Acknowledgment of liability in settlement correspondence can extend limitation, even when marked "without prejudice".

A written settlement proposal for an admitted debt can amount to acknowledgment of liability under Section 18 of the Limitation Act, 1963 if it is made before expiry of limitation. The NCLAT read the corporate debtor's correspondence, including letters dated 24.04.2012, 12.03.2014 and 09.06.2016, as acknowledging an existing outstanding liability despite the phrase "without prejudice". On that basis, fresh limitation periods ran from the acknowledged dates, and the Section 7 application filed on 11.07.2018 was held to be within time and not barred by limitation.

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Issues: Whether the corporate debtor's letters, including the one-time settlement proposal marked "without prejudice", amounted to an acknowledgment of liability under Section 18 of the Limitation Act, 1963 so as to extend limitation for the Section 7 application under the Insolvency and Bankruptcy Code, 2016.

Analysis: The limitation issue turned on whether the subsequent correspondence disclosed a written acknowledgment of an existing debt before expiry of the prescribed period. The letter dated 09.06.2016 was read along with earlier acknowledgments dated 24.04.2012 and 12.03.2014. The expression "without prejudice" was held not to negate acknowledgment where the debtor was seeking settlement in respect of an admitted outstanding liability. On that basis, fresh periods of limitation were computed from the acknowledged dates, and the Section 7 application filed on 11.07.2018 was held to be within time.

Conclusion: The acknowledgment letters extended limitation, and the Section 7 application was not barred by time.

Ratio Decidendi: A written proposal for settlement of an admitted debt, even if stated to be "without prejudice", can constitute acknowledgment of liability under Section 18 of the Limitation Act, 1963 and give rise to a fresh period of limitation.

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