Balance Sheet Debt Entry Without Disclaimer Extends Limitation For IBC Plea: NCLT Kolkata Reaffirms

The National Company Law Tribunal (NCLT) at Kolkata has admitted an insolvency petition filed by ICICI Bank against clothing company Anuj Textiles Private Limited. It reiterated that acknowledgements of debt recorded in the company's balance sheet were sufficient to extend the limitation period.

A bench of Judicial Member Bidisha Banerjee and Technical Member Siddharth Mishra held that the acknowledgements in the company's records kept the debt alive.

The tribunal observed, “Since there has been entries in the balance sheet for FY 2022-23 expressly acknowledging debt, such acknowledgement of debt would extend the limitation period to a further period of 3 years. Accordingly, the C.P. filed on 13.01.2025 is well within time in terms of section 18 of the Limitation Act.”

ICICI Bank had extended working capital facilities to Anuj Textiles in December 2015. The limits, initially about Rs 29.7 crore, were later enhanced to Rs 30 crore and renewed periodically. However, on default, the company's loan account was classified as a non-performing asset on November 30, 2018.

As part of recalling the debt, the bank withdrew the loan facilities, invoked both personal and corporate guarantees.

A demand notice under the SARFAESI Act was also issued in 2019 but was later withdrawn. The bank issued a fresh notice in July 2022, this time demanding Rs 49.92 crore. When repeated attempts to auction the secured assets did not succeed, the bank moved the present insolvency plea in January 2025.

Opposing the plea, Anuj Textiles argued that the application was barred by limitation. It argued that as more than three years had passed since the loan account was classified as a non-performing asset, the plea was not maintainable.

The company also contended that neither the one-time settlement proposal made in July 2021 nor the entries in its balance sheet for the financial year 2022–23 could be treated as a valid acknowledgment of debt under the Limitation Act.

The tribunal rejected these objections. It found that the one-time settlement proposal was made within the extended limitation period and amounted to an acknowledgment of liability. It further held that the balance sheet entries for FY 2022–23 were sufficient in themselves to extend limitation.

The tribunal relied on the apex court's ruling in Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal & Anr. (2021), and observed that it is a settled law that entries in balance sheets, if not accompanied by an express disclaimer, constitute acknowledgment of liability under Section 18 of the Limitation Act.

On the issue of default, the tribunal recorded that, based on the loan agreements, bank statements, CIBIL report and SARFAESI notices, “the Corporate Debtor has committed default in repayment of financial debt due to the Financial Creditor.”

The NCLT accordingly admitted the insolvency petition, imposed a moratorium, and appointed an interim resolution professional to take over the management of the clothing company during the insolvency process