Written acknowledgment and part-payment can extend limitation for a section 7 insolvency claim under the Limitation Act.

A section 7 IBC application is governed by Article 137 of the Limitation Act, with time running from the date the financial debt became due, including when it was treated as non-performing, but that period can be extended by a valid written acknowledgment under section 18 or a duly acknowledged part-payment under section 19. On the stated facts, the debtor's post-NPA letters, settlement terms and part-payments were made before expiry of limitation and formed a continuous chain of acknowledgments and payments. Those acts gave a fresh period of limitation, so the insolvency claim remained within time and the application was maintainable.

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Issues: (i) Whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation. (ii) Whether the written acknowledgments, settlement terms and part-payments extended the limitation period under the Limitation Act, 1963.

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

Analysis: An application under section 7 is governed by Article 137 of the Limitation Act, 1963, with limitation ordinarily running from the date the financial debt is declared non-performing. However, the running of limitation is subject to the statutory rules on acknowledgment and payment contained in sections 18 and 19 of the Limitation Act, 1963. On the facts, the debt was declared NPA in 2012, but the record showed subsequent written acknowledgments and payments before expiry of the applicable limitation period.

Conclusion: The application under section 7 was not barred by limitation.

Issue (ii): Whether the written acknowledgments, settlement terms and part-payments extended the limitation period under the Limitation Act, 1963.

Analysis: A written acknowledgment signed by the debtor before expiry of limitation gives rise to a fresh period of limitation under section 18 of the Limitation Act, 1963, and a payment made before expiry of limitation, when duly acknowledged, attracts section 19 of the Limitation Act, 1963. The letters, settlement proposal, settlement terms and part-payments constituted a continuous chain of acknowledgments and payments made within time, each giving a fresh lease of life to the claim. The claim was therefore within limitation when the insolvency application was filed.

Conclusion: The acknowledgments and part-payments validly extended limitation in favour of the financial creditor.

Final Conclusion: The appeal failed because the insolvency claim remained enforceable within limitation and the admission of the insolvency application was sustained.

Ratio Decidendi: A written acknowledgment of liability or a part-payment made before expiry of limitation gives rise to a fresh period of limitation, and a section 7 insolvency application filed within such extended period is maintainable.

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