Documentary admissions in balance sheets can prove liability in debt recovery proceedings, and are not limited to tribunal pleadings.
Balance sheet and profit and loss account entries can amount to an admission of liability for recovery proceedings under Rule 12(5) of the Debts Recovery Tribunal (Procedure) Rules, 1993 when supported by signed financial statements and no satisfactory explanation is shown. The expression "admission" is not confined to pleadings or statements made before the Tribunal; it extends to documentary admissions in pre-existing records, consistent with the Evidence Act and the scheme of speedy debt recovery. The limitation objection was treated as unsustainable on the material before the court, and the challenge failed.
Issues: (i) Whether the statement of liability reflected in a company's balance sheet and profit and loss account can constitute an admission under Rule 12(5) of the Debts Recovery Tribunal (Procedure) Rules, 1993. (ii) Whether such an admission must be confined to pleadings or statements made during the proceedings before the Tribunal. (iii) Whether the petition was barred by limitation.
Issue (i): Whether the statement of liability reflected in a company's balance sheet and profit and loss account can constitute an admission under Rule 12(5) of the Debts Recovery Tribunal (Procedure) Rules, 1993.
Analysis: The provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Rules permit the Tribunal to act on an admitted debt. The balance sheet and profit and loss account are statutory financial statements required under the Companies Act, 1956, and an auditor's report and signed financial statements are documentary material capable of amounting to an admission under the Evidence Act. In the absence of any satisfactory explanation or material showing that the entries were wrong, paid off, or otherwise not due, the entries in such statements could be treated as admissions of liability.
Conclusion: Yes. The balance sheet and profit and loss account constituted an admission of liability against the petitioner.
Issue (ii): Whether such an admission must be confined to pleadings or statements made during the proceedings before the Tribunal.
Analysis: Rule 12(5) does not restrict the expression "admission" to admissions made only in pleadings before the Tribunal. Read with the scheme of the Act, and guided by the wider notion of admission recognised in Order XII, Rule 6 of the Code of Civil Procedure and the Evidence Act, the expression extends to admissions contained in documents or other material, including pre-existing documents. A narrow construction would defeat the object of speedy recovery under the Act.
Conclusion: No. The admission need not be confined to pleadings or statements made during the proceedings before the Tribunal.
Issue (iii): Whether the petition was barred by limitation.
Analysis: The limitation objection was not properly raised before the Tribunal and, on the material noticed, the application was filed within time measured from the date of the relevant financial statement. The plea was therefore without substance.
Conclusion: No. The petition was not held to be barred by limitation.
Final Conclusion: The writ petition failed. The orders directing payment to the extent of the admitted liability were sustained and the challenge to the Tribunal's and Appellate Tribunal's orders was rejected.
Ratio Decidendi: An admission of liability for purposes of Rule 12(5) of the Debts Recovery Tribunal (Procedure) Rules, 1993 may be proved by documentary admissions such as balance sheets and profit and loss accounts, and is not confined to admissions made only in pleadings before the Tribunal.
TaxTMI 
AI Drafter ✕
TaxTMI 
