The Impact Of Accounting Entries On Limitation Periods Under The IBC Asset Reconstruction Company (India) Limited V Bishal Jaiswal & Anr
Published date | 05 May 2021 |
Subject Matter | Accounting and Audit, Corporate/Commercial Law, Litigation, Mediation & Arbitration, Accounting Standards, Contracts and Commercial Law, Trials & Appeals & Compensation |
Law Firm | Tuli & Co |
Author | Mr Saurajay Nanda and Ribhu Garg |
The Impact Of Accounting Entries On Limitation Periods Under The Ibc Asset Reconstruction Company (India) Limited V Bishal Jaiswal & Anr1
According to '18 of the Limitation Act 1963, an acknowledgment of liability in writing before the expiry of the limitation period will reset the limitation clock to the date of the acknowledgment. The Supreme Court has held that entries in the books of account of a company, including a balance sheet, can amount to the acknowledgement of a debt and so reset the limitation period under '18.
The Supreme Court judgment overturns the contrary decision of a 5-Judge Bench order of the National Company Law Appellate Tribunal (NCLAT) in V Padmakumar v Stressed Assets Stabilisation Fund2 where, by a 4:1 majority, the NCLAT held that balance sheets entries do not amount to the acknowledgment of a debt and so would not extend limitation under '18.
Procedural History
The Appellant filed an IBC application before the National Company Law Tribunal (NCLT) on the strength of balance sheet entries made by the Respondent recording an amount of c. ₹6,000 crores/c. US$809m owed to it. The NCLT admitted the application and this decision was appealed to the NCLAT in reliance on V Padmakumar. A 3-Judge Bench of the NCLAT made a reference to the Acting Chairperson of the NCLAT to reconsider V Padmakumar. A 5-Judge Bench of the NCLAT refused to reconsider the earlier decision and the Appellant therefore appealed to the Supreme Court.
Supreme Court of India
The Supreme Court held:
- '238A of the IBC makes the provisions of the Limitation Act applicable to proceedings before the NCLT and the NCLAT '18 of the Limitation Act is therefore applicable.
- There are a catena of judgments of various High...
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