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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the letter dated 12.06.2017 constituted an acknowledgment of liability under Section 18 of the Limitation Act, 1963 so as to extend limitation for the Section 95 proceeding.
Analysis: The letter was written in response to the demand notice under Section 13(2) of the SARFAESI Act, 2002 and expressly referred to the outstanding loan. Read with the notice, the letter conveyed that the borrower companies were in advanced discussions with lenders, expected to close the loan shortly, and sought time till 31.07.2017 while asking that further action be withheld. The letter was treated as a clear admission of the subsisting debt. The settled position applied was that acknowledgment by a borrower or guarantor, if made before expiry of limitation, gives rise to a fresh period of limitation, and such acknowledgment is to be construed liberally by examining the intention and surrounding circumstances.
Conclusion: The letter dated 12.06.2017 was a valid acknowledgment under Section 18 of the Limitation Act, 1963 and limitation for the Section 95 application ran afresh from that date; the admission of the application as within time was upheld.
Ratio Decidendi: A written communication by a guarantor, when read in the surrounding context and before expiry of the prescribed period, will amount to acknowledgment of liability if it admits the subsisting debt and thereby extends limitation by commencing a fresh period from the date of signing.
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