NCLAT’s Observations under the IBC on Limitation Period on Outstanding Debt

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Jun 30, 2020

NCLAT’s Observations under the IBC on Limitation Period on Outstanding Debt

NCLAT^[1], held the following in relation to the initiation of the corporate insolvency resolution process under the IBC:

i. written acknowledgment of a financial debt by a corporate debtor prior to the expiry of limitation extends the limitation from the date of such acknowledgement;

ii. cheques issued towards part-payment of a debt after the expiry of the limitation period is not an acknowledgement of debt under Section 18 of the Limitation Act, 1963; and

iii. an offer of part-payment of a debt on the condition that the operational creditor relinquishes the remaining portion of the claim will not be considered as satisfaction of a demand notice issued by an operational creditor under Section 8 of the IBC.

[1] Hussan Kadri v. Edelweiss Asset Reconstruction Company Limited & Another, Company Appeal (AT) (Insolvency) No. 1073 of 2019; Ritu Murli Manohar Goyal v. SVG Fashions Ltd. & Another, Company Appeal (AT) (Insolvency) No. 1340 of 2019 and Raj Kumar Garg & Another v. Health Care at Home India Private Limited & Another, Company Appeal (AT) (Insolvency) No. 39 of 2020.

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