Limitation under insolvency law: balance-sheet entries and a late settlement proposal did not extend time for a section 7 claim.

An application under section 7 of the Insolvency and Bankruptcy Code was found time-barred because the debt had defaulted and the account was declared NPA on 10.06.2014, while the application was filed on 19.09.2018, beyond the three-year limitation period. The balance-sheet entries did not extend limitation, as mandatory statutory financial statements were not treated as acknowledgement of debt under section 18 of the Limitation Act, 1963. The one-time settlement proposal also did not revive limitation because it was made after expiry of the original period. The application was therefore rejected.

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Issues: Whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation, and whether entries in the balance sheets or the one-time settlement proposal extended the period of limitation by amounting to acknowledgement of debt.

Analysis: The debt and default were not disputed, and the account was declared NPA on 10.06.2014, while the application was filed on 19.09.2018, beyond three years. The balance-sheet entries did not assist the applicant because mandatory statutory financial statements cannot, by themselves, be treated as acknowledgement under section 18 of the Limitation Act, 1963. The one-time settlement proposal was also of no avail because it was submitted after expiry of the original limitation period, and therefore could not bring the claim within time.

Conclusion: The application under section 7 was time-barred and was rightly rejected.

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