Acknowledgement of liability extends insolvency limitation where balance sheets and settlement proposals confirm the debt in writing.

An application under the Insolvency and Bankruptcy Code was held to be within limitation because written acknowledgements revived the limitation period under Section 18 of the Limitation Act, 1963 as applied by Section 238A of the Code. The account had turned non-performing in 2013, but a balance and security confirmation letter, acknowledgements in the corporate debtor's balance sheets, and later one-time settlement proposals constituted acknowledgements of liability before expiry of the prescribed period. Those acknowledgements extended the three-year limitation, so the petition filed in 2019 was treated as timely and the limitation objection failed.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation, and whether acknowledgements in the balance sheets, balance confirmation letter, and one time settlement proposals extended the period of limitation.

Analysis: The account was declared non-performing on 30.09.2013, but the record showed a balance and security confirmation letter dated 16.04.2014, acknowledgements reflected in the corporate debtor's balance sheets for FY 2014-15 and FY 2015-16, and settlement offers dated 23.02.2017 and 15.09.2018. In view of Section 238A of the Insolvency and Bankruptcy Code, 2016, the Limitation Act, 1963 applies to proceedings under the Code. Section 18 of the Limitation Act, 1963 permits a fresh period of limitation where liability is acknowledged in writing before expiry of the prescribed period. The Court found that these acknowledgements extended limitation beyond the initial three-year period and that the petition filed on 10.06.2019 was therefore within time.

Conclusion: The limitation objection failed and the admission of the Section 7 application was upheld.

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