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N. Subramanian v. M/S. Aruna Hotels Ltd & Anr.

Civil Appeal · 2021 INSC 144Decided 3 Mar 2021
Civil Appeal No. 187 of 2019
Justice Rohinton Fali Nariman · Justice B.R. Gavai · Justice Hrishikesh Roy

Background

The appellant, a former employee of the corporate debtor (a hotel company) who retired in 2013, claimed about Rs.1.87 crore in unpaid salary arrears dating back to 1998, pointing to several written acknowledgments of this liability by the company, the latest being a 2014 letter from its then Managing Director admitting about Rs.1.06 crore was due. He filed an application under Section 9 of the IBC as an operational creditor; the NCLT admitted it, accepting that the 2014 acknowledgment kept the claim within limitation and rejecting the company's reliance on a "payment voucher" and a later-filed civil suit as a red herring. The NCLAT, however, reversed this, holding the 18-year delay in raising the claim was unexplained and that a genuine dispute existed, so the Section 9 application was not maintainable.

Decision Breakdown

The Supreme Court held that a written acknowledgment of liability (here, the Managing Director's 2014 letter spelling out the exact arrears) resets the limitation clock under Section 18 of the Limitation Act, so the claim for at least three years' salary prior to that acknowledgment was well within time and payable; the Court found the Employees' Provident Fund letter relied on by the NCLAT was irrelevant "red-herring" evidence unconnected to the arrears claim, and concluded there was a clear acknowledgment of liability and hence no genuine "dispute" barring admission. It therefore set aside the NCLAT's judgment, restored the NCLT's order admitting the Section 9 application, and allowed the main appeal; in the same judgment, it separately rejected permission to file three other connected civil appeals (Diary Nos.34841, 34836 and 34839 of 2018), which were distinct matters not otherwise addressed on merits.

Lesson Learnt

A clear, written acknowledgment of a debt, even one made years after it first fell due, can revive the limitation period and make an insolvency claim maintainable, so companies cannot escape genuine, acknowledged dues to employees or creditors merely by pointing to the original debt's age or raising unrelated technical objections.

Official source (sci.gov.in)View Judgment (PDF)

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