Written Acknowledgement Extends Limitation For Section 7 Insolvency, and Ex Parte Objection Fails

A Section 7 insolvency application was not time-barred because the account had become NPA in 2012, bringing Article 137 of the Limitation Act into play, and the record contained repeated written acknowledgements, including letters and one-time settlement proposals, which extended limitation under Section 18 by starting fresh periods before expiry. The objection that the proceeding was vitiated by an ex parte order also failed because service of notice, newspaper publication, and continued non-appearance of the corporate debtor were shown. The appeal therefore failed and admission of the corporate insolvency resolution process was sustained.

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Issues: (i) Whether the insolvency application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation; (ii) Whether the proceeding was vitiated because the corporate debtor was proceeded ex parte.

Issue (i): Whether the insolvency application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation.

Analysis: The account of the corporate debtor was classified as non-performing on 29 August 2012, so Article 137 of the Limitation Act, 1963 applied to the filing of the insolvency application. The record also contained several letters, one-time settlement proposals, and related conduct by the corporate debtor showing written acknowledgements of liability from time to time. Under Section 18 of the Limitation Act, 1963, a written acknowledgement signed before expiry of the prescribed period gives rise to a fresh period of limitation. On that basis, the acknowledged liability kept extending the limitation period and the application could not be treated as time-barred.

Conclusion: The limitation objection failed and the insolvency petition was held to be within time.

Issue (ii): Whether the proceeding was vitiated because the corporate debtor was proceeded ex parte.

Analysis: The order sheet showed service of notice, publication in newspapers, and repeated absence of representation for the corporate debtor. The proceeding was taken ex parte only after such service efforts and continued non-appearance.

Conclusion: The ex parte objection was rejected.

Final Conclusion: The appeal failed on the only substantial challenge and the admission of the corporate insolvency resolution process was sustained.

Ratio Decidendi: A written acknowledgement of a subsisting liability before expiry of limitation starts a fresh period of limitation under Section 18 of the Limitation Act, 1963, and repeated acknowledgements can keep the debt alive for a Section 7 insolvency application governed by Article 137.

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