Acknowledgment of liability through balance confirmation letters and part payment extended limitation and kept the insolvency application in time.

A Section 7 insolvency application was held to be within limitation because written balance and security confirmation letters, together with a later part payment, constituted acknowledgment of liability before expiry of the limitation period. The acknowledgment triggered a fresh period under Section 18 of the Limitation Act, so the limitation objection failed. On that basis, the debt and default were treated as established and the insolvency admission order was sustained.

---

---

Issues: (i) Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation. (ii) Whether the balance confirmation letters and part payment amounted to acknowledgment of liability so as to extend limitation under Section 18 of the Limitation Act, 1963.

Issue (i): Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation.

Analysis: The limitation period for a Section 7 application runs from the date of default, but it can be extended where a valid acknowledgment of liability is established within the prescribed period. The record showed balance and security confirmation letters executed in respect of the corporate debtor's account and a subsequent part payment, which were treated as material circumstances relevant to limitation. On that footing, the filing in July 2019 was held to be within time.

Conclusion: The application was not barred by limitation.

Issue (ii): Whether the balance confirmation letters and part payment amounted to acknowledgment of liability so as to extend limitation under Section 18 of the Limitation Act, 1963.

Analysis: An acknowledgment need not be in any particular form and may be inferred from written admissions of subsisting liability signed before expiry of the prescribed period. The confirmation letters dated 20.02.2018 and the payment made on 15.10.2018 were accepted as constituting acknowledgment of debt, thereby giving rise to a fresh period of limitation. This displaced the plea that the claim had become time-barred.

Conclusion: The documents and payment constituted valid acknowledgment of liability and extended limitation.

Final Conclusion: The insolvency admission order was sustained because the debt and default stood established and the limitation objection failed on account of valid acknowledgment extending time.

Ratio Decidendi: A written acknowledgment of liability executed before expiry of the limitation period, including balance confirmation letters supported by part payment, gives rise to a fresh period of limitation and can render a Section 7 insolvency application maintainable in time.

---