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TMI Blog2021 (4) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of India in the matter of B.K. Educational Services [ 2018 (10) TMI 777 - SUPREME COURT ] referred to Report of the Insolvency Law Committee of March, 2018. Said Report, recorded that debts in Winding up Proceedings cannot be time barred . In the present matter, the Learned Counsel for Appellant instead of requesting Hon ble High Court to transfer the winding-up proceedings, (which were in Limitation) to the Adjudicating Authority withdrew the Petition - considering the facts, and provisions and interest of justice, and also the intent of the High Court Order dated 19th August, 2019, the same can be read as an Order which permitted, in effect the lis to be transferred for decision and adjudication to the Adjudicating Authority. This is clear from Paragraph 1 2 of the Order, read with wording in third paragraph which recorded that Permission as prayed for is granted . The third paragraph kept alive factual and legal contentions raised in the petition and also directed that withdrawal of this petition shall not come in the way of Petitioner . However, in the present matter, it is not necessary for us to resort to even this, in order to do justice. The Adjudicating Authority referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of IBC has already been held by the Hon ble Supreme Court. IBC has not excluded Application of Section 4 to 24 while determining Period of Limitation and Section 29 (2) appears to be applicable. This being so, Section 18 and 19 of Limitation Act must be said to be applicable. Claim of Appellant is not time-barred - HELD THAT:- The Respondent has not shown that while preparing the balance-sheets the directors in their reports recorded denial or any reservation with regard to the debts shown by the Chartered Accountant to claim that they were time-barred. If the debt became NPA on 30th November, 2013 and there are acknowledgments in the balance-sheets of 2014-15 to 2016-17 the Application filed under Section 7 of IBC on 15th December, 2017 cannot be said to be time-barred. This is apart from admitted payment by cheque in April of 2015 though it is argued that it was part of proposal of One Time Settlement which never materialized - Section 7 application was dismissed on ground of limitation. It is not the case that the application was not complete or defective otherwise. The same is required to be admitted. The Application under Section 7 of IBC as filed by the Appellant is within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him that after the Account of Respondent- Corporate Debtor became NPA on 30th November, 2013, the winding up petition was filed within time on 7th April, 2015 and on 11th June, 2015, the Hon ble High Court had issued Notice in the winding up petition. The Respondent had appeared in the winding up proceedings. It is submitted by Learned Sr. Counsel that subsequently on 15th November, 2016 the Insolvency and Bankruptcy Code, 2016 (Act No. 31 of 2016) dated 28th May, 2016 read with Notification SO 3453 (E) dated 15th November, 2016 substituted the earlier existing Section 434 of the Companies Act, 2013 (Act-in short). By the amendment, provision was made for transfer of certain proceedings including winding up proceedings from the High Court to the Tribunal. Reference was made to The Companies (Transfer of Pending Proceedings) Rules 2016 which came into force on 15th December, 2016 and incorporated Rule 5 . It provided that Petitions relating to winding-up under Clause-e of Section 434 of the Act on the ground of inability to pay its debts pending before a High Court and where the Petition has not been served on the Respondents shall be transferred to the Tribunal. The other Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argovind Bhai Dave Vs. Asset Reconstruction Company (I) Ltd and Anr. (Civil Appeal No. 4952 of 2019) and Babulal Vadharji Gurjar Vs. Veer Gurjar Aluminum Industries Pvt. Ltd. (Civil Appeal No. 6347 of 2019) to submit that the Hon ble Supreme Court has held that the intention of the Court could not have been to give a new lease of life to debts which are already time-barred. It is also argued that so-called cheques dated 16th April, 2015 and 30th April, 2015 relied on by the Appellant cannot be treated as acknowledgment of the debt under Section 18 and 19 of the Limitation Act, 1963. The Learned Counsel for the Respondent argued that the Cheques were given as part of proposal of One-Time Settlement which never materialized. Referring to the Balance-Sheets, the Learned Counsel submits that in Judgment in the matter of V. Padmakumar Vs. Stressed Assets Stabilisation Fund Anr. [(2020) SCC ONLINE NCLAT 417] larger Bench of this Tribunal has observed that if Balance-Sheet of the Company is considered to be acknowledgment of debt then in effect there would be no Limitation. Is Appellant Financial Creditor/Assignee? 5. Learned Counsel for Respondent further argued that the Application file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to Page 248 to show that the secured debt of the Appellant M/s. L T Infrastructure Finance Company Ltd. (the assignor of Appellant) was recognized as due. Reference is also made to the directors concerned signing the Annual Report. Appellant then filed O.A. No. 127 of 2016 before DRT Ahmedabad on 04th February, 2016 (Annexure A16 Page 254). Subsequent to that, there is Directors Report under MGT9 EXTRACT (Annexure A 17-Page 274 @ 308) in which part of Balance-Sheet is there at Page 308 showing similar acknowledgment, but now for the amount of ₹ 35,28,33,333/- as on 31st March, 2016. The Appellant has put on record that even after IBC came into force there was similar Directors Report (Annexure A19 Page 316) in the part of Balance-Sheet of 2016-17 showing acknowledgment of ₹ 35,28,33,333 as on 31st March, 2017. The Learned Counsel for the Appellant pointed out Page 350 of the Appeal Paper Book in this regard. Thereafter, the Application under Section 7 (Annexure A20 Page 355) was filed on 15th September, 2017. 8. Learned Counsel for the Appellant has, relying on such record claimed that even without looking at Transfer of Pending Proceedings Rules, there are suffici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary documents were before the Ld. Adjudicating Authority however the Adjudicating Authority did not pass Impugned Order for another eight (8) months and subsequently without going into the complete facts, and without looking into the facts of pendency of the winding up petition and the effect of the same, Adjudicating Authority wrongly concluded that the Application was time-barred. Appellant is Financial Creditor/Assignee 10. Before entering into other discussions, we are disposing one issue raised by the Respondent where it is claimed that the Appellant is not the Financial Creditor. It is claimed that M/s. L T Infrastructure Finance Company Ltd. assigned the debt to Phoenix Trust Fy-14-9 and Appellant filed Petition in capacity of Trustee of Phoenix Fy-14-9 and so is not a Financial Creditor. Copy of the assignment deed dated 30th December, 2013 (Annexure A10- Page 158) shows (See Page 166) that the Assignor was M/s. L T Infrastructure Finance Company Ltd . and the Assignee is Phoenix ARC Private Limited which is described as acting in its capacity as trustee of Phoenix Trust Fy-14-9. Considering the description of the Assignor and Assignee in the assignment agreement, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) all proceedings under the Companies Act, 1956, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer: Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government. (2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section. 9. On and from 17.08.2018, Section 434 was substituted again. This time, the provision reads as follows:- 434. Transfer of certain pending proceedings.- (1) On such date as may be notified by the Central Government in this behalf,- (a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in this section referred to as the Company Law Board) constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided further that any party or parties to any proceedings relating to the winding up of companies pending before any Court immediately before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018, may file an application for transfer of such proceedings and the Court may by order transfer such proceedings to the Tribunal and the proceedings so transferred shall be dealt with by the Tribunal as an application for initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (31 of 2016). (2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section. (Emphasis supplied.) 10. When the Code was enacted with effect from 01.12.2016, two Notifications both dated 07.12.2015 were made. The first Notification, which was titled as the Companies (Transfer of Pending Proceedings) Rules, 2016 laid down in Rule 5 as follows: 5. Transfer of pending proceedings of Winding up on the ground of inability to pay debts.- (1) All petitions relating to winding up under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records transferred in accordance with Rule 7, required for admission of the petition under Sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal upto 15th day of July, 2017, failing which the petition shall stand abated: Provided further that any party or parties to the petitions shall, after the 15th day of July, 2017, be eligible to file fresh applications under Sections 7 or 8 or 9 of the Code, as the case may be, in accordance with the provisions of the Code: Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this Rule and remains in the High Court and where there is another petition under clause (e) of Section 433 of the Act for winding up against the same company pending as on 15th December, 2016 such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent. 12. The Hon ble Supreme Court in the above Judgment in the matter of Forech India thereafter referred to Rules 26 and 27 of the Companies (Court) Rules, 1959 and Form No. 6 which prescribed under Rules, to observe in Paragraph 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n right to file fresh Applications under Section 7 or 8 or 9 of the Code. Reading Rule 5 as a whole, in present matter we are not entering into the issue of such standalone right claimed (with no outer limit as to in how much time it should be exercised after abatement as stated). Here it is sufficient to hold that considering the law and Section 434 read with Rule 5 legislature did not treat rights of applicants to file application under Section 7 of IBC as time barred whose within limitation Petition for Winding up was Pending giving them option to seek transfer if they desired. 14. What is material is that the Section 434 as substituted on 17th August, 2018, which is referred supra has now removed the condition which was existing earlier. Any party or parties to the proceedings can apply for transfer of such petitions to NCLT to deal with them as an application for initiation of CIRP under IBC, without being tied down with the condition where the Petition has not been served on the Respondent 15. What appears to be clear to us from Section 434 of the Companies Act as is now appearing is that the Legislature did not intend to treat the claims of Applicants whose Winding-up Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, considering the facts, and provisions and interest of justice, and also the intent of the High Court Order dated 19th August, 2019, the same can be read as an Order which permitted, in effect the lis to be transferred for decision and adjudication to the Adjudicating Authority. This is clear from Paragraph 1 2 of the Order, read with wording in third paragraph which recorded that Permission as prayed for is granted . The third paragraph kept alive factual and legal contentions raised in the petition and also directed that withdrawal of this petition shall not come in the way of Petitioner . However, in the present matter, it is not necessary for us to resort to even this, in order to do justice. This is because, there is material available on record which shows that the claim filed by the Appellant even otherwise cannot be treated as time- barred. If the debt was not time barred during pendency of Winding up Proceeding and in the parallel Section 7 IBC application which was filed and pending (which was permissible) Section 7 application later cannot be rejected only because of Winding up Petition being withdrawn instead of transferring and merging with Section 7 applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26 of 2018 which was given retrospective effect from 06th June, 2018. Section 238-A reads as under: 238-A. Limitation. - The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be. (Emphasis Supplied) It is clear from the above Section that the provisions of Limitation Act, 1963 shall apply as far as may be to the proceedings or Appeals before the Adjudicating Authority or this Tribunal. Thus it is necessary to look into the Limitation Act to consider how far Limitation Act may be, or could be applied. 23.2. Validity of Section 238-A were examined by the Hon ble Supreme Court of India in Judgment dated 11.10.2018 in the matter of B.K. Educational Services Vs. Parag Gupta MANU/SC/1160/2018 where reference was made to the Report of Insolvency Law Committee and Paragraph 6 read as under: 6. Having heard the learned counsel for both sides, it is important to first set out the reason for the introduction of Section 238-A into the Code. This is to be found in the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that the Limitation Act may not apply to applications of corporate applicants, as these are initiated by the applicant for its own debts for the purpose of CIRP and are not in the form of a creditor s remedy. (Emphasis supplied) The Report of the Committee would indicate that it has applied its mind to judgments of NCLT and NCLAT. It has also applied its mind to the aspect that the law is a complete Code and the fact that the intention of such a Code could not have been to give a new lease of life to debts which are time-barred. (Emphasis supplied) In the same Judgment of B.K. Educational Services, in Paragraph 27 it was observed as under: 27. It is thus clear that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. The right to sue , therefore accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d period means period of limitation computed in accordance with the provisions of this Act. 23.9 Section 3 deals with Bar of Limitation and sub- Section 1 reads as under: Bar of Limitation.-(1) Subject to the provisions contained in sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence. Thus to consider, if given debt is or not barred by Limitation Sections 4 to 24 are relevant. In B.K. Educational Services we have already seen that Hon ble Supreme Court has held that to condone delay Section 5 will have to be applied. We need to see other sections now to consider whether the debt is not barred by Limitation considering the provisions as may be applicable. 23.10 This takes us to sections 4 to 24. Relevant for the present matter are Sections 18 and 19 which read as under: 18: Effect of acknowledgement in writing: (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son liable to pay, a fresh period of Limitation shall be computed from the time when the payment was made. The date of NPA will not shift. It will remain the foundational date and Period of Limitation gets triggered from that date. But when prescribed period is computed in accordance with the Limitation Act and facts of this matter, Section 18 and 19 do appear to be attracted. 19. It was further observed by us in Paragraph 26 of our Judgment in Rajendra Narottamdas supra as under: 26. The Learned Counsel for the Appellant referring to Judgment in the matter of Jagdish Prasad Sharda referred (Supra.) of another bench of this Tribunal submitted that in that matter it was interpreted that even if the payments were made after the Account was declared NPA if the Account was not regularized benefit cannot be taken. It may be clarified that limitation issue is decided on facts and law both and it differs from case to case. In the instant case, when Bank declared NPA to recover dues, it moved DRT. If the Corporate Debtor made some payments, as a reasonable prudent person, Bank received the payments. Section 19 of the Limitation Act, 1963 is not subject to any qualification/exception that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime-barred. So far as Mr. Banerjee s reliance on para 7 of B.K. Educational Services Private Limited (Supra), suffice it to say that the Report of the Insolvency Law Committee itself stated that the intent of the Code could not have been to give a new lease of life to debts which are already time- barred. It can be seen that in spite of filing of OAs within Limitation, the Hon ble Supreme Court accepted the submissions that the time of Limitation when it began running on 21.07.2011, the Application under Section 7 filed on 03.10.2017 was time-barred. Thus, it appears to us that the filing of OAs and pendency of the same did not extend the time for the Financial Creditor, in independent proceeding under IBC. 14. Then, there is Judgment in the matter of Jignesh Shah. Vs. Union of India (2019) SCC Online SC 1254. In Paragraph 4 of the Judgment, the Hon ble Supreme Court of India initially referred to the controversy as was arising in the Writ Petition No. 455 of 2019. 14.1. Briefly the facts may be referred from the Judgment. What appears is that on 20th August, 2009 a Share Purchase Agreement was executed between Multi Commodity Exchange India Ltd. (MCX), Multi Commodity Stock Exchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a time-barred Winding up Petition filed under Section 433 of the Companies Act, 1956 would not suddenly get resuscitated into a Section 7 petition under the Code filed within time, by virtue of the transfer of such petition 14.6. After referring to arguments of Advocates for IL FS the Hon ble Supreme Court first adverted to the decision in the matter of B.K. Educational Services Pvt. Ltd. vs. Parag Gupta Associates in which Section 238 A of the Code relating to the Limitation was considered. The Hon ble Supreme Court in Paragraph 8 to 11 of the Judgment in the matter of Jignesh Shah Vs. Union of India reproduced portion from Judgment in the matter of B.K. Educational Services Pvt. Ltd. and after referring to the said Judgment observed in Paragraph 12 and 13 as under: 12. This Judgment clinches the issue in favour of the Petitioner/Appellant. With the introduction of Section 238 A into the Code, the provisions of the Limitation Act apply to applications made under the Code. Winding up Petitions filed before the Code came into force are now converted into petitions filed under the Code. What has, therefore, to be decided is whether the Winding up Petition, on the date that it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court allowed the Appeal which was filed before it and held that Winding up Petition filed on 21st October, 2016 being beyond the period of three years mentioned in Article 137 of the Limitation Act was time-barred and cannot be proceeded with any further. 15. It is quite clear from the above that although the suit was filed in time the Winding up Petition was beyond three years of the default and when such Winding up Petition was transferred in view of the Rules to the NCLT to convert the same into a proceeding under Section 7 of IBC, it was found that as the Winding up Petition itself was time-barred from the date of default, the same could not be proceeded further as Application under Section 7. 21. Further, we had discussed in our Judgment in the matter of A. Balakrishnan supra paragraphs 19 to 21 as under: 19. It has already been held by the Hon ble Supreme Court that when there is default and the Account is classified as NPA the time would start running. When this is so, if filing of the suit or filing of OAs did not extend the time, the question is whether consequential issuing of Recovery Certificate would trigger a fresh cause of action for filing Application under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application. 4. In order to get out of the clutches of para 27, it is urged that Section 23 of the Limitation Act would apply as a result of which Limitation would be saved in the present case. This contention is effectively answered by a judgment of three learned Judges of this Court in Balkrishna Savalram Pujari and Others vs. Shree Dnyaneshwar Maharaj Sansthan Others , [1959] supp. (2) S.C.R. 476. In this case, this Court held as follows: . In dealing with this argument it is necessary to bear in mind that S. 23 refers not to a continuing right but to a continuing wrong. It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury. If the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue. If, however, a wrongful act is of such a character that the injury caused by it itself continues then the act constitutes a continuing wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etely the right of Appellant which would have begun ticking as a result of the Limitation Act, Rights, as a result of which Limitation would have begun ticking were injured effectively and completely when Recovery Certificate was issued. This is what appears to us from reading the Judgment. 21. Earlier in the matter of Digamber Bhondwe Vs. JM Financial Asset Reconstruction in Company Appeal (AT) (Ins.) No. 1379 of 2019 also the Learned Counsel therein had claimed that the date of NPA was to be ignored and Limitation was to be counted from the date of Recovery Certificate for Section 7 of IBC. We had at that time gone into details and for reasons recorded concluded that we are unable to accept the submissions that date of NPA was to be ignored and Limitation was to be counted from the date of Recovery Certificate. Even now, for reasons recorded by us in the Judgment of Digamber Bhondwe Vs. JM Financial Asset Reconstruction, when we have revisited the Judgment in the matter of Vashdeo R Bhojwani Vs. Abhyudaya Co-operative Bank Ltd. Anr. we are unable to agree that the Judgment gives a fresh date to trigger Application under Section 7 of IBC. 22. In this regard, now we have the advant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings before the wrong forum terminate? Hon ble Supreme Court considered the law on the subject and earlier Judgments of Hon ble Supreme Court and while dismissing the Appeal in Paragraphs 63, 64, 66, 67, 68, 88 and 92 of the Judgment in the matter of Sesh Nath Singh Anr. (Supra) observed as under: 63. Section 5 of the Limitation Act, 1963 does not speak of any application. The Section enables the Court to admit an application or appeal if the applicant or the appellant, as the case may be, satisfies the Court that he had sufficient cause for not making the application and/or preferring the appeal, within the time prescribed. Although, it is the general practice to make a formal application under Section 5 of the Limitation Act, 1963, in order to enable the Court or Tribunal to weigh the sufficiency of the cause for the inability of the appellant/applicant to approach the Court/Tribunal within the time prescribed by limitation, there is no bar to exercise by the Court/Tribunal of its discretion to condone delay, in the absence of a formal application. 64. A plain reading of Section 5 of the Limitation Act makes it amply clear that, it is not mandatory to file an application in writi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red. The Adjudicating Authority does not resolve disputes, in the manner of suits, arbitrations and similar proceedings. However, the ultimate object of an application under Section 7 or 9 of the IBC is the realization of a debt by invocation of the Insolvency Resolution Process. In any case, since the cause of action for initiation of an application, whether under Section 7 or under Section 9 of the IBC, is default on the part of the Corporate Debtor, and the provisions of the Limitation Act 1963, as far as may be, have been applied to proceedings under the IBC, there is no reason why Section 14 or 18 of the Limitation Act would not apply for the purpose of computation of the period of limitation. 92. In other words, the provisions of the Limitation Act would apply mutatis mutandis to proceedings under the IBC in the NCLT/NCLAT. To quote Shah J. in New India Sugar Mill Limited v. Commissioner of Sales Tax, Bihar, It is a recognised rule of interpretation of statutes that expression used therein should ordinarily be understood in a sense in which they best harmonise with the object of the statute, and which effectuate the object of the Legislature . Thus, it is clear that Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where before the expiration of the prescribed period for a suit in respect of any property or right, an acknowledgement 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, a fresh period of limitation shall commence from the time when the acknowledgement was so signed. In an early case, in England, in Jones v. Bellgrove Properties, (1949) 2KB 700, it was held that a statement in a balance sheet of a company presented to a creditor- share holder of the company and duly signed by the directors constitutes an acknowledgement of the debt. In Mahabir Cold Storage v. CIT (1991) 188 ITR 91, the Supreme Court held: The entries in the books of accounts of the appellant would amount to an acknowledgement of the liability to Messrs. Prayagchand Hanumanmal within the meaning of Section 18 of the Limitation Act, 1963, and extend the period of limitation for the discharge of the liability as debt. In several judgments of this Court, this legal position has been accepted. The Hon ble High Court then referred to some of the Judgements. 9. In the Judgement in the matter of Sheetal Fabrics (supra), Hon ble Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atute the balance sheet was a separate document and as such if there was unequivocal acknowledgement on the balance- sheet is a statutory document and perhaps is a separate document but the balance sheet not confirmed or passed by the shareholders at the appropriate meeting and in order to do so it must be accompanied by a report, if any, made by the Directors. Therefore, even though the balance sheet may be a separate document these two documents in the facts and circumstances of the case should be read together and should be construed together. 13. In the same breath, the High Court also explained as to what would constitute an acknowledgement under Section 18 of the Limitation Act by referring to the judgment of the Supreme Court and this discussion would be found in the following passage: It was held by the Supreme Court in the case of L.C. Mills v. Aluminium Corpn. of India Ltd., (1971) 1 SCC 67 : AIR 1971 SC 1482, that it was clear that the statement on which the plea of acknowledgement did not create a new right of action but merely extended the period of limitation. The statement need not indicate the exact nature or the specific character of the liability. The words used i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a), the Hon ble High Court of Delhi after referring to Judgement of the Hon ble Supreme Court in M/s Mahabir Cold Storage Versus C.I.T. (supra) and the legal positon in Para 17, observed that in several Judgements of the High Court, the legal position has been accepted and added:- In Daya Chand Uttam Prakash Jain vs. Santosh Devi Sharma 67 (1997) DLT 13, S.N. Kapoor J. applied the principle in a case where the primary question was whether a suit under Order 37 CPC could be filed on the basis of an acknowledgement. In Larsen Tubro Ltd. v. Commercial Electric Works 67 (1997) DLT 387 a Single Judge of this Court observed that it is well settled that a balance sheet of a company, where the defendants had shown a particular amount as due to the plaintiff, would constitute an acknowledgement within the meaning of Section 18 of the Limitation Act. In Rishi Pal Gupta v. S.J. Knitting Finishing Mills Pvt. Ltd. 73 (1998) DLT 593, the same view was taken. The last two decisions were cited by Geeta Mittal, J. in S.C. Gupta v. Allied Beverages Company Pvt. Ltd. (decided on 30/4/2007) and it was held that the acknowledgement made by a company in its balance sheet has the effect of extending the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets. The submission on behalf of the debtor that the letter of undertaking was given in the course of negotiations and cannot be held to be an evidence of the acknowledgement of liability of the debtor, apart from being untenable in law, reiterates the attempt to evade liability and must be rejected. The submission that the letter was written without prejudice to the legal rights and remedies available under any law and therefore the acknowledgement or the undertaking has no legal effect must likewise be rejected. This letter is reminiscent of a letter that fell for consideration in Spencer s case as pointed out by Mr. Harish Salve, as a Rule the debtor who writes such letters has no intention to bind himself further than is bound already, no intention of paying so long as he can avoid payment, and nothing before his mind but a desire, somehow or other, to gain time and avert pressure. It was argued in a subsequent case that an acknowledgment made without prejudice in the case of negotiations cannot be used as evidence of anything expressly or impliedly admitted. The House of Lords observed as follows: But when a statement is used as acknowledgement for the purpose of Section 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Co., Ltd. reported as MANU/SC/0007/1958, while dealing with Resolution of Board of Directors and while considering Balance Sheet with regard to question of limitation, Hon ble Supreme Court examined the Resolution and also the Balance Sheet and in the context of the facts of that matter came to a conclusion that the Resolution or the Balance Sheet did not help the Appellant. It is not that it was held that for the purpose of limitation, Balance Sheet cannot be considered at all. 33. In the matter of A.V. Murthy Versus B.S. Nagabasavanna reported as (2002) 2 SCC 642, while dealing with a complaint under Section 138 of the Negotiable Instruments Act, 1881 when dispute came up whether the cheque drawn was in respect of a debt or liability not legally enforceable, and the Additional Sessions Judge had held that there was error in taking cognizance of the offence, Hon ble Supreme Court observed in Para 5 as under:- Moreover, in the instant case, the appellant has submitted before us that the respondent, in his balance sheet prepared for every year subsequent to the loan advanced by the appellant, had shown the amount as deposits from friends. A copy of the balance sheet as on 31-3-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for any suit, appeal or application a period of limitation different from the period prescribed by the Schedule, the provisions of section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in sections 4 to 24 (inclusive) shall apply only in so far as, and to the extent to which, they are not expressly excluded by such special or local law. (3) Save as otherwise provided in any law for the time being in force with respect to marriage and divorce, nothing in this Act shall apply to any suit or other proceeding under any such law. (4) Sections 25 and 26 and the definition of easement in section 2 shall not apply to cases arising in the territories to which the Indian Easements Act, 1882 (5 of 1882), may for the time being extend. It is clear that Insolvency and Bankruptcy Code is a special law. Section 238 A of IBC states that the provisions of the Limitation Act shall, as far as may apply to the proceedings or Appeals before the Adjudicating Authority and this Tribunal as the case may be. Article 137 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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