Acknowledgement of debt extends limitation and supports admission of a section 7 insolvency petition.

A written acknowledgement of debt made before expiry of the limitation period gave rise to a fresh period of limitation under section 18 of the Limitation Act, so the section 7 insolvency petition was not time-barred. The corporate debtor's acceptance of a one-time settlement proposal and part payments were treated as acknowledgement of liability, and the record also showed subsisting financial debt and default. On that basis, the petition was found maintainable, the threshold requirements under the Insolvency and Bankruptcy Code were satisfied, and initiation of the corporate insolvency resolution process was directed.

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Issues: Whether the petition under section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation, and whether the financial creditor had established a subsisting financial debt and default so as to warrant admission of the insolvency petition.

Analysis: The record showed an existing financial debt and default. The corporate debtor had accepted the one-time settlement proposal and had made part payments towards it. Such acceptance and payment were treated as acknowledgement of liability and, therefore, attracted section 18 of the Limitation Act, 1963, resulting in a fresh period of limitation. In view of the acknowledged liability, the petition could not be rejected as time-barred. The materials also reflected default in repayment of the borrowing facilities and satisfaction of the threshold requirement under the Code.

Conclusion: The petition was held to be within limitation and maintainable. The insolvency application was admitted, and initiation of corporate insolvency resolution process was directed against the corporate debtor.

Final Conclusion: The petition succeeded, limitation was repelled on the basis of acknowledgement of debt, and CIRP was ordered to commence.

Ratio Decidendi: A written acknowledgement of debt made before expiry of the prescribed limitation period gives rise to a fresh period of limitation for a section 7 application under the Insolvency and Bankruptcy Code, 2016.

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