Limitation and acknowledgment of liability can keep a section 7 insolvency petition in time and support CIRP admission.

Repeated acknowledgment of liability and the lifting of a prior restraint on recovery can preserve limitation for a section 7 Insolvency and Bankruptcy Code petition. Where the default had continued, but recovery proceedings were stayed by the High Court and later the debtor made one-time settlement proposals, the Tribunal treated the petition as filed within time. Documentary records, including loan documents, account statements, charge filings, CIBIL material and a bankers' books certificate, were accepted as establishing financial debt and default. On that basis, the statutory requirements for admission were satisfied, and the petition was admitted with initiation of CIRP, appointment of the proposed IRP and commencement of moratorium.

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Issues: (i) whether the petition under section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation in view of the long-standing default and the pending court proceedings, and (ii) whether debt and default were established so as to warrant admission of the corporate insolvency resolution process and commencement of moratorium.

Issue (i): whether the petition under section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation in view of the long-standing default and the pending court proceedings

Analysis: The default was shown from 1 May 2000, but the matter had remained entangled in litigation and coercive recovery was stayed by the High Court until 7 March 2018. The Tribunal treated the vacation of stay as giving rise to a clear cause of action for recovery, and also relied on repeated one-time settlement proposals made by the corporate debtor in 2019 as acknowledgments of the subsisting liability. On that basis, the filing of the petition on 21 August 2018 was held to be within limitation.

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

Issue (ii): whether debt and default were established so as to warrant admission of the corporate insolvency resolution process and commencement of moratorium

Analysis: The record contained loan documents, charge filings, account statements, CIBIL material and a certificate under the Bankers' Books Evidence Act, 1891, which together established financial debt and default. The Tribunal found that the statutory requirements for admission under section 7 were satisfied, including the existence of debt above the threshold, the occurrence of default, and the completeness of the application. It therefore admitted the petition, appointed the proposed interim resolution professional, and declared moratorium in terms of the Code.

Conclusion: Debt and default were proved, and the petition was admitted with initiation of CIRP and moratorium.

Final Conclusion: The corporate debtor was brought into the insolvency resolution process, the limitation defence failed, and the statutory moratorium and IRP regime were triggered.

Ratio Decidendi: Repeated acknowledgment of liability and the lifting of a prior restraint on recovery can keep a section 7 insolvency petition within limitation, and once financial debt and default are supported by documentary evidence, the petition must be admitted and CIRP commenced.

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