TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 99
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.... respondent was unable to meet its debt obligations. 4. In the Section 7 IBC application filed by the appellant on 15.01.2024, a default amount of Rs. 55,45,97,395/- was set out and it was mentioned therein that the date of default was 01.03.2018; that it was duly recorded in the information utility as annexed; that a recall facility notice was issued on 10.08.2018 for which there was no response; that ever since the loan facility was extended in February 2015, the respondent acknowledged the liability and its default in all its year to year audited financial statements from 2015 till the latest available Balance Sheet for the financial year 2019-20; that the financials were duly filed by the respondent with the Registrar of Companies; that the Balance Sheet of F.Y. 2019-20 was duly approved by the Board of Directors and the date of signing of the said financial statement was 12.08.2020; the Balance Sheet of 2019-20 was made available to the public on 14.02.2021 and it was averred that the Section 7 application in view of the acknowledgement was filed on time. Reliance was also placed on the order dated 10.01.2022 of this Court in Suo Moto Writ Petition (C) No. 3 of 2020 in In Re ....
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....03/2017 Borrowings notes [Abstract] Details of borrowings [Abstract] Details of borrowings [LineItems] Borrowings 23,68,91,933 24,57,40,400 23,68,91,933 24,57,40,400 Nature of Security [Abstract] Nature of Security Secured by Pledge of 8,10,804 shares of Adhunik Metaliks Ltd. Secured by Pledge of 8,10,804 shares of Adhunik Metaliks Ltd. Secured by Pledge of 8,10,804 shares of Adhunik Metaliks Ltd. Secured by Pledge of 8,10,804 shares of Adhunik Metaliks Ltd. Details on Loans guaranteed [Abstract] Aggregate amount of loans guaranteed by directors 0 0 0 0 Aggregate amount of loans guaranteed by others 23,68,91,933 24,57,40,400 23,68,91,933 24,57,40,400 Details on defaults on borrowings [Abstract] Outstanding amount of continuing default principal 0 0 0 0 Outstanding amount of continuing default interest 0 0 0 0 The above table under the column - Secured borrowing....
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....ustments to profit (loss) [Abstract] Adjustments for depreciation and amortisation expense 6,45,289 6,80,044 Total adjustments to profit (loss) 6,45,289 6,80,044 Adjustments for working capital [Abstract] Adjustments for decrease (increase) in trade receivables 0 20,77,089 Adjustments for increase (decrease) in other current liabilities -38,02,634 (A) -11,60,73,898 Total adjustments for working capital -38,02,634 -11,39,96,809 Total adjustments for reconcile profit (loss) -31,57,345 -11,33,16,765 Net cash flows from (used in) operations -9,83,60,306 -11,62,51,762 Net cash flows from (used in) operating activities before extraordinary items -9,83,60,306 -11,62,51,762 Net cash flows from (used in) operating activities -9,83,60,306 -11,62,51,762 Cash flows from used in investing activities [Abstract] Cash payment for investment in partnership firm or association of persons or limited liability partnerships 0 -50,57,854 Cash advances and loans made to other parties 8,23,30,679 11,34,....
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....2018 and had also issued Recall facilities Notice to the CD on 10th August 2018. Hence, the Limitation period of 3 (three) years under the Limitation Act 1963 to initiate any action against the CD from 10th August 2018 has already been expired on 9th August 2021. Further, in terms of the order dated 10th January 2022, passed by the Hon'ble Supreme Court in Suo Moto Writ Petition (C) No: 3 of 2020, the limitation period of 90 days after 28.02.2022 also expired on 29th May 2022. Therefore, filing of the present Application at this belated stage for claiming a debt which is time barred is non est in law and is only arm twisting tactic to extort money. 23. Thus I deny each and every allegations made, in the said Application and not accepting any of the allegations made in contradiction of the aforesaid averments and documents submitted herein. There is no live claim of the Financial Creditor, as on date. I am denying any debts in favour of the Financial Creditor. 24. Further, I state that the limitation for filing of the present application must be considered from the date of default, i.e, 1st March 2018, which clearly makes the claim of FC hopelessly time barred and the same c....
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....and Mr. Ramji Srinivasan, learned Senior Counsel, for the respondent. We have also perused the records of the case. 18. Mr. Ritin Rai, learned Senior Advocate, after adverting to the facts and the documents submitted that there was a clear acknowledgment of the debt within the meaning of Section 18 of the Limitation Act in the Balance Sheet of F.Y. 2019-20. According to the learned Senior Counsel, even taking 12.08.2020, the date of signing of the financial statements of F.Y. 2019-20 as the commencement date, limitation was available in the ordinary course till 11.08.2023. According to the learned Senior Counsel, under the extension of limitation orders of this Court dated 10.01.2022, Para 5(1) would apply and the whole of the period from 15.03.2020 to 28.02.2022 would stand excluded. According to the learned Senior Counsel, in which case, time was available till 27.02.2025 to file the Section 7 application and the Section 7 application has been filed on 15.01.2024, well within time. The learned Senior Counsel relied on certain judgments of this Court in support of his propositions. 19. Mr. Ramji Srinivasan, learned Senior Counsel, submitted that in the Balance Sheet of F.Y. 2019....
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....Court in Suo Moto Writ Petition No. 3 of 2020 govern the situation? 22. It is now well settled in view of Section 238A of the IBC that the Limitation Act, 1963 shall, as far as may be, apply to the proceedings under the Code. It is also well settled that Article 137 of the first schedule to the Limitation Act providing a period of three years from the date when the right to apply accrues will govern the situation. [Dena Bank (Now Bank of Baroda) v. C. Shivakumar Reddy and Anr., (2021) 10 SCC 330 following Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India) Ltd. and Anr., (2019) 10 SCC 572, B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates, (2019) 11 SCC 633, and Jignesh Shah and Anr. v. Union of India and Anr., (2019) 10 SCC 750]. 23. In this case, it is not disputed that the account of the respondent was declared as a non-performing asset on 01.03.2018. However, the appellant is relying on the entries adverted to hereinabove in the Balance Sheet of F.Y. 2019-20 signed by the Directors on 12.08.2020. Does the entry adverted to hereinabove in the Balance Sheet of F.Y. 2019-20 constitute an acknowledgment of debt, as contemplated under Section 18 of the Limit....
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.... plea of acknowledgment 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 acknowledgment 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 be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally courts lean in favour of a liberal construction of such statements though it does not ....
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....l document. In this letter Respondent 2 had told Respondent 1 that the Chandni Bazar property was being sold the next morning at the Registrar's sale on behalf of the first mortgagee and that the matter was urgent, otherwise the property would be sacrificed. It appears that the said property was subject to the first prior mortgage and Respondent 2 appealed to Respondent 1 to save the said threatened sale at the instance of the prior mortgagee. It is common ground that Respondent 1 paid to Respondent 2 Rs 2500 on 27-11-1931, and the threatened sale was avoided. This fact is relevant in construing the subsequent letter. 13. The said property was again advertised for sale on 11-3- 1932, and it was about this sale that the letter in question came to be written by Respondent 2 to Respondent 1 on March 1932. This is how the letter reads: "My dear Durga prosad, Chandni Bazar is again advertised for sale on Friday the 11th instant. I am afraid it will go very cheap. I had a private offer of Rs 2,75,000 a few days ago but as soon as they heard it was advertised by the Registrar they withdrew. As you are interested why do not you take up the whole. There is only about 70,000 due to....
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....ttorney-General but we see no reason to differ from the conclusion reached by the court of appeal below that this letter amounts to an acknowledgment. The tenor of the letter shows that it is addressed by Respondent 2 as mortgagor to Respondent 1 as puisne mortgagee, it reminds him of his interest as such mortgagee in the property which would be put up for sale by the first mortgagee, and appeals to him to assist the avoidance of sale, and thus acquire the whole of the mortgagee's interest. It is common ground that no other relationship existed between the parties at the date of this letter, and the only subsisting relationship was that of mortgagee and mortgagor. This letter acknowledges the existence of the said jural relationship and amounts to a clear acknowledgment under Section 19 of the Limitation Act. It is conceded that if this letter is held to be an acknowledgment there can be no other challenge against the decree under appeal. (Emphasis supplied) 29. What is significant about this judgment is that this Court construed the primary document of 05.03.1932 in the context of an earlier letter of 26.11.1931 and thereby considered the surrounding circumstances and consi....
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....ement of account enclosed therewith were merely explanatory and did not amount to an admission of the jural relationship of debtor and creditor and of the liability to pay the amount found due at the foot of the account on finalisation." ( Emphasis supplied ) 31. Thereafter, the other objections with regard to the conditional nature of the offer and the authority of Mr. Subramanyam to make the acknowledgements were examined and it was ruled in favor of the appellant. The letter of 16.04.1946 was held to be an acknowledgement. The appeals of the appellants were allowed and the matter remitted to the High Court to examine the other questions. 32. The facts of the above two precedents are relevant only to repel an express argument raised by the respondent herein that the Balance Sheet of F.Y. 2019-20 has to be read as a standalone document and the other documents cannot be looked at to construe the said document. 33. It was not disputed before us that entries in Balance Sheets could constitute a valid acknowledgement and in fact it could not have been disputed, in view of the categoric pronouncement of this Court in Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal and Anot....
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....rlier judgments in Laxmi Pat Surana v. Union Bank of India, (2021) 8 SCC 481, Dena Bank (now Bank of Baroda) v. C. Shivakumar Reddy and Anr., (2021) 10 SCC 330, and Rajendra Narottamdas Sheth and Anr. v. Chandra Prakash Jain and Anr., (2022) 5 SCC 600 to reiterate that Section 18 of the Limitation Act dealing with acknowledgment of debt applies to proceedings under the IBC in view of Section 238A. 35. Thereafter, this Court, on facts, recorded the following findings: - "10. Having considered the specific facts and circumstances of this case, the Adjudicating Authority as well as the National Company Law Appellate Tribunal have concurrently held that the entries in the balance-sheets amount to clear acknowledgment of debt. We agree with the findings. Further, note 3.4 appended to said balance-sheet entry dated March 31, 2017 mentions that "company has made certain defaults in the repayment of term loans and interest." It further mentions of a continuing default. The entry also mentions long-term borrowings. The conclusions of the National Company Law Tribunal and National Company Law Appellate Tribunal that there is acknowledgment of debt are unimpeachable. 10.1. Following the ....
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....cknowledgment as in construing wills, for instance, it is not very useful to refer to judicial decisions on the point. The effect of the words used in a particular document must inevitably depend upon the context in which the words are used and would always be conditioned by the tenor of the said document, and so unless words used in a given document are identical with words used in a document judicially considered it would not serve any useful purpose to refer to judicial precedents in the matter......." (Emphasis supplied) 39. Having said that, the legal principles as to what constitutes a valid acknowledgment as laid down in the precedents, have to be rigorously applied. It should also not be forgotten that this Court in Khan Bahadur Shapoor (supra) has held that surrounding circumstances could be considered and that a liberal construction should be favoured, though the process of reasoning should not be involved or far-fetched. This Court in Khan Bahadur Shapoor (supra) had considered the general tenor and context of the document. Further, as noticed in Lakshmirattan Cotton Mills (supra), the previous correspondence and the surrounding circumstances were also taken into cons....
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....om the balance sheets of F.Y. 2015-16, 2016-17 & 2017-18 clearly points to the fact that the entry in the balance sheet of F.Y. 2019-20 constitutes a valid acknowledgement and pertains to the same borrowing as was reflected in the balance sheet of F.Y. 2015-16, 2016-17 & 2017-18. ii) Under the Indian Accounting Standards (Ind AS) 7, a cash flow statement is appended to the financial statement. The cash flow statement indicates that in F.Y. 2018-19 there was proceeds from borrowings of Rs.72,30,902/- and added to Rs.23,68,91,933/-, a figure of Rs.24,41,22,835/- is arrived at. iii) More importantly, in the cash flow statement it was indicated that no part of cash flow proceeds was utilised in the repayment of existing borrowings under the financial activities since the amount under the head "cash flows from (used in) financial activities" is nil. This clearly indicates that the debt remained unpaid even in 2019-20. 42. In addition to the above, it is significant to note that in this case in the reply filed to the Section 7 application, apart from a general objection as to the application being barred by limitation only a bare denial was made in the following terms:- "(sic) den....