Acknowledgment of liability extends limitation in Section 7 IBC proceedings; restructuring default allowed creditor to revive original liability.

An acknowledgment of liability made before expiry of the three-year limitation period extends limitation for a Section 7 IBC application, so the petition remained within time on the facts described. The restructuring correspondence also showed admission of liability, and later part-payments did not negate that acknowledgment. The creditor was entitled under the restructuring terms to revoke the sanction on default and proceed on the restored original liability. Objections based on the circular and alleged malicious filing were found unsubstantiated, and the CIRP was allowed to continue.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation or otherwise liable to be rejected on the basis of the date of default and the restructuring of the debt.

Analysis: The Corporate Debtor did not dispute the NPA classification, the restructuring of the liability, or the admission of liability recorded in the restructuring correspondence. Even if the date of default was taken as 30.04.2018, the subsequent restructuring in March 2021 contained an acknowledgment of liability before expiry of the three-year limitation period. The part-payments made later did not dilute that acknowledgment. The creditor was also entitled under the restructuring terms to revoke the sanction upon default and restore the original liability. The other objections, including alleged non-compliance with the circular and malicious filing, were found unsubstantiated.

Conclusion: The Section 7 application was within limitation and the admission of the petition was sustained. The appeal failed and the CIRP was allowed to continue.

Ratio Decidendi: An acknowledgment of liability made before expiry of limitation extends the limitation period for a Section 7 insolvency , and a creditor may rely on the contractual restructuring terms to revoke the restructuring upon default and proceed on the restored liability.

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