Acknowledgment of liability in balance sheets and an OTS proposal can extend limitation in section 7 insolvency proceedings.

An acknowledgment of liability in duly signed balance sheets, together with an uncontroverted one-time settlement proposal, can defeat a limitation objection in a section 7 insolvency application. Where loan documents, guarantees, hypothecation deeds, acknowledgment of dues, and non-payment of the settled amount also establish debt and default, the application is fit for admission and CIRP may commence. The record therefore shows that limitation and default were both tested on documentary evidence, and the insolvency process was triggered on that basis.

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Issues: (i) Whether the section 7 application was barred by limitation in view of the corporate debtor's contention. (ii) Whether the financial creditor had established a default warranting admission of the insolvency application and commencement of CIRP.

Issue (i): Whether the section 7 application was barred by limitation in view of the corporate debtor's contention.

Analysis: The balance sheets for the relevant financial year recorded secured borrowings and were signed and stamped, which constituted acknowledgment of liability. The corporate debtor had also signed an OTS proposal acknowledging the outstanding liability, and the OTS was later revoked for non-payment. These circumstances were treated as sufficient to negate the plea that the application was time-barred.

Conclusion: The limitation objection was rejected and the application was held to be within time.

Issue (ii): Whether the financial creditor had established a default warranting admission of the insolvency application and commencement of CIRP.

Analysis: The record showed loan documents, guarantees, hypothecation deeds, acknowledgment of dues, and failure to honour the settled amount under the OTS. On that basis, the debt and default were found to be established for the purpose of section 7.

Conclusion: The petition was admitted, moratorium was , and CIRP was set in motion with appointment of an interim resolution professional.

Final Conclusion: The insolvency application succeeded on merits, the objection on limitation failed, and the corporate debtor was brought under the CIRP framework.

Ratio Decidendi: An acknowledgment of liability in duly signed balance sheets and in an uncontroverted OTS proposal can extend limitation and support admission of a section 7 insolvency application when default is otherwise established.

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