Acknowledgment of debt in a balance sheet must indicate a jural relationship and is effective from the date of signing, not filing, to extend the limitation period.

JUDGMENT

(Hybrid Mode)

Per: Barun Mitra, Member (Technical)

The present appeal filed under Section 61 of Insolvency and Bankruptcy Code 2016 (‘IBC’ in short) by the Appellant arises out of the Order dated 16.05.2024 (hereinafter referred to as ‘Impugned Order’) passed by the Adjudicating Authority (National Company Law Tribunal, Guwahati Bench) in C.P.(IB) No.02/GB/2024. By the impugned order, the Adjudicating Authority has dismissed Section 7 application filed by the Financial Creditor-Appellant on the grounds of being time-barred. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant- IL&FS Financial Services Limited.

2. Coming to the brief factual matrix, we notice that a Loan Agreement had been executed between the IL&FS Financial Services Ltd.-Financial Creditor and the Adhunik Meghalaya Steels Pvt. Ltd.-Corporate Debtor on 27.02.2015 for a loan of Rs 30 Cr. against which an amount of Rs 24.44 Cr. was disbursed on 17.03.2015. This loan was also secured by way of pledge of 8,10,804 shares of Adhunik Metals Ltd. (“Adhunik” in short) in favour of the Financial Creditor. This pledge of share was reflected both in the Charge Form and in the Pledge Agreement. Since the Corporate Debtor failed to repay the outstanding debt in terms of the loan facility documents, the Financial Creditor declared the account of the Corporate Debtor as NPA on 01.03.2018. Subsequently, on 10.07.2018, the Financial Creditor issued a notice of default to the Corporate Debtor and followed it up with a Recall Notice on 10.08.2018. Since the Corporate Debtor did not make good the debt liability, the Financial Creditor filed a Section 7 application on 15.01.2024 for a claim amount of Rs 55.45 Cr. The Section 7 application was rejected by the Adjudicating Authority on the grounds of being time-barred and assailing the impugned order, the Appellant-Financial Creditor has come up in appeal.

3. We have heard Shri Krishnendu Dutta, Ld. Senior Advocate for Appellant and Shri Ramji Srinivasan, Ld. Senior Advocate representing Respondent.

4. Making his submissions, Shri Krishnendu Dutta, the Ld. Sr. Counsel for the Appellant-Financial Creditor submitted that the Adjudicating Authority has erroneously held that the Section 7 application had been filed beyond the permissible period of limitation of three years. It is submitted that though the Account of the Corporate Debtor had been declared NPA on 01.03.2018, however, as the Corporate Debtor continued to acknowledge their debt liability in their Balance sheets even after the date of default, the period of limitation continued to be extended in terms of Section 18 of the Limitation Act . It was added that the Balance sheet of the Corporate Debtor for FY 2019-20 clearly recorded an amount of Rs 24.41 Cr. under “secured borrowings” which was a clear acknowledgement of liability. Reliance was placed on the judgement of the Hon’ble Supreme Court in Vidya Sagar Vs UCO Bank 2024 SCC OnLine SC 2993 wherein it held that an acknowledgment of debt in a balance sheet constitutes an acknowledgement of liability even if it does not specify the exact nature of the liability or a name of particular creditor. Further attention was adverted to the ratio contained in L.C. Mills v. Aluminium Corpn. of India Ltd. (1971) 1 SCC 67 wherein it held that the statement on which the plea of acknowledgment is founded must relate to a subsisting liability and indicate the existence of jural relationship between the parties though the statement need not indicate the exact nature or the specific character of the liability.

5. Submission was further pressed that the Adjudicating Authority wrongly calculated the extension of limitation from the date of signing of the Balance sheet by the Corporate Debtor i.e. from 12.08.2020 instead of calculating it from the date it was uploaded on the MCA website i.e. on 14.02.2021. It was asserted that the filing of Balance sheet with RoC serves as the formal acknowledgment of debt