Limitation for Section 7 IBC claims requires a legally recoverable debt, and ineffective acknowledgments cannot revive time-barred claims.

A Section 7 IBC application must be based on a legally recoverable debt within limitation, and Article 137 of the Limitation Act runs from the date of default. On the facts stated, default occurred on 1 April 1993, or at the latest limitation ran from the recovery certificate dated 27 March 2003, so the insolvency filing was time-barred. The balance sheet dated 16 August 2017 and the letter dated 23 April 2019 were not valid acknowledgments under Section 18 because they did not clearly admit subsisting liability and instead reflected denial of debt. The pendency of DRT recovery proceedings also indicated that IBC could not be used as a recovery mechanism.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation and whether the documents relied upon amounted to a valid acknowledgment of liability extending limitation.

Analysis: The default was recorded as having occurred on 1 April 1993, and at the highest limitation began from the recovery certificate issued on 27 March 2003. An application under Section 7 must disclose a legally recoverable debt within limitation, and Article 137 of the Limitation Act, 1963 applies from the date of default. The balance sheet of 16 August 2017 and the letter dated 23 April 2019 did not amount to acknowledgments under Section 18 of the Limitation Act, 1963 because they did not clearly admit subsisting liability and, in fact, reflected denial of the debt. The pendency of recovery proceedings before the DRT also showed that the appellant had an alternate remedy and that the IBC could not be used as a recovery mechanism.

Conclusion: The Section 7 application was time-barred, the alleged acknowledgments were ineffective, and the dismissal of the insolvency petition was justified.

Ratio Decidendi: A Section 7 insolvency /application must be founded on a debt that is legally recoverable on the date of filing, and where the default is beyond the limitation period without a valid acknowledgment made before expiry, the application is barred by limitation.

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