Limitation for insolvency petitions depends on clear, timely acknowledgment; belated liability references do not extend time.

The note explains that, for a section 9 Insolvency and Bankruptcy Code application, limitation can be extended only by a clear and unequivocal acknowledgment or promise to pay made within the three-year period under section 18 of the Limitation Act, 1963. Letters, fax endorsements, and a later reference to liability were treated as insufficient because they did not amount to an effective acknowledgment within time. It also states that time under the Sick Industrial Companies (Special Provisions) Act, 1985 was not excluded, since the creditor was not shown to have a suspended right to pursue recovery under any rehabilitation scheme. The result discussed is that the insolvency petition remained time-barred.

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Issues: (i) Whether the operational creditor established a valid acknowledgment of debt or promise to pay within limitation so as to extend time for a petition under section 9 of the Insolvency and Bankruptcy Code, 2016. (ii) Whether the period during which the corporate debtor was under the Sick Industrial Companies (Special Provisions) Act, 1985 could be excluded for computing limitation.

Issue (i): Whether the operational creditor established a valid acknowledgment of debt or promise to pay within limitation so as to extend time for a petition under section 9 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The relevant default was treated as having occurred in June 2006. The materials relied upon by the operational creditor consisted of letters and fax endorsements said to show receipt and forwarding for payment, along with a later letter referring to liability and proposed interest. For limitation under section 18 of the Limitation Act, 1963, the acknowledgment must be clear, unambiguous, and made within the limitation period. The record did not disclose any unequivocal acknowledgment by the corporate debtor within three years of default. A later reference to liability was treated as insufficient to revive limitation. The creditor could not shift the burden of proving debt particulars onto the corporate debtor in proceedings under rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

Conclusion: The operational creditor did not establish a valid acknowledgment or promise to pay within the limitation period, and the section 9 application was time-barred.

Issue (ii): Whether the period during which the corporate debtor was under the Sick Industrial Companies (Special Provisions) Act, 1985 could be excluded for computing limitation.

Analysis: The claim for exclusion of time under the Sick Industrial Companies (Special Provisions) Act, 1985 was rejected because the operational creditor was not shown to be part of the rehabilitation scheme and its right to pursue recovery was not treated as suspended for limitation purposes.

Conclusion: No exclusion of time under the Sick Industrial Companies (Special Provisions) Act, 1985 was allowed.

Final Conclusion: The appeal failed as the section 9 application remained barred by limitation, and the rejection of the insolvency petition was upheld.

Ratio Decidendi: For extending limitation under section 18 of the Limitation Act, 1963 in an insolvency proceeding, the acknowledgment of liability must be clear, unequivocal, and within the limitation period; a belated or uncertain endorsement is insufficient, and exclusion of time under SICA is unavailable absent a demonstrated legal suspension of remedy.

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