Writing to be an acknowledgement of liability must involve an admission of subsisting jural relationship between the parties and a conscious affirmation of an intention of continuing such relationship in regard to an existing liability.

The National Company Law Appellate Tribunal (NCLAT) held that writing to be an acknowledgement of liability must involve an admission of subsisting jural relationship between the parties and a conscious affirmation of an intention of continuing such relationship in regard to an existing liability and that the said admission need not be in regard to any precise amount nor by expressed words.

In the instant case titled Mr R.R. Gopaljee v. Indian Overseas Bank and Others the issue that was raised before the NCLAT was:

Whether the letter dated March 27, 2017, be treated as an acknowledgement of debt in terms of Section 18 of the Limitation Act, 1963 (“Limitation Act”) in absence of any specific acknowledgement of liability by the Corporate Debtor?

NCLAT held that it is now well settled that writing to be an acknowledgement of liability must involve an admission of subsisting Jural relationship between the parties and a conscious affirmation of an intention of continuing such relationship in regard to an existing liability. The Admission need not be in regard to any precise amount nor by expressed words. If a defendant writes to the plaintiff requesting him to send his claim for verification of payment it amounts to an acknowledgement.

In the instant case, the Corporate Debtor has acknowledged the debt within three years i.e. before the expiration of the prescribed period for a suit or application. Thus, we are of the considered view that Learned Adjudicating Authority has rightly held that the Application under Section 7 of I & B Code is well within limitation. Therefore, no interference is called for in this Appeal.

The court categorically held that:

“ Section 18 of the Limitation Act, deals with the effect of acknowledgement in writing and provides that a fresh period of limitation shall be computed from the time when the acknowledgement was signed before the expiration of the prescribed period for a suit or application in respect of a right. The explanation to the section provides that an acknowledgement may be sufficient though it omits to specify the exact nature of the right or avers that the time for payment has not yet come or is accompanied by a refusal to pay, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the right”.

The NCLAT upheld the admission order passed by the Adjudicating Authority under Section 7 of IBC as the same was well within limitation and hence, the appeal was dismissed.