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TMI Blog2025 (3) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed Section 7 application filed by the Financial Creditor-Appellant on the grounds of being time-barred. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant- IL&FS Financial Services Limited. 2. Coming to the brief factual matrix, we notice that a Loan Agreement had been executed between the IL&FS Financial Services Ltd.-Financial Creditor and the Adhunik Meghalaya Steels Pvt. Ltd.-Corporate Debtor on 27.02.2015 for a loan of Rs 30 Cr. against which an amount of Rs 24.44 Cr. was disbursed on 17.03.2015. This loan was also secured by way of pledge of 8,10,804 shares of Adhunik Metals Ltd. ("Adhunik" in short) in favour of the Financial Creditor. This pledge of share was reflected both in the Charge Form and in the Pledge Agreement. Since the Corporate Debtor failed to repay the outstanding debt in terms of the loan facility documents, the Financial Creditor declared the account of the Corporate Debtor as NPA on 01.03.2018. Subsequently, on 10.07.2018, the Financial Creditor issued a notice of default to the Corporate Debtor and followed it up with a Recall Notice on 10.08.2018. Since the Corporate Debtor did not make good the debt liability, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was deliberate failure on the part of the Corporate Debtor to file the Balance sheets with RoC in a timely manner, they cannot be allowed to seek benefit on account of their own act of omission in arguing that the limitation period should commence from the date of signing the Balance sheet and not from the date of filing of Balance sheet. The impugned order passed by the Adjudicating Authority was further assailed on the ground that the Adjudicating Authority had erroneously interpreted the order of the Hon'ble Supreme Court delivered in Suo Moto Writ Petition(C) No. 03 of 2020 (hereinafter referred to as the "suo moto orders"). The Adjudicating Authority had wrongly applied paragraph 5.III of the suo moto orders of the Hon'ble Supreme Court in computing the limitation period. In the instant case, the applicable paragraph is paragraph 5.I of the suo moto orders which paragraph specifically provides that the entire period between 15.03.2020 and 28.02.2022 is to be excluded in calculating the limitation period and by applying this yardstick the filing of the Section 7 petition on 15.01.2024 fell squarely within the limitation period. In support of their contention, reliance was pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the date of signing of balance sheet and not date of filing of balance sheet with MCA. It has been further contended that mere entries in Balance sheet cannot be taken as unequivocal and unqualified acknowledgment of debt particularly so when the name of Financial Creditor is not found to be specifically mentioned in the Balance sheet of FY 2019-20. The admission in a Balance sheet has to be qua the particular creditor for Balance sheet acknowledgement. It has been vehemently contended that the Appellant-Financial Creditor has failed to establish any jural relationship between the Financial Creditor and Corporate Debtor and the Bishal Jaiswal judgment clearly states that the Adjudicating Authority cannot get into investigations to find out the borrower in respect of whom the credit amount stands reflected in the Balance sheet of the Corporate Debtor. 8. We have duly considered the arguments advanced by the Learned Counsel for both the parties and perused the records carefully. 9. Considering the facts and circumstances in the present case, the narrow compass for our consideration is to decide whether the Section 7 application filed by the Appellant-Financial Creditor was time- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded the pledge of same number of shares besides reflecting an amount of Rs 23.68 Cr. under the heading of "secured borrowings". Though the Balance sheet for FY 2018-19 had not been filed by the Corporate Debtor with the Registrar of Companies ("RoC" in short), it was added that the Balance sheet for the subsequent FY 2019-20 recorded an amount of Rs 24.41 Cr. under "secured borrowings". Since the financial statements of the Corporate Debtor consistently acknowledged the debt owed to the Financial Creditor, the period of limitation got extended each time. These acknowledgements in the financial statements of the Corporate Debtor constituted sufficient basis for extending the period of limitation. Taking into account the extension of the limitation period which was triggered upon by the successive acknowledgement of the debt by the Corporate Debtor in their Balance sheets, the filing of Section 7 application fell very much within the extended period of limitation. 12. It is also the case of the Appellant that the Adjudicating Authority had erroneously interpreted the suo moto orders of the Hon'ble Supreme Court and wrongly applied paragraph 5.III of the suo moto orders while c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acknowledgement of debt if it fails to mention the name of the Financial Creditor specifically. It has also been contended that the charge form filed by the Corporate Debtor was dated 27.02.2015 and since more than 10 years have elapsed this charge form cannot be relied upon either. 14. Having noted the rival submissions of both the parties, we would like to confine ourselves to find out whether the Balance sheets of the Corporate Debtor from 2016-17 onwards constitute sufficient ground for allowing extension of the period of limitation and the applicability of the suo moto orders of the Hon'ble Supreme Court. 15. When we look at the material placed on record, we notice that the name of the Financial Creditor appears under the heading of "Secured borrowings" in the balance sheet of F.Y. 2016-17 as may be seen at page 370-371 of Appeal Paper Book ("APB" in short). This entry of "Secured borrowings" continues in subsequent balance sheets as well up to F.Y. 2019-20 as at page 558 of APB. We also notice that the F.Y. 2019-20 balance sheet was approved by the Board of Directors and signed by the authorised signatory on 12.08.2020 and uploaded on the portal of MCA on 14.02.2021. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owledgement of debt." 17. Coming to our analysis, even if the argument of the Appellant is accepted that the acknowledgement of the liability in the balance sheet of the Corporate Debtor of FY 2017-18 extended the period of limitation, even in such an event, since the balance sheet was signed on 02.09.2018, the three years period would have ended on 01.09.2021. Since the date 01.09.2021 fell within the excluded period as provided under the suo moto orders, this would clearly have attracted para 5.III of the suo moto orders and the last date for filing for Section 7 petition would still have been a date on or before expiry of 90 days from 01.03.2022. Thus, the limitation period would have extended until 30.05.2022 and therefore the Section 7 application filed on 05.01.2024 would have been hit by limitation. 18. If we now take the argument canvassed by the Appellant that there is acknowledgement of debt in the balance sheet for FY 2019-20, we notice that the said balance sheet of FY 2019-20 was signed on 12.08.2020, Even in this case, para 5.III of the suo moto orders would have been attracted and the last date for filing of Section 7 petition would have continued until expiry of 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent that the contention of the Appellant that the date of uploading on the MCA portal is the relevant date indicating acknowledgement for limitation purposes lacks legal basis. 21. This brings before us the moot question as to whether acknowledgment in Balance sheet for the purpose of limitation has to be counted from the date of signing of the Balance sheet or from the date of its uploading with the RoC on the MCA portal. 22. To arrive at our finding, at this stage, we may in the first instance, notice the provision contained in Section 18 of the Limitation Act,1963 which reads as under: - "18. Effect of acknowledgment in writing.-(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. (2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh period of limitation was allowed in respect of Balance sheet for FY ending on 31.03.2017 when the same was signed by the Corporate Debtor on 01.09.2017. Thus, this Tribunal has already held in the affirmative in the above judgment that the acknowledgement of liability in the balance sheet arises once the balance sheet is signed by an authorised signatory. 25. It may be relevant to refer to the relevant portions of G.S. Buildtech judgment supra which is as under : "5. The Balance Sheet for the Financial Year 2016-17 having been signed on 01.09.2017 and the above Application having been filed on 20.03.2020, it is well within three years' period from acknowledgment of debt as claimed by the Appellant. It is now well settled that acknowledgment in the Balance Sheet is sufficient acknowledgment under Section 18 of the Limitation Act, 1963. We may refer to the judgment of the Hon'ble Supreme Court in "Asset Reconstruction Company (India) Limited vs. Bishal Jaiswal and Anr.-(2021) 6 SCC 366". After referring to the earlier judgment of the Hon'ble Supreme Court on the question and noticing the provisions of the Companies Act regarding preparation of the Balance Sheets, following wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e debt." (Emphasis supplied) 26. We are also guided by the judgement of Hon'ble High Court of Andhra Pradesh in Vijaya Kumar Machinery & Electrical Stores Versus Alaparthi Lakshmikanthamma 1968 SCC OnLine AP 219 wherein it has been held that that the date on which the balance-sheet was signed is material to constitute an acknowledgment. It may be useful to refer to the relevant portions of the said judgment which is as below: "46. The first of them is that of a Bench of the Madras High Court in Rajah of Vizianagaram v. Official Liquidator, Vizianagaram Mining Company Ltd. One of the appeals considered therein was a case of a balance-sheet presented at an annual general meeting of the company. The relevant discussion is contained in paragraph 33 of the said judgment. A certain amount was claimed in the case. The objection as to bar of limitation in regard to the claim, was sought to be got over by relying upon the inclusion of the item in the balance-sheet presented to the annual general meeting of the limited company. The balance-sheet was signed by the agents of the company and it was also found that the amount claimed was included in the balance-sheet. Reliance was placed up ..... X X X X Extracts X X X X X X X X Extracts X X X X
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