2024 (9) TMI 412 - AT - IBC

Admitting Section 95 Application challenged by the Personal Guarantor - challenge on the ground that Application filed by Financial Creditor under Section 95 was barred by time - whether Letter dated 12.06.2017 which was written by the Appellant to the Financial Creditor had effect of extending the Limitation for a period of three years from 12.06.2017 or the Letter cannot be treated an acknowledgement within meaning of Section 18 of the Limitation Act? HELD THAT - It is well settled that acknowledgement whether by Borrower or by Guarantor has effect of extending the limitation under Section 18 of the Limitation Act. The above proposition was laid down by the Hon ble Supreme Court in the matter of Laxmi Pat Surana Vs. Union Bank of India Anr 2021 (3) TMI 1179 - SUPREME COURT . In Paragraph 48 of the Judgment Hon ble Supreme Court held that a fresh period of Limitation be required to be computed from the time when the acknowledgement so signed by the Principal Borrower or the Corporate Guarantor. The Hon ble Supreme Court in several cases has laid down that acknowledgement under Section 18 has to be liberally construed and the intention of the Party writing acknowledgement has to be looked into to find out as to whether debt is acknowledged or not. The Letter contains clear acknowledgment of debt and Adjudicating Authority did not commit an error in giving the benefit of Section 18 of the Limitation Act. When the letter dated 12.06.2017 is treated to be acknowledgement Limitation of three years will expire on 11.06.2020 and the period from 15.03.2020 to 25.03.2021 directed to be excluded by Hon ble Supreme Court by its Order passed in Suo Motu Writ Petition No. 03/2020 2021 (3) TMI 497 - SC ORDER Application filed on 30.09.2021 was well within time and Adjudicating Authority has rightly overruled the objection of the Appellant that Application is barred by time. There are no error in the Order of the Adjudicating Authority holding that Application is well within time - appeal dismissed.

Summary

Issues Involved:
1. Whether the application filed by the Financial Creditor under Section 95 of the Insolvency and Bankruptcy Code, 2016, was barred by limitation.
2. Whether the letter dated 12.06.2017 constituted an acknowledgment of debt under Section 18 of the Limitation Act, 1963.

Detailed Analysis:

Issue 1: Whether the application filed by the Financial Creditor under Section 95 of the Insolvency and Bankruptcy Code, 2016, was barred by limitation.

The Appellant contended that the application under Section 95 was barred by limitation. The Appellant argued that the Bank Guarantee was invoked on 17.01.2017, and thus the three-year limitation period expired on 16.01.2020. Since the application was filed on 30.09.2021, it was claimed to be time-barred. The Respondent countered that the letter dated 12.06.2017 extended the limitation period under Section 18 of the Limitation Act, and with the exclusion of the period from 15.03.2020 to 25.03.2021 due to the Supreme Court's order in "Re: Cognizance for Extension Of Limitation," the application was within time.

Issue 2: Whether the letter dated 12.06.2017 constituted an acknowledgment of debt under Section 18 of the Limitation Act, 1963.

The core question was whether the letter dated 12.06.2017 extended the limitation period. Section 18 of the Limitation Act provides that an acknowledgment of liability in writing, signed by the party against whom the property or right is claimed, extends the limitation period. The Tribunal referred to the Supreme Court's judgment in "Laxmi Pat Surana Vs. Union Bank of India & Anr." which affirmed that an acknowledgment by a borrower or guarantor extends the limitation period. The Tribunal also cited "Laxmiratan Cotton Mills Company Ltd. Vs. Aluminium Corp. of India Ltd." wherein the Supreme Court emphasized that an acknowledgment should be liberally construed to determine if it indicates a subsisting liability and the existence of a jural relationship.

The letter dated 12.06.2017, written by the Appellant in response to a notice under Section 13(2) of the SARFAESI Act, acknowledged the debt and requested time till 31.07.2017 to close the loan. The Tribunal found that this letter, read with the notice dated 01.06.2017, constituted a clear acknowledgment of debt, thus extending the limitation period. Consequently, the limitation period extended to 11.06.2020, and with the exclusion of the period due to the Supreme Court's order, the application filed on 30.09.2021 was within time.

Conclusion:

The Tribunal concluded that the application under Section 95 was not barred by limitation. The letter dated 12.06.2017 was a valid acknowledgment under Section 18 of the Limitation Act, extending the limitation period. The appeal was dismissed, and the order admitting the Section 95 application was upheld.