{"id":355522,"date":"2025-08-04T11:30:43","date_gmt":"2025-08-04T06:00:43","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=355522"},"modified":"2025-08-04T12:18:29","modified_gmt":"2025-08-04T06:48:29","slug":"supreme-court-ifin-insolvency-plea-acknowledgment-of-debt-limitation","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2025\/08\/04\/supreme-court-ifin-insolvency-plea-acknowledgment-of-debt-limitation\/","title":{"rendered":"Creditor\u2019s name not essential in balance sheet for acknowledgment of debt to extend limitation period; Supreme sets aside NCLAT Order; Allows IFIN\u2019s plea"},"content":{"rendered":"
\n

Supreme Court:<\/span> In an appeal filed by IL&FS Financial Services Ltd. (\u2018IFIN\u2019) against the judgment of the National Company Law Appellate Tribunal (\u2018NCLAT\u2019) which had dismissed IFIN\u2019s application under Section 7<\/a> of the Insolvency and Bankruptcy Code, 2016<\/a> (\u2018IBC\u2019), for initiation of corporate insolvency resolution process against Adhunik Meghalaya Steels Pvt. Ltd (\u2018respondent\/Corporate Debtor\u2019) on the ground of limitation, the division bench of Manoj Misra and KV Viswanathan*<\/span>, JJ. held that the entry in the Balance Sheet of the Corporate Debtor for the financial year 2019\u201420 constituted a valid acknowledgment of debt under Section 18<\/a> of the Limitation Act, 1963<\/a>. This acknowledgment effectively extended the limitation period for initiating insolvency proceedings.<\/p>\n

The Court further clarified that the exclusion of limitation during the COVID-19 period granted through its earlier orders in Cognizance for Extension of Limitation, In re<\/span>, (2021) 5 SCC 452<\/a>,, was applicable under Paragraph 5(I) of its order dated 10-01-2022. As a result, IFIN\u2019s Section 7 application was held to be well within the extended limitation period.<\/p>\n

Setting aside the concurrent findings of the NCLT and NCLAT, the Court remitted the matter to the NCLT for fresh consideration of IFIN\u2019s application under Section 7<\/a> of the Insolvency and Bankruptcy Code<\/a> on its merits.<\/p>\n

Background<\/h3>\n

On 27-02-2015, IFIN and respondent entered into a Loan Agreement for a term loan of \u20b930 crores, secured in part by a pledge of 8,10,804 shares of Adhunik Metaliks Ltd. via a Pledge Agreement on the same date.<\/p>\n

The respondent\u2019s account was declared a Non-Performing Asset (NPA) on 01-03-2018 due to default in repayment. IFIN filed a Section 7<\/a> IBC<\/a> application on 15-01-2024, stating a default amount of \u20b955.45 crore, with the default date recorded as 01-03-2018 and acknowledged in the information utility.<\/p>\n

IFIN relied on a recall notice dated 10-08-2018 (unanswered) and consistent acknowledgments of debt in the respondent\u2019s audited financial statements from FY 2015 to FY 2019-20. The Balance Sheet for FY 2019-20, signed on 12-08-2020 and made public on 14-02-2021, was approved by the Board of Directors and filed with the Registrar of Companies.<\/p>\n

IFIN argued that the signing date of 12-08-2020 constituted an acknowledgment under Section 18<\/a> of the Limitation Act<\/a>, extending the limitation period to 11-08-2023. With the benefit of the Supreme Court\u2019s COVID-related limitation extension (excluding the period from 15-03-2020 to 28-02-2022), the limitation was further extended to 27-0-.2025. Thus, the Section 7 application filed on 15-01-2024 was within limitation. The entire case revolves around the question as to whether at all there was a valid acknowledgment of the debt under Section 18<\/a> of the Limitation Act 1963<\/a>, in view of the entries in the Balance Sheet of F.Y. 2019-20.<\/p>\n

The NCLT held that there was no valid acknowledgment of liability in the Balance Sheet for FY 2019\u201420, as it did not mention the name of the financial creditor. It concluded that the Section 7<\/a> IBC<\/a> application filed by IFIN was barred by limitation, stating it should have been filed by 30-05-2022.<\/p>\n

Aggrieved by this decision, IFIN filed an appeal before the NCLAT. The NCLAT observed that the Balance Sheet for FY 2017\u201418 was signed on 02-09-2018, and the three-year limitation would ordinarily expire on 01-09-2021. However, with the benefit of the Supreme Court\u2019s limitation extension order, the limitation period extended up to 30-05-2022. Accordingly, the appeal was dismissed, prompting IFIN to approach the Supreme Court.<\/p>\n

Issue<\/h3>\n

Whether the National Company Law Appellate Tribunal (\u2018NCLAT\u2019) and the National Company Law Tribunal (\u2018NCLT\u2019) were justified in dismissing the Section 7 application filed by the appellant against the respondent under the IBC, 2016, on the ground that the same was being barred by limitation.<\/p>\n

Analysis and Decision<\/h3>\n

The Court reiterated that, in view of Section 238A<\/a> of IBC<\/a>, the provisions of the Limitation Act, 1963<\/a> would apply, as far as possible, to proceedings under the Code. It reaffirmed that Article 137<\/a> of the Limitation Act<\/a>, which prescribes a limitation period of three years from the date when the right to apply accrues, would govern such applications.<\/p>\n

The Court noted that it was undisputed that the respondent\u2019s account was declared an NPA on 01-03-2018. However, IFIN relied on certain entries in the Balance Sheet for FY 2019-20, which was signed by the Directors on 12-08-2020. The key question before the Court was whether those entries constituted an acknowledgment of debt under Section 18<\/a> of the Limitation Act<\/a>, thereby extending the limitation period.<\/p>\n

The Court held that, upon examining the facts of the case, the Balance Sheet for FY 2019-20, when considered alongside admitted documents, including previous years’ financial statements, clearly constituted a valid acknowledgment of a subsisting liability. It reflected the existence of a jural relationship and an admission of such relationship. The Court gave the following reasons:<\/p>\n

i) The overall tenor and context of the FY 2019-20 Balance Sheet, viewed in light of the Balance Sheets for FYs 2015-16, 2016-17, and 2017\u201418, indicated that the entry related to the same borrowing and amounted to a valid acknowledgment of debt.<\/p>\n

ii) As per Indian Accounting Standards (Ind AS) 7, a cash flow statement was appended to the financials. The statement showed proceeds from borrowings of \u20b972,30,902 in FY 2018-19, which, when added to \u20b923,68,91,933, resulted in a total of \u20b924,41,22,835.<\/p>\n

iii) Importantly, the cash flow statement revealed that no part of the proceeds was used for repayment of borrowings, as the figure under \u201ccash flows from (used in) financial activities\u201d was nil, clearly indicating that the debt remained unpaid even during FY 2019-20.<\/p>\n

The Court further noted that, in addition to the above, the respondent\u2019s reply to the Section 7 application contained only a general objection on the ground of limitation and offered merely a bare denial, without specifically disputing the acknowledgments reflected in the financial statements.<\/p>\n

The Court observed that the Section 7 application contained detailed averments referring to a series of audited financial statements and Balance Sheets from FY 2015-16 to FY 2019-20, to establish that the entry in the FY 2019-20 Balance Sheet amounted to an acknowledgment under Section 18<\/a> of the Limitation Act<\/a>. The Court clarified that its finding was not based merely on the respondent\u2019s non-denial, but rather on a substantive construction of the entry itself, which was deemed a valid acknowledgment of debt.<\/p>\n

It was noted that the FY 2019-20 Balance Sheet was signed by the Board of Directors on 12-08-2020, which fell within the original limitation period, computed from 01-03-2018 to 28-02-2021. The acknowledgment on 12-08-2020 extended the limitation up to 11-08-2023.<\/p>\n

However, due to the COVID-19 pandemic, the Supreme Court had issued a series of orders extending the limitation period, with the relevant order in this case dated 10-01-2022. The parties were in dispute as to whether sub-para (I) or sub-para (III) of paragraph 5 of that order would apply.<\/p>\n

The Court concluded that sub-para (I) of para 5 of its order dated 10-01-2022 was applicable, and therefore the entire period from 15-03-2020 to 28-02-2022 stood excluded for the purpose of limitation. As a result, the limitation period reckoning from the acknowledgment dated 12-08-2020 would commence on 01-03-2022 and run until 28-02-2025. Since the Section 7 application was filed on 15-01-2024, it was held to be within the prescribed limitation period.<\/p>\n

The Court clarified that once the fresh period of limitation began on 12-0-2020, there was no question of limitation expiring between 15-03-2020 and 28-02-2022, making sub-para (III) of the order dated 10-01-2022 inapplicable to the case.<\/p>\n

Accordingly, the judgments of the NCLT (dated 16-05-2024) and NCLAT (dated 25-03-2025) were set aside. The appeal was allowed, and the matter was remitted to the adjudicating authority to proceed in accordance with law, treating the Section 7 application as having been filed within limitation.<\/p>\n

[IL & FS Financial Services Ltd. v. Adhunik Meghalaya Steels (P) Ltd., 2025 SCC OnLine SC 1567<\/a>, decided on 29-07-2025<\/span>]<\/p>\n

*Judgment Authored by: Justice K.V. Viswanathan<\/span><\/strong><\/p>\n

\n

Advocates who appeared in this case:<\/p>\n

For Appellant(s):<\/span> M\/s. Cyril Amarchand Mangaldas, AOR, Mr. Raunak Dhillon, Adv., Ms. Aishwarya Gupta, Adv., Ms. Niharika Shukla, Adv., Mr. Jeezan Pakhliwal, Adv., Mr. Vikash Kumar Jha, Adv.<\/p>\n

For Respondent(s):<\/span> Mr. Ramji Srinivasan, Sr. Adv., Mr. Pranav Sachdeva, AOR, Mr. D N Sharma, Adv., Mr. Nilay Sengupta, Adv., Ms. Shefali Munde<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The judgment reaffirmed the principle that entries in a corporate debtor’s balance sheet can constitute an acknowledgment of liability under Section 18 of the Limitation Act, provided they indicate a subsisting jural relationship between the parties, even if the financial creditor is not named explicitly. The Court emphasised that such entries must be interpreted liberally and in context, considering the overall tenor of the balance sheet and the surrounding circumstances.<\/p>\n","protected":false},"author":67011,"featured_media":355534,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,9],"tags":[45905,32299,86572,86571,30361,86570,6121,32057,22014,12521,65339,33589,5363],"class_list":["post-355522","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-supremecourt","tag-acknowledgment-of-debt","tag-balance-sheet","tag-covid-extension","tag-creditor-name","tag-ibc","tag-ifin","tag-insolvency","tag-limitation-period","tag-nclat","tag-nclt","tag-section-18","tag-section-7-ibc","tag-supreme-court"],"yoast_head":"\nSupreme Court revives IFIN's insolvency petition, clarifies law on acknowledgment of debt in balance sheets | SCC Times<\/title>\n<meta name=\"description\" content=\"Supreme Court revived IFIN's insolvency petition and clarified that entries in a corporate debtor's balance sheet can amount to acknowledgment of debt under Section 18 of the Limitation Act, even without naming the creditor.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.scconline.com\/blog\/post\/2025\/08\/04\/supreme-court-ifin-insolvency-plea-acknowledgment-of-debt-limitation\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Creditor\u2019s name not essential in balance sheet for acknowledgment of debt to extend limitation period; 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Ramasubramanian, JJ. held that there is no bar in law to amendment of pleadings in an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 or to filing of additional documents apart from those initially filed, at any\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/07\/MicrosoftTeams-image-13.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/07\/MicrosoftTeams-image-13.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/07\/MicrosoftTeams-image-13.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/07\/MicrosoftTeams-image-13.png?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/07\/MicrosoftTeams-image-13.png?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":344468,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/03\/27\/acknowledgment-of-balance-sheet-under-section-18-of-limitation-act-be-counted-from-date-of-signing-of-balance-sheet-nclat-scc-times\/","url_meta":{"origin":355522,"position":2},"title":"Acknowledgment of Balance Sheet under Section 18 of Limitation Act to be counted from date of signing of Balance Sheet: NCLAT","author":"Ritu","date":"March 27, 2025","format":false,"excerpt":"\u201cThere is no mandatory requirement for factorising the date of uploading of the balance sheet on the MCA portal for computing the period of limitation.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"National Company Law Appellate Tribunal","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/resolution-plan.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/resolution-plan.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/resolution-plan.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/resolution-plan.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":248324,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/05\/17\/acknowledgment-of-debt\/","url_meta":{"origin":355522,"position":3},"title":"NCLAT | ‘Balance and Security Confirmation Letter’ is sufficient ‘acknowledgement of debt’ so as to extend limitation period for initiating insolvency proceedings under S. 7 IBC","author":"Bhumika Indulia","date":"May 17, 2021","format":false,"excerpt":"National Company Law Appellate Tribunal (NCLAT): A Division Bench of Justice Venugopal M. (Judicial Member) and V.P. Singh (Technical Member) dismissed an appeal filed against the order of the National Company Law Tribunal, Hyderabad (\"NCLT\"), whereby the NCLT had admitted an application filed by the Financial Creditor\u2212Punjab National Bank under\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":241412,"url":"https:\/\/www.scconline.com\/blog\/post\/2020\/12\/29\/nclat-whether-reflection-of-debt-in-balance-sheet-of-a-corporate-debtor-would-amount-to-acknowledgement-under-s-18-of-limitation-act-5-member-bench-decodes-interplay-between-ibc\/","url_meta":{"origin":355522,"position":4},"title":"NCLAT | Whether reflection of debt in Balance Sheet of a Corporate Debtor would amount to acknowledgement under S. 18 of Limitation Act? 5-Member Bench decodes Interplay between IBC & Limitation Act; discusses ‘Judicial Indiscipline’","author":"Bhumika Indulia","date":"December 29, 2020","format":false,"excerpt":"National Company Law Appellate Tribunal (NCLAT), New Delhi: The Bench of Justice Bansi Lal Bhat (Acting Chairperson) and Justice Venugopal M. (Judicial Member), Justice Anant Bijay Singh (Judicial Member), Kanthi Narahari (Technical Member) and Shreesha Merla (Technical member), while addressing the present matter observed that: \"...for purpose of computing the\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/08\/NCLAT.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":260021,"url":"https:\/\/www.scconline.com\/blog\/post\/2022\/01\/14\/corporate-insolvency-claims-against-corporate-debtor-and-period-of-limitation-sc-assesses-impact-of-covid-19-pandemic\/","url_meta":{"origin":355522,"position":5},"title":"Corporate Insolvency, Claims against Corporate Debtor and Period of Limitation; SC assesses impact of COVID-19 pandemic","author":"Editor","date":"January 14, 2022","format":false,"excerpt":"Supreme Court: In a case relating to Corporate Insolvency, the Division Bench comprising of Indira Banerjee* and J.K. 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