Limitation under insolvency law: last payment and written admission extended time for a Section 9 application.

An application under Section 9 of the Insolvency and Bankruptcy Code was held not barred by limitation because Article 137 applied, limitation ran from accrual of the right to apply, and the last payment on 26.08.2019, together with the COVID-related exclusion period, kept the filing within time. Section 19 of the Limitation Act was also satisfied because the debtor's written reply admitted the last payment towards the price of goods, which amounted to acknowledgment of payment within the prescribed period and gave rise to a fresh period of limitation. The limitation objection therefore failed and the rejection of the preliminary objection was sustained.

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Issues: (i) Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation under Article 137 of the Limitation Act, 1963; (ii) Whether the last payment made by the corporate debtor on 26.08.2019 entitled the operational creditor to a fresh period of limitation under Section 19 of the Limitation Act, 1963.

Issue (i): Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation under Article 137 of the Limitation Act, 1963.

Analysis: The application was founded on invoices raised between January 2018 and August 2018. For an application under Section 9, limitation is governed by Article 137, and time begins to run when the right to apply accrues. The record showed that payments were made from time to time and the last payment was received on 26.08.2019. The exclusion of the COVID period under the Supreme Court's extension orders also meant that the filing date had to be tested against the extended limitation window.

Conclusion: The application was not barred by limitation.

Issue (ii): Whether the last payment made by the corporate debtor on 26.08.2019 entitled the operational creditor to a fresh period of limitation under Section 19 of the Limitation Act, 1963.

Analysis: Section 19 requires that payment on account of a debt be made before expiry of the prescribed period and that acknowledgment of the payment appear in the handwriting of, or in a writing signed by, the payer. The last payment was made within three years of the invoices becoming due, and the corporate debtor's reply to the demand notice admitted that the last payment towards the price of goods was made on 26.08.2019. That written admission satisfied the statutory requirement of acknowledgment. The cited authorities were distinguished on their facts because no comparable acknowledgment or running-account basis was established there.

Conclusion: The conditions of Section 19 were satisfied and the operational creditor was entitled to a fresh period of limitation.

Final Conclusion: The limitation objection failed, and the order rejecting the preliminary objection was sustained.

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