Fresh cause of action under insolvency law can reset limitation for a Section 7 application

A Section 7 Insolvency and Bankruptcy Code application may remain within limitation where a later judicial order concerning the same corporate debtor creates a fresh cause of action and an enforceable right for a separate project. The Tribunal treated the subsequent order as the relevant starting point for limitation, holding that the petition filed within three years of that order was timely. On that basis, the limitation objection failed and the insolvency application was admitted.

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

Analysis: The application was filed after the earlier insolvency proceedings against the same corporate debtor were initially confined to a different project by order dated 04.09.2020. The Tribunal held that this subsequent order created a fresh cause of action for the homebuyers of the separate project, and that the application filed on 19.08.2021 was within three years from that date. Relying on the principle that limitation under the Insolvency and Bankruptcy Code can run from a later judgment, decree, or order giving rise to a fresh enforceable right, the Tribunal found no error in the finding that the petition was within limitation.

Conclusion: The limitation objection was rejected and the application under Section 7 was held to be within time.

Final Conclusion: The appeal failed on the sole issue urged and the admission of the insolvency application was upheld.

Ratio Decidendi: Where a subsequent judicial order concerning the same corporate debtor gives rise to a fresh cause of action, a Section 7 application under the Insolvency and Bankruptcy Code, 2016 may be treated as filed within limitation if instituted within the prescribed period from that later order.

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