Acknowledgment of debt through reply and settlement correspondence extended limitation for insolvency proceedings.

A Section 7 insolvency application was treated as within limitation because the debtor's written reply, read with later One Time Settlement correspondence, amounted to acknowledgment of a subsisting liability before expiry of the limitation period. The reply did not dispute the debt, referred to settlement of dues, and was signed by the debtor's director. The subsequent OTS proposal, creditor's acceptance, request for extension of time, and extension of the settlement period were taken together as evidence of a continuing debtor-creditor relationship. On that basis, limitation was extended under Section 18 of the Limitation Act, 1963, and the challenge to admission of CIRP failed.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation, or whether the debtor's written reply and subsequent One Time Settlement correspondence amounted to acknowledgment of liability under Section 18 of the Limitation Act, 1963 so as to extend the period of limitation.

Analysis: The application was filed beyond three years from the date treated as the default date. The decisive question was whether there was a written acknowledgment of a subsisting liability made before expiry of the limitation period. The debtor's reply to the demand notice did not dispute the liability, referred to settlement of dues, and was signed by the debtor's director. This was followed by an uncontroverted One Time Settlement proposal, acceptance by the creditor, a request for extension of time, and extension of the settlement period by the creditor. These documents were treated together as evidencing a conscious admission of the outstanding debt and a continuing debtor-creditor relationship. In that situation, the limitation period stood extended under Section 18 of the Limitation Act, 1963.

Conclusion: The application under Section 7 was held to be within limitation and the challenge to admission of CIRP failed.

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