TMI Blog2020 (10) TMI 961X X X X Extracts X X X X X X X X Extracts X X X X ..... . The acknowledgment to extend the period of limitation should be voluntary and cannot be given under the compulsion of law or with the threat of any penalty/punishment. We are unable to convince with the argument of learned counsel for the corporate debtor that section 18 of the Limitation Act, 1963 is not applicable to insolvency cases. The judgment in V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) requires reconsideration on following reasons : (I) There is consistent view of the hon'ble Supreme Court and High Court of Allahabad, Calcutta, Delhi, Karnataka, Kerala and Telangana that the entries in the balance-sheet of the company be treated as an acknowledgment of debt for the purpose of section 18 of the Limitation Act, 1963. The majority view in V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) is just contrary to settled law. (II) In V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) minority view is in the line of settled law that balance-sheet of the company, be treated as acknowledgment of debt for the purpose of section 18 of the Limitation Act, 1963. In the majority judgment no reasons have been assigned for disagreement with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oof or production of original as evidence of any contents of the original or of any fact stated therein of which direct evidence is admissible. Thus, with all great respect to the hon'ble Five Members Bench of this Appellate Tribunal that V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) requires reconsideration. Hence, we are referring the matter - the matter be referred to a Bench of five hon'ble Members of this Appellate Tribunal. - Company Appeal (AT) (Insolvency) No. 385 of 2020. - - - Dated:- 25-9-2020 - Jarat Kumar Jain J. (Judicial Member), Balvinder Singh And V. P. Singh (Technical Members) For the Appellant : Abhijeet Sinha , Sandeep Bajaj and Devansh Jain For the Respondent No. 1 : Ramji Srinivasan , Senior Advocate, Abhirup Das Gupta , Rishub Kapoor and Varun Gupta For the Respondent No. 2 : Sanjeev Kumar , Senior Advocate, Pankaj Dhanuka and Anshul Sehgal JUDGMENT We have heard the arguments in this Appeal. During the course of argument, a judgment rendered by five hon'ble Members of this Appellate Tribunal in the case of V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's bank. The corporate debtor has availed loan facilities aggregating to ₹ 2175,00,00,000 (rupees two thousand one hundred seventy five crores only) for the Phase-I project and availed ₹ 2387,00,000 (rupees two thousand three hundred eighty seven crores only) for Phase II project for setting up another 540 MW coalbased plant from the various bankers referred above and loan agreements have been executed between the corporate debtor and the above referred banks. However, the corporate debtor failed to repay the dues under the facilities granted by the abovementioned banks. Thereafter, State Bank of India issued a loan recall notice dated March 27, 2015 which was replied by the corporate debtor on March 28, 2015. The Consortium Lenders issued notices on June 20, 2015 under section 13(2) of the SARFAESI Act, 2002 demanding a total amount of ₹ 5997,80,02,973 (rupees five thousand nine hundred ninety seven crore eighty lakhs two thousand nine hundred seventy three only) but the corporate debtor failed to repay the loan amount. The abovementioned banks had assigned the debt in favour of Asset Reconstruction (respondent No. 1 referred as financial creditor). Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant) submitted that the judgment passed in V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCLAT) does not require reconsideration because in the dissenting judgment by one of the hon'ble Members of the Bench has referred the judgment of the hon'ble Supreme Court in the case of Mahabir Cold Storage v. CIT [1991] 188 ITR 91 (SC), A. V. Murthy v. B. S. Nagabasavanna [2002] 108 Comp Cas 838 (SC) and S. Natarajan v. Sama Dharman MANU/SC/0698/2014. Hence, it cannot be said that these precedents are not brought to the notice of the Bench. Therefore, the judgment still holds the field and is binding on this Bench. 8. Learned counsel for the corporate debtor further submitted that the hon'ble Supreme Court in the case of Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries P. Ltd. [2020] 222 Comp Cas 115 (SC) ; [2020] SCC Online SC 647 finally settled that section 18 of the Limitation Act, 1963 is not applicable to insolvency cases. Therefore, there is no question for referring V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCLAT) for reconsideration. 9. Learned counsel for the financial cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for the discharge of the liability as debt. Section 2(47) of the Act defines 'transfer' in relation to a capital asset under clause (i) the sale, exchange or relinquishment of the asset or (ii) the extinguishment of any right thereof or-(clauses (iii) to (vi) are not relevant hence omitted). 13. In the case of A. V. Murthy v. B. S. Nagabasavanna [2002] 108 Comp Cas 838, 840 (SC) ; [2002] 2 SCC 642 at page 644 the hon'ble Supreme Court of India held : Moreover, in the instant case, the appellant has submitted before us that the respondent, in his balance-sheet prepared for every year subsequent to the loan advanced by the appellant, had shown the amount as deposits from friends. A copy of the balance-sheet as on March 31, 1997 is also produced before us. If the amount borrowed by the respondent is shown in the balance-sheet, it may amount to acknowledgment and the creditor might have a fresh period of limitation from the date on which the acknowledgment was made. However, we do not express any final opinion on all these aspects, as these are matters to be agitated before the Magistrate by way of defence of the respondent. 14. In the case of Usha Rectifier C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 the hon'ble High Court of Calcutta has held : 11. To come under section 19 an acknowledgment of a debt need not be made to the creditor nor need it amount to a promise to pay the debt. In England it has been held that a balance-sheet of a company stating the amount of its indebtedness to the creditor is a sufficient acknowledgment in respect of a speciality debt under section 5 of the Civil Procedure Act, 1833 (3 and 4 Will-4c. 42), see Atlantic and Pacific Fibre Importing and Manufacturing Co. Ltd., In re [1928] 8 Ch D 836 under section 1 of the Lord Tentenden's Act, 1828 (9 Geo. 4, c. 14) read with section 13 of the Mercantile Law Amendment Act, 1856 (19 and 20 Vict. c. 97), see Coliseum (Burrow) Ltd., In re [1930] 2 Ch D 44 at 47 and under sections 23 and 24 of the Limitation Act, 1939 (c. 21), see Ledingham v. Bermejo Estancia Co. Ltd. [1947] 1 All ER 749 (KB) and Jones v. Bellgrove Properties Ltd. [1949] 2 KB 700, on appeal from Jones v. Bellgrove Properties Ltd. [1949] 1 All ER 498 (CA). Section 5 of the Civil Procedure Act, 1833 did not require that the acknowledgment should be given to the claiming creditor and consequently a balance-sheet containing an admis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced before the company by the directors, and section 132 (section 211 of the Companies Act, 1956) requires that the balance-sheet should contain a summary, inter alia, of the current liabilities of the company. But, as pointed out by Bachawat J., in Ben gal Silk Mills Co. v. Ismail Golam Hossain Ariff MANU/WB/0033/ 1962 ; AIR 1962 Cal 115 although there was statutory compulsion to prepare the annual balance-sheet. There was no compulsion to make any particular admission, and a document is not taken out of the purview of section 18 of the Indian Limitation Act, 1963 (section 19 of the Indian Limitation Act, 1908) merely on the ground that it is prepared under compulsion of law or in discharge of statutory duty. Reference may also be made to the decisions in Rajah of Vizianagram v. Official Liquidator, Vizianagram Mining Co. Ltd. MANU/TN/0116/1952 ; AIR 1952 Mad 136, Jones v. Bellgrove Properties Ltd. [1949] 1 All ER 498 (CA) and Lahore Enamelling and Stamping Co. Ltd. v. A. K. Bhalla [1958] 28 Comp Cas 216 (Punjab) ; AIR 1958 Punjab 341 ; MANU/PH/0099/1958, in which statements in balance-sheets of companies were held to amount to acknowledgments of liability of the companies. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter following Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, AIR 1962 Cal 115, Rajah of Vizianagram v. Official Liquidator, Vizianagram Mining Co. Ltd. MANU/TN/0116/1952 ; AIR 1952 Mad 136, Lahore Enamelling and Stamping Co. Ltd. v. A. K. Bhalla [1958] 28 Comp Cas 216 (Punjab) ; AIR 1958 Punjab 341 and Jones v. Bell grove Properties Ltd. [1949] 2 All ER 198 (CA) held, 'What emerges from a consideration of the above decision is that the date of signing the balance-sheet by the second defendant started a fresh period of limitation'. 21. In the case of CIT v. Shri Vardhman Overseas Ltd. [2011] SCC Online (Delhi) 5599 ; [2012] 343 ITR 408, 421 (Delhi) the hon'ble High Court of Delhi has held that : 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 March 31, 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 acknowledgment in writing. It says where before the expira ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the court to reach a finding that the liability is established. 12. This court in ESPN Software India P. Ltd. v. Modi Entertainment Network Ltd. [2012] 173 Comp Cas 465, 473 (Delhi), noted that : 'Admission in balance-sheet is per se an admission of liability . . . This entry clearly states that an amount of ₹ 8,00,04,000 is due and payable by the respondent in accordance with the terms of the contract. This document has been signed by the directors of the company and its company secretary on October 31, 2002'. 24. In the case of Al-Ameen Ltd. v. K. P. Sethumadhavan [2017] SCC Online Ker 11337. The hon'ble High Court of Kerala at Ernakulam has held that : 7. The inclusion of a debt in a balance-sheet duly prepared and authenticated would amount to admission of a liability and therefore satisfies the requirement of law for a valid acknowledgment under section 18 of the Act. We may recapitulate the words of Mr. Justice P. Subramonian Poti in Krishnan Assari v. Akilakerala Viswakarma Maha Sabha [1980] KLT 515 and the following is the extract : '10. How far the balance-sheets could be acted upon in deciding the claim of the appellant is the nex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has the effect of extending the period of limitation under section 18 of the Limitation Act, 1963. However, I may refer to only one decision of the learned single judge of this court (Manmohan J.) in Bhajan Singh Samra v. Wimpy International Ltd. [2011] 185 DLT 428 ; [2012] 173 Comp Cas 455 (Delhi) for the simple reason that it collects all the relevant authorities on the issue, including some of the supports the petitioners on this point.' In view of the legal position spelt out in judgments noted above, the acknowledgment of the debt in the balance-sheet extends the period of limitation. The acknowledgment is as on March 31, 2015. This suit is filed in 2017. The suit is clearly within limitation. 26. In the case of Agni Aviation Consultants v. State of Telangana (April 21, 2020) MANU/TL/0077/2020, the hon'ble High Court of Telangana has held that : 100. In several cases, various High Courts have held that an acknowledgment of liability in the balance-sheet by a company registered under the Companies Act, 1956 extends the period of limitation though it is not addressed to the creditor specifically. (Zest Systems P. Ltd. v. Center for Vocational and Entrepreneu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment. In this view of the matter, reliance on the decision in Mahabir Cold Storage v. CIT [1991] 188 ITR 91 (SC) does not advance the cause of respondent No. 2. 29. With the aforesaid we are unable to convince with the argument of learned counsel for the corporate debtor that section 18 of the Limitation Act, 1963 is not applicable to insolvency cases. 29. Reasons for reconsideration of V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCLAT) 30. We are of the view that the judgment in V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCLAT) requires reconsideration on following reasons : (I) There is consistent view of the hon'ble Supreme Court and High Court of Allahabad, Calcutta, Delhi, Karnataka, Kerala and Telangana that the entries in the balance-sheet of the company be treated as an acknowledgment of debt for the purpose of section 18 of the Limitation Act, 1963. The majority view in V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCLAT) is just contrary to settled law. (II) In V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of account and financial statement without the order made by the court of competent jurisdiction or the Tribunal. Directors of the company after making judgments and estimates that are reasonable and prudent cannot resile without permission of the Tribunal. (VII) Section 397 of the Companies Act, provides that the documents filed for the purpose of the Companies Act, and Rules made thereunder by a company with the Registrar shall be admissible in any proceedings there under. Without proof or production of original as evidence of any contents of the original or of any fact stated therein of which direct evidence is admissible. 31. With the aforesaid reasons we are of the considered view with all great respect to the hon'ble Five Members Bench of this Appellate Tribunal that V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCLAT) requires reconsideration. Hence, we are referring the matter. 32. Learned senior counsel for the financial creditor submitted that the hon'ble Supreme Court in the case of Pradip Chandra Parija v. Promod Chandra Patnaik [2002] 1 SCC 1 has dealt with a situation when the Bench of two learned judges of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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