Acknowledgment and part-payment can extend limitation for insolvency claims, keeping a section 7 application within time.

A written acknowledgment of liability or part-payment made within limitation can extend time for a section 7 insolvency application under article 137 of the Limitation Act, 1963. Here, the debt was rescheduled in 2016, the corporate debtor signed a fresh acceptance arrangement, and further part-payments were made thereafter. Those steps showed continuing liability, so the application was not confined to the original 2012 default date. The non-payment after 31 May 2017 kept the claim within the limitation period, and the September 2018 filing was held to be in time. The limitation objection therefore failed, and the section 7 application was maintainable.

---

---

Issues: Whether the application under section 7 of the Insolvency and Bankruptcy Code was barred by limitation in view of the original default date and whether the subsequent loan rescheduling, acknowledgment of liability, and part-payments extended the limitation period.

Analysis: The financial facility originally granted by the assignor bank was in default, but the debt was later assigned and the corporate debtor entered into a fresh letter of acceptance and rescheduling arrangement in June 2016. The corporate debtor also made several part-payments thereafter. An acknowledgment in writing, if made within the limitation period and signed by the debtor, constitutes an acknowledgment of existing liability and gives rise to a fresh period of limitation. Part-payment similarly supports extension of limitation. On the facts, the relevant default for the section 7 proceedings was not confined to the original instalment schedule in 2012, because the rescheduled debt and the subsequent non-payment after 31 May 2017 showed continuing liability within the limitation period. The application filed in September 2018 was therefore within time under article 137 of the Limitation Act, 1963.

Conclusion: The limitation objection failed and the section 7 application was maintainable.

Ratio Decidendi: A written acknowledgment of liability or part-payment made within limitation, including in the course of rescheduling or restructuring of debt, extends the period of limitation for a section 7 insolvency application under article 137 of the Limitation Act, 1963.

---