2022 (8) TMI 1003 - AT - Insolvency and Bankruptcy

Maintainability of application of CIRP (which was admitted) - application was barred by time or not - sufficient reasons, present or not, to hold that there was extension of limitation under Section 18 of the Limitation Act since the entries in the Balance-Sheets year 2012-13 to 2018-19 have not been looked into - HELD THAT - The loan is acknowledged by the entry in the balance sheets and the opinion expressed by the Auditor cannot be read to mean that acknowledgement in balance sheet is detracted in any manner. When the acknowledgment is unequivocal and Auditor s opinion in any manner does not detract it from being an acknowledgment under Section 18 of the Limitation Act, the mere fact that the financial document contains a counter claim shall not in any manner take away the acknowledgment under Section 18 of the Limitation Act. The Adjudicating Authority has rightly held that the balance sheets contain the acknowledgment under Section 18 hence the Application under Section 7 was not barred by time - It is further to be noticed that the financial documents have been prepared in the normal course of business and submitted under the Companies Act. Appeal dismissed.

Summary

Issues:
Admission of Section 7 Application under Insolvency and Bankruptcy Code, 2016, based on time limitation challenge.

Analysis:
The appeal was filed against the Order admitting the Application under Section 7 by the Adjudicating Authority. The UCO Bank had sanctioned financial credit facilities to the Corporate Debtor, subsequently declared as Non-Performing Assets. The Corporate Debtor challenged the proceedings before the DRT, leading to the UCO Bank filing the Section 7 Application. The Adjudicating Authority admitted the Application, prompting the Appellant to challenge it on the grounds of time limitation. The Appellant argued that the Bank's Application was time-barred, citing the entries in the Balance Sheets from 2012 to 2019. The Appellant contended that the Balance Sheets did not confirm the debts, thus not constituting acknowledgment under Section 18 of the Limitation Act.

The Adjudicating Authority rejected the Appellant's contention on time limitation, citing the acknowledgment of debt in the Balance Sheets from 2012 to 2019. The Appellant referred to the Supreme Court judgment in "Asset Reconstruction Company (India) Ltd. Vs. Bishal Jaiswal & Anr.," emphasizing the need to examine each case to determine if an entry in the Balance Sheet constitutes an acknowledgment under Section 18 of the Limitation Act. The Appellant highlighted the Auditor's notes in the Balance Sheets, arguing that they did not negate the acknowledgment of debt.

The Appellant also pointed out the management's contentions regarding disputes with the UCO Bank, emphasizing certain financial details and credit facilities. The Appellant argued that the mere presence of a counter claim in the financial documents should not detract from the acknowledgment under Section 18 of the Limitation Act. The Adjudicating Authority upheld that the Balance Sheets contained acknowledgments under Section 18, thus rejecting the time limitation challenge.

The Appellate Tribunal dismissed the Appeal, noting that all contentions were considered in the Impugned Order. The Appellant's concern regarding the lack of action by the IRP was advised to be addressed through an appropriate application before the Adjudicating Authority. The judgment reaffirmed the acknowledgment of debt in the Balance Sheets and the compliance with the Companies Act in preparing the financial documents.