When part payment is made before the expiration of the prescribed period of limitation by the person liable to pay the debt, a fresh period of limitation shall be computed from the time when the payment was made: NCLAT

The National Company Law Appellate Tribunal (NCLAT) held that when the alleged amount due on account of non-payment of invoice amount, generated in 2011 and the acknowledgement of debt was made in April 2017, which is beyond the limitation period, relief of a fresh period of limitation under Section 18 of the Limitation Act cannot be provided.

The Operational Creditor filed an Application under Section 9 of the Insolvency & Bankruptcy Code, 2016 (IBC), for initiation of Corporate Insolvency Resolution Process against the Corporate Debtor for a total debt amount Rs. 5,97,09,566/-. The Respondents/Applicant served the demand notice dated 09th June 2018, but when the Corporate Debtor did not repay the amount, the petition under Section 9 of the IBC was filed.

The National Company Law Tribunal (NCLT/Adjudicating Authority) admitted the petition.

An appeal was filed with the NCLAT alleging that the Adjudicating Authority failed to consider that he Application filed under Section 9 of the IBC was incomplete; and was also incomplete on the ground of non-compliance of statutory provision of Section 9(3)(b) and 9(3(c) of the IBC. It was also stated that the NCLT failed to consider that the Application is time-barred in as much as debt is claimed under invoice dated 13th December 2011, which is almost nine years old.

The Appellant challenged the admission order by the NCLT mainly on the ground of limitation. The Appellant contended that the Applicant/Operational Creditor had mentioned in the demand notice that 12th January 2012 is the date from which such debt fell due. Appellant further contended that last part payment was made on 30th May 2015; after that, the Corporate Debtor confirmed the outstanding dues through balance confirmation letter dated 01st April 2017. The alleged claim of the Operational Creditor is relating to the invoice dated 13th December 2011.

According to the NCLAT, the legislature did not contemplate enabling a creditor who has allowed the period of limitation to lapse to allow such delayed claims through the mechanism of the IBC, and the expression “debt due” in the definition section of the IBC would obviously only refer to debts “due and payable” in law, i.e., the debts that are not time-barred.

The NCLAT ruled that The alleged amount is due on account of goods supplied in December 2011 w.e.f. January 2012 – after the expiry of two months grace period. The first date of default was in January 2012, and after a lapse of about five years, acknowledgement of liability was made in April 2017. The NCLAT held that in the instant case, a fresh period of limitation will not accrue w.e.f. April 2017 since three years limitation period for realization of the amount was up to December 2014.

The NCLAT added that, “In this case, the Adjudicating Authority has passed the Order of admission under Section 9 of the Code, without even considering the statutory requirement of Section 9(3)(b) and 9(3)(c) of the Code. The Adjudicating Authority has even not considered the issue of limitation, though Section 3 of Limitation Act mandates to decide the issue of limitation. The Adjudicating Authority has admitted the time barred petition, though as per statutory provision of Section 3 of the Limitation Act, it was obligatory on the Adjudicating Authority to examine the issue of limitation.”

Justice Venugopal M – Member (Judicial); V.P. Singh – Member (Technical) and Alok Srivastava – Member (Technical) presided over the case.

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