Fresh settlement and part-payment can revive limitation for an insolvency claim despite an older default.

A Section 7 insolvency application was examined for limitation in light of an earlier default, later restructuring, and one-time settlement arrangements. The Tribunal treated the subsequent settlement agreements in 2011 and 2014, together with continued part-payments, as legally significant because they indicated a fresh promise to pay and not merely the original default date. Applying the effect of Section 25 of the Contract Act, 1872, the claim was found to remain enforceable for limitation purposes. The objection that the debt was time-barred was rejected, and the insolvency application was held to be within limitation.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation despite prior default and declaration of non-performing asset, in view of subsequent restructuring and one time settlement arrangements.

Analysis: The account was originally declared non-performing, but the debt was later restructured and the appellant entered into fresh settlement arrangements in 2011 and again in 2014, agreeing to pay revised amounts. The Tribunal treated these subsequent settlements and part-payments as material circumstances showing that the claim was not to be tested only from the original default dates. On these facts, the limitation period was held to have been affected by the later contractual promises, including the effect of Section 25 of the Contract Act, 1872, and the continued part-payments made thereafter.

Conclusion: The application under Section 7 was held to be within limitation, and the objection that the debt was time-barred was rejected.

Final Conclusion: The dismissal of the appeal left undisturbed the finding that the insolvency application was not barred by limitation.

Ratio Decidendi: A fresh settlement or promise to pay a previously defaulted debt can give rise to a new enforceable obligation for limitation purposes, so that the insolvency claim is not barred merely because the original default was older.

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