TMI Blog2022 (4) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... he OTS proposal was made in June, 2018, whereas the prescribed period of three years have already lapsed in June, 2017. The Balance Sheet for the Year ending 31.03.2017 which is within three years from the date of NPA i.e. 13.09.2014 shows that there is an amount of ₹ 366953917.45 depicted under secured term loan vis a vis a sanction limit of ₹ 3383 lakhs. The amount in default is shown to be ₹ 3692 lakhs. Expression of default has been defined in Section 3(12) of the Code meaning non-payment of Debt when a whole or part or any part or instalment of the amount of debit has become due and payable and is not paid by the Debtor or the Corporate Debtor, as the case may be. Section 18 of the Limitation Act, 1963 comes into play every time when the principal borrower/Corporate Debtor, as the case may be, acknowledged their liability to pay the debt, however, such acknowledgement must be before the expiration of the prescribed period of limitation, which in the instant case is within three years period. This Tribunal is of the considered view that the Appellant having exercised their legal right to file an IA before this Tribunal to bring on record the Balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 43,04,08,269.00 was due and payable and the account of the Corporate Debtor was declared as NPA. By the impugned order, the Adjudicating Authority, while dismissing the Application has observed as follows:- 22. In sum (a) The date of default is 30.06.2014. (b) The balance confirmation letter placed on record is dated 30.06.2013/ (c) The letter informing the Corporate Debtor about the accounts having become NPA is dated 13.11.2014. (d) There is nothing on record to show that there is any acknowledgement of debt after the accounts were declared as NPA on 13.11.2014. (e) The OTS proposal is dated 01.08.2018 i.e. long after the expiry of the prescribed period of limitation. 23. Applying the ratio of the judgements of the Hon ble Supreme Court in BK Educational Services (supra), Gaurav Hargovindbhai Dave (supra), Jignesh Shah (supra), Vashdeo R Bhojwani (supra), Sagar Sharma (supra) and Sampuran Singh (supra), and those of the Hon ble NCLAT in Ishrat Ali (supra), Munish Kumar Bhunsali (supra) and V Hotels Limited (supra) and the fact that the judgement in Sesh Nath (supra) no longer represents the correct law, we hold that the present pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India 2021 SCC OnLine SC 267 and Sesh Nath Singh V Baidyabati Sheoraphull Cooperative Bank Ltd 2021 SCC OnLine SC 244. The Learned Counsel for the Appellant contended that merely because of the word Without Prejudice in the OTS letters will not bar the Court from scrutinizing such letter and import the true purport and intent of the maker of such documents. In the instant case, the Corporate Debtor has acknowledged the subsisting liability and existence of a jural relationship between the parties and also intended to make payment of the outstanding dues of the Appellant. The Balance Sheet of the Financial Year 2016-17 were signed by the Director on 05.09.2017 which clarifies that there was an admission made within the period of limitation. The Corporate Debtor was obliged to submit its Annual Returns to the Appellant Bank regularly and in breach of such terms and conditions of Sanction Letter , the Respondent has not submitted their Annual Returns to the Appellant since 2014-15. 4. Submissions of Respondent. The Learned Counsel strenuously contended that there is no material on record to establish that there is any acknowledgement of debt after the accounts wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... piry of three years from the date of the said default and hence does not meet the essential requisites under Section 18 of the Limitation Act, 1963. Therefore, the Adjudicating Authority has rightly dismissed the Application filed under Section 7 of the Code as barred by Limitation. Assessment 5. The brief point that falls for consideration is whether the Learned Adjudicating Authority was justified in dismissing the Application filed under Section 7 of the Code, as barred by Limitation. 6. Admittedly the date of default is 30.06.2014 and the letter informing the Corporate Debtor about the accounts having become NPA is 13.11.2014. At the outset, we address to the contention of the Learned Counsel for the Appellant/UCO Bank that the OTS proposal dated 06.06.2018, 01.08.2018, 20.11.2018 and subsequently on 28.02.2019 should be taken into consideration as admission of liability and acknowledgement of Debt as provided for under Section 18 of the Limitation Act, 1963. Section 18 of the Limitation Act, 1963 reads as follows: 18. Effect of acknowledgment in writing.-(1) Where, before the expiration of the prescribed period for a suit or application in respect of any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 321. 32. A perusal of the aforesaid Sections would show that there is no doubt that the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7). Equally, the auditor s report may also enter caveats with regard to acknowledgements made in the books of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills (supra), that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law as 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, which then has to be examined on a case by case basis to establish whether an acknowledgement of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act. 33.. The judgment in Bengal Silk Mills (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned that even in this decision of the Privy Council it has been recognised that balance-sheets could in certain circumstances amount to acknowledgements of liability. It cannot, therefore, be said as a general proposition of law that statements in balance-sheets of a company cannot operate at ll as acknowledgements of liability as contended by Shri Rameshwar Dial. 48. The learned counsel next argued that the words used in the entry in the balance-sheet in the present case did not amount to any acknowledgement of liability. We do not think so. The words used in the entry apparently show that in explaining its current liabilities and the provisions made for the same, it was stated that there was a sum of ₹ 7,87,150.42 held in share- holders' suspense account for payment to the share-holders of the Indian National Airways Limited (in voluntary liquidation - since dissolved). The words used clearly acknowledge the liability. The learned single Judge also took the same view as regards the words used in the balance-sheet. In Lahore Enamelling and Stamping co Ltd V A.K. Bhalla, Tek Chand J.. held that debts due to creditors not mentioned by name but included in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance-sheet (Schedule D to Annexure J) was signed by the Secretary and two Directors, and Annexure J contains the Auditors report and the Board s report. It was stated in the judgment of the learned single Judge that the balance-sheet was adopted by the company and the same was not disputed before us. It is thus quite clear that the balance- sheet was signed by duly authorised agents of the company. 34. The judgment of Sabyasachi Mukharji, J. (as His Lordship then was), sitting singly in the Calcutta High Court, has, in Pandam Tea Co. Ltd., In re, 1973 SCC OnLine Cal 93 : AIR 1974 Cal 170, held as follows: 4. Now the question is whether the statements, which are contained in the profits and loss accounts and the assets and liabilities side indicating the liability of the petitioning creditor along with the statement of the Directors made to the shareholders as Directors report should be read together and if so whether reading these two statements together these amount to an acknowledgement as contemplated under Section 18 of the Limitation Act, 1963, or Section 19 of the Limitation Act, 1908. In my opinion, both these statements have to be read together. The balance- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that where a statement was made without intending to admit the existence of jural relationship, such intention should be fastened on the person making the statement by an involved and far-fetched reasoning. In order to find out the intention of the document by which acknowledgement was to be construed the document as a whole must be read and the intention of the parties must be found out from the total effect of the document read as a whole. 10. It is the case of the Respondent that the Balance Sheet for the Financial Year 2016-17 was signed by the Directors on 05.09.2017, was adopted by the Members on 13.09.2017 and filed with the ROC on 13.09.2017. At this juncture, we find it relevant to rely on Note 27 of the Balance Sheet for the Year ending 2016-17 which is disclosed in the Auditor Report as hereunder: Textual Information (27) Disclosure in auditors report relating to default in repayment of financial dues As per the information and explanation given and representation made to us, the Company has defaulted in repayment of dues to the banks, the details are given below: Sl. Name of Bank. Nature of Facilities, Outstanding as on 31.03.2017 (in Crores), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of the IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years. 141. Moreover, a judgment and/or decree for money in favour of the Financial Creditor, passed by the DRT, or any other Tribunal or Court, or the issuance of a Certificate of Recovery in favour of the Financial Creditor, would give rise to a fresh cause of action for the Financial Creditor, to initiate proceedings under Section 7 of the IBC for initiation of the Corporate Insolvency Resolution Process, within three years from the date of the judgment and/or decree or within three years from the date of issuance of the Certificate of Recovery, if the dues of the Corporate Debtor to the Financial Debtor, under the judgment and/or decree and/or in terms of the Certificate of Recovery, or any part thereof remained unpaid. 142. There is no bar in law to the amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.3765/2020, addressing to the submissions made by the Learned Counsel that no opportunity should be given to the Appellant to go back to NCLAT, the Appellant having already amended its pleadings once, and the Hon ble Supreme Court having already remitted the matter to NCLAT, still gave one further opportunity to the Appellant to amend its pleadings so as to incorporate what was stated in the written submissions. Even in Civil Appeal No.3228/2020 the Hon ble Apex Court had given an opportunity to the Appellant to amend its pleadings on payment of cost of ₹ 1 lakh. 15. The Hon ble Supreme Court in Dena Bank (Supra) has noted that there is no bar in law with respect to amendment of pleadings or filing additional documents before the Adjudicating Authority. Though the Appellant has not brought the Balance Sheet on record before the Adjudicating Authority but instead has chosen to file an IA before this Tribunal, and has filed additional documents to bring on record the Balance Sheet of the Financial Year 2016-17, it cannot be said to be fatal to the issue. Having regard to the facts and circumstances of the case on hand and that the Section 7 Application is of the year 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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