Limitation for Section 7 insolvency claims runs from default; later acknowledgments cannot revive a time-barred debt.

A section 7 IBC application is governed by Article 137 of the Limitation Act and must be filed within three years from default. The tribunal applied the settled rule that a time-barred debt cannot be used to initiate insolvency. It held that acknowledgment under section 18 of the Limitation Act extends limitation only if made before expiry of the prescribed period, and that the assignment agreement, mortgage deed, balance-sheet entry and later acknowledgment relied on here arose after the original default and did not revive the claim. Section 25(3) of the Contract Act also did not assist on these facts. The application was therefore barred by limitation and not admissible.

---

---

Issues: Whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation, and whether the documents relied upon by the applicant extended limitation through acknowledgment or a fresh promise to pay.

Analysis: An application under section 7 of the Insolvency and Bankruptcy Code, 2016 is governed by Article 137 of the Limitation Act, and limitation runs from the date of default. The Court applied the settled position that a time-barred debt cannot be used to trigger the insolvency process. It further held that acknowledgment under section 18 of the Limitation Act must be made before the expiry of the prescribed limitation period, and that the materials relied upon by the applicant, including the assignment agreement, mortgage deed, balance-sheet entry and later acknowledgment, arose after the original default and could not revive a debt already barred by time. The Court also held that section 25(3) of the Indian Contract Act, 1872 could not assist in triggering the insolvency proceeding on these facts, as the proceeding was not one for recovery and the claimed default remained linked to the pre-assignment period.

Conclusion: The application was barred by limitation and could not be admitted.

Ratio Decidendi: For a section 7 application, limitation is governed by Article 137 of the Limitation Act and begins on default, while acknowledgment can extend limitation only if made within the prescribed period; a time-barred debt cannot be revived for insolvency initiation by later documents or a fresh promise relied upon after limitation has expired.

---