Entries Made In Balance Sheet Amounts To Acknowledgement Of Debt As Per Section 18 Of Limitation Act, 1963: NCLT New Delhi

The National Company Law Tribunal, New Delhi Bench, comprising of Shri Bachu Venkat Balaram Das, (Judicial member) and Shri Rahul Bhatnagar (Technical Member), while adjudicating an application filed under section 9 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in M/s SKC Infratech Pvt. Ltd vs M/s EOS Hospitality Pvt. Ltd. has reiterated that entries made in the Balance Sheet amounts to acknowledgement of debt as per section 18 of Limitation Act, 1963Background FactsEOS Hospitality Pvt. Ltd. (“Corporate Debtor”) entered into an agreement dated 24.09.2012 with M/s SKC Infratech Pvt. Ltd. (“Operational Creditor”) for civil construction of a hotel at Bhiwadi, Rajasthan. The Operational Creditor submitted that it issued invoices against the work done in a time bound and phased manner, which were duly acknowledged by the Corporate Debtor. The Corporate Debtor stopped making payments which constrained the Operational Creditor to stop the works of the project in October 2014. A Legal Notice dated 22.07.2015 was sent to the Corporate Debtor calling upon the payment of an amount of Rs. 3,96,87,744/-.Certain meetings took place between the Corporate Debtor and the Operational Creditor in which the Corporate Debtor confirmed its liability for Financial Year 2014-15 on 16.02.2016. Further, promises were made to make the aforesaid payment before 31.03.2017. However, the Operational Creditor was again constrained to send a Legal Notice dated 27.06.2018 demanding payment of Rs. 3,96,87,744/- along with interest at 24% per annum besides Rs. 5,16,00,0001- qua idling of resources and Rs. 25,00,000- qua mental harassment caused to the Operational Creditor. It was submitted by the Operational Creditor that the Corporate Debtor addressed an Acknowledgement Letter dated 13.09.2019 vide which the Corporate Debtor unequivocally undertook to clear off the payment of Rs. 1,21,06,031/- which was duly recorded in the books of the Corporate Debtor. When the Corporate Debtor did not make the payment despite the Acknowledgement Letter, the Operational Creditor issued a Demand Notice to the Corporate Debtor. On the Contrary, the Corporate Debtor contended that the application is time barred as it is based on invoices raised in the year 2013-14, with the last invoice being raised on 04.02.2014. Further, even assuming that the Corporate Debtor acknowledged the debt vide the letters dated 16.02.2016 and 13.09.2019, the benefit of Section 18 of the Limitation Act, 1963 cannot be taken as the acknowledgment dated 16.02.2016 would have initiated the a fresh period of limitation till 16.02.2019. However, the acknowledgement dated 13.09.2019 cannot extend the limitation period as the same was not given between 16.02.2016 and 16.02.2019. It was further submitted that payments with respect to the running bills raised by the Operational Creditor were duly released without any delay. According to the ledger maintained by the Corporate Debtor, payments to the tune of Rs. 7.6 crores were duly made to the Operational Creditor thereby discharging the liability of the Corporate Debtor. The Corporate Debtor further pointed out various deficiencies in the services provided by the Operational Creditor vide multiple E-mails. In the Rejoinder filed by the Operation Creditor, it was submitted that the Corporate Debtor in its balance sheet for the Financial Year ending on 31.03.2019 categorically showed the outstanding amount due to the Operational Creditor with its name mentioned in the footnotes of the Balance Sheet. The aforesaid acknowledgement in the balance sheet brings the application within the period of limitation under section 18 of the Limitation Act, 1963.Findings of the TribunalThe Tribunal observed that a debt amount of Rs. 1,21,06,031/- has been duly acknowledged by the Corporate Debtor in the balance sheet for the year ending on 31.03.2018 and 31.03.2019. The Tribunal reiterated that entries made in the Balance sheet amounts to acknowledgement of debt as per section 18 of Limitation Act, 1963. Reliance was placed on the Supreme Court Judgment of Dena Bank (Now Bank of Baroda) Vs. C. Shivakumar Reddy & Anr. 2021 SCC Online SC 543 wherein it was held 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. Thus the petition filed on 20.01.2020 was within the period of limitation as there was an acknowledgment of debt on 31.03.2019.It was further observed by the Tribunal that the Corporate Debtor had repeatedly requested the Operational Creditor to expedite the work and has also complained about the quality of work vide multiple E-mails. The work has been delayed and the construction has not been completed till date. Thus, the Corporate Debtor has already released payment of Rs. 7,57,61,568/- and with respect to the remaining amount, there exists a pre-existing dispute between the parties. . With the aforesaid observations, the Tribunal dismissed...

Entries Made In Balance Sheet Amounts To Acknowledgement Of Debt As Per Section 18 Of Limitation Act, 1963: NCLT New Delhi

Udai Yashvir Singh

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

Entries Made In Balance Sheet Amounts To Acknowledgement Of Debt As Per Section 18 Of Limitation Act, 1963: NCLT New Delhi

Udai Yashvir Singh

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

This is a premium content
Available exclusively to
Our subscribers