K.R.V. Uday Charan Rao Vs Bank of India & Anr - Ack. under section 18 of The Limitation Act will extend Limitation for filing application U/s 7 of the Code.

 NCLAT(13.11.2019) in K.R.V. Uday Charan Rao Vs Bank of India & Anr.  [Company Appeal (AT) (Insolvency) No. 731 of 2019] held that; 

• From the aforesaid provisions, it is clear that the limitation will start from the date of accrual of right. The accrual of right is also to be noticed from the date of confirmation or acknowledgment of the debt and to be read along with Section 18 of the Limitation Act, 1963.

Excerpts of the order;

‘M/s. Bank of India’- (‘Financial Creditor’) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“I&B Code” for short) for initiation of the ‘Corporate Insolvency Resolution Process’ against ‘M/s. Sainath Estates Private Limited’- (‘Corporate Debtor’). The Adjudicating Authority (National Company Law Tribunal), Hyderabad Bench, Hyderabad, by impugned order dated 8th July, 2019 admitted the application.

# 2. Learned counsel appearing on behalf of the Appellant/ Shareholder submitted that the application under Section 7 was barred by limitation.

# 3. It was submitted that the loan was availed by the ‘Corporate Debtor’ on 20th August, 2010 from the ‘Financial Creditor’. Subsequently, notice issued under Section 13(2) of the SARFAESI Act, 2002, but no action was taken against the ‘Corporate Debtor’.

# 4. It was submitted that on invocation of provisions of the ‘I&B Code’, the ‘Corporate Debtor’ had no option but to provide confirmation of debt on 5th March, 2018. It was submitted that the said Agreement executed by the ‘Corporate Debtor’ was in violation of Section 25 of the Indian Contract Act.

# 5. Reliance has been placed on the decision of the Hon’ble Supreme Court in “Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. & Anr. − Civil Appeal No. 4952 of 2019” to suggest that the application is barred by limitation.

# 6. Learned counsel for the Respondents submitted that the application under Section 7 is not barred by limitation for the following reasons:

• (i) The ‘Corporate Debtor’ have acknowledged the debt vide letters dated 17th March, 2015, 20th March, 2015 and 5th March, 2018.

# 7. Counsel for the Respondents also placed reliance on Section 18 of the Limitation Act to suggest that the Application is not barred by limitation as the limitation starts from the date of acknowledgement,

# 8. For counting the period of limitation in filing the application under Section 7, we find that Part II of Third Division of Schedule of Limitation Act, 1963 i.e. Article 137 is applicable,

# 9. From the aforesaid provisions, it is clear that the limitation will start from the date of accrual of right. The accrual of right is also to be noticed from the date of confirmation or acknowledgment of the debt and to be read along with Section 18 of the Limitation Act, 1963.

# 10. It was in this background, as far back as on 17th March, 2015, the ‘Corporate Debtor’ acknowledged the debt for the purpose of accepting the liability under Section 18 of the Limitation Act, 1963,

# 11. In view of the aforesaid facts and provisions of law, we hold that the application under Section 7 is not barred by limitation and the Adjudicating Authority has rightly admitted the application under Section 7.

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Author’s comments; In the judgement following are the relevant dates,

Date of availment of loan by the CD - 20th August, 2010 

Date of Ack. under section 18 0f Limitation Act - 17th March, 2015

Judgement has not discussed the date of default. 

I think the limitation runs from the date of default and extension of limitation can be on the basis of acknowledgement (Under section 18 of Limitation Act.) made before the expiration of limitation. This ratio has been upheld by the Appellate Authority in the following judgement.

NCLAT (20.01.2020) in Vivek Jha Vs. Daimler Financial Services India Private Ltd. & Anr. [Company Appeal (AT) Insolvency No. 756 of 2018] held that;

• # 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

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