Balance Sheet can be considered as acknowledgement of debts under Section 18 of the Limitation Act: Supreme Court.
In the recent case of Asset Reconstruction Company v. Bishal Jaiswal, the major issue of that case was whether the judgement given by the V Padmakumar v. Stressed Assets Stabilized Fund was correct or not. In this case, it was decided whether reflection of debt in the books of accounts amounts to acknowledgement of debt under Section 18 of the Limitation Act, 1963, and thereby extends the period of limitation. In this, the bench stated in negative and said that it cannot be considered as acknowledgement of debt. Also, the majority concluded that the filing of balance sheet being mandatory under Section 92(4) of the Companies Act, 2013, it cannot be treated to be an acknowledgement under Section 18.
The NCLAT stated that if the Balance Sheet of the corporate debtor amounts to acknowledgement under Section 18 then it is to be held that no limitation would be applicable because every year, it is mandatory for the corporate debtor to file Balance sheet. When the current judgement was challenged in the Supreme Court, the court held that the balance sheets can amount to acknowledgement of debt under Section 18 of the Limitation Act.
The facts in brief of this case are that the Corporate Debtor (Corporate Power Ltd.) had availed the loan from the Consortium Lenders for setting up 1080 MW coal-based plant at Chandwa of Latehar District in the State of Jharkhand in two phases comprising of 2×270 MW in each phase by executing common loan agreement with the lender’s bank. The Corporate Debtor has availed loan facilities aggregating to Rs.2175,00,00,000/- for the Phase-I project and availed Rs.2387,00,000/- 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 above-mentioned Banks. Thereafter, State Bank of India issued a loan recall notice dated 27th March 2015 which was replied by the Corporate Debtor on 28th March 2015. The Consortium Lenders issued notices on 20th June 2015 under Section 13(2) of the SARFAESI Act, 2002 demanding a total amount of Rs.5997,80,02,973/- but the Corporate Debtor failed to repay the loan amount. The above-mentioned Banks had assigned the debt in favour of Asset Reconstruction. Therefore, the Financial Creditor has filed the Application for initiation of CIRP against the Corporate Debtor under Section 7 of the I&B Code.