Acknowledgment of liability extends limitation for insolvency claims where balance sheets and settlement proposals show subsisting debt.

An application under section 7 of the Insolvency and Bankruptcy Code, 2016 was treated as within limitation because balance-sheet disclosures, a settlement proposal, a settlement letter and other acknowledgments were held to extend time under section 18 of the Limitation Act, 1963. The tribunal found the financial debt and default established, noted the debt assignment in favour of the applicant, and held that the phrase "without prejudice to the rights and contentions" did not negate acknowledgment of liability. It applied a broad construction of acknowledgment for limitation purposes and treated the OTS or settlement proposal as evidence of subsisting liability. The limitation objection was rejected and the insolvency application was admitted.

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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 balance-sheet entries, settlement proposal, settlement letter and other acknowledgments extended limitation under section 18 of the Limitation Act, 1963, so as to justify admission of the insolvency application.

Analysis: The financial debt and default were found to be established. The record showed assignment of the debt in favour of the applicant and multiple subsequent events relied upon as acknowledgments of liability, including the balance-sheet disclosures and the settlement proposal/settlement letter. The order treated the expression "without prejudice to the rights and contentions" as not negating admission of liability. It was held that an acknowledgment for the purpose of section 18 of the Limitation Act, 1963 is to be construed broadly, and that an OTS/settlement proposal can amount to a valid acknowledgment when it evidences subsisting liability. On that basis, limitation was held to stand extended and the application was treated as within time.

Conclusion: The limitation objection was rejected, and the section 7 application was admitted.

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