In Brief
The Supreme Court examined whether a petition for corporate insolvency resolution under Section 7 of the IBC could proceed when the alleged debt was barred by limitation. Respondents claimed Rs.2.10 crores loaned to a proprietorship firm in 2002-2005, later allegedly taken over by the appellant company. The company showed proof of repayment and conversion of Rs.90 lakhs into share capital, disputed the existence of debt, and raised limitation as a defence. The Court held that a petition barred by limitation cannot be admitted, that alternative defenses are permissible, and that amounts converted into shares do not constitute financial debt. The Court allowed the appeal, setting aside the appellate tribunal's order and restoring the NCLT's dismissal of the petition as barred by limitation.
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