TaxTMI 
TaxTMI 
2026 (3) TMI 110
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....ncipal Bench, New Delhi admitting Section 7 application filed by the IDBI Bank Limited, the Respondent No.1 herein. 2. Brief facts of the case necessary to be noticed for deciding the Appeal are:- 2.1. M/s. HIL (India) Limited (Hindustan Insecticides Limited) is a Government of India enterprises having 100% shareholding with the President of India under the Department of Chemicals & Petrochemicals, Ministry of Chemicals & Fertilizers, Government of India. The Corporate Debtor was incorporate in March 1954. Southern Pesticides Corporation Limited (SPCL) is a subsidiary Company of the Corporate Debtor. IDBI has approved a term loan amounting to Rs. 280 Lakhs for SPCL in the year 1983. SPCL availed a foreign currency loan facility of Rs. 40 Lakh and entered into second loan agreement. There were third loan agreement entered with IDBI and SPCL to secure the repayment of loan amount of IDBI. M/s. HIL (India) Limited executed a Deed of Guarantee dated 21.11.1988 undertaking the repayment of loan taken by SPCL. On account of default by SPCL, the loan account was classified as NPA. The IDBI invoked the guarantee vide letter dated 01.07.1994. Pursuant to default committed by principal....
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....ppeal that "till the next date IRP not to take any further steps in pursuance of the impugned order". On various dates, this Tribunal noticed the submissions of the Counsel for the parties that Appellant has submitted a proposal for settlement before the IDBI Bank. Intervention Applications were also filed. On 17.11.2025, statement of counsel for the Bank has been recorded that settlement offer submitted by the Appellant has been accepted. On 17.11.2025, following order was passed by this Tribunal:- "17.11.2025: Learned counsel for the Bank submits that settlement offer by the Appellant has been accepted and communication has been issued. Learned counsel for the Appellant submits that Appeal be taken up after four weeks to bring relevant material on record for praying for further course of action in the matter. As prayed, list this appeal on 19.12.2025. Learned counsel for the another Operational Creditor - ATO India seeks liberty to file an Intervention Application, which may be done within a week. Interim order to continue." 2.3. IA No.5502 of 2025 has been filed by 'M/s. Associated Road Carriers Ltd.' seeking intervention claiming to be Ope....
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....d to the claim of interveners who has filed application in this Appeal, it is submitted that the interveners are free to take their remedies in accordance with law. 5. Learned Counsel appearing for the IDBI Bank does not dispute that settlement has been entered with the Corporate Debtor by the IDBI bank and the amount has already been received by the IDBI Bank. Learned Counsel for the IDBI Bank, however, refuted the submission of the Counsel for the Appellant that the application filed by the IDBI Bank was barred by time. It is submitted that the acknowledgment in the balance sheets for the F.Y. 2019- 2020, 2020-2021 and 2021-2022 reflects counter guarantee provided by the Corporate Debtor in favour of the borrower which is clear acknowledgment within the meaning of Section 18 of the Limitation Act. There being acknowledgment within the period of three years from 26.07.2018, bank shall have fresh period of limitation from the date of acknowledgment thus, on 13.06.2024 when the application was filed it was not barred by time. Learned Counsel for the Respondent further relying on letters dated 18.04.2022 and 02.06.2022 issued by the Corporate Debtor offering to accept the settleme....
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....ed for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings. II. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. III. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply. IV. It is further clarified that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under Sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone d....
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....o 27.04.2011) 497.57 506.20 Penal Interest on Govt. Loan @2.75% 690.59 578.27 Commitments a) Estimated amounts of contracts remaining to be executed on the capital account and not provided for 37.90 105.64 b) Bank Guarantees and Letter of Credit 2,837.79 2,924.38 c) Others 261.71 274.51 TOTAL (A+B) 5,777.49 5,840.93 (b) Company had provided a counter guarantee of Rs. 2,265.00 lakhs in favour of Southern Pesticides Corporation Limited, earlier subsidiary of the company, which got liquidated vide Hon'ble High Court of Andhra Pradesh order dated 2nd April, 2002. As on 31st March 2021 the counter guarantee has no validity. However, if counter guarantee is invoked by Financial Institutions, Govt. of India will provide support, as approved by Cabinet Committee on Economic Affairs (CCEA) on 27th July, 2006." 13. The above note clearly indicate that the bank guarantee and letter of credit are admitted and the counter guarantee given in favour of the SPCL have been specifically mentioned and as noted in (b). There are similar acknowl....
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....on the subject of acknowledgment is well settled. Entries in the balance sheet have also held to be acknowledgment within the meaning of Section 18 of the Limitation Act subject to certain caveat. The Hon'ble Supreme Court in a recent judgment "IL and FS Financial Services Ltd. vs. Adhunik Meghalaya Steels P. Ltd.- 2025 SCC OnLine SC 1567" after taking note of earlier judgment of the Hon'ble Supreme Court has clarified the law. In the case before the Hon'ble Supreme Court, the question arose as to whether in the balance sheet for the F.Y. 2019-2020 there was acknowledgment within the meaning of Section 18 of the Limitation Act so as to extend the limitation for filing an application under Section 7. In the above case, date of default was 01.03.2018. Balance sheet for F.Y. 2019-2020 was signed on 12.08.2020. Section 7 application was filed on 15.01.2024. The Hon'ble Supreme Court had occasion to consider the extension by virtue of Suo Moto Order of the Hon'ble Supreme Court in Writ Petition (C) No. 03 of 2020 as well as acknowledgment under the balance sheet. In paragraph 21 of the judgment, the Hon'ble Supreme Court has noted the question for consideration which is as follows:- ....
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....on 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 mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or farfetched process of reasoning. Broadly stated that is the effect of the relevant provisions contained in section 19, and there is really no substantial difference between the parties as to the true legal position in this matter." (emphasis supplied) 27. It will be clear from the above passage that an acknowledgment of debt merely renews the debt and does not create a new right of action. It is further ....
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....sts. paragraph 35 of Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal [(2021) 14 Comp Cas-OL 445 (SC); (2021) 6 SCC 366; (2021) 3 SCC (Cri) 23; (2021) 3 SCC (Civ) 605; 2021 SCC OnLine SC 321.] reads as under [ See page 479 of 14 Comp Cas-OL.] : "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 acknowledgments made in the books of account including the balance-sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills Co. (in liquidation) v. Ismail Golam Hossain Ariff [1961 SCC OnLine Cal 128; AIR 1962 Cal 115.], that there is a compulsion in law to prepare a balance-sheet but no compulsion to make any particular admission, is correct in law as it would depend on the facts of each case as to whether an entry made in a balance....
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....rounding circumstances were also taken into consideration. In Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal [(2021) 14 Comp Cas-OL 445 (SC); (2021) 6 SCC 366; (2021) 3 SCC (Cri) 23; (2021) 3 SCC (Civ) 605; 2021 SCC OnLine SC 321.], this court held that a case-to-case examination will be made with regard to entries made in balance-sheets to decide the question of acknowledgment. In Dena Bank (now Bank of Baroda) v. C. Shivakumar Reddy [(2021) 15 Comp Cas-OL 558 (SC); (2021) 10 SCC 330; 2021 SCC OnLine SC 543.], this court held that in relation to proceedings under the Insolvency and Bankruptcy Code, 2016, section 18 of the Limitation Act, cannot be construed with pedantic rigidity. In Vidyasagar Prasad v. UCO Bank [(2024) 251 Comp Cas 636 (SC); 2024 SCC OnLine SC 2993.], this court affirmed the finding of the National Company Law Appellate Tribunal in that case wherein the National Company Law Appellate Tribunal had held that the company's balance-sheet is prepared in the statutory format as per schedule 3 of the Companies Act, which did not provide for giving the specific name of every secured or unsecured creditor." 19. In paragraph 41 applying the ratio of the ab....
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....ng the periods prescribed under sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of section 138 of the Negotiable Instruments Act, 1881and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or Tribunal can condone delay) and termination of proceedings." 46. We have no manner of doubt that sub-paragraph (I) of paragraph 5 of the order of this court dated January 10, 2022 would apply and the entire period from March 15, 2020 to February 28, 2022 would stand excluded, which would mean that the limitation would, reckoning the acknowledgment of August 12, 2020, commence on March 1, 2022 and continue till February 28, 2025. Since the application has been filed on January 15, 2024 the same is within time. Limitation, in view of the acknowledgment as found above, having commenced only on August 12, 2020, the question of limitation expiring between March 15, 2022 and February 28, 2022 cannot arise. Hence, paragraph 5(III) of the order of this court dated January 10, 2022, has no application to the facts of this case. ....
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....f each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgment of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act." 22. Another judgment relied by the Counsel for the Appellant is "SBI v. Krishidhan Seeds (P) Ltd., (2023) 1 SCC 209" where Hon'ble Supreme Court in paragraph 11 held that an acknowledgment in the balance sheet without qualification can be relied upon for the purpose of the proceedings under the IBC. In paragraph 11, following was laid down:- "11. An acknowledgment in a balance sheet without a qualification can be relied upon for the purpose of the proceedings under the IBC. This principle also emerges from the decision in Asset Reconstruction Co. [Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal, (2021) 6 SCC 366 : (2021) 3 SCC (Civ) 605 : (2021) 3 SCC (Cri) 23], which noted the decisions in Sesh Nath Singh [Sesh Nath Singh v. Baidyabati Sheoraphuli Coop. Bank Ltd., (2021) 7 SCC 313 : (2021) 4 SCC (Civ) 113] and Laxmi Pat Suran....
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....case laid down following:- "In terms of the aforestated provision, there must be an 'acknowledgment of liability in respect of the property or right in question' and even if such an acknowledgment is accompanied by refusal to pay, it would mean that the period of limitation would have to be computed from the time when such acknowledgment is signed. In the case on hand, the respondent never acknowledged the sum claimed by the appellant in its notice dated 14.03.1992. On the other hand, the respondent clearly asserted that the contract value was much lesser, being just 1,55, 223/- (Rupees one lakh fifty five thousand two hundred twenty three only), and went on to state that only a sum of 27,874.10 (Rupees twenty seven thousand eight hundred seventy four and ten paisa only) was due and payable by it. In effect, there was never an acknowledgment of the total suit claim of Rs.3,07,115.85 (Rupees three lakhs seven thousand one hundred fifteen and eighty five paisa only), whereby the appellant could avail the benefit of extended period of limitation for the entire amount claimed. Learned counsel for the appellant placed reliance on the judgment of this C....
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....for settling the matter as per clause No. IV of letter No. 52/3/2005-CH.III dated Aug.4th, 2006(copy enclosed) Ministry will provide support to HIL, in case corporate guarantee furnished by HIL are invoked by Financial Institutions who have lent funds to SPEC which had gone into liquidation. As you are also aware that due to the COVID-19 pandemic situations, all matter dealt by Govt or Statutory Bodies are badly effected and the above mentioned case is also one of them. Now some positive response are coming from Administrative Ministry for settlement of offer as proposed by you. As per your settlement offer, an amount of Rs. 30,90,143.28 can be paid upto 31.03.2021 and after that Rs. 32,52,782.40 is payable You are, therefore, requested to consider our request favourably and inform the settlement amount. Thanking you, Yours faithfully. (SP Mohanty) Chairman & Managing Director Enclo: as above" 27. The above letter was clear acknowledgment. The submission which has been made by Counsel for the Appellant is that the said acknowledgment was after three years from expiry of limitation which limitation in the present case....