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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 ..... 7.2012 and 31.12.2012. The said loan and other credit facilities were availed for funding of Corporate Debtor's Thermal Power Plant. 2.1 Having defaulted on repayment of principal as well as interest levied thereupon, Corporate Debtor's account was declared as Non-Performing Asset (NPA) on 05.11.2014. Further, proceedings under SARFAESI Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act and DRT Debts Recovery Tribunal for recovery of dues were also initiated. However, we are not concerned with these proceedings for disposal of the present appeal. 3. The root of the present controversy arose on 13.02.2019 when UCO Bank filed an application under Section 7 of the Code to initiate CIRP proceeding against the Corporate Debtor before the Adjudicating Authority (NCLT, Kolkata Bench). These proceedings were resisted by the Corporate Debtor, primarily on the grounds of limitation. Additionally, the Section 7 application was also challenged on the grounds that it was not signed by a competent person and also that there is no liability to pay as per the terms of the agreement and as such there is no debt. 4. On the issue of competency of the Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Form-1 for initiation of the Corporate Insolvency Process. 11.6 We find that the balance sheet for the financial year ending on March 31 2017, was part of the record before the learned Adjudicating Authority and was annexed with Section 7 Application, which was also duly admitted by the Appellant during the hearing. Subsequently, the balance sheet for the financial year ending will March 31 2019, was annexed with the reply filed by Respondent No. 1 before this Hon'ble Tribunal on March 02, 2020. However, as the practice and procedure of this Hon'ble Tribunal, the same was not accepted at the filing counter without the specific mention of this Hon'ble Tribunal. Accordingly, a copy of the Application for the additional document is also annexed as Annexure A. Subsequently; this Hon'ble Tribunal permitted such additional documents to be taken on record vide its Order dated July 15 2020. 11.7 The Company's balance sheet is prepared in the statutory format as per Schedule 3rd of the Companies Act 2013, which does not provide for giving the specific name of every secured or unsecured creditor. 11.8 It is further observed that the Corporate Debtor has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. With the extension of Limitation Act to the provisions of the Code, the benefit of Section 18 of the Limitation Act dealing with the effect of acknowledgement of a debt in writing applies. Considering the same issue in Laxmi Pat Surana v. Union Bank of India (2021) 8 SCC 481, the Court observed: "42. Notably, the provisions of the Limitation Act have been made applicable to the proceedings under the Code, as far as may be applicable. For, Section 238-A predicates that the provisions of the Limitation Act shall, as far as may be, apply to the proceedings or appeals before the adjudicating authority, NCLAT, the DRT or the Debt Recovery Appellate Tribunal, as the case may be. After enactment of Section 238-A IBC on 6-6-2018, validity whereof has been upheld by this Court, it is not open to contend that the limitation for filing application under Section 7 IBC would be limited to Article 137 of the Limitation Act and extension of prescribed period in certain cases could be only under Section 5 of the Limitation Act. There is no reason to exclude the effect of Section 18 of the Limitation Act to the proceedings initiated under the Code. 43. Ordinarily, upon declaration of the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IBC is required to be filed within the period of limitation prescribed by law, which in this case would be three years from the date of default by virtue of Section 238-A IBC read with Article 137 of the Schedule to the Limitation Act, the delay in filing a petition in the NCLT is condonable under Section 5 of the Limitation Act unlike delay in filing a suit. Furthermore, as observed above Sections 14 and 18 of the Limitation Act are also applicable to proceedings under the IBC. ............ 140. To sum up, in our considered opinion an application under Section 7 IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the corporate debtor as NPA, if there were an acknowledgment of the debt by the corporate debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years." (emphasis supplied) 7.2 A reference must also be made to a three Judge Bench decision in Rajendra Narottamdas Sheth v. Chandra Prakash Jain (2022) 5 SCC 600 which succinctly observed; "27. It is no more res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are annexed to or forming part of such financial statements are expressly recognised by Section 134(7). Equally, the auditor's report may also enter caveats with regard to acknowledgments made in the books of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff , that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law as it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgment of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act." (emphasis supplied) 10. Having considered the specific facts and circumstances of this case, the Adjudicating Authority as well as the NCLAT have concurrently held that the entries in the balance sheets amount to clear acknowledgment of debt. We agree with the findings. Further, Note 3.4 appended to said b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of the admission and the surrounding circumstances. Generally speaking, a liberal construction of the statement in question should be given. That of course does not mean that where a statement is made without intending to admit the existence of jural relationship, such intention should be fastened on the person making the statement by an involved and farfetched reasoning..." (emphasis supplied) 11.1 It is also relevant to refer to judgment in Dena Bank (Supra) which held as follows: "139. Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of onetime settlement of a live claim, made within the period of limitation, should not also be construed as an acknowledgment to attract Section 18 of the Limitation Act..." (emphasis supplied) 12. Both these factors, acknowledgment of debt in the balance sheet as well as in the OTS proposal, have been considered by NCLAT while dismissing the appeal. The relevant portion of the NCLAT findings, after considering balance sheet entries and OTS letter are as follows: "11.7 The Company's balance sheet is prepared ..... X X X X Extracts X X X X X X X X Extracts X X X X
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