Limitation for Section 7 insolvency petitions runs from default; pending DRT proceedings do not extend time.

Limitation for a Section 7 insolvency application runs from the date of default under Article 137, and a later filing may be saved only by a legally effective acknowledgment or a fresh cause of action based on a decree or recovery certificate. Pendency of DRT proceedings, without any such determination, did not extend limitation. The balance-sheet entry was not treated as sufficient acknowledgment on the facts, particularly where the liability was shown as non-current and the dispute remained unresolved. The petition was therefore time-barred and not entertainable.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation under Article 137 of the Limitation Act, 1963, and whether the pendency of the DRT proceedings or entries in the balance sheet extended limitation.

Analysis: The Corporate Debtor had been classified as NPA on 30.06.2002, and the Section 7 petition was filed only on 05.06.2020. Limitation for a Section 7 application is governed by Article 137 and ordinarily runs from the date of default. The plea based on the pendency of the DRT matter did not assist the Financial Creditor because no decree, judgment, or recovery certificate had yet been passed. The balance-sheet entry relied upon was not accepted as sufficient acknowledgment in the facts of the case, particularly since the liability was shown under non-current liabilities while the DRT dispute remained unresolved. The Tribunal also noted that the amount reflected was below the then applicable pecuniary threshold.

Conclusion: The Section 7 application was held to be time-barred and not entertainable; the application under Section 60(5) was allowed and the insolvency petition was dismissed.

Ratio Decidendi: For a Section 7 insolvency application, limitation runs from default and can be extended only by a legally effective acknowledgment or by a fresh cause of action arising from a decree or recovery certificate; mere pendency of an adjudication proceeding without such determination does not extend limitation.

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