IBC section 7 insolvency claims cannot be defeated by RBI compliance objections, and limitation may run from continuing default.

Alleged non-compliance with Reserve Bank of India circulars and the Reserve Bank of India Act did not defeat a section 7 Insolvency and Bankruptcy Code application founded on financial debt and default. The tribunal treated those objections as collateral to the insolvency claim and rejected them. The limitation plea also failed: applying Article 137 of the Limitation Act, the application was held to be within three years, with the right to apply treated as having accrued on the commencement of the insolvency regime and the default regarded as continuing. The admission of the insolvency application was therefore left undisturbed.

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Issues: (i) Whether alleged non-compliance with Reserve Bank of India circulars and the Reserve Bank of India Act could defeat an application under section 7 of the Insolvency and Bankruptcy Code, 2016. (ii) Whether the section 7 application was barred by limitation.

Issue (i): Whether alleged non-compliance with Reserve Bank of India circulars and the Reserve Bank of India Act could defeat an application under section 7 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The application under section 7 is founded on the existence of financial debt and default. Alleged non-adherence to circulars or to the Reserve Bank of India Act does not, by itself, provide a ground to reject an admitted claim of default under the insolvency regime.

Conclusion: The objection based on Reserve Bank of India circulars and the Reserve Bank of India Act was rejected and did not assist the appellant.

Issue (ii): Whether the section 7 application was barred by limitation.

Analysis: The plea of limitation was not accepted. The decision proceeded on the basis of a continuing cause of action. Even assuming the Limitation Act, 1963 applied, Article 137 would govern the application and allow three years from the date when the right to apply accrued. On the facts, the right to apply under section 7 was treated as having accrued on the commencement of the Insolvency and Bankruptcy Code, 2016, and the application was therefore within time.

Conclusion: The section 7 application was held not to be barred by limitation and the objection failed.

Final Conclusion: The appellate challenge failed on all substantial grounds, and the admission of the insolvency application remained undisturbed.

Ratio Decidendi: A section 7 insolvency application is not defeated by collateral objections based on Reserve Bank of India compliance, and limitation under Article 137 does not bar the application where the right to apply is treated as having accrued within the permissible period and default remains continuing.

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