Law of Limitation explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 238A applies the Limitation Act to proceedings under the Code. Three years run from the date of default, an acknowledgment in the accounts or a settlement proposal restarts the clock, and the appeal period runs from pronouncement rather than upload.
Jignesh Shah v. Union of India
The Supreme Court held that the limitation period for filing a winding-up petition — or a section 7 petition under the Code — is three years from the date of default, and not from the date the petition is filed. It further held that time-barred winding-up petitions cannot be revived as insolvency proceedings, strictly applying the three-year period measured from the default.
Section 238A, which applies the Limitation Act, 1963 to proceedings before the Adjudicating Authority and the appellate tribunals, was inserted with effect from 6 June 2018.
The temptation Jignesh Shah closes off is obvious. A creditor with a claim long past limitation, or with a winding-up petition that had failed on that ground, might treat the new Code as a clean slate.
The law of limitation says otherwise. The clock runs from the default — the event the Code itself makes the trigger for a section 7 application — so a debt that was time-barred before the petition was filed is time-barred under the Code too. Establish the date of default first; everything else in the petition depends on it.
The law of limitation can be restarted — K.R.V. Uday Charan Rao v. Bank of India
In this NCLAT decision [2020] 113 taxmann.com 54 (NCLAT), a CIRP application was allowed to proceed even though the original default was more than three years earlier, because there were written acknowledgments of liability by the corporate debtor.
Two kinds of acknowledgment were held sufficient to extend limitation under section 18 of the Limitation Act, 1963:
- acknowledgments in audited financial statements; and
- a One-Time Settlement proposal.
Both are documents the debtor generates in the ordinary course, which is what makes them powerful. A balance sheet that shows the borrowing as a liability is an acknowledgment in writing; so is a proposal to settle it.
How the two decisions work together
Applying the law of limitation to a section 7 petition is a four-step exercise:
| Step | What to establish |
|---|---|
| 1 | The date of default — limitation runs from here (Jignesh Shah) |
| 2 | Whether three years have elapsed from that date |
| 3 | If so, any written acknowledgment within the period — audited accounts, an OTS proposal (Uday Charan Rao) |
| 4 | Whether the acknowledgment itself falls within the running period, as section 18 requires |
The fourth step is the one most often missed. An acknowledgment restarts limitation only if it is made before the existing period expires. A balance sheet signed after the three years have run does not revive a claim that is already dead.
The law of limitation for appeals — Tarandeep Kaur Ahluwalia v. One City Infrastructure
The NCLAT held:
- limitation starts not from the date the order was uploaded but from the date the order was pronounced; and
- counted from the date of pronouncement in court on 3 July 2024, the appeal went beyond the further 15 days, which cannot be condoned in any manner.
The appeal period is 30 days, extendable by up to 15 for sufficient cause, and the extension is an outer limit rather than a discretion. Counting from the upload date instead of the pronouncement date is the error that most often consumes it.
Practical points
- Plead the date of default specifically and support it with the account records.
- Collect the debtor's audited financial statements for each intervening year and identify the entry acknowledging the debt.
- Keep any OTS proposal — it is an acknowledgment even though it was an attempt to settle.
- Diarise appeal periods from the date of pronouncement in court.
Common mistakes
- Counting the three years from the date of filing or from the NPA classification rather than the default.
- Relying on an acknowledgment made after limitation had already expired.
- Attempting to revive a time-barred winding-up petition as an IBC application.
- Computing the appeal period from the date the order was uploaded.