Severable assignment deeds and balance-sheet acknowledgment can preserve insolvency claims despite a partial registration defect and partial payment.

A composite assignment deed was held severable, so the Tamil Nadu place-of-registration defect invalidated it only to the extent it created an interest over the Coimbatore immovable property and did not nullify the entire transaction. The Section 7 application was treated as within limitation because the corporate debtor's later balance sheets acknowledged the debt, and such acknowledgment extended limitation even though the assignee was not separately named. Deposit of the principal amount under an interim order did not discharge the financial debt, as the deposit covered only part of the outstanding liability and did not extinguish default.

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Issues: (i) Whether the assignment deed was void in respect of the immovable property situated in Tamil Nadu under the Tamil Nadu amended registration provision; (ii) whether the Section 7 application was barred by limitation; (iii) whether deposit of the principal amount pursuant to the interim order discharged the financial debt.

Issue (i): Whether the assignment deed was void in respect of the immovable property situated in Tamil Nadu under the Tamil Nadu amended registration provision.

Analysis: The assignment deed was a composite instrument covering several financial assets and accounts, but it also dealt with an equitable mortgage over land and building in Coimbatore. The amended place-of-registration rule applicable in Tamil Nadu rendered a document registered outside the State void to the extent it affected immovable property situated in Tamil Nadu. The offending part of the transaction was therefore severable from the rest of the assignment, and the invalidity did not extend to the entire deed.

Conclusion: The assignment deed is void only to the extent it creates an interest over the immovable property situated at Coimbatore, but it is not void in its entirety.

Issue (ii): Whether the Section 7 application was barred by limitation.

Analysis: The account was declared NPA on 30.09.2011, but the corporate debtor's balance sheets for subsequent financial years recorded the debt consistently. An acknowledgment of liability in the corporate debtor's financial statements constitutes acknowledgment for the purpose of extending limitation, even if the assignee's name is not separately mentioned. The assignee was entitled to rely on such acknowledgments as the transferee of the debt.

Conclusion: The Section 7 application was not barred by limitation.

Issue (iii): Whether deposit of the principal amount pursuant to the interim order discharged the financial debt.

Analysis: The amount deposited corresponded only to the principal sum mentioned in the assignment deed, whereas the relevant financial debt for the Section 7 proceeding was the outstanding claim as on the date of the application. A partial deposit made during the appeal did not liquidate the entire debt or extinguish the default.

Conclusion: The deposit did not discharge the financial debt.

Final Conclusion: The admission of the Section 7 application was upheld, the interim protection was vacated, the deposited amount was directed to be returned with accrued interest, and the assignment was held invalid only insofar as it related to the Tamil Nadu immovable property.

Ratio Decidendi: A registered assignment instrument is severable, so statutory invalidity affecting immovable property in one part of the transaction does not necessarily nullify the entire assignment; and acknowledgment of debt in a corporate debtor's balance sheets can extend limitation even where the assignee is not named separately.

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