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Entries admitting debt in books of accounts or balance sheets unequivocally amount to acknowledgement under Section 18 of Limitation Act, restarting 3-year limitation from acknowledgement date, as affirmed across NCLT/NCLAT/SC precedents (e.g., Bishal Jaiswal); caveat: must be signed, prior to expiry, and imply liability without dispute ["Vidyasagar Prasad VS UCO Bank - 2024 0 Supreme(SC) 963"] ["ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED VS BISHAL JAISWAL - 2021 3 Supreme 569"] ["IL & FS Financial Services Limited VS Adhunik Meghalaya Steels Private Limited - Supreme Court"] ["State Bank of India VS Ramesh Chand Garg - National Company Law Tribunal"] ["B. Prashanth Hegde VS State Bank of India - Supreme Court"]. Thus, query affirmed: debt admission in books extends limitation ["Sudarshan Cargo Private Limited, Bangalore VS Techvac Engineering Private Limited, Mysore - Karnataka"] ["JKM Infrastructure Pvt. Ltd VS Cadillac Infotech Pvt. Ltd. - National Company Law Appellate Tribunal"].
In the complex world of debt recovery and commercial disputes, time is of the essence. Creditors often wonder: if debt is admitted in books of account, does the same amount to acknowledgement and admission, thereby extending the limitation period? This question frequently arises in suits for recovery, winding-up petitions, and insolvency proceedings. Under Indian law, particularly Section 18 of the Limitation Act, 1963, such admissions can indeed reset the clock—but only under specific conditions.
This post explores the legal principles, landmark cases, and practical nuances to help businesses and individuals navigate this area. Note: This is general information based on precedents and should not be taken as specific legal advice. Consult a qualified lawyer for your situation.
Section 18 of the Limitation Act, 1963, provides that an acknowledgement of liability in writing, signed by the party against whom the right is claimed, made before the expiry of the limitation period, creates a fresh period of limitation from the date of acknowledgement. Importantly, it must be clear, unequivocal, and relate to a subsisting liability. ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED VS BISHAL JAISWAL - 2021 3 Supreme 569
Admissions in books of account, especially company balance sheets, are often treated as such acknowledgements. For companies, balance sheet entries showing debts as liabilities to creditors typically qualify as signed writings (by directors), extending limitation—provided the debt isn't written off to profit/loss accounts. ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED VS BISHAL JAISWAL - 2021 3 Supreme 569Vidyasagar Prasad VS UCO Bank - 2024 0 Supreme(SC) 963
Key requirements:- In writing and signed: Balance sheets under the Companies Act fulfill this.- Unequivocal: No caveats or disputes noted by auditors.- Before limitation expires: Starts a new 3-year period (or applicable timeline).- Implies jural relationship: Indicates the debt is due and payable. Prabhakaran VS M. Azhagiripillai (Dead) by Lrs. - 2006 3 Supreme 245
Courts have consistently held that balance sheet entries constitute acknowledgements. In CIT-III v. Shri Vardhman Overseas Ltd., the Delhi High Court ruled: The assessee being a limited company, this amounted to acknowledging the debts in favour of the creditors... a statement in a balance sheet of a company presented to a creditor-share holder of the company and duly signed by the directors constitutes an acknowledgement of the debt. ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED VS BISHAL JAISWAL - 2021 3 Supreme 569
The Supreme Court in Mahabir Cold Storage v. CIT affirmed: The entries in the books of accounts of the appellant would amount to an acknowledgement of the liability... and extend the period of limitation for the discharge of the liability as debt. ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED VS BISHAL JAISWAL - 2021 3 Supreme 569
This principle extends to modern contexts like the Insolvency and Bankruptcy Code (IBC). In UCO Bank v. Official Liquidator, the Supreme Court upheld: the entries in the balance sheets amount to clear acknowledgment of debt... Note 3.4 appended to said balance sheet entry dated 31.03.2017 mentions that 'company has made certain defaults in the repayment of term loans and interest.' Vidyasagar Prasad VS UCO Bank - 2024 0 Supreme(SC) 963
Citing Bishal Jaiswal, it noted: 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. Vidyasagar Prasad VS UCO Bank - 2024 0 Supreme(SC) 963
Similar views in Shahi Exports Pvt. Ltd. v. CMD Buildtech Pvt. Ltd.: an entry made in the company’s balance sheet amounts to an acknowledgement of the debt and has the effect of extending the period of limitation under section 18. ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED VS BISHAL JAISWAL - 2021 3 Supreme 569
Under the Negotiable Instruments Act, balance sheets showing loans as 'deposits from friends' can extend limitation: If the amount borrowed... is shown in the balance sheet, it may amount to acknowledgement. A. V. Murthy VS B. S. Nagabasavanna - 2002 1 Supreme 517
Additional precedents reinforce this. In a winding-up case, the court held: admission of a debt either in a balance sheet or in the form of a letter duly signed by the respondent, would amount to an acknowledgement, extending the period of limitation. Usha Jain VS Aditya Landcon Private Limited - 2017 Supreme(Del) 3837 Similarly: acknowledgement of liability in the balance sheet extends the period of limitation. Fresh Coconut Products Ltd. VS Kerala State Industrial Development Corporation Ltd. - 2016 Supreme(Ker) 822
Beyond balance sheets, entries in trading books or ledgers qualify if confirmed by signed statements from authorized persons. In one arbitration dispute, signed statements of accounts admitting balances due implied a jural relationship, extending limitation. Lakshmirattan Cotton Mills Company LTD. VS Aluminium Corporation Of India LTD. - 1970 0 Supreme(SC) 434H. H. Maharajadhiraja Madhav Rao Jivaji Rao Scindia Bahadur Of Gwalior H. H. Maharajadhiraja Maharana Bhagwat Singhji Bahadur Of Udaipur Col. H. H. Brarbans Saramaur Raja-i-rajagan Sir Pratap Singh Malvendra Bahadur Col. Raja Surinder Singh Bahadur O VS Union Of India - 1970 0 Supreme(SC) 495
Ledger accounts and letters also work, as in National Seeds Corporation Ltd. vs. National Agro Seeds: acknowledgements in ledger accounts and letters extended limitation, rejecting contingency on subsidies. National Seeds Corporation Limited VS National Agro Seeds Corporation (india) - 2022 Supreme(Del) 873
Handwritten notes from books, if accepted, are admissible under Evidence Act Sections 58/145 for limitation purposes. Gannmani Anasuya VS Parvatini Amarendra Chowdhary. - 2007 5 Supreme 357
Not every entry suffices. Courts scrutinize carefully:- Mere entries without acceptance: mere entries in the bank’s books of account... are not sufficient... except where person concerned accepts correctness of entries. Chandradhar Goswami VS Gauhati Bank LTD. - 1966 0 Supreme(SC) 277- Lack of authority or clarity: Consent orders or unsigned copies don't count. Must be signed by the party or authorized agent. Rajan Products VS Jayant Vegoiles & Chemicals Pvt. Ltd - 1990 0 Supreme(Bom) 44- Equivocal entries: Auditor notes disputing or non-subsisting liabilities fail—case-by-case. Vidyasagar Prasad VS UCO Bank - 2024 0 Supreme(SC) 963- No part payment or writing alone: Limitation extends only via Section 18 writing or Section 19 payment; demand notices don't. NATIONAL MINORITIES DEVELOPMENT AND FINANCE CORPORATION VS BHAGAT SINGH ORGANIZATION FOR AWAKENING AND RURAL DEVELOPMENT (THR ITS PRESIDENT) - 2016 Supreme(Del) 3002
In banking cases, executed acknowledgements reset limitation: An acknowledgement of debt need not be express, but it may be by necessary implication. Canara Bank Branch Office, Kayamkulam, Kayamkulam. P.O. Vs Sreekumari K. W/o. Anil Kumar S. - 2025 Supreme(Ker) 652
For creditors:- Preserve signed balance sheets/books showing debts (no P&L transfer).- Pair with one-time settlement (OTS) letters or notes admitting defaults.- In suits (recovery, IBC S.7, NI S.138, winding-up), plead specific entries/dates.
For debtors:- Challenge via evidence of disputes/caveats.- Ensure debts are written off properly.
Courts apply these liberally but factually, inferring intent from circumstances—no oral evidence needed if implied.
Understanding these can save or sink a claim. Stay vigilant with financial records. For tailored advice, reach out to legal experts.
References include core cases like ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED VS BISHAL JAISWAL - 2021 3 Supreme 569, Vidyasagar Prasad VS UCO Bank - 2024 0 Supreme(SC) 963, A. V. Murthy VS B. S. Nagabasavanna - 2002 1 Supreme 517, and others cited inline.
#LimitationAct #DebtAcknowledgement #IndianLaw
Further, the said Letter is not “without prejudice” basis and, therefore, amounts to an unequivocal acknowledgement of liability of the Corporate Debtor. ... Bishal Jaiswal (supra), it is settled that entries in books of accounts and/or balance sheets of a Corporate Debtor would amount to an acknowledgement under Section 18. ... Further, the said Letter is not “without prejudice” basis and, therefore, amounts to an unequivocal acknowledgement of liability of the Corporate Debtor. ... b....
With regard to the plea of limitation, it was found that a clear admission in Ex.P11 email which was fully extracted in the judgment under appeal, the plea could not be sustained. 9. ... Section 18 of the Limitation Act, 1963 reads as follows:- "18. Effect of acknowledgement in writing. ... By Ex.P10 - a letter of the appellant dated 19.11.2010 admitted the liability to pay amounts to the plaintiff. However, without specifying the amount. Ex.P5 is a Measurement Book, signed by the app....
would constitute a valid and legal acknowledgement of debt though not signed as required under Section 18 of the Limitation Act?" ... Per contra, learned Counsel for petitioner submits that respondent has never disputed the liability and having admitted that amounts are due by it to petitioner through e-mails, it cannot now contend contrary to its own admission. ... paid the admitted outstanding amount it would clearly indicate that respondent is unable to pay its #HL....
According to the NCLAT, limitation would have extended in view of the order of this Court dated 10.01.2022. According to the NCLAT, limitation would stand extended under Para 5(III) up to 30.05.2022. ... This date was within the subsisting period of limitation for the reason that taking 01.03.2018 as the commencement of limitation, limitation ordinarily would have continued till 28.02.2021. Since an acknowledgment came into effect on 12.08.2020, limitation#H....
On 24.09.2007, she admitted the liability and executed an acknowledgement of debt, and again on 24.07.2010, she executed another acknowledgement of debt in favour of the plaintiff bank. ... The normal way of proof of acknowledgement of debt is by producing the same before the court, through an authorized officer. An acknowledgement of debt need not be express, but it may be by necessary implication. Every acknowledgement#H....
The suit is, therefore, clearly barred by limitation, says the learned Advocate for the defendants and the limitation which has already expired, cannot be extended. ... This payment is made by the defendants on behalf of the plaintiffs to the tax authorities for the amounts held in the credit of the plaintiffs in the books of accounts of the defendants. According to Shri Kadam, the limitation would run from 24-4-1995 or from the date of the payment i.e. 31-3-1995. ... ... In the case....
Thereafter, could have been extended only after acknowledgement of liability by the personal guarantor. 15. ... Therefore, the principal borrower has extended the period of limitation to 04.11.2017. 19. ... Thus, it cannot have said to have been acknowledged by the respondent and does not qualifies to act as evidence adequate enough for being an acknowledgement of debt. There is no acknowledgement of debt from the corporate debtor or respondent. ... ....
It is hardly necessary to cite authorities in support of the well-established position that an entry made in the company's balance sheet amounts to an acknowledgement of the debt and has the effect of extending the period of limitation under section 18 of the Limitation Act, 1963. ... Admittedly, on facts, there has never been a pleading before either the NCLT or the NCLAT that an acknowledgement of liability contained in any of the balance sheets extended l....
The application of the said provision cannot be extended to the filing of the claims before the RP. It is submitted that the law of limitation merely extinguishes the remedy and not the right to recover the debt. ... Hence, the Section 7 application filed by Phoenix ARC on basis of same debt having been held to be time barred, the same debt could not have been admitted in the CIRP of the Corporate Debtor in view of the legal principle laid down in Ome Prakash Verma (Supra) on ground of....
The application of the said provision cannot be extended to the filing of the claims before the RP. It is submitted that the law of limitation merely extinguishes the remedy and not the right to recover the debt. ... Hence, the Section 7 application filed by Phoenix ARC on basis of same debt having been held to be time barred, the same debt could not have been admitted in the CIRP of the Corporate Debtor in view of the legal principle laid down in Ome Prakash Verma (Supra) on ground of....
The issue to consider here is the acknowledgement of debt as well as the debt being within the limitation period.
However, admission of a debt either in a balance sheet or in the form of a letter duly signed by the respondent, would amount to an acknowledgement, extending the period of limitation. Certainly a time barred debt cannot be the basis of a winding up petition. Section 18(1) of the Limitation Act, 1963 reads as under:- "18. Section 18(1) of the Limitation Act, 1963 incorporates the said principle.
Limitation can be extended only by way of acknowledgement of debt in writing or part payment of debt as provided under Sections 18 and 19 of the Limitation Act, 1963. In the absence of any document i.e. acknowledgement of debt in writing or part payment of debt allegedly made by the defendants, I hold that there is inordinate delay in filing of the present suit. Merely sending demand notice to the defendant can not extend the limitation. Claim being barred by limitation, present suit is liable to be dismissed.
In other words, acknowledgement of liability in the balance sheet extends the period of limitation. Therefore, a time barred debt cannot be the basis of a winding up petition. However, admission of a debt in the balance sheet of the company would amount to acknowledgement, extending the period of limitation.
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