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

Citation: [2021] 3 S.C.R. 524 · Decided: 15-04-2021 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Disposed off

Cited by 3 judgment(s) · cites 7 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 3 S.C.R.
ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED
v.
BISHAL JAISWAL & ANR.
(Civil Appeal No. 323 of 2021)
APRIL 15, 2021
[ROHINTON FALI NARIMAN, B. R. GAVAI AND
HRISHIKESH ROY, JJ.]
Insolvency and Bankruptcy Code, 2016 – s.7 – Some original
lenders of the corporate debtor, assigned the debts owed to them by
the corporate debtor to the appellant – Appellant took actual
physical possession of project assets of the corporate debtor under
the SARFAESI Act and filed application u/s.7 of IBC before the
National Company Law Tribunal (NCLT) for default from the
corporate debtor – As the relevant form indicating the date of default
did not indicate any such date, this was subsequently made up by
the appellant by filing a supplementary affidavit before the NCLT,
specifically mentioning the date of default and annexing copies of
balance sheets of the corporate debtor, which, according to the
appellant, acknowledged periodically the debt that was due – NCLT
admitted the s.7 application, observing that balance sheets of the
corporate debtor, wherein it acknowledged its liability, were signed
before expiry of three years from the date of default, and entries in
such balance sheets being acknowledgements of the debt due for
purposes of s.18 of the Limitation Act, the s.7 application was not
barred by limitation – Whether entries in balance sheets of a
corporate debtor would amount to acknowledgement of debt for
purpose of extending limitation u/s.18 of the Limitation Act – Held:
An entry made in the books of accounts, including the balance sheet,
can amount to an acknowledgement of liability within the meaning
of s.18 of the Limitation Act – Though the filing of a balance sheet
is by compulsion of law, the acknowledgement of a debt is not
necessarily so – Provisions of the Companies Act show that filing
of a balance sheet in accordance with the provisions of the
Companies Act is mandatory, any transgression of the same being
punishable by law – However, what is of importance is that notes
that are annexed to or forming part of such financial statements
are expressly recognised by s.134(7) – Equally, the auditor’s report
[2021] 3 S.C.R. 524
524
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may also enter caveats with regard to acknowledgements made in
the books of accounts including the balance sheet – Thus, there is
a compulsion in law to prepare a balance sheet but no compulsion
to make any particular admission, as it would depend on the facts
of each case as to whether an entry made in a balance sheet qua
any particular creditor is unequivocal or has been entered into with
caveats, which then has to be examined on a case by case basis to
establish whether an acknowledgement of liability has, in fact, been
made, thereby extending limitation u/s.18 of the Limitation Act –
Limitation Act, 1963 – s.18 – Companies Act, 2013 – ss.2(40), 90,
128, 129, 134 and 137 – Securitisation and Reconstruction of
Financial Assets and Enforcement of Securities Interest Act, 2002.
Insolvency and Bankruptcy Code, 2016 – s.238A – Whether
s.18 of the Limitation Act, which extends the period of limitation
depending upon an acknowledgement of debt made in writing and
signed by the corporate debtor, is also applicable under s.238A,
given the expression “as far as may be” governing the applicability
of the Limitation Act to the IBC – Held: The aforesaid question is no
longer res integra as two recent judgments of this Court have applied
the provisions of s.14 and s.18 of the Limitation Act to the IBC –
Limitation Act, 1963 – s.18.
Limitation Act, 1963 – s.9 – Principle of s.9 of the Limitation
Act is to be strictly adhered to, namely, that when time begins to
run, it cannot be halted, except by a process known to law.
Precedents – Binding precedent – Rule of stare decisis – Every
argumentative novelty does not undo a settled position of law –
Constitution of India – Art. 141.
Disposing of the matters, the Court
HELD: 1. Several judgments of this Court have indicated
that an entry made in the books of accounts, including the balance
sheet, can amount to an acknowledgement of liability within the
meaning of Section 18 of the Limitation Act, 1963. [Para 14][541-
F-G]
2. An exhaustive judgment of the Calcutta High Court in
Bengal Silk Mills Co. case held that an acknowledgement of
liability that is made in a balance sheet can amount to an
ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED v.
BISHAL JAISWAL & ANR.
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SUPREME

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