TMI Blog2022 (7) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... ledgement in a balance sheet without a qualification can be relied upon for the purpose of the proceedings under the IBC. In view of the above decisions, the position of law has been set at rest. Neither the NCLT nor the NCLAT had the benefit of adjudicating upon the factual controversy in the context of the decisions of this Court. The principles which emerge are that: (i) The provisions of Section 18 of the Limitation Act are not alien to and are applicable to proceedings under the IBC; and (ii) An acknowledgement in a balance sheet without a qualification can furnish a legitimate basis for determining as to whether the period of limitation would stand extended, so long as the acknowledgement was within a period of three years from the original date of default. It is also noted that Mr Niranjan Reddy has relied upon documentary material to indicate that the acknowledgements of liability were within a period of three years from the date of default and, hence, the applicant filed by the appellant under Section 7 of the IBC was within limitation. Reliance has also been placed on the letter of revival dated 26 April 2015 and the offer of OTS on 6 November 2015. Since w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itutions Act 1993, while continuing to engage in negotiations with the respondent. Thereafter, the respondent issued letter dated 19 January 2016 to the appellant offering a one-time settlement OTS of Rs 61 crores in lieu of its debts, which was conditionally accepted by the appellant. However, by a letter dated 18 September 2017, the respondent unilaterally revised the OTS to Rs 40.6 crores, which was refused by the appellant. 4 The application for initiation of the CIRP was then filed by the appellant on the ground that there was a default on the part of the respondent in paying a financial debt in the amount of approximately Rs 189 crores (calculated with interest as on 30 June 2018). The date of default was mentioned as 10 June 2014, when the respondent s account was declared as an NPA. 5 While rejecting the application under Section 7 of the IBC on the ground of limitation, the NCLT observed that: (i) The respondent s loan account was declared to be an NPA on 10 June 2014, while the proceeding under Section 7 was instituted on 19 September 2018 beyond a period of three years from the date on which the right to apply accrued; (ii) In the decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considering most of these judgments, has reached the correct conclusion. We, therefore, set aside the majority judgment of the Full Bench of NCLAT dated 12-3-2020 9 Apart from the above decision, it is also necessary to note that the provisions of Section 18 of the Limitation Act were held applicable to IBC proceedings by a two-Judge Bench of this Court in Sesh Nath Singh v Baidyabati Sheoraphuli Coop. Bank Ltd. (2021) 7 SCC 313 ( Sesh Nath Singh ) . 10 While the observation in Sesh Nath Singh (supra) was obiter dicta , the matter has been set at rest in a decision of a three-Judge Bench of this Court in Laxmi Pat Surana v Union Bank of India and Another (2021) 8 SCC 481 ( Laxmi Pat Surana ) , where, speaking for the Bench, Justice A M Khanwilkar has held: 42. Notably, the provisions of the Limitation Act have been made applicable to the proceedings under the Code, as far as may be applicable. For, Section 238-A predicates that the provisions of the Limitation Act shall, as far as may be, apply to the proceedings or appeals before the adjudicating authority, NCLAT, the DRT or the Debt Recovery Appellate Tribunal, as the case may be. After enactmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o time, for institution of the proceedings under Section 7 IBC. Further, the acknowledgment must be of a liability in respect of which the financial creditor can initiate action under Section 7 IBC. ( emphasis supplied ) 11 An acknowledgement in a balance sheet without a qualification can be relied upon for the purpose of the proceedings under the IBC. This principle also emerges from the decision in Asset Reconstruction Company (supra), which noted the decisions in Sesh Nath Singh (supra) and Laxmi Pat Surana (supra). This Court held: 35. 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 acknowledgments 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 , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not come to the rescue of the Appellants in the facts of this case. It is clarified that the onus on the financial creditor, at the time of filing an application under Section 7, to prima facie demonstrate default with respect to a debt, which is not time-barred, is not sought to be diluted herein. In the present case, if the documents constituting acknowledgement of the debt beyond April, 2016 had not been brought on record by the Corporate Debtor, the application would have been fit for dismissal on the ground of lack of any plea by the Financial Creditor before the Adjudicating Authority with respect to extension of the limitation period and application of Section 18 of the Limitation Act. 13 In view of the above decisions, the position of law has been set at rest. Neither the NCLT nor the NCLAT had the benefit of adjudicating upon the factual controversy in the context of the decisions of this Court. The principles which emerge are that: (i) The provisions of Section 18 of the Limitation Act are not alien to and are applicable to proceedings under the IBC; and (ii) An acknowledgement in a balance sheet without a qualification can furnish a legitimate basis f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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