ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED versus BISHAL JAISWAL & ANR.

ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED versus BISHAL JAISWAL & ANR.

Entries made in the books of accounts, including signed balance sheets, can amount to an acknowledgement of liability under Section 18 of the Limitation Act and thereby extend limitation; Section 18 is applicable to proceedings under the IBC by virtue of Section 238A; the NCLAT Full Bench majority in V. Padmakumar is overruled; cases must be examined factually to determine whether balance-sheet entries are unequivocal acknowledgements or qualified by notes/auditor's reports.

Parties
Appellant / Financial Creditor: Asset Reconstruction Company (India) Limited; Respondents / Corporate Debtor: Bishal Jaiswal & Anr.
Jurisdiction
India
Judgment Date
15 April 2021
Procedural Posture
Civil Appeal / Final Judgment and Remand Order
Outcome
Appeal(s) allowed in part; Full Bench NCLAT majority decision in V. Padmakumar overruled; impugned NCLAT judgment set aside; matters remanded to NCLAT for fresh decision in accordance with this judgment
Legal Topics
Acknowledgement of Debt, Limitation, Entries in Balance Sheets, Applicability of Limitation Act to IBC, Stare Decisis
Insolvency and Bankruptcy Code, 2016 Limitation Act, 1963 Companies Act, 2013 SARFAESI Act, 2002 Acknowledgement of Debt Limitation Entries in Balance Sheets Applicability of Limitation Act to IBC +1 more

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Parties

Asset Reconstruction Company (India) Limited

Appellant / Financial Creditor

Bishal Jaiswal & Anr.

Respondents / Corporate Debtor

Procedural Posture

Civil Appeal / Final Judgment and Remand Order

Legal Issues

  1. 1 Whether entries in balance sheets of a corporate debtor amount to acknowledgement of debt for the purpose of extending limitation under Section 18 of the Limitation Act, 1963
  2. 2 Whether Section 18 of the Limitation Act is applicable to proceedings under the Insolvency and Bankruptcy Code, 2016 by virtue of Section 238A
  3. 3 Whether the NCLAT Full Bench majority decision in V. Padmakumar is correct and whether the NCLAT’s refusal to answer a reference was competent

Ratio Decidendi

Entries made in the books of accounts, including signed balance sheets, can amount to an acknowledgement of liability under Section 18 of the Limitation Act and thereby extend limitation; Section 18 is applicable to proceedings under the IBC by virtue of Section 238A; the NCLAT Full Bench majority in V. Padmakumar is overruled; cases must be examined factually to determine whether balance-sheet entries are unequivocal acknowledgements or qualified by notes/auditor's reports.

Court Disposition

Appeal(s) allowed in part; Full Bench NCLAT majority decision in V. Padmakumar overruled; impugned NCLAT judgment set aside; matters remanded to NCLAT for fresh decision in accordance with this judgment

Orders

  • Majority judgment of the Full Bench of the NCLAT in V. Padmakumar (dated 12.03.2020) overruled
  • Impugned NCLAT judgment dated 22.12.2020 set aside