Section 18 of the Limitation Act, 1963 provides for effect of acknowledgement in writing. It says where before the expiration of the prescribed period for a suit in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, a fresh period of limitation shall commence from the time when the acknowledgement was so signed.
A statement in a balance sheet of a company presented to a creditor- share holder of the company and duly signed by the directors constitutes an acknowledgement of the debt. The balance sheets and in explaining the statements in the balance-sheets, the balance-sheets together with the Directors’ report must be taken together.
NCLAT held that the statement recorded by the Auditor with regard to the pending litigation cannot be read as an acknowledgement by Company under Section 18 of the Limitation Act.
No exclusion of time due to other reason was allowed.