Tribunal Rules Against Extending Limitation Period Using Debtor's Own Acknowledgment in Insolvency Case
In a significant judgment, the National Company Law Appellate Tribunal (NCLAT) Principal Bench in New Delhi has upheld the dismissal of a petition filed by Kanta Gupta, a personal guarantor, under Section 94 of the Insolvency and Bankruptcy Code (IBC), 2016. The tribunal ruled that the petition was time-barred and could not benefit from an extended limitation period via the debtor's own acknowledgment of liability.
The appeal, filed by Kanta Gupta, challenged an earlier order by the National Company Law Tribunal (NCLT), Chandigarh Bench, which had dismissed her petition as being barred by the statute of limitations. The core issue revolved around whether the debtor could invoke Section 18 of the Limitation Act, 1963, to extend the limitation period by acknowledging the debt through proposals like a One-Time Settlement (OTS).
The NCLAT bench, comprising Mr. Justice Mohd. Faiz Alam Khan and Mr. Naresh Salecha, reiterated that the limitation period for filing an application under Section 94 of the IBC begins from the date the personal guarantee is invoked. In this case, the guarantee was invoked on September 10, 2019, and the limitation period expired on September 10, 2022.
The tribunal emphasized that an acknowledgment under Section 18 of the Limitation Act must be made by the party against whom the right is claimed and cannot be used by the debtor for their benefit. The bench noted that proposals for a One-Time Settlement made by the guarantor do not constitute valid acknowledgment under Section 18 for extending the limitation period.
Furthermore, the tribunal found that the petition was not filed with bona fide intent but rather as a tactic to trigger an interim moratorium and obstruct the realization of assets by creditors. The NCLAT observed that the appellant had filed the petition six years after the invocation of the guarantee, which was a calculated attempt to delay proceedings.
The judgment also addressed the appellant's challenge to an auction notice issued by the Bank of India, the lead bank in a consortium of creditors. The tribunal stated that the NCLAT does not have jurisdiction over actions under the SARFAESI Act, 2002, and the relief sought by the appellant was beyond its purview.
The NCLAT's decision reinforces the principle that the limitation period cannot be extended through unilateral acknowledgments by the debtor, thus providing clarity on the application of Section 18 of the Limitation Act in insolvency proceedings.
Bottom Line :
An acknowledgment under Section 18(1) of the Limitation Act, 1963, cannot be claimed by a debtor for their own benefit to extend the limitation period for filing an application under Section 94 of the Insolvency and Bankruptcy Code, 2016. The limitation period for filing such applications begins from the date of invocation of the guarantee, not from subsequent acknowledgments or proposals like OTS (One-Time Settlement).
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Section 94, Limitation Act, 1963 Section 18, SARFAESI Act, 2002 Section 13
Kanta Gupta v. Bank of India, (NCLAT)(Principal Bench, New Delhi) : Law Finder Doc id # 2967152
