TMI Blog2021 (4) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... . Said Report, recorded that debts in Winding up Proceedings cannot be time barred . In the present matter, the Learned Counsel for Appellant instead of requesting Hon ble High Court to transfer the winding-up proceedings, (which were in Limitation) to the Adjudicating Authority withdrew the Petition - considering the facts, and provisions and interest of justice, and also the intent of the High Court Order dated 19th August, 2019, the same can be read as an Order which permitted, in effect the lis to be transferred for decision and adjudication to the Adjudicating Authority. This is clear from Paragraph 1 2 of the Order, read with wording in third paragraph which recorded that Permission as prayed for is granted . The third paragraph kept alive factual and legal contentions raised in the petition and also directed that withdrawal of this petition shall not come in the way of Petitioner . However, in the present matter, it is not necessary for us to resort to even this, in order to do justice. The Adjudicating Authority referred to the Judgments being relied on by the Learned Counsel for the Respondents to find that the period of Limitation under Article 137 of the Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Period of Limitation and Section 29 (2) appears to be applicable. This being so, Section 18 and 19 of Limitation Act must be said to be applicable. Claim of Appellant is not time-barred - HELD THAT:- The Respondent has not shown that while preparing the balance-sheets the directors in their reports recorded denial or any reservation with regard to the debts shown by the Chartered Accountant to claim that they were time-barred. If the debt became NPA on 30th November, 2013 and there are acknowledgments in the balance-sheets of 2014-15 to 2016-17 the Application filed under Section 7 of IBC on 15th December, 2017 cannot be said to be time-barred. This is apart from admitted payment by cheque in April of 2015 though it is argued that it was part of proposal of One Time Settlement which never materialized - Section 7 application was dismissed on ground of limitation. It is not the case that the application was not complete or defective otherwise. The same is required to be admitted. The Application under Section 7 of IBC as filed by the Appellant is within Limitation - appeal allowed - decided in favor of appellant. - Company Appeal (AT) (Insolvency) No. 690 of 2020 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him that after the Account of Respondent- Corporate Debtor became NPA on 30th November, 2013, the winding up petition was filed within time on 7th April, 2015 and on 11th June, 2015, the Hon ble High Court had issued Notice in the winding up petition. The Respondent had appeared in the winding up proceedings. It is submitted by Learned Sr. Counsel that subsequently on 15th November, 2016 the Insolvency and Bankruptcy Code, 2016 (Act No. 31 of 2016) dated 28th May, 2016 read with Notification SO 3453 (E) dated 15th November, 2016 substituted the earlier existing Section 434 of the Companies Act, 2013 (Act-in short). By the amendment, provision was made for transfer of certain proceedings including winding up proceedings from the High Court to the Tribunal. Reference was made to The Companies (Transfer of Pending Proceedings) Rules 2016 which came into force on 15th December, 2016 and incorporated Rule 5 . It provided that Petitions relating to winding-up under Clause-e of Section 434 of the Act on the ground of inability to pay its debts pending before a High Court and where the Petition has not been served on the Respondents shall be transferred to the Tribunal. The other Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of Gaurav Hargovind Bhai Dave Vs. Asset Reconstruction Company (I) Ltd and Anr. (Civil Appeal No. 4952 of 2019) and Babulal Vadharji Gurjar Vs. Veer Gurjar Aluminum Industries Pvt. Ltd. (Civil Appeal No. 6347 of 2019) to submit that the Hon ble Supreme Court has held that the intention of the Court could not have been to give a new lease of life to debts which are already time-barred. It is also argued that so-called cheques dated 16th April, 2015 and 30th April, 2015 relied on by the Appellant cannot be treated as acknowledgment of the debt under Section 18 and 19 of the Limitation Act, 1963. The Learned Counsel for the Respondent argued that the Cheques were given as part of proposal of One-Time Settlement which never materialized. Referring to the Balance-Sheets, the Learned Counsel submits that in Judgment in the matter of V. Padmakumar Vs. Stressed Assets Stabilisation Fund Anr. [(2020) SCC ONLINE NCLAT 417] larger Bench of this Tribunal has observed that if Balance-Sheet of the Company is considered to be acknowledgment of debt then in effect there would be no Limitation. Is Appellant Financial Creditor/Assignee? 5. Learned Counsel for Respondent furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st March, 2015. Learned Counsel for the Appellant has referred to Page 248 to show that the secured debt of the Appellant M/s. L T Infrastructure Finance Company Ltd. (the assignor of Appellant) was recognized as due. Reference is also made to the directors concerned signing the Annual Report. Appellant then filed O.A. No. 127 of 2016 before DRT Ahmedabad on 04th February, 2016 (Annexure A16 Page 254). Subsequent to that, there is Directors Report under MGT9 EXTRACT (Annexure A 17-Page 274 @ 308) in which part of Balance-Sheet is there at Page 308 showing similar acknowledgment, but now for the amount of ₹ 35,28,33,333/- as on 31st March, 2016. The Appellant has put on record that even after IBC came into force there was similar Directors Report (Annexure A19 Page 316) in the part of Balance-Sheet of 2016-17 showing acknowledgment of ₹ 35,28,33,333 as on 31st March, 2017. The Learned Counsel for the Appellant pointed out Page 350 of the Appeal Paper Book in this regard. Thereafter, the Application under Section 7 (Annexure A20 Page 355) was filed on 15th September, 2017. 8. Learned Counsel for the Appellant has, relying on such record claimed that even without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Annexure A27) Page 444 of the Written- Submissions filed by the Appellant to submit that all the necessary documents were before the Ld. Adjudicating Authority however the Adjudicating Authority did not pass Impugned Order for another eight (8) months and subsequently without going into the complete facts, and without looking into the facts of pendency of the winding up petition and the effect of the same, Adjudicating Authority wrongly concluded that the Application was time-barred. Appellant is Financial Creditor/Assignee 10. Before entering into other discussions, we are disposing one issue raised by the Respondent where it is claimed that the Appellant is not the Financial Creditor. It is claimed that M/s. L T Infrastructure Finance Company Ltd. assigned the debt to Phoenix Trust Fy-14-9 and Appellant filed Petition in capacity of Trustee of Phoenix Fy-14-9 and so is not a Financial Creditor. Copy of the assignment deed dated 30th December, 2013 (Annexure A10- Page 158) shows (See Page 166) that the Assignor was M/s. L T Infrastructure Finance Company Ltd . and the Assignee is Phoenix ARC Private Limited which is described as acting in its capacity as tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied that the appellant was prevented by sufficient cause from filing an appeal within the said period, allow it to be filed within a further period not exceeding sixty days; and (c) all proceedings under the Companies Act, 1956, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer: Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government. (2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section. 9. On and from 17.08.2018, Section 434 was substituted again. This time, the provision reads as follows:- 434. Transfer of certain pending proceedings.- (1) On such date as may be notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en under sub- section (1) of Section 485 of the Companies Act, 1956 but the company has not been dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959: Provided further that any party or parties to any proceedings relating to the winding up of companies pending before any Court immediately before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018, may file an application for transfer of such proceedings and the Court may by order transfer such proceedings to the Tribunal and the proceedings so transferred shall be dealt with by the Tribunal as an application for initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (31 of 2016). (2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section. (Emphasis supplied.) 10. When the Code was enacted with effect from 01.12.2016, two Notifications both dated 07.12.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt) Rules, 1959,] shall be transferred to the Bench of the Tribunal established under sub-Section (4) of Section 419 of the Companies Act, 2013, exercising territorial jurisdiction to be dealt with in accordance with Part II of the Code: Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under Sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal upto 15th day of July, 2017, failing which the petition shall stand abated: Provided further that any party or parties to the petitions shall, after the 15th day of July, 2017, be eligible to file fresh applications under Sections 7 or 8 or 9 of the Code, as the case may be, in accordance with the provisions of the Code: Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this Rule and remains in the High Court and where there is another petition under clause (e) of Section 433 of the Act for winding up against the same company pending as on 15th December, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided further that any party or parties to the petitions shall after 15th July, 2017, be eligible to file fresh applications under Section 7 or 8 or 9 of the Code, as the case may be, in accordance with the provisions of the Code: The Learned Counsel for the Appellant is relying on this Second Proviso of Rule 5 to state that the parties to such winding-up petitions are given right to file fresh Applications under Section 7 or 8 or 9 of the Code. Reading Rule 5 as a whole, in present matter we are not entering into the issue of such standalone right claimed (with no outer limit as to in how much time it should be exercised after abatement as stated). Here it is sufficient to hold that considering the law and Section 434 read with Rule 5 legislature did not treat rights of applicants to file application under Section 7 of IBC as time barred whose within limitation Petition for Winding up was Pending giving them option to seek transfer if they desired. 14. What is material is that the Section 434 as substituted on 17th August, 2018, which is referred supra has now removed the condition which was existing earlier. Any party or parties to the proceedings can apply for transfer of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary for meeting the ends of justice or to prevent abuse of the process of the Appellate Tribunal. In the backdrop of such provisions and such powers existing of ours, we have option to dispose the Appeal giving liberty to the Appellant to approach Hon ble High Court to seek modification of the Orders passed by the Hon ble High Court on 19th August, 2019 from withdrawal to one of transfer. However, considering the facts, and provisions and interest of justice, and also the intent of the High Court Order dated 19th August, 2019, the same can be read as an Order which permitted, in effect the lis to be transferred for decision and adjudication to the Adjudicating Authority. This is clear from Paragraph 1 2 of the Order, read with wording in third paragraph which recorded that Permission as prayed for is granted . The third paragraph kept alive factual and legal contentions raised in the petition and also directed that withdrawal of this petition shall not come in the way of Petitioner . However, in the present matter, it is not necessary for us to resort to even this, in order to do justice. This is because, there is material available on record which shows that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are time-barred. Reference was also made to Judgment in the matter of Babulal Vardharji Gurjar Vs. Veer Gurjar (Civil Appeal No. 6347 of 2019) dated 14.08.2020 (2020 SCC OnLine SC 747) where also Supreme Court of India has held that under Section 7 the period of limitation starts running from Date of Default and the same is considered to be the date of NPA. 23.1. Section 238-A was inserted in the IBC by way of Amendment Act No. 26 of 2018 which was given retrospective effect from 06th June, 2018. Section 238-A reads as under: 238-A. Limitation. - The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be. (Emphasis Supplied) It is clear from the above Section that the provisions of Limitation Act, 1963 shall apply as far as may be to the proceedings or Appeals before the Adjudicating Authority or this Tribunal. Thus it is necessary to look into the Limitation Act to consider how far Limitation Act may be, or could be applied. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be in compliance with the existing laws for the time being in force as per Section 30 (4) of the Code. 28.3. Given that the intent was not to package the Code as a fresh opportunity for creditors and claimants who did not exercise their remedy under existing laws within the prescribed limitation period, the Committee thought it fit to insert a specific section applying the Limitation Act to the Code. The relevant entry under the Limitation Act may be on a case-to- case basis. It was further noted that the Limitation Act may not apply to applications of corporate applicants, as these are initiated by the applicant for its own debts for the purpose of CIRP and are not in the form of a creditor s remedy. (Emphasis supplied) The Report of the Committee would indicate that it has applied its mind to judgments of NCLT and NCLAT. It has also applied its mind to the aspect that the law is a complete Code and the fact that the intention of such a Code could not have been to give a new lease of life to debts which are time-barred. (Emphasis supplied) In the same Judgment of B.K. Educational Services, in Paragraph 27 it was observed as under: 27. It is thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lications under Section 7 and 9 of IBC fall under Article 137 of the Limitation Act, 1963. 23.7 When we go to Sections, Section 2 (j) is relevant which reads as under: (j) period of limitation means the period of limitation prescribed for any suit, appeal or application by the Schedule, and prescribed period means the period of limitation computed in accordance with the provisions of this Act; 23.8 Thus, when Article 137, for such Applications prescribes Period of Limitation as Three Years triggered When the right to apply accrues , Section 2 (j) provides that prescribed period means period of limitation computed in accordance with the provisions of this Act. 23.9 Section 3 deals with Bar of Limitation and sub- Section 1 reads as under: Bar of Limitation.-(1) Subject to the provisions contained in sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence. Thus to consider, if given debt is or not barred by Limitation Sections 4 to 24 are relevant. In B.K. Educational Services we have already seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation.- For the purposes of this section,- (a) where mortgaged land is in the possession of the mortgagee, the receipt of the rent or produce of such land shall be deemed to be a payment; (b) debt does not include money payable under a decree or order of a Court. 24. Section 18 applies to not merely suits but also applications and where before expiry of the prescribed period for an Application an acknowledgment is made, the Section provides for computing fresh period of Limitation from the time when acknowledgment was so signed. Perusal of Section 19 shows that where payment is made on account of a debt or interest before expiration of the prescribed period by the person liable to pay, a fresh period of Limitation shall be computed from the time when the payment was made. The date of NPA will not shift. It will remain the foundational date and Period of Limitation gets triggered from that date. But when prescribed period is computed in accordance with the Limitation Act and facts of this matter, Section 18 and 19 do appear to be attracted. 19. It was further observed by us in Paragraph 26 of our Judgment in Rajendra Narottamdas supra as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before NCLAT and this Tribunal had held that Limitation would run only from 01st December, 2016 when IBC came into force and dismissed the Appeal. With such set of facts, the observations of the Hon ble Supreme Court in Paragraph 7 of the Judgment were as under: 7. Having heard the learned counsel for both sides, what is apparent is that Article 62 is out of the way on the ground that it would only apply to suits. The present case being an application which is filed under Section 7, would fall only within the residuary article 137. As rightly pointed out by learned counsel appearing on behalf of the appellant, time, therefore, begins to run on 21.07.2011, as a result of which the application filed under Section 7 would clearly be time-barred. So far as Mr. Banerjee s reliance on para 7 of B.K. Educational Services Private Limited (Supra), suffice it to say that the Report of the Insolvency Law Committee itself stated that the intent of the Code could not have been to give a new lease of life to debts which are already time- barred. It can be seen that in spite of filing of OAs within Limitation, the Hon ble Supreme Court accepted the submissions that the time of Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that bar of limitation would not be attracted as Winding up Petition was filed within three years of the date on which the Code came into force. Against such Judgment of this Tribunal matter was carried to the Hon ble Supreme Court. 14.5. In this matter of Jignesh shah. Vs. Union of India the Learned Sr. Advocate Dr. Abhishek Manu Singhvi raised issue of the statutory bar of Limitation. The Hon ble Supreme Court has recorded submissions of the Counsel in Paragraph 5 of the Judgment. Part of the submissions may be reproduced for context. The same are as under: .Inasmuch as the Winding up Petition that has been transferred to the NCLT was filed on 21st October,2016, i.e. beyond the period of three years prescribed (as the cause of action had arisen in August, 2012), it is clear that a time-barred Winding up Petition filed under Section 433 of the Companies Act, 1956 would not suddenly get resuscitated into a Section 7 petition under the Code filed within time, by virtue of the transfer of such petition 14.6. After referring to arguments of Advocates for IL FS the Hon ble Supreme Court first adverted to the decision in the matter of B.K. Educational Services Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e remedy of winding up would, in no manner, impact the Limitation within which the winding up proceeding is to be filed, by somehow keeping the debt alive for the purpose of the winding up proceeding. (Emphasis Supplied) 14.8. It was then observed and held in Paragraph 27 of the Judgment as follows: 27. It is clear that IL FS pursued with reasonable diligence the cause of action which arose in August, 2012 by filing a suit against La-Fin for specific performance of the Letter of Undertaking in June, 2013. What has been lost by the aforesaid party s own inaction or laches, is the filing of the Winding up Petition long after the trigger for filing of the aforesaid petition had taken place; the trigger being the debt that became due to IL FS, in repayment of which default has taken place. For such and other reasons, the Hon ble Supreme Court allowed the Appeal which was filed before it and held that Winding up Petition filed on 21st October, 2016 being beyond the period of three years mentioned in Article 137 of the Limitation Act was time-barred and cannot be proceeded with any further. 15. It is quite clear from the above that although the suit was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case was continuing no Limitation period would attach. It was further held that the Recovery Certificate of 2001 plainly shows that there is a default and that there is no statable defence. 3. Having heard learned Counsel for both parties, we are of the view that this is a case covered by our recent judgment in B.K. Educational Services Private Limited vs. Parag Gupta and Associates , 2018 (14) Scale 482, para 27 of which reads as follows: - 27. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue , therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application. 4. In order to get out of the clutches of para 27, it is urged that Section 23 of the Limitation Act would apply as a result of which Limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after issuance of the Recovery Certificate would not be regarded as a continuing wrong to give rise to continuing cause of action. We are unable to read the last part as saying that right to sue is triggered when recovery certificate is issued. It is rather speaking of cessation of right, rather than trigger. Perusal of the Judgment in the matter of Vashdeo R Bhojwani Vs. Abhyudaya Co-operative Bank Ltd. Anr. shows that in that matter the Respondent No. 2 had been declared NPA by the Co-operative Bank on 23rd December, 1999. Recovery Certificate dated 24th December, 2001 was issued for such amount. Section 7 Application was filed on 21st July, 2017 claiming that the amount together with the interest which Kept ticking from 1998 was payable. (Default in that matter appears to have been of 1998). It is these words which have reflected in the final part of the Judgment where it was observed that the Certificate injured effectively and completely the right of Appellant which would have begun ticking as a result of the Limitation Act, Rights, as a result of which Limitation would have begun ticking were injured effectively and completely when Recovery Certificate was issued. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 002, until further orders. Financial Creditor on 10th July, 2018 filed Application under Section 7 of IBC. Corporate Debtor opposed the Application but ground of limitation was not there. Adjudicating Authority admitted the said application on 25th April, 2019. In Appeal to NCLAT issue of limitation was raised but the Appeal was dismissed. With such set of facts, when the matter was carried to Hon ble Supreme Court, and ground of limitation was agitated, the issues considered by Hon ble Supreme Court are as under: 57. The issues involved in this appeal are:- (i) Whether delay beyond three years in filing an application under Section 7 of IBC can be condoned, in the absence of an application for condonation of delay made by the applicant under Section 5 of the Limitation Act, 1963? (ii) Whether Section 14 of the Limitation Act, 1963 applies to applications under Section 7 of the IBC? If so, is the exclusion of time under Section 14 available, only after the proceedings before the wrong forum terminate? Hon ble Supreme Court considered the law on the subject and earlier Judgments of Hon ble Supreme Court and while dismissing the Appeal in Paragraphs 63, 64, 66, 67, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment is signed. However, the acknowledgment must be made before the period of limitation expires. 67. As observed above, Section 238A of the IBC makes the provisions of the Limitation Act, as far as may be, applicable to proceedings before the NCLT and the NCLAT. The IBC does not exclude the application of Section 6 or 14 or 18 or any other provision of the Limitation Act to proceedings under the IBC in the NCLT/NCLAT. All the provisions of the Limitation Act are applicable to proceedings in the NCLT/NCLAT, to the extent feasible. 68. We see no reason why Section 14 or 18 of the Limitation Act, 1963 should not apply to proceeding under Section 7 or Section 9 of the IBC. Of course, Section 18 of the Limitation Act is not attracted in this case, since the impugned order of the NCLAT does not proceed on the basis of any acknowledgment. 88. An Adjudicating Authority under the IBC is not a substitute forum for a collection of debt in the sense it cannot reopen debts which are barred by law, or debts, recovery whereof have become time barred. The Adjudicating Authority does not resolve disputes, in the manner of suits, arbitrations and sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Before us, the learned Counsel for the Respondent No.1 (Respondent in short) referred to the Judgements in the matters of Sheetal Fabrics versus Coir Cushions Ltd. reported as 2005 SCC OnLine DEL 247; The Commissioner of Income 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the Court refused to accept entry in the balance sheet as acknowledgement of debt because of two reasons: (a) The balance sheet was not passed by the shareholders at the appropriate meeting. (b) The Directors' report, in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble High Court, and in the facts of that matter, found that the list of Creditors maintained by the Respondent Company before High Court or in the balance sheet, was without any conditions or any strings attached. [Emphasis supplied] 26. Thereafter, this Tribunal in Judgement in the matter of Gautam Sinha discussed facts regarding the Balance Sheet as was relied on in that matter and concluded as under:- 14. We have already referred to the Judgements in the matters of Sheetal Fabrics and Padam Tea which show that the Balance Sheet would be required to be read with Directors Report. In the Directors Report which is before us, there does not appear to be any acknowledgement of debt. 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. 27. In the above reference to our Judgement in the matter of Gautam Sinha while referring the Judgement of the Hon ble High Court of Delhi in the matter of The Commissioner of Income Tax-III v. Shri Vardhman Overseas Ltd. reported as 2011 SCC OnLine DEL 5599, only part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MANU/NL/0518/2019 held that letter emanating from Corporate Debtor in that matter, addressed to the Financial Creditor where Corporate Debtor agreed to settle all outstanding dues of the Financial Creditor on One Time Settlement (OTS) basis amounted to acknowledgment of outstanding debt in writing. 29. In Judgement in the matter of ITC Limited Vs. Blue Coast Hotels Ltd. and Ors. dated 19th March, 2018 reported as MANU/SC/0263/2018, Hon ble Supreme Court was dealing with question whether Sub-Section (3A) of Section 13 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI - in short) was mandatory or directory in nature and in the context, dealt with the matter where the Creditor had not replied to debtors representation and it was claimed that there was breach of Section 13(3A). In that context, Hon ble Supreme Court dealt with attendant circumstances and the Notices which were issued by the Creditor and the different proposals debtor made including a Letter of Undertaking dated 25th November, 2013 and in Para 35 of that Judgement observed:- Letter of Undertaking Without Prejudice 35. Much was sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Courts of Delhi and other High courts, what appears to us is that it is well settled position of law that Annual Returns/Audited Balance Sheets can be referred to and relied on to see if contents therein amount to acknowledgement or not. The above discussion of the Judgements shows that even after referring to the Annual Reports/ Balance Sheets, there are instances where the contents are not relied on to conclude that there is acknowledgement of debt. This is clear from Para 11 of the Judgement in the matter of In re. Padam Tea Company Ltd. (referred supra). There the Directors recorded their opinion with regard to the liabilities shown to say that the same are barred by limitations and hence, the liabilities are not being confirmed by the Directors. Thus contents recorded in Balance Sheet/Financial Statements are to be looked into on case to case basis. 32. Apart from Judgements of the High Courts, as referred, Judgement in the matter of Mahabir Cold Storage (supra) recorded that entries in the books of accounts would amount to an acknowledgement of the liability within the meaning of Section 18 of the Limitation Act, 1963. If books of accounts can be considered, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Judgements of the High Court of Delhi and other High Courts that Balance Sheets can be looked into to see if there is acknowledgement of debt. Perusing Judgements of Hon ble Supreme Court we find that even Hon ble Supreme Court has looked into Balance Sheets and Books of Account to see if there is Acknowledgement of Liability. If the amount borrowed is shown in the Balance Sheet, it may amount to Acknowledgement. We find that the Judgements of Hon ble Supreme Court of India are binding and Balance Sheets cannot be outright ignored. 36. For the above reasons, we are of the opinion that Annual Returns/Audited Balance Sheets, one-time settlement proposals, proposals to restructure loans, by whatever names called, cannot be simply ignored as debarred from consideration and in every given matter, it would be a question of applying the facts to the law and vice versa, to see whether or not the specific contents, spell out an acknowledgement under the Limitation Act. 37. As mentioned there are Judgments especially of the Hon ble Supreme Court which show that entries in the Balance-sheet may amount to acknowledgment. We are bound by the observations of the Hon ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0th November, 2013 and there are acknowledgments in the balance-sheets of 2014-15 to 2016-17 the Application filed under Section 7 of IBC on 15th December, 2017 cannot be said to be time-barred. This is apart from admitted payment by cheque in April of 2015 though it is argued that it was part of proposal of One Time Settlement which never materialized (See Written Submissions of Respondent Diary No. 23105). Even if the One Time Settlement did not materialize, the payment made on account of the same debt in April 2015 would attract also Section 19 of Limitation Act. For such reasons, the Appeal deserves to be allowed. Section 7 application was dismissed on ground of limitation. It is not the case that the application was not complete or defective otherwise. The same is required to be admitted. There is no substance in the defence being raised. Order The Appeal is allowed. The Impugned Order is quashed and set aside. We hold the Application under Section 7 of IBC as filed by the Appellant to be within Limitation. The Application C.P (IB) NO. 5/NCLT/AHM/2018 is restored to the file of the Adjudicating Authority. Unless parties settle earlier, the Adjudicating Authority is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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