Acknowledgment of Liability Post Limitation Cannot Revive Past Payment Claims: Allahabad HC

New Delhi, Aug 12 (KNN) In a significant ruling, the Allahabad High Court has clarified the application of limitation periods under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.

This ruling clarifies a crucial aspect of limitation law in the context of MSMED claims, potentially affecting numerous cases where parties seek to revive old claims based on recent acknowledgments of liability.

The court held that claims filed beyond the prescribed limitation period cannot be revived by a subsequent acknowledgment of liability by the opposing party.

The division bench, comprising Chief Justice Arun Bhansali and Justice Vikas Budhwar, emphasised that for an acknowledgment to extend the limitation period under Section 18 of the Limitation Act, it must occur within the original limitation period.

The court stated, "For taking advantage of acknowledgement for the purpose of extension of limitation, it is sine qua non that the acknowledgement must take place within the period of limitation."

The case, "M/S Standard Niwar Mills v. Government of India Ministry of Home Affairs Procurement Wing Jaisalmer House," involved a claim for dues dating back to 1998-2000.

The appellant sought to recover Rs.40,17,889 as principal and Rs.3,25,59,035 as interest under the MSMED Act in 2012, arguing that acknowledgments of liability made by the respondent between 2010 and 2014 should extend the limitation period.

However, the court disagreed, noting that the original cause of action arose in 2000, and the acknowledgments made a decade later could not revive what had become a stale claim.

The bench observed that the appellant had not contested the limitation issue when it was initially raised by the respondent before the MSME Facilitation Council.

(KNN Bureau)