Balance-sheet acknowledgment extends limitation for insolvency claims when liability is reflected before expiry of the original period.

Entries in a corporate debtor's balance sheets and financial statements can constitute acknowledgment of liability for Section 18 of the Limitation Act, extending limitation for a Section 7 application under the Insolvency and Bankruptcy Code where the acknowledgment is made before expiry of the original period. The record showed the debt reflected in the relevant balance sheet and a balance-sheet entry after the last loan disbursement within the limitation period. On that basis, the application was held to be within limitation, and dismissal on limitation grounds was unsustainable.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation in view of the alleged acknowledgments in the corporate debtor's balance sheets and financial statements.

Analysis: The impugned order had relied on a precedent that had later been set aside, and the relevant legal position was tested against the Supreme Court's exposition that entries in balance sheets and financial statements can amount to acknowledgment of liability for the purposes of Section 18 of the Limitation Act, 1963. The record showed that the debt was reflected in the corporate debtor's balance sheet for the relevant financial year, and the last tranche of loan disbursement was followed by a balance-sheet reflection within the limitation period. In insolvency proceedings, where a valid acknowledgment exists before expiry of the original limitation period, the limitation period stands extended accordingly.

Conclusion: The application under Section 7 was not barred by limitation, and the dismissal of the application on that ground was unsustainable.

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