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Issues: (i) Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was within limitation in view of the alleged acknowledgment of liability and part-payments. (ii) Whether pendency of proceedings before the DRT and High Court, and the consortium arrangement, barred the financial creditor from maintaining the Section 7 application.
Issue (i): Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was within limitation in view of the alleged acknowledgment of liability and part-payments.
Analysis: The account was declared NPA on 30.01.2014, but the corporate debtor made part-payments on 27.11.2014 and 28.11.2014 and also issued a letter dated 29.11.2014 and a certificate dated 20.11.2015 acknowledging the debt. Section 18 of the Limitation Act, 1963 provides that a fresh period of limitation begins from a written acknowledgment signed before expiry of the prescribed period. By virtue of Section 238A of the Insolvency and Bankruptcy Code, 2016, the Limitation Act applies to proceedings under the Code, and the residuary period under Article 137 of the Limitation Act, 1963 governs an application under Section 7.
Conclusion: The application was within limitation and this issue was answered in favour of the petitioner.
Issue (ii): Whether pendency of proceedings before the DRT and High Court, and the consortium arrangement, barred the financial creditor from maintaining the Section 7 application.
Analysis: The earlier appellate order had already held that the application was maintainable and that the assignee financial creditor was not barred from proceeding under the Code merely because other consortium-related or SARFAESI proceedings were pending. The Tribunal followed that view and held that such pendency did not create a legal bar to initiation of CIRP under Section 7. The assignment in favour of the applicant entitled it to enforce the debt as financial creditor.
Conclusion: The Section 7 application was maintainable and this issue was answered in favour of the petitioner.
Final Conclusion: The corporate debtor was found to have defaulted within a subsisting limitation period, and the financial creditor was entitled to invoke the insolvency process under the Code, leading to admission of the petition and commencement of CIRP.
Ratio Decidendi: For a Section 7 application, a written acknowledgment of debt or part-payment made before expiry of limitation gives rise to a fresh limitation period, and pendency of parallel recovery proceedings does not by itself bar initiation of CIRP when the financial creditor is otherwise entitled to proceed.
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