Binding precedent and limitation in insolvency: smaller benches cannot reopen larger-bench rulings, and balance sheets do not extend time.

A larger-bench precedent in Section 7 insolvency proceedings is treated as binding, and the text states that a three-member referral bench cannot question it or make a fresh reference outside recognised exceptions. It also notes that limitation for a Section 7 application runs from default, usually the NPA date, under Article 137, and that an acknowledgment under Section 18 must be in writing and made before limitation expires. On that basis, balance sheet and annual return entries, though statutory filings under the Companies Act, 2013, are said not to extend limitation by themselves in insolvency proceedings.

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Issues: (i) whether the three-member referral bench could doubt the correctness of the five-member decision in V. Padmakumar and make a fresh reference; (ii) whether entries in a corporate debtor's balance sheet or annual return can amount to acknowledgment of debt for the purpose of Section 18 of the Limitation Act, 1963 in proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Issue (i): whether the three-member referral bench could doubt the correctness of the five-member decision in V. Padmakumar and make a fresh reference.

Analysis: The five-member decision had been constituted to resolve conflicting views of coordinate benches and had laid down the law on limitation in Section 7 proceedings. A smaller bench cannot sit in appeal over a larger bench decision or treat it as open for reconsideration unless the matter falls within recognised exceptions. The referral order proceeded as if re-appreciating the earlier decision, which was contrary to judicial discipline and the binding force of precedent.

Conclusion: The reference was incompetent and could not be entertained.

Issue (ii): whether entries in a corporate debtor's balance sheet or annual return can amount to acknowledgment of debt for the purpose of Section 18 of the Limitation Act, 1963 in proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Analysis: Limitation for a Section 7 application runs from the date of default, i.e. the date of NPA, and is governed by Article 137. An acknowledgment must be in writing and must occur before expiry of limitation. The five-member bench held that balance sheets and annual returns, being statutory filings under the Companies Act, 2013, do not operate as acknowledgments under Section 18 for extending limitation in insolvency proceedings.

Conclusion: Balance sheet or annual return entries do not extend limitation under Section 18 in Section 7 insolvency proceedings.

Final Conclusion: The attempted reference was rejected, and the appeal was directed to be listed for regular hearing before the appropriate bench.

Ratio Decidendi: A smaller bench cannot question and refer for reconsideration a binding larger-bench decision on the same point, and statutory balance-sheet disclosures do not by themselves constitute an acknowledgment extending limitation in Section 7 insolvency proceedings.

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