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TMI Blog2020 (10) TMI 961X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel for the parties, we with the great respect to the hon'ble Members of the judgment thought it proper to refer V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCLAT) for reconsideration. We shall proceed further in this Appeal, after receiving answer of the reference. The Registrar is directed to place the attached reference along with V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCLAT) before the hon'ble Acting Chairperson for constituting appropriate Bench. Reference : Three Members Bench of National Company Law Appellate Tribunal. Reference 1. We Three Members Bench of this Appellate Tribunal heard the arguments in Company Appeal (AT) (Insolvency) No. 385 of 2020. During the course of arguments, a judgment rendered by five hon'ble Members of this Appellate Tribunal in the case of V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCLAT) in Company Appeal (AT) (Insolvency) No. 57 of 2020 has been cited before us. After hearing the arguments of learned counsel for the parties. We with the great respect to the hon'ble Members of the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Insolvency and Bankruptcy Code, 2016. 3. The corporate debtor contends that the financial creditor has no cause of action to initiate and proceed against the corporate debtor. The purported amount claimed by the financial creditor is yet to be ascertained, and proceedings in that regard are already pending before the DRT, Kolkata. The corporate debtor has also raised the issue of limitation. 4. The Adjudicating Authority has admitted the application on the ground that the debt and default are not under challenge and the application is filed within limitation. Being aggrieved with the order the corporate debtor filed the appeal. 5. The appeal is filed mainly on the ground that the learned Adjudicating Authority has failed to consider that the State Bank of India, the predecessor in interest of financial creditor (respondent No. 1) had declared the accounts of the corporate debtor (respondent No. 2) as NPA on February 28, 2014. The application under section 7 of the I and B Code was filed in December 2018, i. e., after a delay of almost five years. The application is barred by limitation. The Adjudicating Authority has failed to appreciate that the balance-sheet produced by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Thereafter, the corporate debtor has time and again admitted and unequivocally acknowledged its debt in the balancesheets for the years ending March 31, 2015, March 31, 2016 and March 31, 2017. Hence, the right to sue stood extended in terms of section 18 of the Limitation Act, 1963. 10. Regarding the issue of limitation in the present matter, it is pleaded that entries in the balance-sheet amounts to an acknowledgment of debt in terms of section 18 of the Limitation Act. The Adjudicating Authority observed that in the balance-sheet the corporate debtor, admitted its liability, which was signed before the expiry of three years from the date of default. It is an acknowledgment of debt in terms of section 18 of the Limitation Act and is therefore, not barred by limitation. Therefore, the Adjudicating Authority admitted the application for initiation of CIRP of the corporate debtor. 11. Learned counsel for the financial creditor submitted that in Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries P. Ltd. [2020] 222 Comp Cas 115 (SC) ; [2020] SCC Online SC 647 the hon'ble Supreme Court formulated a question, whether section 18 of the Limitation Act, 1963 could be ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court held that : "The aforesaid position is further corroborated by the directors report appearing at page 2 of the annual report for the year ending December 1988, wherein it was mentioned that during the year the company developed a large number of testing equipments on its own for using the same for the testing of semiconductors. Once the appellants have themselves made admission in their own balance-sheet, which was not rebutted and was further substantiated in the director's report, the appellant now cannot turn around and make sub mission which are contrary to their own admissions." 15. In the case of S. Natarajan v. Sama Dharman MANU/SC/0698/2014 the hon'ble the Supreme Court of India held that : "Referring to the facts before it, this court observed that the complainant therein had submitted his balance-sheet, prepared for every year subsequent to the loan advanced by the complainant and had shown the amount as deposits from friends. This court noticed that the relevant balance-sheet is also produced in the court. This court observed that if the amount borrowed by the accused therein is shown in the balance-sheet, it may amount to acknowledgment and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to the debenture holders who happened to be the share holders of the company and not to the other debenture holders, see Atlantic and Pacific Fibre Importing and Manufacturing Co. Ltd., In re [1928] 8 Ch D 836. Under Tentenden's Act, 1828 as also under the Limitation Act, 1939 (c. 21) the acknowledgment must be made to the creditor or his agent and if the balance-sheet is sent to a shareholder who is also a creditor the requirements of those Acts were satisfied, see Coliseum (Burrow) Ltd., In re [1930] 2 Ch D 44 at 47, Jones v. Bellgrove Properties Ltd. [1949] 1 All ER 498 (CA) at 504 affirmed [1949] 2 KB 700. The decision in the last case has been followed in India and it has been held that an admission of indebtedness in a balance-sheet is a sufficient acknowledgment under section 19 of the Indian Limitation Act, see Rajah of Vizianagram v. Official Liquida tor, Vizianagram Mining Co. Ltd. [1951] 2 MLJ 535 at 550-1 ; AIR 1952 Mad 136 at 145, Lahore Enamelling and Stamping Co. Ltd. v. A. K. Bhalla [1958] 28 Comp Cas 216 (Punjab) ; AIR 1958 Punjab 341 at 347, First National Bank Ltd. v. Mandi (State) Industries Ltd. [1957] 59 PLR 589 and in an unreported decision of S. R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability contained in the balance-sheet of a company furnishes a fresh starting point of limitation. It is not necessary, as the law stands in India, that the acknowledgment should be addressed and communicated to the creditor. We are in respectful agreement with the view taken by the learned company judge on the point. The position of law that an acknowledgment of debts in the balance-sheets of a company does furnish fresh starting point of limitation is too well-settled to need any elaborate discussion. (See : Jones v. Bellgrove Properties Ltd. [1949] 2 KB 700, Compania de Electricidad de la Provincia de Buenos Aires Ltd., In re [1980] Ch D 146, Babulal Rukmanand v. Official Liquidator MANU/RH/0043/1968 and Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff MANU/WB/0033/1962 ; AIR 1962 Cal 115." 20. In the case of Bhajan Singh Samra v. Wimpy International Ltd. [2011] SCC Online Delhi 4888 ; [2012] 173 Comp Cas 455 (Delhi), the hon'ble High Court of Delhi has held that : "Having heard the parties, this court is of the opinion that the petitioning creditor has to satisfy the court that the debt on which the petition is based was due and payable on the date of the petition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the party against whom such property or right is claimed, a fresh period of limitation shall commence from the time when the acknowledgment was so signed. In an early case, in England, in Jones v. Bellgrove Properties Ltd. [1949] 2 KB 700, it was held that a statement in a balance-sheet of a company presented to a creditor-shareholder of the company and duly signed by the directors constitutes an acknowledgment of the debt." 22. The hon'ble High Court of Delhi in the case of Shahi Exports P. Ltd. v. CMD Buildtech P. Ltd. (No. 1) [2013] 181 Comp Cas 111, 118 (Delhi) ; [2013] SCC Online Delhi 2535 held as under : "It is hardly necessary to cite authorities in support of the well- established position that an entry made in the company's balance- sheet amounts to an acknowledgment of the debt and has the effect of extending the period of limitation under section 18 of the Limitation Act, 1963. However, I may refer to only one decision of the learned single judge of this court (Manmohan J.) in Bhajan Singh Samra v. Wimpy International Ltd. [2011] 185 DLT 428 ; [2012] 173 Comp Cas 455 (Delhi) for the simple reason that it collects all the relevant authorities on the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned by the party against whom the right is claimed gives rise to a fresh period of limitation. Under Explanation (b) to the section the word 'signed' means signed either personally or by an agent duly authorized. A company being a corporate body acts through its representatives, the managing director and the board of directors. Under section 210 of the Companies Act it is the statutory duty of the board of directors to lay before the company at every annual general body meeting a balance-sheet and a profit and loss account for the preceding financial year. Section 211 directs that the form and contents of the balance-sheet should be as set out in Part I of Schedule VI. The said form stipulates for the details of the loans and advances and also of sundry creditors. The balance-sheet should be approved by the board of directors, and thereafter authenticated by the manager or the secretary if any and not less than two directors one of whom should be the managing director. (See section 215). The Act also provides for supply of copies of the balance-sheet to the members before the company in general meeting. Going by the above provisions, a balance-sheet is the statement of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akshmikant hamma MANU/AP/0150/1968 ; [1969] 74 ITR 224 (AP) and Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff [1961] SCC Online Cal 128 ; [1960-61] 65 CWN 856 ; [1962] AIR 1962 Cal 115, Rajah of Vizianagram v. Official Liquidator, Vizianagram Mining Co. Ltd. MANU/TN/0116/1952 ; AIR 1952 Mad 136). 101. Therefore it is not necessary that the acknowledgment of liability must be contained in a document addressed to the creditor, i. e., the petitioners in the instant case." 27. Firstly we have considered whether section 18 of the Limitation Act, 1963 is applicable to insolvency cases ? 28. We have carefully gone through the judgment of hon'ble Supreme Court in the case of Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries P. Ltd. [2020] 222 Comp Cas 115, 165 (SC) ; [2020] SCC Online SC 647. The hon'ble Supreme Court has held as under : "Therefore, on the admitted fact situation of the present case, where only the date of default as 'July 8, 2011' has been stated for the purpose of maintaining the application under section 7 of the Code, and not even a foundation is laid in the application for suggesting any acknowledgment of any other date of defaul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent no reasons have been assigned for disagreement with this view. (III) In support of majority judgment in V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCLAT) none of the precedent cited before us. (IV) In V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCLAT), it is discussed that the balance-sheet of the company is prepared pursuant to section 92 of the Companies Act, 2013 and filing of balance-sheet/annual return being mandatory under section 92(4) of the Companies Act, 2013, failing of which attracts penal action under section 92(5) and (6) of the Act. In our humble opinion balance- sheet is not annual return but is a financial statement. Financial statement is defined under section 2(40) of the Companies Act, 2013. (V) In V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF) [2020] 221 Comp Cas 153 (NCLAT) it is held that the balance-sheet is required to be prepared under the obligation casted under section 92 of the Companies Act, 2013. Therefore, it cannot amount to an acknowledgment for section 18 of the Limitation Act, 1963. The acknowledgment should be voluntary and cannot be given unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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