NCLAT Delhi Upholds CIRP Initiation Based on Debt Acknowledgment, Extends Limitation Period

New Delhi, Apr 21 (KNN) The National Company Law Appellate Tribunal (NCLAT), Principal Bench, has upheld the initiation of the Corporate Insolvency Resolution Process (CIRP) against a corporate debtor, ruling that written acknowledgment of debt extends the limitation period under Section 18 of the Limitation Act.

A two-member bench comprising Justice Yogesh Khanna (Judicial Member) and Ajai Das Mehrotra (Technical Member) dismissed an appeal filed by the corporate debtor against the order of the National Company Law Tribunal (NCLT), New Delhi, which had admitted a Section 9 application under the Insolvency and Bankruptcy Code (IBC), 2016.

The dispute arose when the operational creditor, who supplied and installed fire safety systems in a residential project, sought insolvency proceedings after the corporate debtor defaulted on payment.

The corporate debtor contended that the last invoice and payment were dated in 2017, and the Section 9 application filed in February 2024 was barred by limitation.

However, the respondent pointed to several letters dated April 16, 2018, January 03, 2019, and December 22, 2021, where the corporate debtor acknowledged its debt and explained delays in payment.

The NCLAT agreed, holding that the written acknowledgments reset the limitation clock, making the application timely.

This judgment reinforces the principle that written acknowledgment of debt can revive the limitation period under the Limitation Act, supporting operational creditors in asserting their claims through CIRP.

(KNN Bureau)