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SVG Fashions Pvt. Ltd. (Earlier Known as SVG Fashions Ltd.) vs Ritu Murli Manohar Goyal & Anr.

Civil Appeal · 2022 INSC 363Decided 29 Mar 2022
Civil Appeal No. 4228 of 2020
Hemant Gupta · V. Ramasubramanian

Background

SVG Fashions, an operational creditor, had supplied fabric to a corporate debtor since 2013 and, after the debtor failed to pay, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016. The debtor argued the claim was time-barred, relying on the fact that six cheques it had issued towards payment (which it claimed were "lost" and cancelled via stop-payment) were dated December 2017: long after the debt arose in 2013. The National Company Law Tribunal (NCLT) admitted the insolvency application, finding an acknowledgment of liability that kept the claim within limitation, but the National Company Law Appellate Tribunal (NCLAT) reversed this and dismissed the application as time-barred.

Decision Breakdown

The Supreme Court found that the NCLAT had completely overlooked a crucial piece of evidence: a 2015 letter from the operational creditor whose cheque numbers and bank details matched the very six cheques the debtor claimed were "lost," which, if genuine, would count as a written acknowledgment of the debt under Section 18 of the Limitation Act and restart the limitation clock. The Court also noted the debtor's own admission that a supposed 2017 "stop payment" letter actually bore a 2018 date, adding to the unresolved factual disputes. Because the law on acknowledgment-of-debt under Section 18 (as developed through cases like Asset Reconstruction Company v. Bishal Jaiswal) had not been properly examined by the NCLAT, the Supreme Court set aside its order and sent the matter back for fresh consideration.

Lesson Learnt

A written acknowledgment of a debt, even something like a letter referencing specific cheque numbers, can restart the limitation clock under Section 18 of the Limitation Act, so appellate tribunals must carefully examine such evidence before dismissing an insolvency claim as time-barred.

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

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