NCLT admitted a Section 7 petition within limitation, holding that a part payment in 2025 reset the limitation period for the insolvency claim.
Part Payment Resets Limitation for Insolvency Petition
The National Company Law Tribunal (NCLT) admitted a Section 7 insolvency petition involving a financial default of ₹8.42 crore, ruling that the petition was filed within limitation due to a recent part repayment. The debtor made a partial payment, which was accepted as an acknowledgment of debt, thereby extending the limitation period.
The Tribunal emphasized that acknowledgment through part payment operates under Section 18 of the Limitation Act, 1963, reviving the limitation clock from the date of such payment. This allowed the financial creditor to file the petition well after the original due date but within three years of the last discharge.
Takeaway: Financial institutions and legal representatives should monitor even small repayments or acknowledgments from defaulting entities. These can reset limitation periods, preserving the right to initiate insolvency proceedings. Documentation of such transactions is critical for future enforcement.
Citations
- Section 7, Insolvency and Bankruptcy Code
- Section 18, Limitation Act, 1963
