The balance sheet can constitute a valid acknowledgment of debt under Section 18 of the Limitation Act, even without explicitly mentioning the creditor's name, provided it reveals a jural relationship and acknowledges subsisting liability.

JUDGMENT :

K.V. Viswanathan, J.

1. The short question that arises for consideration is whether the National Company Law Appellate Tribunal (for short ‘NCLAT’) and the National Company Law Tribunal (for short ‘NCLT’) were justified in dismissing the Section 7 application filed by the appellant against the respondent under the Insolvency and Bankruptcy Code, 2016 (for short ‘IBC’), on the ground that the same was being barred by limitation.

BRIEF FACTS: -

2. According to the appellant, on 27.02.2015, a Loan Agreement was entered into between the appellant and the respondent for a term loan facility of Rs. 30 crores. The loan was secured, inter alia, by way of a pledge of 8,10,804 shares of Adhunik Metaliks Ltd. in favour of the appellant by virtue of a Pledge Agreement dated 27.02.2015.

3. On 01.03.2018, the account of the respondent was admittedly declared as a Non-Performing Asset (NPA) as the 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 : Cognizance for Extension of Limitation (read with earlier orders dated 23.03.2020, 08.03.2021 and 27.04.2021). It was contended that the period between 15.03.2020 till 28.02.2022 ought to be excluded.

5. In short, the stand of the appellant was that if 12.08.2020, the date on which the Balance Sheet of 2019-20 was signed, is taken as the date of acknowledgment (which was within the 3 years from 01.03.2018) limitation would expire only on 11.08.2023. However, in view of the benefit of the extension orders passed by this Court on 10.01.2022, the entire period up to 28.02.2022 ought to be excluded and if that were so limitation was available till 27.02.2025. Hence, the Section 7 application filed on 15.01.2024 was well within time.

6. It will be necessary to advert to the Balance Sheet as annexed for the years 2015-16, 2016-17, 2017-18 and 2019-20. The entire case revolves around the question as to whether at all there was a valid acknowledgment of the debt under Section 18 of the LIMITATION ACT 1963, in view of the entries in the Balance Sheet of F.Y. 2019-20.

7. In the Balance Sheet of 2015-16 under the head “Textual Information (14) -