Limitation in Section 7 insolvency proceedings can restart on an unpaid decree and be extended by debt acknowledgement.

For Section 7 proceedings under the Insolvency and Bankruptcy Code, the relevant limitation date is the date of default, not merely the classification of the account as a non-performing asset. An unpaid decree or recovery certificate in favour of the financial creditor can create a fresh cause of action for insolvency proceedings, and limitation may also be extended by a valid acknowledgement of liability in balance sheets or audited financial statements under Section 18 of the Limitation Act, 1963. On the stated facts, the debt was acknowledged in audited financial statements and the application was filed within the extended limitation period, so the challenge based on limitation failed.

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Issues: Whether the Section 7 application was barred by limitation, and whether the debt acknowledgements and the decree or recovery certificate extended the limitation period.

Analysis: The relevant date for limitation in proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 is the date of default and not merely the date of classification of the account as non-performing asset. A final judgment, decree, or recovery certificate passed in favour of the financial creditor gives rise to a fresh cause of action for initiating proceedings under Section 7 if the decretal dues remain unpaid. The period of limitation may also be extended by a valid acknowledgement of liability in balance sheets and audited financial statements under Section 18 of the Limitation Act, 1963. On the facts, the debt had been acknowledged in audited financial statements, and the Section 7 application was filed within three years of the decree and within the extended period of limitation.

Conclusion: The Section 7 application was within limitation and the challenge to admission of the insolvency proceeding failed.

Ratio Decidendi: A decree or recovery certificate in favour of a financial creditor, when unpaid, can constitute a fresh cause of action for Section 7 proceedings, and limitation is further extendable by a valid acknowledgement of debt made before expiry of the limitation period.

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