Limitation for Section 7 insolvency runs from default, and a later NPA date cannot revive a time-barred claim

For a Section 7 insolvency application, limitation is governed by Article 137 of the Limitation Act and runs from the date of default. A later declaration of the account as NPA does not extend limitation where the record shows default had already occurred and the account had been treated as NPA earlier. On the facts noted, the application filed in October 2018 was beyond three years from the relevant default/NPA date, so it was not maintainable and the insolvency admission was set aside.

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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 date of default had to be reckoned from the date on which the account was declared NPA.

Analysis: For an application under Section 7, the residuary Article 137 of the Limitation Act, 1963 applies, and limitation begins from the date of default. A later date of NPA cannot be adopted to extend limitation when the record shows that default had already occurred and the account had been treated as NPA earlier. The materials before the Tribunal showed that the debt had already been classified as NPA before the date relied upon by the Bank in Form-1, and the application filed in October 2018 was beyond three years from that earlier default/NPA date. In such circumstances, the application could not be maintained.

Conclusion: The application under Section 7 was barred by limitation and was liable to be dismissed.

Final Conclusion: The order admitting the insolvency petition was set aside, and the corporate insolvency process initiated against the corporate debtor was brought to an end.

Ratio Decidendi: For an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, limitation is governed by Article 137 of the Limitation Act, 1963 and runs from the date of default, so a time-barred debt cannot be revived by referring to a later date of NPA.

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