TaxTMI 
TaxTMI 
2021 (4) TMI 753
X X X X Extracts X X X X
X X X X Extracts X X X X
....bad, State Bank of Bikaner and Jaipur, State Bank of Patiala, and State Bank of Travancore assigned the debts owed to them by the corporate debtor to the appellant, the Asset Reconstruction Company (India) Limited. On 20.06.2015, the appellant issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 ["SARFAESI Act"] on behalf of itself and other consortium lenders to the corporate debtor. On 01.06.2016, the appellant took actual physical possession of the project assets of the corporate debtor under the SARFAESI Act. On 26.12.2018, the appellant filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 ["IBC"] before the National Company Law Tribunal, Calcutta ["NCLT"] for a default amounting to Rs. 5997,80,02,973/- from the corporate debtor. As the relevant form indicating the date of default did not indicate any such date, this was made up by the appellant on 08.11.2019 by filing a supplementary affidavit before the NCLT, specifically mentioning the date of default and annexing copies of balance sheets of the corporate debtor, which, according to the appellant, acknowle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acknowledgements of liability and have, therefore, correctly been relied upon by the NCLT on the facts of this case. He argued, relying upon certain judgments, that the reference made to the five-Member Bench by the three- Member Bench was perfectly in order and ought to have been answered on merits. He also argued that the constitution of the five-Member Bench which passed the impugned judgment was not in order as three out of the five members of the said Bench were members who assented with the majority opinion in V. Padmakumar (supra), the dissentient member not being made part of the Bench so formed. This, according to him, was contrary to the principles of natural justice. He also argued that the fact that a balance sheet has to be filed under compulsion of law does not mean that an acknowledgement of debt has also to be made under compulsion of law, and for this purpose, he referred to two High Court judgments. 4. Refuting the aforesaid submissions, Shri Abhijeet Sinha, learned Advocate appearing on behalf of the Respondents, argued that the Explanation to Section 7, read with the definition of "default" contained in Section 3(12) of the IBC, would preclude the application....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... After hearing counsel for both sides, it is important to first advert to the rationale for the enactment of Section 238A of the IBC, which was enacted by way of the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 w.e.f. 06.06.2018. Section 238A of IBC reads as follows: "238A. Limitation.-The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be." 6. In Jignesh Shah v. Union of India, (2019) 10 SCC 750, this Court referred to the Report of the Insolvency Law Committee of March, 2018, which led to the introduction of Section 238A, as follows: "8. In para 7 of the said judgment [B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633], the Report of the Insolvency Law Committee of March 2018 was referred to as follows: ([B.K. Educational Services (P) Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633], SCC pp. 644-45, para 11) "11. Having heard the learned counsel for both sides, it is impo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing laws for the time being in force as per Section 30(4) of the Code. 28.3. Given that the intent was not to package the Code as a fresh opportunity for creditors and claimants who did not exercise their remedy under existing laws within the prescribed limitation period, the Committee thought it fit to insert a specific section applying the Limitation Act to the Code. The relevant entry under the Limitation Act may be on a case-to-case basis. It was further noted that the Limitation Act may not apply to applications of corporate applicants, as these are initiated by the applicant for its own debts for the purpose of CIRP and are not in the form of a creditor's remedy.'" (emphasis in original) A perusal of the above would show that considering that the Limitation Act applies only to courts, unless made statutorily applicable to tribunals, the Committee was of the view that such Act should be made to apply to the IBC as well, observing that though the IBC is not a debt recovery law, the trigger being "default in payment of debt" would render the exclusion of the law of limitation "counter-intuitive". Thus, it was made clear that an application to the IBC should ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of India, Civil Appeal No. 2734 of 2020, a judgment delivered on 26.03.2021, this Court, after referring to various judgments of this Court, including the judgment in Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd., (2020) 15 SCC 1 ["Babulal"], then held: "35. The purport of such observation has been dealt with in the case of Babulal Vardharji Gurjar (II) [Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd., (2020) 15 SCC 1]. Suffice it to observe that this Court had not ruled out the application of Section 18 of the Limitation Act to the proceedings under the Code, if the fact situation of the case so warrants. Considering that the purport of Section 238A of the Code, as enacted, is clarificatory in nature and being a procedural law had been given retrospective effect; which included application of the provisions of the Limitation Act on case-to-case basis. Indeed, the purport of amendment in the Code was not to reopen or revive the time barred debts under the Limitation Act. At the same time, accrual of fresh period of limitation in terms of Section 18 of the Limitation Act is on its own under that Act. It will not be a case of giv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r order shall not be deemed to be an application in respect of any property or right." 37. Ordinarily, upon declaration of the loan account/debt as NPA that date can be reckoned as the date of default to enable the financial creditor to initiate action under Section 7 of the Code. However, Section 7 comes into play when the corporate debtor commits "default". Section 7, consciously uses the expression "default" - not the date of notifying the loan account of the corporate person as NPA. Further, the expression "default" has been defined in Section 3(12) to mean nonpayment of "debt" when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be. In cases where the corporate person had offered guarantee in respect of loan transaction, the right of the financial creditor to initiate action against such entity being a corporate debtor (corporate guarantor), would get triggered the moment the principal borrower commits default due to non-payment of debt. Thus, when the principal borrower and/or the (corporate) guarantor admit and acknowledge their liability after declaration of NPA ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1973 Supp SCR 1] (1973) and Kanan Devan [Kanan Devan Hills Produce Co. Ltd. v. State of Kerala, (1973) 1 SCR 356 : (1972) 2 SCC 218 : AIR 1972 SC 2301] (1972) to Gwalior Rayons [State of Kerala v. Gwalior Rayon Silk Mfg. (Wvg). Co. Ltd.(1973) 2 SCC 713 : (1974) 1 SCR 671] (1976) and after Article 31-A has stood judicial scrutiny although, as stated earlier, we do not base the conclusion on Article 31-A. Even so, it is fundamental that the nation's Constitution is not kept in constant uncertainty by judicial review every season because it paralyses, by perennial suspense, all legislative and administrative action on vital issues deterred by the brooding threat of forensic blow up. This, if permitted, may well be a kind of judicial destabilisation of State action too dangerous to be indulged in save where national crisis of great moment to the life, liberty and safety of this country and its millions are at stake, or the basic direction of the nation itself is in peril of a shake-up. It is surely wrong to prove Justice Roberts of the United States Supreme Court right when he said: [Smith v. Allwright, 321 US 649, 669, 670 (1944)] "The reason for my concern is that the instan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....da v. Durga Prasad, (1962) 1 SCR 140 ["Shapoor Fredoom Mazda"], after referring to Section 19 of the Limitation Act, 1908, which corresponds to Section 18 of the 1963 Act, held: "It is thus clear that acknowledgement as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgement of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledgement is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgement must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or the law for the limitation of suits, is a valid contract. Moreover, in the instant case, the appellant has submitted before us that the respondent, in his balance sheet prepared for every year subsequent to the loan advanced by the appellant, had shown the amount as deposits from friends. A copy of the balance sheet as on 31-3-1997 is also produced before us. If the amount borrowed by the respondent is shown in the balance sheet, it may amount to acknowledgement and the creditor might have a fresh period of limitation from the date on which the acknowledgement was made. However, we do not express any final opinion on all these aspects, as these are matters to be agitated before the Magistrate by way of defence of the respondent." The judgment in A.V. Murthy (supra) was followed in S. Natarajan vs. Sama Dharman, Crl. A. No. 1524 of 2014 (decided on 15.07.2014) as follows: "7. In this connection, we may usefully refer to a judgment of this Court in A.V. Murthy v. B.S. Nagabasavanna [A.V. Murthy v. B.S. Nagabasavanna, (2002) 2 SCC 642] where the accused had alleged that the cheque issued by him in favour of the complainant in respect of sum advanced to the accused by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er compulsion of law Mr. Banerji relies upon the decision in Kashinath v. New Akot Ginning and Pressing Co. Ltd., I.L.R. 1950 Nag. 562 at 568 : A.I.R. 1951 Nag. 255. It is true that the balance-sheets were required to be made both by the Indian Companies Act, 1913 as also by the articles of association of the defendant company. There was a compulsion upon the managing agents to prepare the documents but there was no compulsion upon them to make any particular admission. They faithfully discharged their duty and in doing so they made honest admissions of the Company's liabilities. Those admissions, though made in discharge of their duty, are nevertheless conscious and voluntary admissions. A document is not taken out of the purview of section 19 of the Indian Limitation Act merely on the ground that it is made under compulsion of law, see Venkata v. Partha Saradhi, 1892 I.L.R. 16 Mad. 220 at 222, Udaya Thevar v. Subrahmania Chetti, (1896) 6 M.L.J. 266, 269, Good v. Jane Job, 120 E.R. 810 at 812. I am unable to agree with the reasoning of the Nagpur decision that a balance-sheet does not save limitation because it is drawn up under a duty to set out the claims made on the company....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsisting jural relation, and then an intention to continue it until it is lawfully determined must also be evident." The section requires a definite admission of liability in respect of the debt, but even an admission that the debt existed at a previous date may, having regard to the language used and the surrounding circumstances, amount to an implied representation that the debt is still subsisting (see Maniram Seth v. Seth Rupchand, I.L.R. 33 Cal. 1047 P.C.). In my opinion the balance-sheets satisfy the test of an acknowledgement under section 19. Each of them contains an admission that balances have been struck at the end of the previous year and that a definite sum has been found to be the balance then due to the creditor. The natural inference to be drawn from the balance-sheet is that the closing balance due to the creditor at the end of the previous year will be carried forward as the opening balance due to him at the beginning of the next year. In each balance-sheet there is thus an admission of a subsisting liability to continue the relation of debtor and creditor and a definite representation of a present intention to keep the liability alive until it is lawfully determi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....facturing Co. Ltd., (1928) 1 Ch. 836. Under Tentenden's Act, 1828 as also under the Limitation Act, 1939 (c. 21) the acknowledgement must be made to the creditor or his agent and if the balancesheet is sent to a shareholder who is also a creditor the requirements of those Acts were satisfied, see Re: The Coliseum (Burrow) Ltd., (1930) 2 Ch. 44 at 47, Jones v. Bellgrove Properties Ltd., (1949) 1 A.E.R. 498 at 504 affirmed (1949) 2 K.B. 700. The decision in the last case has been followed in India and it has been held that an admission of indebtedness in a balance-sheet is a sufficient acknowledgement under section 19 of the Indian Limitation Act, see Raja of Vizianagram v. Official Liquidator, Vizianagram Mining Co. Ltd., (1951) 2 M.L.J. 535 at 550-1 : A.I.R. 1952 Mad. 136 at 145, Lahore Enamelling and Stamping Co. Ltd. v. A.K. Bhalla, A.I.R. 1958 Punjab 341 at 347, First National Bank Ltd. v. The Mandi (State) Industries Ltd., (1957) 59 Punjab Law Reports 589 and in an unreported decision of S.R. Das Gupta, J. in matter No. 449 of 1955 Re: Vita Supplies Corporation Ltd. decided on December 7, 1956." Importantly, this judgment holds that though the filing of a balance sheet i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unt in a balance sheet would amount to an acknowledgement under Section 18 of the Limitation Act. This was done as follows: "5. The learned Counsel for the appellant relied on a decision of the Karnataka High Court in State Bank of India v. Hegde and Golay Ltd., 1985 SCC OnLine Kar 428 : ILR 1987 Kar 2673, wherein it is observed that showing of an amount in a balance sheet amounts to an acknowledgement in terms of the Indian Limitation Act. Consequently, the amount having been admitted and the respondent having not paid the same, the petition required admission as laid down by the said judgment that civil suit as well as legal proceedings can continue simultaneously. Without expressing our opinion on the law laid down in the said judgment, though it cannot be categorically laid down that mere showing a debt due in a balance-sheet would amount to acknowledgement, we may observe that it is a well-established law that for giving an acknowledgement, a person has to be conscious of his act to the knowledge of the other person. Merely showing a debt in a balance-sheet cannot, prima facie, as presently advised, be termed to be an acknowledgement in terms of the Indian Limitation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h are relevant, are alone not sufficient evidence to charge any person with liability. Learned counsel also relied on the Illustration given to the said section, which is as follows: "A sues B for Rs. 1000, and shows entries in his account-books showing B to be indebted to him to this amount. The entries are relevant, but are not sufficient without other evidence to prove the debt." On the basis of the aforesaid provision it was submitted that the entries in the books of account showing the defendants to be indebted to the plaintiff for certain amount might be relevant but are not sufficient to prove the debt. In the instant case, the learned counsel submitted, even the entries have not been proved. What is sought to be proved is the balance appearing in the accounts or in the balance sheet as due from the defendants. Such a course is not permissible except in a case of "accounts stated". Admittedly, the present case is not one of "accounts stated". 10. I have carefully considered the submissions. I find that neither the individual entries have been proved by the plaintiff nor there is any material whatsoever other than the books of account or the balance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ertain particulars as follows: "92. Annual return.-(1) Every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of the financial year regarding- (a) its registered office, principal business activities, particulars of its holding, subsidiary and associate companies; (b) its shares, debentures and other securities and shareholding pattern; (c) [* * *]; (d) its members and debenture-holders along with changes therein since the close of the previous financial year; (e) its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year; (f) meetings of members or a class thereof, Board and its various committees along with attendance details; (g) remuneration of directors and key managerial personnel; (h) penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment; (i) matters relating to certification of compliances, disclosures as may ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction or the rules made thereunder, he shall be liable to a penalty of two lakh rupees." Vide Section 128, every company shall prepare and keep at its registered office, books of accounts and financial statements for every financial year, as follows: "128. Books of account, etc., to be kept by company.-(1) Every company shall prepare and keep at its registered office books of account and other relevant books and papers and financial statement for every financial year which give a true and fair view of the state of the affairs of the company, including that of its branch office or offices, if any, and explain the transactions effected both at the registered office and its branches and such books shall be kept on accrual basis and according to the double entry system of accounting: Provided that all or any of the books of account aforesaid and other relevant papers may be kept at such other place in India as the Board of Directors may decide and where such a decision is taken, the company shall, within seven days thereof, file with the Registrar a notice in writing giving the full address of that other place: Provided further that the company may keep su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns for such deviation and the financial effects, if any, arising out of such deviation. xxx xxx xxx (7) If a company contravenes the provisions of this section, the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person charged by the Board with the duty of complying with the requirements of this section and in the absence of any of the officers mentioned above, all the directors shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both. Explanation.-For the purposes of this section, except where the context otherwise requires, any reference to the financial statement shall include any notes annexed to or forming part of such financial statement, giving information required to be given and allowed to be given in the form of such notes under this Act." Likewise, under Section 134, financial statements are to be approved by the Board of Directors before they are signed, and the auditor's report, as well as a report by the Board of Directors, is to be atta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....shall be liable to a penalty of fifty thousand rupees." Under Section 137, copies of financial statements are then to be filed with the Registrar of Companies as follows: "137. Copy of financial statement to be filed with Registrar. -(1) A copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting in such manner, with such fees or additional fees as may be prescribed: Provided that where the financial statements under subsection (1) are not adopted at annual general meeting or adjourned annual general meeting, such unadopted financial statements along with the required documents under subsection (1) shall be filed with the Registrar within thirty days of the date of annual general meeting and the Registrar shall take them in his records as provisional till the financial statements are filed with him after their adoption in the adjourned annual general meeting for that purpose: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of fifty thousand rupees." 22. A perusal of the aforesaid Sections would show that there is no doubt that the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7). Equally, the auditor's report may also enter caveats with regard to acknowledgements made in the books of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rove Properties Ltd., (1949) 1 All E.R. 498; and Lahore Enamelling and Stamping Co. v. A.K. Bhalla, A.I.R. 1958 Punjab 341, in which statements in balancesheets of companies were held to amount to acknowledgements of liability of the companies. 47. Shri Rameshwar Dial referred to the decision of the Privy Council in Consolidated Agencies Ltd. v. Bertram Ltd., (1964) 3 All. E.R. 282. We shall advert to this decision presently when we deal with another argument of Shri Rameshwar Dial, and it is sufficient to state so far as the argument under consideration is concerned that even in this decision of the Privy Council it has been recognised that balance-sheets could in certain circumstances amount to acknowledgements of liability. It cannot, therefore, be said as a general proposition of law that statements in balance-sheets of a company cannot operate at all as acknowledgements of liability as contended by Shri Rameshwar Dial. 48. The learned counsel next argued that the words used in the entry in the balance-sheet in the present case did not amount to any acknowledgement of liability. We do not think so. The words used in the entry apparently show that in explaining....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... audited, section 216 requires that the Auditors' report should be attached to the balance-sheet, and section 217 requires the Board of Directors also to make a report. The balance-sheet together with the Auditors report and the Board's report are then required to be placed before the company at the annual general meeting for adoption of the balance-sheet. After the balancesheet has been so laid before the company at the annual general meeting, section 220 requires that three copies of the balance-sheet should be filed with the Registrar. In the present case, the balance-sheet (Schedule D to Annexure J) was signed by the Secretary and two Directors, and Annexure J contains the Auditors' report and the Board's report. It was stated in the judgment of the learned single Judge that the balance-sheet was adopted by the company and the same was not disputed before us. It is thus quite clear that the balancesheet was signed by duly authorised agents of the company." 24. The judgment of Sabyasachi Mukharji, J. (as His Lordship then was), sitting singly in the Calcutta High Court, has, in Pandam Tea Co. Ltd., In re, 1973 SCC OnLine Cal 93 : AIR 1974 Cal 170, held as follows: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cter of the liability. The words used in the statement in question must, however, relate to a present subsisting liability and indicate the existence of a jural relationship between the parties such as, for instance, that of a debtor and a creditor and the intention to admit such jural relationship. Such an intention need not, however, be in express terms and could be inferred by implication from the nature of the admission and the surrounding circumstances. Generally speaking, a liberal construction of the statement in question should be given. That of course did not mean that where a statement was made without intending to admit the existence of jural relationship, such intention should be fastened on the person making the statement by an involved and far-fetched reasoning. In order to find out the intention of the document by which acknowledgement was to be construed the document as a whole must be read and the intention of the parties must be found out from the total effect of the document read as a whole. ..." 25. In Hegde & Golay Limited v. State Bank of India, 1985 SCC OnLine Kar 428 : ILR 1987 Kar 2673, the Karnataka High Court held as follows: "43. Re. Point (e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eriod of limitation from the date of such acknowledgement. 15. The Calcutta High Court in the case of Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, AIR 1962 Cal. 115 held that in an appeal arising from a money decree against a company, even statement of a liability in the balance-sheet of the company amounted to admission/acknowledgement of a debt giving rise to a fresh period of limitation, notwithstanding the fact that the balance-sheet was prepared under 'compulsions of statute and of the articles of association of the company'. 16. In Vijaya Kumar Machinery & Electrical Stores v. Alaparthi Lakshmikanthamma, (1969) 74 ITR 224 (AP), the Andhra Pradesh High Court after following Bengal Silk Mills Co. (supra), Raja of Vizianagram v. Official Liquidator, Vizianagram Mining Company Limited, AIR 1952 Mad. 1361, Lahore Enamelling and Stamping Co. Ltd. v. A.K. Bhalla, AIR 1958 Punj. 341 and Jones v. Bellgrove Properties Ltd., (1949) 2 All.ER 198 held, "What emerges from a consideration of the above decision is that the date of signing the balance-sheet by the second defendant started a fresh period of limitation". 17. Consequently, in the present case, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the basis of an acknowledgement. In Larsen & Toubro Ltd. v. Commercial Electric Works 67 (1997) DLT 387 a Single Judge of this Court observed that it is well settled that a balance sheet of a company, where the defendants had shown a particular amount as due to the plaintiff, would constitute an acknowledgement within the meaning of Section 18 of the Limitation Act. In Rishi Pal Gupta v. S.J. Knitting & Finishing Mills Pvt. Ltd. 73 (1998) DLT 593, the same view was taken. The last two decisions were cited by Geeta Mittal, J. in S.C. Gupta v. Allied Beverages Company Pvt. Ltd. (decided on 30/4/2007) and it was held that the acknowledgement made by a company in its balance sheet has the effect of extending the period of limitation for the purposes of Section 18 of the Limitation Act. In Ambika Mills Ltd. Ahmedabad v. CIT Gujarat (1964) 54 ITR 167, it was further held that a debt shown in a balance sheet of a company amounts to an acknowledgement for the purpose of Section 19 of the Limitation Act and in order to be so, the balance sheet in which such acknowledgement is made need not be addressed to the creditors. In light of these authorities, it must be held that in the present c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Similar findings have also been recorded by the Calcutta High Court in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, AIR 1962 Cal 115, paragraph 12, and Raja of Vizianagram v. The Official Liquidator, Vizianagram Mining Company Limited, Vizagapatam, AIR 1952 Mad 136. Indeed, the entry admits such liability towards JSPL for the amount claimed, and no explanation that may be provided, or circumstance surrounding the entry, can alter the fact of that liability. Thus, while this admission establishes liability, the fact is traced to the exchange of letters mentioned above, thus bringing the case within Order XXXVII CPC." 30. In M/s. Al-Ameen Limited v. K.P. Sethumadhavan, 2017 SCC OnLine Ker 11337 : (2017) 4 KLJ 80, the Kerala High Court held: "7. The inclusion of a debt in a balance sheet duly prepared and authenticated would amount to admission of a liability and therefore satisfies the requirement of law for a valid acknowledgement under Section 18 of the Act. We may recapitulate the words of Mr. Justice P. Subramonian Poti in Krishnan Assari v. Akilakerala Viswakarma Maha Sabha [1980 KLT 515 (DB)] and the following is the extract: "10. How far the ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ished position that an entry made in the company's balance sheet amounts to an acknowledgement of the debt and has the effect of extending the period of limitation under section 18 of the Limitation Act, 1963. However, I may refer to only one decision of the learned single judge of this Court (Manmohan, J.) in Bhajan Singh Samra v. Wimpy International Ltd., 185 (2011) DLT 428 for the simple reason that it collects all the relevant authorities on the issue, including some of the judgments cited before me on behalf of the petitioners. This judgment entirely supports the petitioners on this point." 6. In view of the legal position spelt out in judgments noted above, the acknowledgement of the debt in the balance sheet extends the period of limitation. The acknowledgement is as on 31.3.2015. This suit is filed in 2017. The suit is clearly within limitation. The present application is allowed." 32. In Agni Aviation Consultants v. State of Telangana, 2020 SCC OnLine TS 1462 : (2020) 5 ALD 561, the High Court of Telangana held: "107. In several cases, various High Courts have held that an acknowledgement of liability in the balance sheet by a Company registered un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Bhojwani v. Abhyudaya Coop. Bank Ltd., (2019) 9 SCC 158, to argue that limitation starts running from the date a recovery certificate has been obtained pursuant to proceedings before the Debts Recovery Tribunal under the Recovery of Debts Act. On facts, he argued that such a certificate was issued on 31.08.2009 after which, there were several letters written by the corporate debtor, M/s Uttara Fashion Knitwear Ltd., acknowledging liability to pay loans that had been availed by it. He pointed out that whereas the NCLT had, by an order dated 21.11.2019, admitted the appellant's application under Section 7 of the IBC; the NCLAT had, vide the impugned judgment, set aside the NCLT order on the ground that an entry in a balance sheet cannot amount to an acknowledgement of liability for the purpose of Section 18 of the Limitation Act. As a matter of fact, he argued, in the alternative, that even if dues were stated to be recoverable on and from the loan-recall notice dated 31.10.2002, there were balance sheets right from 2002 up till 2010, followed by various letters from the corporate debtor, which would show a consistent course of acknowledgement of liability, thereby extending limitati....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... v. Phoenix Arc (P) Ltd., (2019) 10 SCC 353. 2. The NCLAT, by the impugned order dated 14.10.2020, found that the appellant had classified the corporate debtor's account as a non-performing asset on 28.05.2014. However, the said date was changed to 31.01.2010 after an attempt to restructure the corporate debtor's account failed. The three other banks forming part of the consortium of lenders, viz., Punjab National Bank, Corporation Bank, and UCO Bank, had also classified the account of the corporate debtor as a non-performing asset on 30.06.2014, 31.12.2014, and 31.12.2014, respectively. Even if the date of default was taken to be the last of these dates, i.e. 31.12.2014, the NCLAT held that the three-year period under Article 137 of the Limitation Act had expired on 30.12.2017, and that since the amended application under Section 7 of the IBC had been filed only on 23.07.2018, it was barred by limitation. The NCLAT, therefore, allowed the appeal. 3. Shri Rohatgi pointed out that in the written submissions filed by the appellant on 21.09.2020, after judgment was reserved by the NCLAT on 17.09.2020, it was pointed out that the corporate debtor had acknowledged its liability in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the years ending 2014-2015, 2015-2016, and 2016-2017 cannot amount to acknowledgements of liability, as a result of which the NCLT order admitting the appellant's application under Section 7 of the IBC was set aside. 2. Suffice it to say that the basis of the Section 7 application in this case was a DRT decree dated 17.08.2018, pursuant to which a recovery certificate dated 19.06.2019 was issued. The Section 7 application averred that the date of the DRT decree furnished the cause of action and, thus, was the starting point of limitation in this case. 3. Shri Sidhartha Barua, learned counsel appearing on behalf of the appellant, has argued that this appeal deserves to be allowed and the matter sent back to the NCLAT to be decided in accordance with our judgment delivered in Civil Appeal No.323 of 2021. 4. Shri Saurabh Kirpal, learned Senior Advocate appearing on behalf of the respondents, has argued that no pleading qua acknowledgement of liability was made before either the NCLT or the NCLAT. Instead, the only pleading that was made was that the date of default was the date on which the DRT decree was passed, which is wholly incorrect in law. The Section 7 application be....