NCLT New Delhi Rules, Time Spent In Voluntary Pre-Institution Mediation Cannot Be Excluded For Computing Limitation U/S 14 Of Limitation Act
Pranav B Prem
The National Company Law Tribunal (NCLT), New Delhi Bench (Court-IV), comprising Manni Sankariah Shanmuga Sundaram (Judicial Member) and Atul Chaturvedi (Technical Member), has held that the period spent in voluntary pre-institution mediation proceedings cannot be excluded while computing limitation under Section 14 of the Limitation Act, 1963. The Bench was dealing with a petition filed by Shiva Asphaltic Products Private Limited under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Atlas Constructions Private Limited for an alleged default amounting to ₹1.13 crore.
Background
The operational creditor supplied bitumen emulsion to the corporate debtor against several invoices. Despite repeated demands, the payment remained outstanding. The corporate debtor, through a letter dated June 17, 2024, expressed willingness to reconcile accounts but failed to clear the dues. Before approaching the NCLT, the operational creditor initiated pre-institution mediation proceedings under Section 12A of the Commercial Courts Act, 2015 before the District Legal Services Authority, East Delhi. However, the mediation failed due to the non-participation of the corporate debtor, and a non-starter report was issued on September 19, 2024. The creditor thereafter filed the insolvency petition under Section 9 of the IBC.
Contentions
The operational creditor argued that the corporate debtor had acknowledged the liability through its communication dated June 17, 2024, and that such acknowledgment extended the limitation period under Section 18 of the Limitation Act. It was further contended that the period spent in mediation proceedings between August 3, 2024, and September 19, 2024, should be excluded under Section 14 of the Limitation Act, as the mediation was pursued bona fide to settle the dispute. Conversely, the corporate debtor disputed the claim, denying any acknowledgment of debt and contending that the application was barred by limitation.
Findings
The Tribunal observed that the last payment was made on May 10, 2022, making the three-year limitation period expire on May 9, 2025. Since the petition was filed on May 31, 2025, it was prima facie beyond limitation unless validly extended or excluded. On the alleged acknowledgment, the Bench held that the debtor’s letter dated June 17, 2024, expressing readiness to reconcile accounts, could not be construed as a clear or unconditional acknowledgment of liability under Section 18. “The mere proposal to reconcile accounts or settle legitimate dues if any cannot be construed as acknowledgment of a subsisting debt,” the Bench observed.
Regarding the plea for exclusion of the mediation period, the Tribunal clarified that Section 14 of the Limitation Act applies only where a prior proceeding was pursued before a court without jurisdiction or under a bona fide mistake. It does not extend to voluntary pre-institution mediation, which is initiated at the discretion of a party and lies outside the IBC framework. Referring to the IBBI Expert Committee’s “Report on Framework for Use of Mediation under the Insolvency and Bankruptcy Code, 2016” (January 31, 2024), the Bench cited the following observation: “Any mediation prior to such application would fall outside the realm of the Code and technically not be ‘insolvency mediation.’ Thus, it cannot therefore be enforced in the same manner as mediations post the filing of an application under the Code.” Accordingly, the Bench held that “the time spent in voluntary pre-institution mediation proceedings cannot be excluded for computation of limitation under Section 14 of the Limitation Act.”
Holding that there was no valid acknowledgment of debt and no ground for exclusion of limitation, the NCLT concluded that the application was barred by limitation. Consequently, the Tribunal dismissed the insolvency petition filed by Shiva Asphaltic Products Private Limited against Atlas Constructions Private Limited, with no order as to costs.
Appearance
For Applicant: Mr. Nipun Gupta, Advocate
For Respondent: Mr. Shrey Patnaik, Ms. Saira Khan, and Mr. Ritwik Batra, Advocates
Cause Title: Shiva Asphaltic Products Private Limited v. Atlas Constructions Private Limited
Case No: CP (IB) 339 (ND)/2025
Coram: Shri Manni Sankariah Shanmuga Sundaram (Member-Judicial), Shri Atul Chaturvedi (Member-Technical)
