Balance and security confirmation letters’ would amount to sufficient acknowledgment of debt to extend limitation under Section 18 of the Limitation Act, for initiating insolvency proceedings. The order passed by the NCLAT New Delhi (principle bench), in its decision in Lakshmi Narayan Sharma v. Punjab National Bank, (Company Appeal (AT) (CH) (Insolvency)No.01 of 2021) by Hon’ble Shri Justice Venugopal M
The facts of the case was such that the Corporate Debtor alongside Maha Hotels Projects Pvt. Ltd. was granted a public-private organization venture to create and work a four-star inn on formwork move premise with the National Institute of Tourism and Hospitality Management. To work with the task, the Corporate Debtor has endorsed a consortium loan by Punjab National Bank/Respondent alongside Punjab and Sindh Bank according to a consortium loan arrangement and assent letters.
Because of a few deferrals and complexities in the fruition of the undertaking, the Corporate Debtor defaulted to its greatest advantage installments. Against such default, Respondent favored an application under Section 7 of the Insolvency and Bankruptcy Code before the Adjudicating Authority. The Adjudicating Authority request dated 18 January 2021 conceded the Section 7 Application recorded by Respondent holding that the monetary leaser had set up the obligation and default through different archives documented, and accordingly proclaimed the ban. The Impugned Order came to be tested before the NCLAT by a Promoter of the Corporate Debtor as an oppressed individual.
The counsel on behalf of the Appellant looked to challenge the accuracy of the Impugned Order on the ground of limitation. The Appellant battled that the Section 7 Application was liked past the endorsed limitation period and the Adjudicating Authority submitted a grave blunder in conceding something very similar. According to the Appellant, the date of default for all offices given by Respondent according to the Section 7 Application was 30 March 2016, though the Section 7 Application was documented uniquely on 18 July 2019 which is past the three-year period of limitation.
The NCLAT clarified the law as under Section 18 of the Limitation Act to express, that the arrangement doesn’t urge that an ‘acknowledgment’ must be in a particular structure or to be express. The acknowledgment for each situation must be analyzed settling upon the chaperon conditions to close a confirmation that the author owes an obligation. Further, to be treated as an acknowledgment, the author should be aware of his risk and the responsibility should be made in regard of such obligation.
The NCLAT saw that in the moment case, the underwriters of the Corporate Debtor had executed ‘equilibrium and security affirmation letters’ dated 20 February 2018 in regard of the records of the Corporate Debtor, in this manner recognizing the ‘obligation’ in unequivocal terms. The NCLAT noticed that under the ‘equilibrium and security affirmation letters’, the underwriters had explicitly affirmed the accuracy of the charge balance.
The NCLAT was of the view that there was truth be told an acknowledgment of obligation as perceived under Section 18 of the Limitation Act, naming it as a powerful, unavoidable and unpreventable end considering the ‘equilibrium and security affirmation letters’. The period of limitation in this way stood reached out by prudence of the acknowledgment.
The NCLAT inferred that the Section 7 Application liked by Respondent in July 2019 was viable in law and well inside the period of limitation. The NCLAT expressed that Respondent had demonstrated the presence of obligation as well as demonstrated the default through reports recorded alongside its application and there was no mistake submitted by the Adjudicating Authority in conceding said application. The appeal was in like manner dismissed.