Acknowledgment of debt extends limitation; a valid assignee may initiate insolvency proceedings under the insolvency code.

Acknowledgment of liability in an OTS proposal, correspondence, BIFR proceedings and balance-sheet entries before expiry of the limitation period extended time under Section 18 of the Limitation Act, 1963, and the section 7 application was therefore within limitation. The pendency of proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 was also considered for exclusion of time. An assignee financial creditor was treated as stepping into the shoes of the original lender and was held entitled to initiate insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.

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Issues: (i) Whether the section 7 application was barred by limitation in view of the date of default, the subsequent settlement proposals, acknowledgments in correspondence and balance sheets, and the pendency of proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985; (ii) Whether the assignee financial creditor lacked authority to initiate insolvency proceedings.

Issue (i): Whether the section 7 application was barred by limitation in view of the date of default, the subsequent settlement proposals, acknowledgments in correspondence and balance sheets, and the pendency of proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: The limitation question was answered by applying Article 137 of the Limitation Act, 1963 and the principle that acknowledgment of liability before expiry of the original limitation period extends time under Section 18 of the Limitation Act, 1963. The recorded OTS proposal, the debtor's reply to the SARFAESI notice, the reference before BIFR, and later balance-sheet entries were treated as acknowledgments of debt. The pendency of SICA proceedings was also taken into account for exclusion of the relevant period. On that basis, the filing of the section 7 petition was held to be within limitation.

Conclusion: The application was not barred by limitation and this objection failed against the appellant.

Issue (ii): Whether the assignee financial creditor lacked authority to initiate insolvency proceedings.

Analysis: The debt had been assigned in favour of the respondent, and the assignee was treated as stepping into the shoes of the original lender for enforcing recovery in accordance with law. The objection based on the trust deed and lack of authority was rejected as unsupported in law.

Conclusion: The assignee financial creditor had authority to initiate the proceedings and this objection failed against the appellant.

Final Conclusion: The admission of the insolvency petition was sustained and the appeal was dismissed.

Ratio Decidendi: An acknowledgment of liability in settlement documents, correspondence, or balance sheets made before expiry of limitation extends the limitation period under Section 18 of the Limitation Act, 1963, and a valid assignee of debt may initiate insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.

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