NCLAT New Delhi: Specific Pleadings On Part Payments With Written Acknowledgment Reset Limitation Period Under Section 19 Of Limitation Act
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), has held that when there are specific pleadings under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) regarding part payments made by the corporate debtor—further supported by a written acknowledgment in reply to the demand notice—the limitation period for filing the application gets reset under Section 19 of the Limitation Act, 1963.
Background
The appeal was filed by the suspended director of M/s MKM Diamonds Pvt. Ltd., challenging an order dated 01.09.2023 passed by the National Company Law Tribunal (NCLT), Mumbai Bench, which admitted a Section 9 application filed by the State Bank of India (SBI), Antwerp Branch, Belgium. SBI, Antwerp, had extended bill discounting facilities to Eurostar Diamond Traders NV, Antwerp, the sister concern of the corporate debtor. Eurostar Diamond Traders raised two invoices dated 03.10.2016 and 05.10.2016 for the supply of polished natural diamonds to MKM Diamonds Pvt. Ltd., which accepted and endorsed the invoices. SBI discounted these invoices and paid the amounts to Eurostar Diamond Traders NV. However, MKM Diamonds failed to make full payment to SBI. A demand notice was issued on 09.10.2020, claiming ₹16.77 crore in default. The corporate debtor replied on 05.11.2020, admitting part payments of USD 1,74,214.56 and USD 1,49,1407 made on 15.05.2017 and 26.09.2017, respectively. SBI subsequently filed a Section 9 application in 2022, claiming ₹21.28 crore, including interest, and the NCLT admitted the petition.
Appellant’s Submissions
The Appellant contended that the Section 9 application was barred by limitation, as the invoices became due on 31.01.2017 and 02.02.2017, and the petition filed on 12.07.2022 exceeded the three-year limitation period. It was also submitted that the entire principal amount of ₹16.77 crore had already been paid before the hearing of the appeal, and that there was no contractual clause providing for interest. Therefore, SBI’s claim for interest and legal costs was unfounded.
Respondent’s Submissions
SBI argued that the Section 9 petition was well within time, as the part payments made by the corporate debtor on 15.05.2017 and 26.09.2017 constituted an acknowledgment of debt under Section 19 of the Limitation Act, thereby extending the limitation period by three years from the date of payment. It was further contended that after giving effect to the Supreme Court’s COVID-19 limitation extension orders in Suo Motu Writ Petition (Civil) No. 3 of 2020, the petition remained within limitation. SBI also maintained that it was entitled to interest on delayed payments.
Observations of the Tribunal
The NCLAT noted that the record and pleadings clearly established that the corporate debtor made two part payments—on 15.05.2017 and 26.09.2017—toward the invoices discounted by SBI. The payments were also expressly acknowledged in writing in the reply to the demand notice. Relying on Section 19 of the Limitation Act, the Tribunal observed that both the essential conditions—payment within the limitation period and acknowledgment in writing—were satisfied. It held that these payments triggered a fresh limitation period from the respective dates. “When the amount is directly paid to the creditor and there is acknowledgment in writing, the conditions as provided in Section 19 are fulfilled,” the Bench held.
The Tribunal further clarified that the COVID-19 limitation exclusion period also applied, making the Section 9 petition well within time. On the issue of interest, the NCLAT referred to its earlier decisions, including M/s SNJ Synthetics Ltd. v. PepsiCo India Holdings Pvt. Ltd. (2025) and Krishna Enterprises v. Gammon India Ltd. (2018), to reiterate that interest cannot be claimed unless expressly agreed upon between the parties or stipulated in the invoices. “The invoices raised do not contain any clause for interest, nor was there any agreement between the parties regarding the same. Hence, the operational creditor was not entitled to claim interest on the operational debt,” the Bench observed.
The Tribunal concluded that since specific pleadings of part payments were made in the Section 9 application, supported by a written acknowledgment by the corporate debtor, the limitation stood extended under Section 19 of the Limitation Act. The principal amount had already been paid, and the operational creditor was not entitled to claim any further interest. “The SBI was not entitled to include any interest in the principal amount. Thus, the entire principal debt stands liquidated,” the NCLAT held. Accordingly, the CIRP was closed, and the corporate debtor was freed from the rigors of insolvency proceedings. The appeal was allowed.
Appearance
For Appellant: Mr. Ramji Srinivasan, Sr. Advocate with Mr. Manish Kumar Shekhari, Ms. Anisha Mahajan, Mr. Sanjay Chaturvedi, Ms. Shefali Munde, Mr. Arjun Bhatia, Advocates.
For Respondents: Mr. Girish Utangale, Mr. Saurabh Utangale, Mr. Sarthak Utangale, Advocates for R-1.
Cause Title: Paresh K. Mehta Investment Pvt. Ltd. Versus State Bank of India & Anr.
Case No: Company Appeal (AT) (Insolvency) No.1197 of 2023
Coram: Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member)
