| Headnote |
Insolvency and Bankruptcy Code, 2016 – s.7 – Some original lenders of the corporate debtor, assigned the debts owed to them by the corporate debtor to the appellant – Appellant took actual physical possession of project assets of the corporate debtor under the SARFAESI Act and filed application u/s.7 of IBC before the National Company Law Tribunal (NCLT) for default from the corporate debtor – As the relevant form indicating the date of default did not indicate any such date, this was subsequently made up by the appellant 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, acknowledged periodically the debt that was due – NCLT admitted the s.7 application, observing that balance sheets of the corporate debtor, wherein it acknowledged its liability, were signed before expiry of three years from the date of default, and entries in such balance sheets being acknowledgements of the debt due for purposes of s.18 of the Limitation Act, the s.7 application was not barred by limitation – Whether entries in balance sheets of a corporate debtor would amount to acknowledgement of debt for purpose of extending limitation u/s.18 of the Limitation Act – Held: An entry made in the books of accounts, including the balance sheet, can amount to an acknowledgement of liability within the meaning of s.18 of the Limitation Act – Though the filing of a balance sheet is by compulsion of law, the acknowledgement of a debt is not necessarily so – Provisions of the Companies Act show that 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 s.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 – Thus, there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, as it would depend on the facts of 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 acknowledgement of liability has, in fact, been made, thereby extending limitation u/s.18 of the Limitation Act – Limitation Act, 1963 – s.18 – Companies Act, 2013 – ss.2(40), 90, 128, 129, 134 and 137 – Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002. Insolvency and Bankruptcy Code, 2016 – s.238A – Whether s.18 of the Limitation Act, which extends the period of limitation depending upon an acknowledgement of debt made in writing and signed by the corporate debtor, is also applicable under s.238A, given the expression “as far as may be” governing the applicability of the Limitation Act to the IBC – Held: The aforesaid question is no longer res integra as two recent judgments of this Court have applied the provisions of s.14 and s.18 of the Limitation Act to the IBC – Limitation Act, 1963 – s.18. Limitation Act, 1963 – s.9 – Principle of s.9 of the Limitation Act is to be strictly adhered to, namely, that when time begins to run, it cannot be halted, except by a process known to law. Precedents – Binding precedent – Rule of stare decisis – Every argumentative novelty does not undo a settled position of law – Constitution of India – Art. 141. |
