Limitation for Section 7 insolvency runs from default date, and an IRP's claim admission is not acknowledgment of liability.

A Section 7 insolvency application is governed by Article 137 of the Limitation Act, so the three-year period runs from the date of default, not a later reference date. On the stated facts, default was linked to 06.12.2016, making that the relevant starting point for limitation. A later filing remained time-barred even after excluding periods arising from earlier insolvency proceedings and Covid-related suspension of limitation. An Interim Resolution Professional's admission of a claim is only an administrative recording of claims and does not amount to acknowledgment of liability by the corporate debtor under Section 18, nor can it revive an already expired limitation period.

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Issues: (i) whether the period of limitation for filing the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 has to be reckoned from 06.12.2016 or 06.12.2017, (ii) whether the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 is within limitation, and (iii) whether an admission of debt by an Interim Resolution Professional amounts to acknowledgment of liability under Section 18 of the Limitation Act, 1963.

Issue (i): whether the period of limitation for filing the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 has to be reckoned from 06.12.2016 or 06.12.2017

Analysis: An application under Section 7 is governed by Article 137 of the Limitation Act, 1963, and the limitation period of three years begins when the right to apply accrues. In insolvency matters, that accrual is tied to the date of default, namely the date on which the corporate debtor first fails to discharge the repayment obligation. On the admitted facts, the accounts were classified as non-performing assets on 06.12.2016. The right to invoke Section 7 therefore accrued on that date, and not on any later date.

Conclusion: The limitation period was to be reckoned from 06.12.2016.

Issue (ii): whether the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 is within limitation

Analysis: The three-year limitation from 06.12.2016 would ordinarily expire on 06.12.2019. Although periods were excluded because of prior insolvency proceedings and the Covid-related exclusion of limitation, the petition was filed only on 23.09.2024. Even after excluding the relevant periods, the filing remained beyond the surviving limitation window. The petition was therefore time-barred.

Conclusion: The petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 was not within limitation.

Issue (iii): whether an admission of debt by an Interim Resolution Professional amounts to acknowledgment of liability under Section 18 of the Limitation Act, 1963

Analysis: A valid acknowledgment must be made by the party against whom the right is claimed, before expiry of limitation, and must evince a clear intention to admit an existing liability. The Interim Resolution Professional performs only an administrative function in collation of claims and has no adjudicatory power. Admission of a claim during insolvency proceedings is only an entry or recording of the claim and does not amount to a conscious acknowledgment of liability by the corporate debtor. In any event, such admission cannot revive a limitation period that has already expired, and the alleged admission here was not within the subsisting limitation period.

Conclusion: Admission of debt by the Interim Resolution Professional did not constitute acknowledgment of liability under Section 18 of the Limitation Act, 1963.

Final Conclusion: The insolvency application was barred by limitation, and the orders admitting the petitions and affirming such admission could not be sustained.

Ratio Decidendi: For a Section 7 insolvency application, limitation runs from the date of default under Article 137 of the Limitation Act, 1963, and an Interim Resolution Professional's administrative admission of claims does not amount to acknowledgment of liability under Section 18 of that Act or extend an expired limitation period.

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