LexIL & FS FINANCIAL SERVICES LIMITED versus ADHUNIK MEGHALAYA STEELS PRIVATE LIMITED
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[2025] 7 S.C.R. 1823 : 2025 INSC 911 IL & FS Financial Services Limited v. Adhunik Meghalaya Steels Private Limited (Civil Appeal No. 5787 of 2025) 30 July 2025 [Manoj Misra and K.V. Viswanathan,* JJ.] Issue for Consideration Whether the Tribunals below were justified in holding that the s.7 application under the IBC filed by the appellant on 15.01.2024 was barred by time; does the entry in the Balance Sheet of F.Y. 2019-20 constitute a valid acknowledgement of debt by the respondent u/s.18, Limitation Act, 1963; will Para 5(I) or 5(III) of the order dated 10.01.2022 passed by the Supreme Court in Suo Moto Writ Petition No. 3 of 2020 govern the situation. Headnotes† Insolvency and Bankruptcy Code, 2016 – ss.7, 238A – Limitation Act, 1963 – s.18 – Effect of acknowledgment in writing – Loan Agreement entered into between the appellant and respondent – Respondent’s account was declared as a non- performing asset on 01.03.2018 – Application u/s.7, IBC filed by the appellant on 15.01.2024 setting out a default amount of Rs. 55 crores – Appellant relied on the entries in the Balance Sheet of F.Y. 2019-20 signed by the Directors on 12.08.2020 to aver that it constituted an acknowledgment of debt – NCLT held that there was no acknowledgement of liability in the Balance Sheet of F.Y. 2019-20 since the name of the financial creditor-appellant did not appear in the Balance Sheet; s.7 application was held to be barred by limitation – Appeal filed by appellant, dismissed by NCLAT – Challenge to: Held: Judgments of NCLAT and NCLT set aside – Whether a certain document in a given case constitutes a valid acknowledgement would depend on the facts and circumstances of each case – In the present case, it is not disputed that entries in Balance Sheets could constitute a valid acknowledgement – Further, the company’s Balance Sheet is prepared in the statutory format as per schedule * Author 1824 [2025] 7 S.C.R. Supreme Court Reports 3 of the Companies Act which did not provide for giving the specific name of every secured or unsecured creditor – On facts, balance Sheet of F.Y. 2019- 20, and other admitted documents, including the financial statements of the previous years, clearly constitutes a valid acknowledgment of a subsisting liability and indicated the existence of a jural relationship and an admission as to the existence of such relationship – The Balance Sheet of F.Y. 2019-20 was admittedly signed by the board of directors on 12.08.2020 – This date was within the subsisting period of limitation for the reason that taking 01.03.2018 as the commencement of limitation, limitation ordinarily would have continued till 28.02.2021 – Since an acknowledgment came into effect on 12.08.2020, limitation would have stood extended till 11.08.2023 – However, Covid-19 intervened resulting in Supreme Court passing a series of orders extending the period of limitation – The relevant order applicable in the instant case is the order of 10.01.2022 – Sub-Para 1 of Para 5 thereof would apply and the entire period from 15.03.2020 to 28.02.2022 would stand excluded thus, the limitation would, reckoning the acknowledgment of 12.08.2020, commence on 01.03.2022 and continue till 28.02.2025 – Since the application was filed on 15.01.2024 the same is within time – Limitation, in view of the acknowledgment, having commenced only on 12.08.2020, the question of limitation expiring between 15.03.2020 and 28.02.2022 cannot arise – Hence, Para 5(III) of the order of the Supreme Court dated 10.01.2022, has no application to the facts of the instant case – Matter is remitted to the adjudicating authority to proceed with and decide in accordance with law, treating the application u/s.7 of the IBC, filed by the appellant, as one filed within limitation. [Paras 33, 38, 39, 41, 44, 46, 47] Limitation Act, 1963 – s.18 – Effect of acknowledgment in writing – ‘A valid acknowledgment’ – What constitutes – Discussed. [Paras 26, 27] Case Law Cited Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal and Another [2021] 3 SCR 524 : (2021) 6 SCC 366; Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria and Others, 1961 SCC OnLine SC 147; Lakshmirattan Cotton Mills Co. Ltd. and M/s Behari Lal Ram Charan v. Aluminium Corporation of India Ltd. [1971] 3 SCR 840 : (1971) 1 SCC 67; Vidyasagar Prasad v. [2025] 7 S.C.R. 1825 IL & FS Financial Services Limited v. Adhunik Meghalaya Steels Private Limited UCO Ba
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