Limitation for insolvency claims may be extended by balance sheets and settlement correspondence showing acknowledgment of liability.

For Section 7 proceedings under the Insolvency and Bankruptcy Code, limitation is governed by Article 137 of the Limitation Act, with Section 238A making the Limitation Act applicable to the Code. A written acknowledgment of liability made before expiry of limitation extends time under Section 18, while part-payment before expiry attracts Section 19. On the facts discussed, audited balance sheets, financial statements, and one-time settlement correspondence were treated as showing subsisting liability and acknowledgment within limitation. The application was therefore within time, the plea of limitation failed, and the objection that balance sheets could not be relied on was rejected.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation, and whether balance sheets, books of account, and the one-time settlement correspondence constituted acknowledgment of liability so as to extend limitation under the Limitation Act, 1963.

Analysis: The period of limitation for an application under Section 7 is governed by Article 137 of the Limitation Act, 1963, and the Limitation Act applies to proceedings under the Code by virtue of Section 238A of the Insolvency and Bankruptcy Code, 2016. The Court relied on the principle that limitation can be extended only in the manner permitted by the Limitation Act, and that acknowledgments made before expiry of the prescribed period attract Section 18 of the Limitation Act, 1963, while payments made before expiry attract Section 19 of the Limitation Act, 1963. It was held that audited balance sheets and related financial statements may amount to acknowledgment on the facts of a case, and that the documents on record, including the balance sheets for the relevant financial years and the settlement correspondence, showed subsisting liability and acknowledgment within the limitation period.

Conclusion: The application under Section 7 was within limitation; the plea of time-bar failed and the contention that balance sheets could not be looked at was rejected.

Ratio Decidendi: For proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016, Article 137 applies, and where a written acknowledgment of liability is made before expiry of limitation, Section 18 of the Limitation Act, 1963 extends the period; audited balance sheets and related creditor-debtor correspondence may constitute such acknowledgment depending on their contents.

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