Part-payment resets limitation and proved financial debt justified admission of the insolvency application and commencement of CIRP.

Part-payment of a debt within the limitation period was treated as giving rise to a fresh period of limitation under Section 19 of the Limitation Act, 1963, so the Section 7 application filed in November 2019 was held to be within time. The Tribunal also found that the lending was a working capital term loan, the corporate debtor had admitted borrowing and liability, and the record established non-repayment; the claim therefore satisfied the definition of financial debt and default was proved. As the procedural requirements for admission were met and no disciplinary issue was shown against the proposed interim resolution professional, the application was admitted and corporate insolvency resolution process commenced.

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Issues: (i) Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was within limitation in view of the part-payments made by the corporate debtor; (ii) Whether the debt was a financial debt and default was established so as to warrant admission of the application and commencement of corporate insolvency resolution process.

Issue (i): Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was within limitation in view of the part-payments made by the corporate debtor.

Analysis: The date of default was stated to be in November 2013, but the record showed payments made by the corporate debtor on several dates thereafter, including the last payment in June 2018. The Bench applied Section 19 of the Limitation Act, 1963 and held that payment on account of debt within the prescribed period gives rise to a fresh period of limitation from the date of such payment. On that basis, the petition filed in November 2019 was treated as being within time.

Conclusion: The petition was held to be within limitation.

Issue (ii): Whether the debt was a financial debt and default was established so as to warrant admission of the application and commencement of corporate insolvency resolution process.

Analysis: The financing was granted as a working capital term loan, the corporate debtor admitted borrowing and liability, and the materials on record established non-repayment of the outstanding amount. The Bench found that the claim satisfied the definition of financial debt and that default had occurred. Since the procedural requirements for admission were also complied with and no disciplinary issue was shown against the proposed interim resolution professional, the application was fit for admission under Section 7 of the Code.

Conclusion: The debt was held to be a financial debt and default was established; the application was admitted and corporate insolvency resolution process was directed to commence.

Final Conclusion: The petition succeeded, the corporate debtor was brought under insolvency resolution, and the moratorium and related insolvency processes were set in motion.

Ratio Decidendi: Part-payment of a debt within the limitation period attracts Section 19 of the Limitation Act, 1963 and gives rise to a fresh period of limitation, and once a financial debt and default are established, the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 is liable to be admitted.

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