Acknowledgment of liability under the Limitation Act can save a section 7 insolvency application where repayment terms were restructured.

A section 7 Insolvency and Bankruptcy Code application was held within limitation because the revival letter dated 31 January 2017 operated as an acknowledgment of liability under section 18 of the Limitation Act, 1963. The Second Amendment Agreement also restructured repayment and fixed 31 December 2015 as the first repayment date, so limitation had to be computed from the amended arrangement rather than the earlier date relied on by the Adjudicating Authority. The Tribunal noted that limitation is a mixed question of law and fact and that a petition should not be rejected on limitation where the bar is not apparent from the pleadings. The rejection on limitation was unsustainable and the matter was remitted for admission and further consideration.

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Issues: Whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation.

Analysis: The limitation question turned on the effect of the revival letter dated 31 January 2017 and the Second Amendment Agreement dated 31 March 2015. The revival letter amounted to an acknowledgment of liability within the meaning of section 18 of the Limitation Act, 1963. The Second Amendment Agreement restructured the repayment schedule and fixed the first repayment date as 31 December 2015, so the default had to be computed with reference to that amended arrangement and not the earlier date treated by the Adjudicating Authority. On that basis, the application filed in September 2018 fell within the three-year limitation period. The Tribunal also noted that limitation is a mixed question of law and fact and that the petition should not be rejected by selectively relying on the record when the pleadings did not make the bar apparent.

Conclusion: The application was not barred by limitation and the rejection on that ground was unsustainable. The appeal succeeded and the matter was remitted for admission and further consideration under section 7.

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