Acknowledgment of debt extends limitation under insolvency law; ex parte admission stands absent proof of non-service or sufficient cause.
An acknowledgment of liability and balance confirmation dated 15.07.2019 extended limitation under Section 18 of the Limitation Act, 1963, so the Section 7 insolvency application filed on 28.07.2020 was not time-barred. The ex parte admission order was also upheld because notice had been issued, the corporate debtor did not file a reply or vakalatnama over two hearings, and no failure of service was shown. A COVID-related explanation for one director's absence was insufficient where the company had more than one director. The admission of the insolvency application was left undisturbed.
Issues: (i) Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation. (ii) Whether the ex parte admission order deserved interference on the ground of breach of natural justice.
Issue (i): Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation.
Analysis: The date of NPA was shown as 28.10.2016, but the record also contained balance confirmation and acknowledgment of liability dated 15.07.2019. Such acknowledgment extended limitation under Section 18 of the Limitation Act, 1963. On that basis, the application filed on 28.07.2020 was within three years and could not be treated as time-barred.
Conclusion: The limitation objection failed and was against the Appellant.
Issue (ii): Whether the ex parte admission order deserved interference on the ground of breach of natural justice.
Analysis: Notice had been issued to the Corporate Debtor, and after two dates of hearing the Corporate Debtor neither filed vakalatnama nor a reply. The plea that one director was affected by COVID was not accepted as sufficient to explain the non-appearance of the company, particularly when the company had more than one director and no lack of service was shown.
Conclusion: No violation of natural justice was established and the ex parte order was not liable to be set aside.
Final Conclusion: The appeal was devoid of merit, and the admission of the insolvency application was left undisturbed.
Ratio Decidendi: An acknowledgment of debt within the limitation period extends the time for initiating proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016, and an ex parte insolvency admission will not be interfered with absent a shown failure of service or a sufficient explanation for non-appearance.
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