Acknowledgment of debt in balance sheets can extend limitation against corporate guarantors under co-extensive liability principles.

A written acknowledgment of liability in the principal borrower's balance sheets, together with repeated part-payments, was treated as extending limitation under Section 18 of the Limitation Act, 1963, creating a fresh limitation period for filing Section 7 applications. Because a guarantor's liability is co-extensive with that of the principal borrower, the acknowledgment was held available against the corporate guarantors as well. The excluded COVID period from 15.03.2020 to 28.02.2022 further supported the computation of limitation, so the Section 7 applications were treated as within time and maintainable.

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Issues: (i) Whether acknowledgment of debt by the principal borrower in its balance sheets and subsequent payments extended limitation for filing the Section 7 applications against the corporate guarantors. (ii) Whether the exclusion of the covid period applied to save the applications from being time-barred.

Issue (i): Whether acknowledgment of debt by the principal borrower in its balance sheets and subsequent payments extended limitation for filing the Section 7 applications against the corporate guarantors.

Analysis: The principal borrower had made repeated part-payments and its balance sheets for the relevant financial years reflected subsisting liability. The Tribunal applied Section 18 of the Limitation Act, 1963 and treated the acknowledgment in writing as giving rise to a fresh period of limitation. Relying on the principle that the guarantor's liability is co-extensive with that of the principal borrower, the Tribunal held that acknowledgment by the principal borrower enured to the benefit of the financial creditor against the corporate guarantors as well. The Tribunal concluded that the applications filed in 2023 were within limitation.

Conclusion: The issue was answered in favour of the appellant and against the respondents.

Issue (ii): Whether the exclusion of the covid period applied to save the applications from being time-barred.

Analysis: The Tribunal held that the period from 15.03.2020 to 28.02.2022 stood excluded for limitation purposes in judicial and quasi-judicial proceedings. On that footing, the limitation computation further supported the maintainability of the Section 7 applications.

Conclusion: The issue was answered in favour of the appellant and against the respondents.

Final Conclusion: The impugned orders were set aside, the appeals were allowed, and the matters were remanded to the Tribunal for fresh consideration after hearing the parties.

Ratio Decidendi: A written acknowledgment of liability in the principal borrower's balance sheet extends limitation under Section 18 of the Limitation Act, 1963, and that acknowledgment can be relied upon against the corporate guarantor because the guarantor's liability is co-extensive with the principal borrower's liability.

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