporate Debtor’, the Adjudicating Authority passed an ‘Ex-parte order’ on 03.10.2018.

# 15. Lastly, the Learned Counsel for the 1st Respondent takes a stand that the Learned Adjudicating Authority had rightly held that there was continuous ‘cause of action’ when Demand Notice dated 17.08.2017 was issued to the ‘Corporate Debtor’ and hence the ‘Debt’ is not time barred.

# 22. As a matter of fact, the Adjudicating Authority had observed in the impugned order that address of the Debtor Company from the Master data is the same for which only the Respondent/Appellant had taken place for sending them hearing notice. Therefore, there was no necessity for a direction being issued for a ‘Substituted service’ to be effected upon the Appellant. Moreover, non-serving of notice on the e-mail address of the Appellant is not fatal to the present case, as opined by this Tribunal.

# 23. It cannot be forgotten that for the Demand Notice dated 17.08.2017 of the Respondent / Applicant (‘Financial Creditor’), the ‘Corporate Debtor’ and the co borrower (s) to the Loan Agreement although received the same had not issued a Reply and also not repaid the outstanding sum of Rs. 29,29,149.74/-. Before that on 18.03.2015 through cheque No. 51367 payment of Rs. 3 lakhs was made by the ‘Corporate Debtor’ and subsequently, the ‘Corporate Debtor’ has not made any payment towards the Loan outstanding amount.

# 30. Admittedly, the Loan cum hypothecation agreement was entered into between the parties on 28.03.2013 and the period of 36 equated monthly instalments of Rs. 1,08,775/- per month towards the purchase of car commenced from 30.03.2013 to 30.03.2016 on 06.05.2014, a Loan Recall notice was issued on behalf of the Respondent for termination of loan agreement. It is not in dispute that a payment of Rs. three lakhs through cheque dated 18.03.2015 was made by the ‘Corporate Debtor’.

# 31. The Demand Notice dated 17.08.2017 was issued by the Respondent / Applicant for which the ‘Corporate Debtor’ and the co-Borrower to the loan agreement had not responded and not made payment of the outstanding sum of Rs. 29,29,149.74/-. As per Section 3(12) of the ‘I&B’ Code the ‘Corporate Debtor’ had committed default in respect of a financial debt envisaged u/s 5(8) of the Code. In Law, an ‘Acknowledgement’ in writing within expiration of prescribed period will mark a new commencement period for limitation to base a claim and the same will not create a new contract. In fact, it only extends the limitation period. Suffice it for this Tribunal to make a pertinent mention that if a suit is filed within three years from the last acknowledgement the same is not barred by limitation as per decision Union of India Vs. M.C. Pandey AIR 2009 NOC Page 494 (UTR). Further, an ‘Acknowledgement’ must be made before the expiration of the limitation period as per Section 18 of the Limitation Act, 1963. An ‘Acknowledgement’ of Liability not only saves limitation period but also confers on an individual a ‘cause of action’ to him, to lay his claim

# 32. Considering the fact that the Appellant / ‘Corporate Debtor’ had made a payment of three Lakhs through Cheque on 18.03.2015 and that the said payment was made after the issuance of Loan Recall notice dated 06.05.2014 and later a demand notice dated 17.08.2017 was issued by the Respondent to the Appellant / ‘Corporate Debtor’ and co-borrower in respect of the loan agreement dated 28.03.2013 where the ‘Corporate Debtor’ had agreed to pay Rs. 1,08,755/- per month beginning from 30.03.2013 to 30.03.2016 and also this Tribunal keeping in mind that the application u/s 7 of the ‘I&B’ Code was filed by the Respondent / Applicant before the Adjudicating Authority on 16.12.2017, this Tribunal comes to a consequent conclusion that the claim of the Respondent / Applicant is not barred by the plea of Limitation. Consequently, the present Appeal fails and the same is dismissed but without costs. All the pending IA’s are closed. The Appellant is directed to file certified copy of the Impugned Order dated 03.10.2018 within 4 days from today.

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Author’s comments; In the present case the Appellant / ‘Corporate Debtor’ had made a payment of three Lakhs through Cheque on 18.03.2015, after the date of default ( Loan Recall notice dated 06.05.2014). As this payment was made within three years of default, the limitation gets extended under section 19 of “The Limitation Act. 1963”. There is no mention of CD ever giving any  acknowledgement of debt. 

Section 19 of “The Limitation Act. 1963” reads as under; 

• # 19. Effect of payment on account of debt or of interest on legacy.

• Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made:

- Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgment of the payment appears in the handwriting of, or in a writing signed by, the person making the payment.

- Explanation.—For the purposes of this section,— 

- (a) where mortgaged land is in the possession of the mortgagee, the receipt of the rent or produce of such land shall be deemed to be a payment; 

- (b) “debt” does not include money payable under a decree or order of a court.