Limitation for insolvency claims turns on date of default, and only timely written acknowledgment extends time.

A Section 7 insolvency application is governed by Article 137 of the Limitation Act, so limitation runs for three years from the date of default. An acknowledgment can extend time under Section 18 only if it is in writing and made before expiry of the limitation period. Balance sheets and one-time settlement communications relied on by the creditor were outside the original period, and the SARFAESI reply was not an unequivocal acknowledgment. On that basis, the admission order could not be sustained and the insolvency application was treated as time-barred.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation.

Analysis: The limitation for an application under Section 7 is governed by Article 137 of the Limitation Act, 1963 and runs for three years from the date when the right to apply accrues, i.e. the date of default. The date of default was taken as 30.06.2011, and the three-year period expired on 30.06.2014. For extension of limitation under Section 18 of the Limitation Act, 1963, any acknowledgment of liability must be in writing and must be made before expiry of the prescribed period. The materials relied upon by the financial creditor, including the later balance sheets and the one-time settlement communications, were not within the original limitation period. The reply to the SARFAESI notice was also held not to amount to an unambiguous and unequivocal acknowledgment sufficient to extend limitation.

Conclusion: The application under Section 7 was barred by limitation and the admission order could not be sustained.

Final Conclusion: The insolvency admission was set aside and the appeal succeeded because the claim was time-barred and no valid acknowledgment extended limitation within the prescribed period.

Ratio Decidendi: For a Section 7 application, limitation runs from the date of default under Article 137 of the Limitation Act, 1963, and only an acknowledgment of liability made in writing before expiry of that period can extend limitation under Section 18 of the Limitation Act, 1963.

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