Balance sheet acknowledgment of debt extends limitation for insolvency proceedings under Section 18 of the Limitation Act.

A balance sheet entry that expressly recorded repayment terms, overdue instalments and continuing interest default was treated as an acknowledgment of debt under Section 18 of the Limitation Act, 1963, rather than a mere borrowing entry. On that basis, limitation for the Section 7 Insolvency and Bankruptcy Code application ran from the date of acknowledgment, and the filing was held to be within the three-year period under Article 137. The limitation objection therefore failed, and the insolvency application was treated as time-barred objection not sustainable.

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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 entries in the corporate debtor's balance sheet constituted acknowledgment of debt under Section 18 of the Limitation Act, 1963 so as to extend limitation.

Analysis: The defaulting liability was reflected in the balance sheet as on 31.03.2016, including repayment terms, overdue instalments and continuing defaults in payment of interest. Such disclosure was treated as an acknowledgment of debt and not merely as a book entry of borrowing. On that basis, limitation was held to run from the date of acknowledgment, and the filing of the Section 7 application on 11.09.2018 was within the three-year period under Article 137 of the Limitation Act, 1963. The cited Supreme Court authority was applied to support the conclusion that a balance sheet entry acknowledging liability extends limitation under Section 18 of the Limitation Act, 1963.

Conclusion: The limitation objection failed. The Section 7 application was within time and the appeal was dismissed.

Ratio Decidendi: A clear acknowledgment of debt in a company's balance sheet constitutes acknowledgment under Section 18 of the Limitation Act, 1963 and extends the period of limitation for initiating insolvency proceedings.

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