NCLAT holds that express or implied debt acknowledgements or restructuring toll limitation under Section 7 IBC.
Debt Acknowledgements and Restructuring Extend Limitation for Section 7 IBC Petition: Delhi NCLAT
The NCLAT, Delhi, ruled that the period of limitation under Section 7 of the IBC is extended where the corporate debtor acknowledges the debt or enters into restructuring, thereby triggering Section 18 of the Limitation Act, 1963.
The petition was filed beyond the standard three-year window from default. However, the debtor had acknowledged the liability through letters and participated in a restructuring exercise after the default. NCLAT held that such conduct constitutes an acknowledgment under law, restarting the limitation period.
"Where there is acknowledgment of liability, the limitation runs from the date of such acknowledgment."
This ruling benefits creditors by allowing delayed petitions when debtors have reaffirmed obligations. Legal teams must document all post-default acknowledgements to support timely IBC initiation.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 7
- Limitation Act, 1963, Section 18