Five-Member NCLAT Bench to reconsider if reflection of debt in balance sheet is acknowledgement of debt

A three-member bench of National Company Law Appellate Tribunal has referred the decision in V Padamakumar vs Stressed Assets Stabilization Fund (SASF) & Anr for reconsideration. .With a 4:1 majority, a five-member bench in V Padamakumar had held that reflection of debt in the balance sheet cannot be considered as an acknowledgement of debt under Section 18 of the Limitation Act..The NCLAT's majority decision on acknowledgement of debt in balance sheets: An appeal to the brooding spirit of law.However, a Bench of Justice Jarat Kumar Jain, Member (Judicial), Balvinder Singh and VP Singh, Members (Technical) has now opined, ."We, with the great respect to the Hon’ble Members of the Judgment, thought it proper to refer V. Padmakumar’s Case for reconsideration.. Hon’ble Supreme Court and various Hon’ble High Courts have consistently held that an entry made in the Company’s Balance Sheet amounts to an acknowledgement of debt under Section 18 of the Limitation Act, 1963, in view of the settled law, V Padmakumar’s Case requires reconsideration.".The Bench was hearing an appeal against an order of admission passed by the Adjudicating Authority against the Corporate Debtor in terms of Section 7 of the Insolvency & Bankruptcy Code. .In line with V Padamakumar, the Corporate Debtor argued that its balance sheet could not be considered as an acknowledgement under Section 18 of the Limitation Act, 1963. .On the other hand, the Financial Creditor referred to Supreme Court's decsion in Mahavir Cold Storage Vs. CIT and submitted that it was settled law that the entries made in the Balance Sheet of a company amounted to an acknowledgement of debt..To support its stand, the Financial Creditor placed several judgements of the Supreme Court and the High Courts before the three-member Bench..First, the Bench opined that Section 18 of Limitation Act, 1963 was indeed applicable to insolvency cases and then went on to observe that the majority view in V Padmakumar was contrary to settled law..In V. Padamakumar’s Case minority view is in the line of settled law that Balance Sheet of the Company, be treated as acknowledgement of debt for the purpose of Section 18 of the Limitation Act, 1963. In the majority Judgment no reasons have been assigned for disagreement with this view.the bench said. .It further noted that the Calcutta High Court and the Delhi High Court have categorically held that merely because a Balance Sheet is prepared under the compulsion of law or in discharge of statutory duty, it could not be held that the Balance Sheet of the Company could not amount to an acknowledgement of liability..Following judicial discipline and propriety, the three-member Bench thus ordered, ."We are of the view that the matter be referred to a Bench of Five Hon’ble Members of this Appellate Tribunal.".The Registrar has been directed to place the Reference before the Acting Chairperson for constituting an appropriate Bench..The Appellant was represented by Advocates Abhijeet Sinha, Sandeep Bajaj, Devansh Jain, instructed by PSL Chambers. .The Financial Creditor was represented by Senior Advocate Ramji Srinivasan with Advocates Abhirup Das Gupta, Rishub Kapoor, Varun Gupta, instructed by HSA Advocates. .Advocate Sanjeev Kumar, Pankaj Dhanuka, Anshul Sehgal appeared for Resolution Professional. .Read the Reference:

Five-Member NCLAT Bench to reconsider if reflection of debt in balance sheet is acknowledgement of debt

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