Entry In Balance Sheet Amounts To Acknowledgment Of Liability: NCLT Kochi
LIVELAW NEWS NETWORK
22 Feb 2022 4:46 PM IST
The NCLT, Kochi Bench consisting of Mr. Ashok Kumar Borah, Judicial Member and Mr. Anil Kumar, Technical Member in M/s Pheonix ARC Private Ltd. v. Kerala Chamber of Commerce and Industries reiterated that acknowledgement of debt in the balance sheet of the Corporate Debtor comes within the meaning of acknowledgment u/s 18 of the Limitation Act, 1963 and has the effect of...
The NCLT, Kochi Bench consisting of Mr. Ashok Kumar Borah, Judicial Member and Mr. Anil Kumar, Technical Member in M/s Pheonix ARC Private Ltd. v. Kerala Chamber of Commerce and Industries reiterated that acknowledgement of debt in the balance sheet of the Corporate Debtor comes within the meaning of acknowledgment u/s 18 of the Limitation Act, 1963 and has the effect of extending limitation.
The Applicant sought to initiate CIRP against the Corporate Debtor/ Pheonix ARC Pvt. Ltd. by filing an application u/s 7 of the Insolvency and Bankruptcy Code 2016, being the Financial Creditor of the Corporate Debtor who had sanctioned loans to the Corporate Debtor.
The account of the Corporate Debtor had been declared an NPA in 2013 but the debt had been acknowledged by the Corporate Debtor at various instances- in 2013,2015,2016, 2017, 2018 and 2019.
The Applicant argued that from 2015-2019 the amount due was recorded in the Balance Sheet of the Corporate Debtor, which amounted to acknowledgement of liability, thereby extending limitation.
The Corporate Debtor, in his counter, stated that since 3 years had already passed since the date the declaration of the account of the Corporate Debtor as NPA in 2013, the application for initiation of CIRP is barred by time.
The Tribunal reiterated that the period of limitation for filing an application u/s 7 of the IBC would be extended if the debt is acknowledged in the balance sheet of the Corporate Debtor.
The Tribunal relied on the judgements in G.S. Buildtech Pvt. Ltd. v. Ardee Infrastructure Venture Pvt. Ltd. and Dena Bank v. C. Shivakumar Reddy and Ors. and concluded that Section 18 of the Limitation Act, 1963 applies to proceedings under the IBC and entries in books of accounts and/or balance sheets of a Corporate Debtor would amount to an acknowledgment u/s 18 of the Limitation Act.
The NCLT analysed the provisions contained in Section 238A of the IBC, Section 18 of the Limitation Act, 1963 and Article 137 of the Limitation Act, 1963 and held that in the present case, since the debt was acknowledged in the Balance Sheet of the Corporate Debtor on 21.06.2019 and the application u/s 7 was filed by the Financial Creditor on 01.09.2021, it is well within the limitation period of 3 years and thereby dismissed the objection regarding limitation, as raised by the Corporate Debtor.
The Tribunal admitted the application filed u/s 7 of the IBC and imposed a moratorium as per the terms of Section 14 of the Code.
Counsel for Financial Creditor: A.V. Thomas, Advocate
Counsel for Corporate Debtor: Marian G.M. Tharakan, Advocate
