Acknowledgment of debt in a settlement letter can extend limitation for insolvency proceedings when subsisting liability is clearly admitted.

A one-time settlement letter may constitute an acknowledgment of debt under Section 18 of the Limitation Act if it clearly admits the creditor-debtor relationship and a subsisting liability, even without an express promise to pay. On that basis, the Supreme Court treated the 01.06.2016 OTS proposal as sufficient acknowledgment, rejected the objection based on the Evidence Act, and held that Section 23 did not exclude the communication because it was not confidential. Since the proposal fell within three years from the date the account was declared NPA, limitation for the Section 7 insolvency application stood extended, and the application was within time.

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Issues: Whether the one-time settlement letter dated 01.06.2016 constituted an acknowledgment of debt under Section 18 of the Limitation Act, 1963 so as to extend limitation for the Section 7 insolvency , and whether the application was therefore within limitation.

Analysis: The letter was treated as a clear admission of the creditor-debtor jural relationship and of a subsisting liability. An acknowledgment under Section 18 need not contain an express promise to pay; an admission of debt is sufficient if it evidences the relationship and liability. The Court further held that the Evidence Act objection was misplaced in the insolvency context, as the communication was not confidential and Section 23 of the Indian Evidence Act, 1872 did not exclude it. On the facts, the settlement proposal fell within three years from the date the account was declared NPA, and therefore operated to extend limitation.

Conclusion: The OTS proposal dated 01.06.2016 extended limitation, and the Section 7 application was within time; the impugned order was set aside and the appeal was allowed.

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