Entries In Book Of Accounts/Balance Sheet Of Corporate Debtor Can Be Treated As Acknowledgment Of Liability Of Debt Payable To Financial Creditor: Supreme Court

The Supreme Court observed the entries in Books of Account/Balance sheet of a company can be treated as acknowledgement of liability in respect of debt payable to a financial creditor.An application under Section 7 of the 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 acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years. the bench comprising Justices Indira Banerjee and JK Maheshwari observed. In such a case the period of limitation would get extended by a further period of three years, The bench observed thus while allowing an appeal filed against NCLAT holding that the Corporate Insolvency Resolution Process (CIRP) initiated by the Asset Reconstruction Company (India) Limited against the Corporate Debtor, V. Hotels Ltd. was barred by limitation. The NCLAT held that Books of Account cannot be treated as an acknowledgement of liability in respect of debt payable. The corporate debtor's contention was that the Application under Section 7 of the IBC is hopelessly barred by limitation as the same was filed about eight/nine years after the account of the Corporate Debtor was declared NPA on 01.12.2008. In appeal, the Apex Court noted that the amount of the Corporate Debtor was declared NPA on 1st December 2008. By a letter dated 7th February, 2011, written well within three years, the Corporate Debtor acknowledged its liability and proposed a settlement. This was followed by several requests of extension of time to make payment and revised settlements. On 6th April, 2013, the Corporate Debtor sought extension of time to pay Rs.239,88,27,673 outstanding as on 31st March 2013. On 19th April, 2013, the Corporate Debtor made payment of Rs.17,50,00,000/-. On 1st July, 2013, the Corporate Debtor acknowledged its liability – this was after the Financial Creditor revoked the settlement invoking the default clause. The Corporate Debtor acknowledged its liabilities in its financial statements from 2008-09 till 2016-17. The application under Section 7(2) of the IBC was filed on 3rd April 2018.Distinguishing Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd, the bench observed:Babulal Vardharji Gurjar (supra) is not an authority for the proposition that the Books of Accounts of a Corporate Debtor could not be treated as acknowledgement of liability to a Financial Creditor. Nor does the judgment lay down the proposition that any affidavits or documents filed during the pendency of the proceedings cannot be taken into consideration.......It is well settled that entries in books of accounts and/or balance sheets of a Corporate Debtor would amount to an acknowledgment under Section 18 of the Limitation Act.While allowing appeal by holding that the application under Section 7 IBC was not barred by limitation, the court observed:To sum up, in our considered opinion an application under Section 7 of the 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 acknowledgement 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.Case details Asset Reconstruction Company (India) Limited vs Tulip Star Hotels Limited | 2022 LiveLaw (SC) 648 | CA 84-85 OF 2020 | 1 August 2022 | Justices Indira Banerjee and JK MaheshwariCounsel: Sr. Adv Neeraj Kishan Kaul for appellant, Sr. Adv Nakul Dewan for respondentInsolvency and Bankruptcy Code, 2016 ; Section 7 - Limitation Act, 1963 ; Section 18 - Entries in Books of Account/Balance sheet of a company can be treated as acknowledgement of liability in respect of debt payable to a financial creditor. (Para 85)Insolvency and Bankruptcy Code, 2016 ; Section 7 - An application under Section 7 of the 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 acknowledgement 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. (Para 97)Insolvency and Bankruptcy Code ; Section 7 - Pleadings - An application under Section 7 in the prescribed form cannot be compared with the plaint in a suit, and cannot be judged by the same standards, as a plaint in a suit, or any other pleadings in a Court of law - There is no scope for elaborate pleadings - Documents filed along with the application, or later, and subsequent affidavits and applications would have to be construed as part of the pleadings (Para 49,76)Limitation Act, 1963 ...

Entries In Book Of Accounts/Balance Sheet Of Corporate Debtor Can Be Treated As Acknowledgment Of Liability Of Debt Payable To Financial Creditor: Supreme Court

LIVELAW NEWS NETWORK

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

Entries In Book Of Accounts/Balance Sheet Of Corporate Debtor Can Be Treated As Acknowledgment Of Liability Of Debt Payable To Financial Creditor: Supreme Court

LIVELAW NEWS NETWORK

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

This is a premium content
Available exclusively to
Our subscribers