Acknowledgment of liability through settlement proposals and part-payments extends limitation for a Section 7 insolvency petition.

A Section 7 insolvency application was held not time barred where the record showed repeated one-time settlement proposals and part-payments within the limitation period. Those settlement communications and payments were treated as acknowledgments of liability attracting Sections 18 and 19 of the Limitation Act, and the recovery certificate was also relevant to limitation. The objection under Section 23 of the Indian Evidence Act failed because the communications did not show any express or inferred agreement excluding their use in evidence. The petition was therefore maintainable on limitation grounds.

---

---

Issues: Whether the Section 7 application was barred by limitation in view of the date of declaration of non-performing asset, and whether the One Time Settlement proposals, subsequent payments and Recovery Certificate extended the limitation period; and whether Section 23 of the Indian Evidence Act, 1872 prevented reliance on the settlement proposals.

Analysis: The account was declared non-performing at different dates across the consortium, but the record showed repeated One Time Settlement proposals in 2016, 2017 and 2018, together with payments made in 2018. Such proposals and payments constituted acknowledgment of liability for the purposes of limitation, and the Recovery Certificate issued by the DRT was also relevant for computing limitation. The plea based on Section 23 of the Indian Evidence Act, 1872 was not made out on the facts, since the settlement communications did not show any express condition excluding their use in evidence or any circumstance from which such an agreement could be inferred. The application of Sections 18 and 19 of the Limitation Act was therefore attracted on the facts.

Conclusion: The Section 7 application was not time barred, the settlement materials were admissible for limitation purposes, and the challenge to admission of the insolvency petition failed.

Ratio Decidendi: A valid acknowledgment of liability within the limitation period, including a genuine One Time Settlement proposal and accompanying part-payments, extends limitation for a Section 7 insolvency , and a recovery certificate may give rise to a fresh cause of action.

---