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TMI Blog2024 (10) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... t (OTS) to UCO Bank. The proposal made by letter dated 07.06.2016 acknowledges that there were prior debts owed to UCO Bank. To substantiate the argument that such OTS constituted acknowledgment of debt since it relates to present and subsisting liability and indicates existence of a jural relationship between the parties, UCO Bank relied on judgment of this Court in Lakshmirattan Cotton Mills Co. Ltd. and Messrs Behari Lal Ram Charan v. Aluminium Corporation of India Limited [ 1970 (10) TMI 81 - SUPREME COURT] . The findings arrived at by the Adjudicating Authority and NCLAT are correct in law and fact - there are no merit in the appeal - appeal dismissed. - PAMIDIGHANTAM SRI NARASIMHA And SANDEEP MEHTA , JJ. JUDGMENT PAMIDIGHANTAM SRI NARASIMHA , J. 1. By the present appeal, the suspended director of the Corporate Debtor assails the order of the NCLAT National Company Law Appellate Tribunal in Company Appeal (AT) (Insolvency) No. 238 of 2020, dated 04.10.2021 affirming the order of the Adjudicating Authority Adjudicating Authority/National Company Law Tribunal, Kolkata Bench, Kolkata order dated 13.12.2019 in CP No. 254/KB/2019 admitting the application under Section 7 of IBC I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation was rejected by the Adjudicating Authority on the ground that there is an acknowledgement of debt in the financial statements as well as auditor s report of the Corporate Debtor for the year ending on 31.03.2017. On the basis of Section 238A of the Code, incorporating the Limitation Act, the Adjudicating Authority relied on Section 18 of the Limitation Act to reckon the period of limitation from the date of acknowledgement of the debt and concluded that the institution of CIRP on 13.02.2019 is within the period of limitation. The further contention of the Corporate Debtor that name of UCO Bank, the financial creditor, is not specifically mentioned in the relied upon entry in the balance sheet was rejected by NCLT by referring to the Explanation to Section 7(1) of the Code providing that the proceedings thereunder get triggered even in the case of a default by debtor in respect of any financial creditor other than the applicant. 5. Aggrieved by the admission of Section 7 application, initiation of CIRP and appointment of IRP, the appellant preferred an appeal to the NCLAT, Principal Bench. The same arguments were advanced before the NCLAT and having considered the same i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... io of the judgement of Hon'ble Supreme Court in the case of Lakshmirattan Cotton Mills Co Ltd and further reiterated in Dena Bank's case (supra) that there is an acknowledgement of subsisting liability of the Corporate Debtor. However, it may not necessarily specify the exact nature of the liability. But it indicates the jural relation between the parties, and in any event, the same can also be derived by implication. Further, the said Letter is not without prejudice basis and, therefore, amounts to an unequivocal acknowledgement of liability of the Corporate Debtor. A reading of the documents above reveals that the Corporate Debtor has acknowledged/subsisting liability to attract the provisions of Section 18 of the Limitation Act, 1963. 11.11 Based on the discussion as above, we think that the present Appeal is liable to be dismissed, and the interim Order dated April 07, 2020, is exposed to vacated. 6. Mr. Balbir Singh, senior counsel appearing on behalf of the appellant has emphatically argued only one point before us. It is that there is no clear and unequivocal acknowledgement of debt of the Corporate Debtor in the entries of the balance sheets. If this is true, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debtor (corporate guarantor), would get triggered the moment the principal borrower commits default due to non-payment of debt. Thus, when the principal borrower and/or the (corporate) guarantor admit and acknowledge their liability after declaration of NPA but before the expiration of three years therefrom including the fresh period of limitation due to (successive) acknowledgments, it is not possible to extricate them from the renewed limitation accruing due to the effect of Section 18 of the Limitation Act. Section 18 of the Limitation Act gets attracted the moment acknowledgment in writing signed by the party against whom such right to initiate resolution process under Section 7 IBC enures. Section 18 of the Limitation Act would come into play every time when the principal borrower and/or the corporate guarantor (corporate debtor), as the case may be, acknowledge their liability to pay the debt. Such acknowledgment, however, must be before the expiration of the prescribed period of limitation including the fresh period of limitation due to acknowledgment of the debt, from time to time, for institution of the proceedings under Section 7 IBC. Further, the acknowledgment must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebt owed to UCO Bank in the balance sheet entries of Corporate Debtor for the years 2017 and 2019. In the absence of clear demarcation as to what the Corporate Debtor owes to the UCO Bank, the said entries cannot be relied on for the purpose of extending the period of limitation in terms of Section 18 of the Limitation Act. Mr. Balbir Singh further argues that even if said entry is taken to be an acknowledgment of debt, the same cannot aid respondent No.1 s case since it fails to mention the name of financial creditor. 8.1 Mr. Partha Sil, counsel on behalf of respondent No. 1-Bank submitted that the Balance Sheets of a company are prepared in the prescribed statutory format as per Section 129, read with Schedule III of the Companies Act 2013, which does not provide for giving specific names of each and every Secured and Unsecured creditor. In support of his submission, Mr. Partha Sil referred to the judgment in Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal (2021) 6 SCC 366 where it was observed that there was no compulsion for Companies to make any particular admissions in the balance sheet, except for what is prescribed. 9. A three Judge Bench of this Court in Bishal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the Corporate Debtor s proposal of One Time Settlement (OTS) to UCO Bank. The proposal made by letter dated 07.06.2016 acknowledges that there were prior debts owed to UCO Bank. To substantiate the argument that such OTS constituted acknowledgment of debt since it relates to present and subsisting liability and indicates existence of a jural relationship between the parties, UCO Bank relied on judgment of this Court in Lakshmirattan Cotton Mills Co. Ltd. and Messrs Behari Lal Ram Charan v. Aluminium Corporation of India Limited (1971) 1 SCC 67 . The implication of a statement about a present and subsisting debt of a Corporate Debtor is articulated by this Court in the following manner; 9. It is clear that the statement on which the plea of acknowledgment is founded must relate to a subsisting liability as the section requires that it must be made before the expiration of the period prescribed under the Act. It need not, however, amount to a promise to pay, for, an acknowledgment does not create a new right of action but merely extends the period of limitation. The statement need not indicate the exact nature or the specific character of the liability. The words used in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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