Balance sheet acknowledgments extended limitation, allowing the insolvency application to proceed despite the time-bar objection.

Balance sheets and annual financial statements filed by the corporate debtor were treated as acknowledgments of liability because they continued to show the debentures and recalled secured loans as outstanding liabilities, thereby extending limitation under Section 18 of the Limitation Act, 1963. The adjudicating authority also excluded the period covered by the sick company regime while computing limitation. On that basis, the Section 7 application under the Insolvency and Bankruptcy Code, 2016 was found to be within limitation, and the plea that the debt was time-barred failed.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation, or whether the corporate debtor's balance sheets and financial statements amounted to acknowledgment of liability so as to extend limitation under Section 18 of the Limitation Act, 1963.

Analysis: The sole defence was that the debt was time-barred. The financial creditor produced annual returns and balance sheets filed by the corporate debtor showing the debentures and the recalled secured loans as outstanding liabilities. The adjudicating authority treated these entries, made from year to year, as clear acknowledgments of liability. It also noted that the corporate debtor had been referred to BIFR and that the period during which proceedings were barred by the sick company regime stood excluded while computing limitation. Reliance was placed on the settled position that entries in balance sheets and financial statements can constitute acknowledgment within the meaning of Section 18 of the Limitation Act, 1963.

Conclusion: The application was held to be within limitation and was admitted; the plea of time-bar failed.

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