2026 (3) TMI 110 - AT - IBC

Limitation extension by acknowledgment enabled admission of the insolvency petition filed within the available limitation period.

Whether the insolvency petition was time-barred turned on limitation principles: a recovery certificate was treated as triggering a fresh limitation ... Acknowledgment under Section 18 of the Limitation Act - extension of limitation by judicial exclusion of period - fresh period of limitation from issuance of recovery certificate - permissibility of withdrawal of appeal with Section 12A route after settlement - Whether application filed by the IDBI Bank under Section 7 was barred by time or not. Fresh period of limitation from issuance of recovery certificate - extension of limitation by judicial exclusion of period - acknowledgment under Section 18 of the Limitation Act - HELD THAT: - The Tribunal held that the Recovery Certificate dated 26.07.2018 by the DRT commenced a fresh three-year limitation period. The period falling between 15.03.2020 and 28.02.2022 was excluded by the Suo Moto order of the Supreme Court, making the residual period available from 01.03.2022 and extending the outer limit accordingly. Independently, the audited financial statements (notes to accounts) for F.Y. 2019-20, 2020-21 and 2021-22 recorded the counter-guarantee and related contingent liabilities and were, on a case-by-case examination, held to constitute acknowledgments within the meaning of Section 18 of the Limitation Act. The settlement correspondence from the Corporate Debtor dated 18.04.2022 and 02.06.2022 were also treated as acknowledgments. Applying the settled principles in precedents (including the approach in Asset Reconstruction Co.[2021 (4) TMI 753 - SUPREME COURT] and subsequent Supreme Court decisions), the Tribunal concluded that these entries and communications renewed the debt and furnished fresh limitation for three years from the date of acknowledgment, thereby rendering the Section 7 application filed on 13.06.2024 within time. [Paras 11, 12, 13, 26, 28] The Section 7 application was not barred by limitation. Permissibility of withdrawal of appeal with Section 12A route after settlement - Whether the Appellant could withdraw the appeal and whether the Corporate Insolvency Resolution Process (CIRP) could be closed following settlement between the Financial Creditor and the Corporate Debtor. - HELD THAT: - The Tribunal recorded that the IDBI Bank had entered into a settlement and received payment. While the Appellant was permitted to withdraw the appeal, the Tribunal held that the CIRP could not be closed merely by settlement between the Financial Creditor and the Corporate Debtor in the appellate forum. Instead, the Financial Creditor was directed to file an application under Section 12A of the IBC before the Adjudicating Authority through the IRP, in accordance with applicable regulations and the law laid down by the Supreme Court in Glas Trust Company LLC v. Byju Raveendran & Ors. [2024 (10) TMI 1185 - SUPREME COURT (LB)] Timelines were specified for filing the Section 12A application and for the IRP's steps; interveners were allowed to oppose or intervene in the Section 12A proceedings. [Paras 29, 31, 32] Appellant permitted to withdraw the appeal; CIRP not closed; Financial Creditor to file Section 12A application through the IRP within the directed timeframe and the IRP to await decision on that application before taking further steps. Final Conclusion: The impugned NCLT order admitting the Section 7 application is upheld because limitation was extended by the recovery certificate, the judicial exclusion of time, and acknowledgments in the audited accounts and correspondence; the Appellant may withdraw the appeal but CIRP remains subsisting until the Financial Creditor seeks termination under Section 12A, which must be filed through the IRP within the timelines directed and may be opposed by interveners. Issues: Whether the Section 7 application filed by the Financial Creditor was barred by limitation.Analysis: The Tribunal examined whether limitation was extended by (a) fresh period of limitation from the Recovery Certificate dated 26.07.2018, (b) exclusion of period by the Suo Moto orders of the Hon'ble Supreme Court, and (c) acknowledgments constituting extension under Section 18 of the Limitation Act as reflected in the audited financial statements and correspondence. The court applied settled principles that entries in balance sheets may constitute an acknowledgment of liability depending on context and tenor, and considered authoritative precedents holding that such entries require case-by-case scrutiny. The Recovery Certificate triggered a fresh three year limitation from 26.07.2018; the period falling within 15.03.2020 to 28.02.2022 was excluded under the Suo Moto order, making the balance of limitation available from 01.03.2022. The audited financial statements (notes regarding bank guarantees and counter guarantees) and the settlement correspondence dated 18.04.2022 and 02.06.2022 were held to be clear acknowledgments within the meaning of Section 18, thereby further extending limitation and rendering the Section 7 application filed on 13.06.2024 within time.Conclusion: The Section 7 application was not barred by limitation; the impugned order admitting the Section 7 application is upheld. In favour of Respondent.