Limitation under insolvency law: balance sheets and settlement proposals can extend time through written acknowledgment of liability.

Proceedings under the Insolvency and Bankruptcy Code are subject to the Limitation Act, 1963, and a Section 7 application is saved from limitation where the corporate debtor has, before expiry of the initial three-year period, made a written acknowledgment of a subsisting liability. Balance sheets and a proposal for one-time settlement may constitute acknowledgment under Section 18 if they reflect the debtor-creditor relationship and a present liability. Additional documents placed on record before final decision may also be considered, and incomplete Form-1 pleadings do not, by themselves, bar reliance on such material. On that basis, the limitation objection failed and the application was treated as not time-barred.

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Issues: Whether the Section 7 application was barred by limitation, and whether the balance sheet and letter of proposal constituted acknowledgment of liability extending limitation under Section 18 of the Limitation Act, 1963.

Analysis: The appeal turned on whether the corporate debtor had, before expiry of the initial three-year limitation period, acknowledged a subsisting liability in writing so as to extend limitation for a Section 7 proceeding under the Insolvency and Bankruptcy Code, 2016. The record included the balance sheet for the relevant financial year and a letter proposing one-time settlement. The governing principle applied was that proceedings under the Code are subject to the Limitation Act, and that an acknowledgment of liability in books of account or balance sheets can amount to acknowledgment if it reflects a present subsisting liability and the jural relationship of debtor and creditor. The Tribunal also relied on the settled position that additional documents placed on record before final decision may be considered, and that the absence of elaborate pleadings in Form-1 does not by itself preclude consideration of such material.

Conclusion: The balance sheet and the letter constituted acknowledgment of liability within the meaning of Section 18 of the Limitation Act, 1963, the Section 7 application was not time-barred, and the limitation objection failed.

Ratio Decidendi: An application under Section 7 of the Insolvency and Bankruptcy Code, 2016 is not barred by limitation where, before expiry of the initial limitation period, the corporate debtor has made a written acknowledgment of a subsisting liability, including through balance sheets or allied documents on record, thereby extending limitation under Section 18 of the Limitation Act, 1963.

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