The balance sheet can be seen as recognition of debts according to § 18 of the Restriction Act: Supreme Court.
In the most recent case of Asset Reconstruction Company v. Bishal JaiswalThe main question in this case was whether the judgment of the V Padmakumar v. Stressed Assets Stabilized Fund was right or not. In this case it was decided whether the inclusion of the debts in the ledger constitutes a recognition of the debts in accordance with Section 18 of the Limitation Act of 1963 and thus extends the limitation period. In this regard, the bank was negative, saying that it could not be seen as an acknowledgment of debt. The majority also concluded that filing financial statements is mandatory under Section 92 (4) of the Companies Act 2013 and cannot be treated as recognition under Section 18.
The NCLAT noted that if the corporate debtor’s balance sheet constituted recognition under Section 18, no limitation would apply as the corporate debtor is required to file a balance sheet every year. When the current judgment was challenged in the Supreme Court, the court ruled that the balance sheets may amount to the recognition of debt under Section 18 of the Statute of Limitations.
The facts in a nutshell in this case are that the corporate debtor (Corporate Power Ltd.) had drawn the syndicated lender loan to build a 1080 MW coal-fired power plant in Chandwa, Latehar district, Jharkhand state in two stages, in 2 × 270 MW in each phase by entering into a joint loan agreement with the lender’s bank. The corporate debtor has loan facilities totaling Rs. 2175.00,000 / – for the Phase I project and Rs. 2387.00,000 / – for the construction of another 540 MW coal-fired power plant of the availed of various bankers The above loan agreements and loan agreements have been entered into between the corporate debtor and the above banks. However, the corporate debtor has failed to repay the fees under the facilities provided by the above banks. Thereafter, the State Bank of India issued a recall notice dated March 27, 2015, to which the corporate debtor responded on March 28, 2015. The Syndicated Lenders issued notices under Section 13 (2) of the SARFAESI Act of 2002 on June 20, 2015, in which they issued a total amount of Rs.5997,80,02,973 / – but the corporate debtor was unable to repay the loan amount. The above banks had ceded the debt in favor of asset rebuilding. Therefore, the financial creditor filed the application to initiate CIRP against the corporate debtor under Section 7 of the I&B Code.