Case: ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED Vs. BISHAL JAISWAL &amp; ANR

Civil Appeal No.323 of 20211. In 2009, Corporate Power Ltd. [the corporate debtor] set up a thermal power project in Jharkhand, and for so doing, availed of loan facilities from various lenders, including the State Bank of India [SBI]. The account of the corporate debtor was declared as a non-performing asset by SBI on 31.07.2013. On 27.03.2015, SBI issued a loan-recall notice to the corporate debtor in its capacity as the lenders agent. On 31.03.2015, some of the original lenders of the corporate debtor, namely, India Infrastructure Finance Company Limited, SBI, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Patiala, and State Bank of Travancore assigned the debts owed to them by the corporate debtor to the appellant, the Asset Reconstruction Company (India) Limited. On 20.06.2015, the appellant issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 [SARFAESI Act] on behalf of itself and other consortium lenders to the corporate debtor. On 01.06.2016, the appellant took actual physical possession of the project assets of the corporate debtor under the SARFAESI Act. On 26.12.2018, the appellant filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 [IBC] before the National Company Law Tribunal, Calcutta [NCLT] for a default amounting to Rs.5997,80,02,973/- from the corporate debtor. As the relevant form indicating the date of default did not indicate any such date, this was made up by the appellant on 08.11.2019 by filing a supplementary affidavit before the NCLT, specifically mentioning the date of default and annexing copies of balance sheets of the corporate debtor, which, according to the appellant, acknowledged periodically the debt that was due. On 19.02.2020, the Section 7 application was admitted by the NCLT, observing that the balance sheets of the corporate debtor, wherein it acknowledged its liability, were signed before the expiry of three years from the date of default, and entries in such balance sheets being acknowledgements of the debt due for the purposes of Section 18 of the Limitation Act, 1963 [Limitation Act], the Section 7 application is not barred by limitation. In an appeal filed to the National Company Law Appellate Tribunal [NCLAT], the corporate debtor relied upon the Full Bench judgment of the NCLAT in V. Padmakumar v. Stressed Assets Stabilisation Fund, Company Appeal (AT) (Insolvency) No. 57 of 2020 (decided on 12.03.2020) [V. Padmakumar], in which a majority of four members [Justice (Retd.) A.I.S. Cheema, Member (Judicial), dissenting] held that entries in balance sheets would not amount to acknowledgement of debt for the purpose of extending limitation under Section 18 of the Limitation Act. After a preliminary hearing, a three-Member Bench passed an order on 25.09.2020 doubting the correctness of the majority judgment of the Full Bench and referred the matter to the Acting Chairman of the NCLAT to constitute a Bench of coordinate strength to reconsider the judgment in V. Padmakumar (supra).2. A five-Member Bench of the NCLAT, vide the impugned judgment dated 22.12.2020, refused to adjudicate the question referred, stating that the reference to the Bench was itself incompetent.The NCLT, by an order dated 14.12.2018, held that despite the fact that the corporate debtors account was declared to be a non-performing asset from 2010 onwards, since, according to the NCLT, there was a continuing cause of action in the facts of this case, the Section 7 application was admitted. In an appeal filed by the suspended Managing Director of the corporate debtor to the NCLAT, by an order dated 26.09.2019, the NCLAT held that the relevant date from which limitation must be determined is 01.12.2016, i.e. the date on which the IBC came into force, and therefore, dismissed the appeal. This Court, by its order dated 21.10.2019, set aside the order of the NCLAT and remanded the matter to the NCLAT to re-examine the question of limitation, having regard to the judgments in B.K. Educational Services (P) Ltd. v. Parag Gupta & Associates, (2019) 11 SCC 633 and Sagar Sharma v. Phoenix Arc (P) Ltd., (2019) 10 SCC 353.2. The NCLAT, by the impugned order dated 14.10.2020, found that the appellant had classified the corporate debtors account as a non-performing asset on 28.05.2014. However, the said date was changed to 31.01.2010 after an attempt to restructure the corporate debtors account failed. The three other banks forming part of the consortium of lenders, viz., Punjab National Bank, Corporation Bank, and UCO Bank, had also classified the account of the corporate debtor as a non-performing asset on 30.06.2014, 31.12.2014, and 31.12.2014, respectively. Even if the date of default was taken to be the last of these dates, i.e. 31.12.2014, the NCLAT held that the three-year period under Article 137 of the Limitation Act had expired on 30.12.2017, and that since the amended application under Section 7 of the IBC had been filed only on 23.07.2018, it was barred by limitation. The NCLAT, therefore, allowed the appeal.

Reasoning:
A perusal of the above would show that considering that the Limitation Act applies only to courts, unless made statutorily applicable to tribunals, the Committee was of the view that such Act should be made to apply to the IBC as well, observing that though the IBC is not a debt recovery law, the trigger being default in payment of debt would render the exclusion of the law of limitation counter-intuitive. Thus, it was made clear that an application to the IBC should not amount to resurrection of time-barred debts which, in any other forum, would have been dismissed on the ground of limitation.7. From the above, it is clear that the principle of Section 9 of the Limitation Act is to be strictly adhered to, namely, that when time begins to run, it cannot be halted, except by a process known to law. One question that arises before this Court is whether Section 18 of the Limitation Act, which extends the period of limitation depending upon an acknowledgement of debt made in writing and signed by the corporate debtor, is also applicable under Section 238A, given the expression as far as may be governing the applicability of the Limitation Act to the IBC.8. The aforesaid question is no longer res integra as two recent judgments of this Court have applied the provisions of Section 14 and Section 18 of the Limitation Act to the IBC. Thus, in Sesh Nath Singh v. Baidyabati Sheoraphuli Co-operative Bank Ltd., Civil Appeal No. 9198 of 2019 (decided on 22.03.2021), after setting out the issues that arose in that case in paragraph 57, and after referring to Section 238A of IBC, held:66. Similarly under Section 18 of the Limitation Act, an acknowledgement of present subsisting liability, made in writing in respect of any right claimed by the opposite party and signed by the party against whom the right is claimed, has the effect of commencing of a fresh period of limitation, from the date on which the acknowledgement is signed. However, the acknowledgement must be made before the period of limitation expires.67. As observed above, Section 238A of the IBC makes the provisions of the Limitation Act, as far as may be, applicable to proceedings before the NCLT and the NCLAT. The IBC does not exclude the application of Section 6 or 14 or 18 or any other provision of the Limitation Act to proceedings under the IBC in the NCLT/NCLAT. All the provisions of the Limitation Act are applicable to proceedings in the NCLT/NCLAT, to the extent feasible.68. We see no reason why Section 14 or 18 of the Limitation Act, 1963 should not apply to proceeding under Section 7 or Section 9 of the IBC. Of course, Section 18 of the Limitation Act is not attracted in this case, since the impugned order of the NCLAT does not proceed on the basis of any acknowledgement.10. Given the aforesaid, it is not possible to accede to the arguments made by Shri Sinha that Section 18 of the Limitation Act cannot be made applicable by reason of the arguments put forth by him. As has been held in Ambika Prasad Mishra v. State of U.P., (1980) 3 SCC 719,  every argumentative novelty does not undo a settled position of law. Krishna Iyer, J., speaking for a Bench of five learned Judges, stated thus:5. … But, after listening to the Marathon erudition from eminent counsel, a 13-Judge Bench of this Court upheld the vires of Article 31-A in unequivocal terms. That decision binds, on the simple score of stare decisis and the constitutional ground of Article 141. Every new discovery or argumentative novelty cannot undo or compel reconsideration of a binding precedent. In this view, other submissions sparkling with creative ingenuity and presented with high pressure advocacy, cannot persuade us to reopen what was laid down for the guidance of the nation as a solemn proposition by the epic Fundamental Rights case [(1973) 4 SCC 225 : 1973 Supp SCR 1]. From Kameshwar Singh [AIR 1952 SC 252 : 1952 SCR 889 : 1952 SCJ 354 ] (1952) and Golak Nath [I.C. Golak Nath v. State of Punjab, AIR 1967 SC 1643 : (1967) 2 SCR 762 : (1967) 2 SCJ 486 ] (1967) through Kesavananda [(1973) 4 SCC 225 : 1973 Supp SCR 1] (1973) and Kanan Devan [Kanan Devan Hills Produce Co. Ltd. v. State of Kerala, (1973) 1 SCR 356 : (1972) 2 SCC 218 : AIR 1972 SC 2301 ] (1972) to Gwalior Rayons [State of Kerala v. Gwalior Rayon Silk Mfg. (Wvg). Co. Ltd.(1973) 2 SCC 713 : (1974) 1 SCR 671 ] (1976) and after Article 31-A has stood judicial scrutiny although, as stated earlier, we do not base the conclusion on Article 31-A. Even so, it is fundamental that the nations Constitution is not kept in constant uncertainty by judicial review every season because it paralyses, by perennial suspense, all legislative and administrative action on vital issues deterred by the brooding threat of forensic blow up. This, if permitted, may well be a kind of judicial destabilisation of State action too dangerous to be indulged in save where national crisis of great moment to the life, liberty and safety of this country and its millions are at stake, or the basic direction of the nation itself is in peril of a shake-up. It is surely wrong to prove Justice Roberts of the United States Supreme Court right when he said: [Smith v. Allwright, 321 US 649, 669, 670 (1944)]The reason for my concern is that the instant decision, overruling that announced about nine years ago, tends to bring adjudications of this tribunal into the same class as a restricted railroad ticket good for this day and train only…. It is regrettable that in an era marked by doubt and confusion, an era whose greatest need is steadfastness of thought and purpose, this Court which has been looked to as exhibiting consistency in adjudication, and a steadiness which would hold the balance even in the face of temporary ebbs and flows of opinion, should now itself become the breeder of fresh doubt and confusion in the public mind as to the stability of our institutions.12. In an illuminating discussion on the reach of Section 18 of the Limitation Act, including the reach of the Explanation to the said Section, this Court, in Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad, (1962) 1 SCR 140 [Shapoor Fredoom Mazda], after referring to Section 19 of the Limitation Act, 1908, which corresponds to Section 18 of the 1963 Act, held:It is thus clear that acknowledgement as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgement of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledgement is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgement must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing on which a plea of acknowledgement rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or far-fetched process of reasoning. Broadly stated that is the effect of the relevant provisions contained in Section 19, and there is really no substantial difference between the parties as to the true legal position in this matter.(at pages 144-145)15. Likewise, in a case concerning the dishonour of a cheque under Section 138 of the Negotiable Instruments Act, 1881, this Court, in A.V. Murthy v. B.S. Nagabasavanna, (2002) 2 SCC 642 [A.V. Murthy], held:5. … It is also pertinent to note that under sub-section (3) of Section 25 of the Indian Contract Act, 1872, a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits, is a valid contract. 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 31-3-1997 is also produced before us. If the amount borrowed by the respondent is shown in the balance sheet, it may amount to acknowledgement and the creditor might have a fresh period of limitation from the date on which the acknowledgement was made. However, we do not express any final opinion on all these aspects, as these are matters to be agitated before the Magistrate by way of defence of the respondent.The judgment in A.V. Murthy (supra) was followed in S. Natarajan vs. Sama Dharman, Crl. A. No. 1524 of 2014 (decided on 15.07.2014) as follows:7. In this connection, we may usefully refer to a judgment of this Court in A.V. Murthy v. B.S. Nagabasavanna [A.V. Murthy v. B.S. Nagabasavanna, (2002) 2 SCC 642] where the accused had alleged that the cheque issued by him in favour of the complainant in respect of sum advanced to the accused by the complainant four years ago was dishonoured by the bank for the reasons account closed. The Magistrate had issued summons to the accused. The Sessions Court quashed the proceedings on the ground that the alleged debt was barred by limitation at the time of issuance of cheque and, therefore, there was no legally enforceable debt or liability against the accused under the Explanation to Section 138 of the NI Act and, therefore, the complaint was not maintainable. While dealing with the challenge to this order, this Court observed that Under Section 118 of the NI Act, there is a presumption that until the contrary is proved, every negotiable instrument was drawn for consideration. This Court further observed that Section 139 of the NI Act specifically notes that it shall be presumed unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 of the NI Act for discharge, in whole or in part, of any debt or other liability. This Court further observed that under Sub-section (3) of Section 25 of the Contract Act, a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits, is a valid contract. 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 acknowledgement and the creditor might have a fresh period of limitation from the date on which the acknowledgement was made. …16. An exhaustive judgment of the Calcutta High Court in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal 128 : AIR 1962 Cal 115 [Bengal Silk Mills] held that an acknowledgement of liability that is made in a balance sheet can amount to an acknowledgement of debt as follows:9. In support of the contention that the balance-sheets do not amount to acknowledgements of liability, because they were prepared under compulsion of law Mr. Banerji relies upon the decision in Kashinath v. New Akot Ginning and Pressing Co. Ltd., I.L.R. 1950 Nag. 562 at 568 : A.I.R. 1951 Nag. 255. It is true that the balance-sheets were required to be made both by the Indian Companies Act, 1913 as also by the articles of association of the defendant company. There was a compulsion upon the managing agents to prepare the documents but there was no compulsion upon them to make any particular admission. They faithfully discharged their duty and in doing so they made honest admissions of the Companys liabilities. Those admissions, though made in discharge of their duty, are nevertheless conscious and voluntary admissions. A document is not taken out of the purview of section 19 of the Indian Limitation Act merely on the ground that it is made under compulsion of law, see Venkata v. Partha Saradhi, 1892 I.L.R. 16 Mad. 220 at 222, Udaya Thevar v. Subrahmania Chetti, (1896) 6 M.L.J. 266, 269, Good v. Jane Job, 120 E.R. 810 at 812. I am unable to agree with the reasoning of the Nagpur decision that a balance-sheet does not save limitation because it is drawn up under a duty to set out the claims made on the company and not with the intention of acknowledging liability. The balance-sheet contains admissions of liability; the agent of the company who makes and signs it intends to make those admissions. The admissions do not cease to be acknowledgements of liability merely on the ground that they were made in discharge of a statutory duty. I notice that in the Nagpur case the balance-sheet had been signed by a director and had not been passed either by the Board of Directors or by the company at its annual general meeting and it seems that the actual decision may be distinguished on the ground that the balance-sheet was not made or signed by a duly authorized agent of the company.10. Mr. Banerji next contends that none of the balance-sheets contains an admission of liability subsisting on the date of which it is made. According to him the balance-sheet for the year ended 30-11-1936 which was made on 1-6-1937 contains an admission of past liability as on 30-11-1936 but not an admission of liability existing on 1-6-1937. Mr. Banerji contends that such an admission does not satisfy the test of an acknowledgement under section 19 of the Indian Limitation Act. His contention is supported by Jwala Prasad v. Jwala Bank Ltd., A.I.R. 1957 All. 143 at 145. In that case the Allahabad High Court held that the balance-sheet did not contain any acknowledgement of an existing liability and therefore could not be treated as an acknowledgement under section 19. Mr. Banerji also relied upon the decisions in Kandasami Reddi v. Suppammal, I.L.R. 45 Mad. 443 , Venkata v. Partha Saradhi, I.L.R. 18 Mad. 220, Rustomji on Limitation, 6th Edition, pages 191–193 and the cases collected therein. Now it is well settled that in order to satisfy the test of an acknowledgement under section 19 the admission of liability must be an admission of subsisting liability. In Kandasami Reddi v. Suppammal, I.L.R. 45 Mad. 443 at 445, Ayling J. said, Liability can only signify present liability at the time of acknowledgement and this is clearly laid down in Venkata v. Parthasaradhi, (1893) 16 Mad. 220. In Venkata v. Parthasaradhi, I.L.R. 16 Mad. 220 at 223 Muttasami Ayyar, J. said, It is therefore necessary that upon a reasonable construction of the language used by the debtor in writing the relation of debtor and creditor must appear to be distinctly admitted, that it must be admitted also to be a subsisting jural relation, and then an intention to continue it until it is lawfully determined must also be evident. The section requires a definite admission of liability in respect of the debt, but even an admission that the debt existed at a previous date may, having regard to the language used and the surrounding circumstances, amount to an implied representation that the debt is still subsisting (see Maniram Seth v. Seth Rupchand, I.L.R. 33 Cal. 1047 P.C.). In my opinion the balance-sheets satisfy the test of an acknowledgement under section 19. Each of them contains an admission that balances have been struck at the end of the previous year and that a definite sum has been found to be the balance then due to the creditor. The natural inference to be drawn from the balance-sheet is that the closing balance due to the creditor at the end of the previous year will be carried forward as the opening balance due to him at the beginning of the next year. In each balance-sheet there is thus an admission of a subsisting liability to continue the relation of debtor and creditor and a definite representation of a present intention to keep the liability alive until it is lawfully determined by payment or otherwise. There is necessarily a time lag between the date of the signing of the balance-sheet and the end of the previous year. The balance-sheet contains no admission of the amount due on the date of the signature, that amount may be and often is different from the amount shown as due at the end of the previous year, but that fact alone does not take the document out of the purview of section19. Take the case of a banker and its depositor. Suppose the banker sends to the depositor a monthly statement of account made for the month of February 1961 and signed on March 15, 1961. The statement gives the balance due on February 28, 1961. The amount due on March 15 may be quite different; the banker might have been made payments for the customer, nevertheless the statement amounts to a sufficient acknowledgement under section 19. I am therefore unable to agree with the decision in Jwala Prasad v. Jwala Bank Ltd., A.I.R. 1957 All. 144.11. To come under section 19 an acknowledgement of a debt need not be made to the creditor nor need it amount to a promise to pay the debt. In England it has been held that a balance-sheet of a company stating the amount of its indebtedness to the creditor is a sufficient acknowledgement in respect of a specialty debt under section 5 of the Civil Procedure Act, 1833 (3 and 4 Will — 4c. 42), see Re: Atlantic and Pacific Fibre Importing and Manufacturing Co. Ltd., 1928 Ch. 836 under section 1 of Lord Tentendens Act, 1828 (9 Geo. 4, c. 14) read with section 13 of the Mercantile Law Amendment Act, 1856 (19 and 20 Vict. c. 97), see Re: The Coliseum (Burrow) Ltd., (1930) 2 Ch. 44 at 47 and under sections 23 and 24 of the Limitation Act, 1939 (c. 21), see Ledingham v. Bermejo Estancia Co. Ltd., (1947) 1 A.E.R. 749 and Jones v. Bellgrove Properties Ltd., (1949) 2 K.B. 700, on appeal from (1949) 1 A.E.R. 498. Section 5 of the Civil Procedure Act, 1833 did not require that the acknowledgement should be given to the claiming creditor and consequently a balance-sheet containing an admission of indebtedness to the debenture holders was a sufficient acknowledgement of liability in respect of the debentures under that section, though it was sent only to the debenture holders who happened to be the shareholders of the company and not to the other debenture holders, see Re: Atlantic and Pacific Fibre Importing and Manufacturing Co. Ltd., (1928) 1 Ch. 836. Under Tentendens Act, 1828 as also under the Limitation Act, 1939 (c. 21) the acknowledgement 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 Re: The Coliseum (Burrow) Ltd., (1930) 2 Ch. 44 at 47, Jones v. Bellgrove Properties Ltd., (1949) 1 A.E.R. 498 at 504 affirmed (1949) 2 K.B. 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 acknowledgement under section 19 of the Indian Limitation Act, see Raja of Vizianagram v. Official Liquidator, Vizianagram Mining Co. Ltd., (1951) 2 M.L.J. 535 at 550-1 : A.I.R. 1952 Mad. 136 at 145, Lahore Enamelling and Stamping Co. Ltd. v. A.K. Bhalla, A.I.R. 1958 Punjab 341 at 347, First National Bank Ltd. v. The Mandi (State) Industries Ltd., (1957) 59 Punjab Law Reports 589 and in an unreported decision of S.R. Das Gupta, J. in matter No. 449 of 1955 Re: Vita Supplies Corporation Ltd. decided on December 7, 1956.Importantly, this judgment holds that though the filing of a balance sheet is by compulsion of law, the acknowledgement of a debt is not necessarily so. In fact, it is not uncommon to have an entry in a balance sheet with notes annexed to or forming part of such balance sheet, or in the auditors report, which must be read along with the balance sheet, indicating that such entry would not amount to an acknowledgement of debt for reasons given in the said note.17. Bengal Silk Mills (supra) also dealt with the judgment in Kashinath Sankarappa v. New Akot Cotton Ginning & Pressing Co. Ltd., 1949 SCC OnLine MP 123 : AIR 1951 Nag 255 [Kashinath] by distinguishing the said judgment on the ground that the balance sheet in that case was not made or signed by a duly authorised agent of the company. Quite apart from this, if the said judgment is perused, what becomes clear is that the observation made in paragraph 20 is really an obiter observation, as the High Court went on to hold in paragraph 26 that the balance sheets that were produced were never proved in accordance with law, apart from being validly rejected by the shareholders, as a result of which, such balance sheets could not, therefore, operate as acknowledgements of liability under Section 19 of the Limitation Act, 1908.19. Two other judgments – of the Andhra Pradesh High Court and the Gauhati High Court – were also relied upon by the counsel for the respondents. So far as the Andhra Pradesh High Court is concerned, in Vijayalakshmi v. Hari Hara Ginning and Pressing, Nandigaon, OS A No. 40 of 1998 (decided on 03.03.1999), Liberhan, C.J. differed from a Karnataka High Court judgment which stated that showing of an amount in a balance sheet would amount to an acknowledgement under Section 18 of the Limitation Act. This was done as follows:5. The learned Counsel for the appellant relied on a decision of the Karnataka High Court in State Bank of India v. Hegde and Golay Ltd., 1985 SCC OnLine Kar 428 : ILR 1987 Kar 2673, wherein it is observed that showing of an amount in a balance sheet amounts to an acknowledgement in terms of the Indian Limitation Act. Consequently, the amount having been admitted and the respondent having not paid the same, the petition required admission as laid down by the said judgment that civil suit as well as legal proceedings can continue simultaneously. Without expressing our opinion on the law laid down in the said judgment, though it cannot be categorically laid down that mere showing a debt due in a balance-sheet would amount to acknowledgement, we may observe that it is a well-established law that for giving an acknowledgement, a person has to be conscious of his act to the knowledge of the other person. Merely showing a debt in a balance-sheet cannot, prima facie, as presently advised, be termed to be an acknowledgement in terms of the Indian Limitation Act. The acknowledgement as envisaged by the Limitation Act categorically had to be with the intention of accepting the debt with the object of extending the limitation for recovery, which is not the case herein. Thus, we do not find the case in hand to be covered by the law laid down by the said judgment though we have our own doubts with respect to correctness of the law laid down in the said judgment.This judgment does not, in any manner, even purport to lay down the law. That apart, the statement that an acknowledgement, as envisaged by the Limitation Act, has to be with the intention of accepting the debt with the object of extending the limitation for recovery is de hors Section 18 of the Limitation Act and directly contrary to Shapoor Fredoom Mazda (supra) which is, in fact, referred to in the very next paragraph of the aforesaid judgment. Shapoor Fredoom Mazda (supra) had made it plain that all that was necessary was that the acknowledgement establishes a jural relationship of debtor and creditor, which undoubtedly was established on the facts of that case. This judgment, therefore, cannot avail the respondents.20. Reliance was also placed on a judgment of the Gauhati High Court in Ajit Chandra Bagchi v. Harishpur Tea Company (P.) Ltd., 1990 SCC OnLine Gau 24 : AIR 1991 Gau 92. In particular, paragraphs 9 and 10 were relied upon by learned counsel for the respondents. These paragraphs state:9. I may now turn to the next submission of learned counsel for the appellants - defendants that the plaintiff failed to prove that the amounts in question were due from the defendants. The contention of the counsel is that the plaintiff simply produced before the court certain books of account and balance sheets. No effort was made even to prove the individual entries in the said books of account. The claim was sought to be established by the plaintiff simply on the basis of the balance appearing in the books of account of plaintiff itself as outstanding against the Tea Estates of the defendants. It was submitted that the books of account or the balance sheets showing the amount due from the defendants are not sufficient without other evidence to prove the debt. The learned counsel in this connection relied on section 34 of the Evidence Act, which provides that even entries in the books of account regularly kept in the course of business, which are relevant, are alone not sufficient evidence to charge any person with liability. Learned counsel also relied on the Illustration given to the said section, which is as follows:A sues B for Rs. 1000, and shows entries in his account-books showing B to be indebted to him to this amount. The entries are relevant, but are not sufficient without other evidence to prove the debt.On the basis of the aforesaid provision it was submitted that the entries in the books of account showing the defendants to be indebted to the plaintiff for certain amount might be relevant but are not sufficient to prove the debt. In the instant case, the learned counsel submitted, even the entries have not been proved. What is sought to be proved is the balance appearing in the accounts or in the balance sheet as due from the defendants. Such a course is not permissible except in a case of accounts stated. Admittedly, the present case is not one of accounts stated.10. I have carefully considered the submissions. I find that neither the individual entries have been proved by the plaintiff nor there is any material whatsoever other than the books of account or the balance sheet to prove that the transactions in question in fact took place. No decree can therefore, be obtained by the plaintiff merely on the basis of certain entries in the account books or the balance shown to be due at the end of the year in such accounts or in the balance sheets. The admitted position in the instant case is that no evidence has been adduced by the plaintiff to prove the transactions which had been categorically denied by the defendants in their written statement. In that view of the matter even on facts it has to be held that the plaintiffs failed to prove that the amount claimed in the suit was due from the defendants. In view of the aforesaid finding, I am of the opinion that the learned trial court was not justified in decreeing the suit. The suit was barred by limitation except in so far as it relates to recovery of a sum of Rs. 30/-. Besides, the plaintiff also failed to prove the debt in accordance with law. Under the circumstances, the suit should have been dismissed.This judgment also does not take the case of the respondents any further as, like the Nagpur High Court judgment in Kashinath (supra), the entries in the books of accounts were not proved on the facts of that case.22. A perusal of the aforesaid Sections would show that there is no doubt that the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7). Equally, the auditors report may also enter caveats with regard to acknowledgements 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 (supra), 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 acknowledgement of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act.23. The judgment in Bengal Silk Mills (supra) has been referred to with approval in various other judgments. Thus, in South Asia Industries (P) Ltd. v. General Krishna Shamsher Jung Bahadur Rana, 1972 SCC OnLine Del 185 : ILR (1972) 2 Del 712, the Delhi High Court held:46. Shri Rameshwar Dial argued that statements in the balance-sheet of a company cannot amount to acknowledgement of liability because the balance-sheet is made under compulsion of the provisions in the Companies Act. There is no force in this argument. In the first place, section 18 of the Limitation Act, 1963, requires only that the acknowledgement of liability must have been made in writing, but it does not prescribe that the writing should be in any particular kind of document. So, the fact that the writing is contained in a balance-sheet is immaterial. In the second place, it is true that section 131 of the Companies Act, 1913 (section 210 of the Companies Act, 1956) makes it compulsory that an annual balance sheet should be prepared and placed before the Company by the Directors, and section 132 (section 211 of the Companies Act, 1956) requires that the balance-sheet should contain a summary, inter alia, of the current liabilities of the company. But, as pointed out by Bachawat J. in Bengal Silk Mills v. Ismail Golam Hossain Ariff, A.I.R. 1962 Calcutta 115 although there was statutory compulsion to prepare the annual balance-sheet, there was no compulsion to make any particular admission, and a document is not taken out of the purview of section 18 of the Indian Limitation Act, 1963 (section 19 of the Indian Limitation Act, 1908) merely on the ground that it is prepared under compulsion of law or in discharge of statutory duty. Reference may also be made to the decisions in Raja of Vizianagram v. Vizianagram Mining Co. Ltd., A.I.R. 1952 Madras 136, Jones v. Bellgrove Properties Ltd., (1949) 1 All E.R. 498; and Lahore Enamelling and Stamping Co. v. A.K. Bhalla, A.I.R. 1958 Punjab 341, in which statements in balance- sheets of companies were held to amount to acknowledgements of liability of the companies.47. Shri Rameshwar Dial referred to the decision of the Privy Council in Consolidated Agencies Ltd. v. Bertram Ltd., (1964) 3 All. E.R. 282. We shall advert to this decision presently when we deal with another argument of Shri Rameshwar Dial, and it is sufficient to state so far as the argument under consideration is concerned that even in this decision of the Privy Council it has been recognised that balance-sheets could in certain circumstances amount to acknowledgements of liability. It cannot, therefore, be said as a general proposition of law that statements in balance-sheets of a company cannot operate at all as acknowledgements of liability as contended by Shri Rameshwar Dial.48. The learned counsel next argued that the words used in the entry in the balance-sheet in the present case did not amount to any acknowledgement of liability. We do not think so. The words used in the entry apparently show that in explaining its current liabilities and the provisions made for the same, it was stated that there was a sum of Rs. 7,87,150.42 held in share- holders suspense account for payment to the share-holders of the Indian National Airways Limited (in voluntary liquidation — since dissolved). The words used clearly acknowledge the liability. The learned single Judge also took the same view as regards the words used in the balance-sheet. In Lahore Enamelling and Stamping Co. Ltd. v. A.K. Bhalla, Tek Chand J. held that debts due to creditors not mentioned by name but included in the item relating to Loans (unsecured) or as due to Sundry Creditors mentioned in the balance-sheet amount to an acknowledgement of liability for the purposes of section 19 of the Indian Limitation Act, 1908. There was thus no force in the argument of the learned counsel.51. The next argument was that the balance-sheet was no doubt signed by two Directors, but they did not sign as duly authorised agents of the transferee company as required by explanation (b) to section 18 of the Limitation Act. There is no substance in this argument. The Companies Act, 1956, came into force in 1956. Section 210 of the Act requires the Board of Directors to lay a balance-sheet before the company at the Annual General Meeting. Section 211 prescribes the form and contents of a balance-sheet. The form of balance-sheet is given in Part 1 of Schedule VI to the Act, and according to it the current liabilities and provisions have to be set out in the balance-sheet. Section 215(i)(ii) requires that the balance-sheet should be signed on behalf of the Board of Directors, inter alia, by the Secretary of the Company and by not less than two Directors of the company. Section 215(3) provides that a balance-sheet shall be approved by the Board of Directors before it is signed on behalf of the Board of Directors in accordance with section 215(i)(ii) and before it is submitted to the Auditors for their report thereon. Thus, the statement of current liabilities and provisions in the balance-sheet has to be approved by the Board of Directors before it is signed by the Secretary and two Directors on behalf of the Board. In other words, the balance-sheet is signed by the Secretary and two Directors at the instance and on the approval of the Board of Directors of the company. After the balance-sheet is audited, section 216 requires that the Auditors report should be attached to the balance-sheet, and section 217 requires the Board of Directors also to make a report. The balance-sheet together with the Auditors report and the Boards report are then required to be placed before the company at the annual general meeting for adoption of the balance-sheet. After the balance- sheet has been so laid before the company at the annual general meeting, section 220 requires that three copies of the balance-sheet should be filed with the Registrar. In the present case, the balance-sheet (Schedule D to Annexure J) was signed by the Secretary and two Directors, and Annexure J contains the Auditors report and the Boards report. It was stated in the judgment of the learned single Judge that the balance-sheet was adopted by the company and the same was not disputed before us. It is thus quite clear that the balance- sheet was signed by duly authorised agents of the company.27. In CIT-III v. Shri Vardhman Overseas Ltd., 2011 SCC OnLine Del 5599 : (2012) 343 ITR 408 , the Delhi High Court held:17. In the case before us, as rightly pointed out by the Tribunal, the assessee has not transferred the said amount from the creditors account to its profit and loss account. The liability was shown in the balance sheet as on 31st March, 2002. The assessee being a limited company, this amounted to acknowledging the debts in favour of the creditors. Section 18 of the Limitation Act, 1963 provides for effect of acknowledgement in writing. It says 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 : 1991 Supp (1) SCC 402, 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. In Daya Chand Uttam Prakash Jain v. 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 & Toubro 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 period of limitation for the purposes of Section 18 of the Limitation Act. In Ambika Mills Ltd. Ahmedabad v. CIT Gujarat (1964) 54 ITR 167 , it was further held that a debt shown in a balance sheet of a company amounts to an acknowledgement for the purpose of Section 19 of the Limitation Act and in order to be so, the balance sheet in which such acknowledgement is made need not be addressed to the creditors. In light of these authorities, it must be held that in the present case, the disclosure by the assessee company in its balance sheet as on 31st March, 2002 of the accounts of the sundry creditors amounts to an acknowledgement of the debts in their favour for the purposes of Section 18 of the Limitation Act. The assessees liability to the creditors, thus, subsisted and did not cease nor was it remitted by the creditors. The liability was enforceable in a court of law.28. In Shahi Exports Pvt. Ltd. v. CMD Buildtech Pvt. Ltd., 2013 SCC OnLine Del 2535 : (2013) 202 DLT 735, the Delhi High Court held:7. It is hardly necessary to cite authorities in support of the well-established position that an entry made in the companys balance sheet amounts to an acknowledgement 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. 185 (2011) DLT 428  for the simple reason that it collects all the relevant authorities on the issue, including some of the judgments cited before me on behalf of the petitioners. This judgment entirely supports the petitioners on this point.31. In Zest Systems Pvt. Ltd. v. Center for Vocational and Entrepreneurship Studies, 2018 SCC OnLine Del 12116, the Delhi High Court held:5. In Shahi Exports Pvt. Ltd. v. CMD Buildtech Pvt. Ltd. (supra) this court held as follows:—7. It is hardly necessary to cite authorities in support of the well-established position that an entry made in the companys balance sheet amounts to an acknowledgement 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., 185 (2011) DLT 428  for the simple reason that it collects all the relevant authorities on the issue, including some of the judgments cited before me on behalf of the petitioners. This judgment entirely supports the petitioners on this point.6. In view of the legal position spelt out in judgments noted above, the acknowledgement of the debt in the balance sheet extends the period of limitation. The acknowledgement is as on 31.3.2015. This suit is filed in 2017. The suit is clearly within limitation. The present application is allowed.33. It is, therefore, clear that the majority decision of the Full Bench in V. Padmakumar (supra) is contrary to the aforesaid catena of judgments. The minority judgment of Justice (Retd.) A.I.S. Cheema, Member (Judicial), after considering most of these judgments, has reached the correct conclusion. We, therefore, set aside the majority judgment of the Full Bench of the NCLAT dated 12.03.2020.34. The NCLAT, in the impugned judgment dated 22.12.2020, has, without reconsidering the majority decision of the Full Bench in V. Padmakumar (supra), rubber-stamped the same. We, therefore, set aside the aforesaid impugned judgment also.35. On the facts of this case, the NCLT, by its judgment dated 19.02.2020, recorded that the default in this case had been admitted by the corporate debtor, and that the signed balance sheet of the corporate debtor for the year 2016-2017 was not disputed by the corporate debtor. As a result, the NCLT held that the Section 7 application was not barred by limitation, and therefore, admitted the same. We have already set aside the majority judgment of the Full Bench of the NCLAT dated 12.03.2020, and the impugned judgment of the NCLAT dated 22.12.2020 in paragraphs 33 and 34.6. There can be no doubt whatsoever that the appellant has been completely remiss and deficient in pleading acknowledgement of liability on the facts of this case. However, given the staggering amount allegedly due from the respondents, we afford one further opportunity to the appellant to amend its pleadings so as to incorporate what is stated in the written submissions filed by it before the NCLAT, subject to costs of Rs.1,00,000/- to be paid by the appellant to the respondents within a period of four weeks from today.2. Suffice it to say that the basis of the Section 7 application in this case was a DRT decree dated 17.08.2018, pursuant to which a recovery certificate dated 19.06.2019 was issued. The Section 7 application averred that the date of the DRT decree furnished the cause of action and, thus, was the starting point of limitation in this case.4. There can be no doubt that the NCLT had, in its order dated 19.08.2019, stated that Article 63(a) of the Limitation Act would apply instead of Article 137, contrary to what has been held by us in several judgments. It cannot, therefore, be said that the Calcutta High Court wrongly exercised jurisdiction in setting aside this finding. However, the High Court then went on to refer to certain balance sheets that had been produced, thereby extending limitation under Section 18 of the Limitation Act, but held that given the judgment in Babulal (supra), such balance sheets could not extend limitation.