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Reflection of debt in Balance Sheet can tantamount to acknowledgment of Debt under Limitation Act: Apex Court

April 16, 2021[2021] 126 taxmann.com 200 (SC)
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IBC : SC set aside majority decision of Full Bench in V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF)[2021] 123 taxmann.com 331 (NCL-AT) to effect that filing of Balance Sheet/Annual Return being mandatory, reflection of debt in a Balance Sheet/Annual Return of corporate debtor cannot be treated to be an acknowledgement of debt under section 18 of Limitation Act, 1963

• The statement of law contained in Bengal Silk Mills Co. V. Ismail Golam Hossain Ariff AIR 1962 Cal 115, that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law 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, there by extending limitation under section 18 of the Limitation Act.

• Thus, majority decision of Full Bench in V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF)[2021] 123 taxmann.com 331 (NCL-AT)/[2020] 221 COMP CASE 153(NCL-AT) is contrary to catena of judgments and liable to be set aside.

• [V. Padmakumar v. Stressed Assets Stabilisation Fund (SASF)[2021] 123 taxmann.com 331 (NCL-AT) set aside]

• [Bishal Jaiswal v. Asset Reconstruction Company [India] Ltd.[2021] 126 taxmann.com 199 (NCL-AT) set aside] [see Annex]

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