TMI Blog2020 (8) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... . Whether in the Balance Sheet which is being relied on, what is seen in the statement and if the same could be read as acknowledgement? - HELD THAT:- The statement recorded by the Auditor with regard to the pending litigation in the facts of the present matter, we find, cannot be read as an acknowledgement by Company under Section 18 of the Limitation Act. The Adjudicating Authority did not go into the particulars. In present matter, we are not deliberating whether entry in Balance Sheet can be termed Acknowledgement in law - In our view, even if we are to consider that contents in Balance Sheet could be read as acknowledgment even then if we read the contents in balance sheet in the matter, for reasons stated above, we do not find that the Corporate Debtor acknowledged as such the liability to pay the alleged outstanding debt. It is stated that the Application under Section 19(4) of SARFAESI Act filed by the Bank on 29th June, 2015 is still pending adjudication before DRT-3, Kolkata. The default dated 31.12.2013 which was declared NPA on 30th March, 2014, was time barred for the purpose of filing of Application under Section 7 of IBC on 31st October, 2018. The Applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 and the Bank vide letter dated 8th April, 2017 had informed the Corporate Debtor regarding Assignment Agreement dated 29.03.2017. The Appellant claims having filed Title Suit No.66/2018 against the Financial Creditor and the bank, on the ground that Assignment Agreement was fraud and it was on insufficient stamp and there was want of registration. In this regard, the observation of the Adjudicating Authority in Para 13 of the Impugned Order is as follows: The law requires that there must be legally assignment of debt. Herein, before us the deed of assignment is produced as Annexure P-3. We find that it is prepared on stamp paper of ₹ 100/-. It has been registered duly before the Registrar of Assurance, Kolkata. Prima facie , we hold that it is legal and valid deed of assignment of debt. If, at all, it is on insufficient stamp paper, then law requires that deficiency of paying stamp can be recovered with penalty. The deed cannot be said to be illegal thereby. Moreover, the Hon ble Appellate Tribunal in the order stated above held that in para 16 that, The appellant has challenged the Deed of Assignment executed between the HSBC Phoenix , but while filin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax-III v. Shri Vardhman Overseas Ltd. reported as 2011 SCC OnLine DEL 5599 and M/s Mahabir Cold Storage Versus C.I.T., Patna reported as 1991 Supp (1) Supreme Court Cases 402. The argument is that acknowledgement of debt in the Balance Sheet also amounts to acknowledgement under Section 18 of the Limitation Act. 8. The Judgement in the matter of The Commissioner of Income Tax (supra) was in the context of provisions of the Income Tax Act. In Para 17 of the Judgement, it was observed:- 17. In the case before us, as rightly pointed out by the Tribunal, the assessee has not transferred the said amount from the creditors' account to its profit and loss account. The liability was shown in the balance sheet as on 31st March, 2002. The assessee being a limited company, this amounted to acknowledging the debts in favour of the creditors. Section 18 of the Limitation Act, 1963 provides for effect of acknowledgement in writing. It says where before the expiration of the prescribed period for a suit in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance sheet, contained the following statement: 11. Your Directors are of the opinion that the liabilities shown in Schedules 'A' and 'B' of the balance sheet excepting those of United Bank of India, M/s. Goenka and Co. Private Ltd. and Caritt, Moran and Co. Pvt. Ltd. are barred by limitations, hence these liabilities are not confirmed by your Directors. 12. These were the two considerations which led the Court to conclude that even the debt shown in the balance sheet in respect of the said petitioning creditor would not amount to an acknowledgement as contemplated under Section 18 of the Limitation Act and following observations in this regard are reported: Therefore, in understanding the balance sheets and in explaining the statements in the balance-sheets, the balance-sheets together with the Directors' report must be taken together to find out the true meaning and purport of the statements. Counsel appearing for petitioning creditor contended that under the statute the balance sheet was a separate document and as such if there was unequivocal acknowledgement on the balance-sheet is a statutory document and perhaps is a separate document but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion before us is whether in the Balance Sheet which is being relied on, what is seen in the statement and if the same could be read as acknowledgement. Copy of the Balance Sheet of 2016 relied on by the Adjudicating Authority is at Page 412 of the Paper Book of Appeal. Page 412 is the Directors Report which presented the Annual Report and audited Financial Statements for the Financial Year ended 31st March, 2016. The relevant portion pointed out to us by the parties is at Page 421. It is Annexure A to the Auditors Report and what Auditors Report stated in Sub-Para - (viii), is as under:- (viii) In our opinion and according to the information and explanations given to us, that Company has not defaulted in the repayment of loans or borrowings to financial institution. The Company did not have any dues outstanding to Government as at the beginning of the year nor did it obtain any such loans during the year. However, the Company has failed to repay its dues owing to bank and has been declared as NPA by bank and the matter is lying with Debts Recovery Tribunal and subjudice (Note No. 29). Amount overdue is as under: United Bank of India, Lohapatty Br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Sheet could be read as acknowledgment even then if we read the contents in balance sheet in the matter, for reasons stated above, we do not find that the Corporate Debtor acknowledged as such the liability to pay the alleged outstanding debt. 15. It is stated that the Application under Section 19(4) of SARFAESI Act filed by the Bank on 29th June, 2015 is still pending adjudication before DRT-3, Kolkata. 16. We find that default dated 31.12.2013 which was declared NPA on 30th March, 2014, was time barred for the purpose of filing of Application under Section 7 of IBC on 31st October, 2018. The Application thus should not have been admitted. 17.(A) For above reasons, the Appeal is allowed. The Application under Section 7 of IBC filed by Respondent No.1 Financial Creditor is dismissed. (B) The Impugned Order is quashed and set aside. Actions taken by IRP/RP in consequence of the Impugned Order are quashed and set aside. The Corporate Debtor is released from the rigour of law and is allowed to function independently through its Board of Directors. The IRP/RP will hand back the records and management of the affairs of Corporate Debtor, to the Board of Directors. (C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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