ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED versus BISHAL JAISWAL & ANR. on 15 April 2021

SUPREME COURT REPORTS

[2021] 3 S.C.R.

AASSET RECONSTRUCTION COMPANY (INDIA) LIMITED

v.

BISHAL JAISWAL & ANR.

(Civil Appeal No. 323 of 2021)

BAPRIL 15, 2021

[ROHINTON FALI NARIMAN, B. R. GAVAI ANDHRISHIKESH ROY, JJ.]

Insolvency and Bankruptcy Code, 2016 – s.7 – Some originallenders of the corporate debtor, assigned the debts owed to them byCthe corporate debtor to the appellant – Appellant took actualphysical possession of project assets of the corporate debtor underthe SARFAESI Act and filed application u/s.7 of IBC before theNational Company Law Tribunal (NCLT) for default from thecorporate debtor – As the relevant form indicating the date of defaultDdid not indicate any such date, this was subsequently made up bythe appellant by filing a supplementary affidavit before the NCLT,specifically mentioning the date of default and annexing copies ofbalance sheets of the corporate debtor, which, according to theappellant, acknowledged periodically the debt that was due – NCLTadmitted the s.7 application, observing that balance sheets of theEcorporate debtor, wherein it acknowledged its liability, were signedbefore expiry of three years from the date of default, and entries insuch balance sheets being acknowledgements of the debt due forpurposes of s.18 of the Limitation Act, the s.7 application was notbarred by limitation – Whether entries in balance sheets of aFcorporate debtor would amount to acknowledgement of debt forpurpose 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 meaningof s.18 of the Limitation Act – Though the filing of a balance sheetis by compulsion of law, the acknowledgement of a debt is notGnecessarily so – Provisions of the Companies Act show that filingof a balance sheet in accordance with the provisions of theCompanies Act is mandatory, any transgression of the same beingpunishable by law – However, what is of importance is that notesthat are annexed to or forming part of such financial statementsHare expressly recognised by s.134(7) – Equally, the auditor’s report

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

may also enter caveats with regard to acknowledgements made inthe books of accounts including the balance sheet – Thus, there isa compulsion in law to prepare a balance sheet but no compulsionto make any particular admission, as it would depend on the factsof each case as to whether an entry made in a balance sheet quaany particular creditor is unequivocal or has been entered into withcaveats, which then has to be examined on a case by case basis toestablish whether an acknowledgement of liability has, in fact, beenmade, 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 ofFinancial Assets and Enforcement of Securities Interest Act, 2002.

Insolvency and Bankruptcy Code, 2016 – s.238A – Whethers.18 of the Limitation Act, which extends the period of limitationdepending upon an acknowledgement of debt made in writing andsigned by the corporate debtor, is also applicable under s.238A,given the expression “as far as may be” governing the applicabilityof the Limitation Act to the IBC – Held: The aforesaid question is nolonger res integra as two recent judgments of this Court have appliedthe 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 LimitationAct is to be strictly adhered to, namely, that when time begins torun, it cannot be halted, except by a process known to law.

Precedents – Binding precedent – Rule of stare decisis – Everyargumentative novelty does not undo a settled position of law –Constitution of India – Art. 141.

Disposing of the matters, the Court

Conclusion

HELD: 1. Several judgments of this Court have indicatedthat an entry made in the books of accounts, including the balancesheet, can amount to an acknowledgement of liability within themeaning of Section 18 of the Limitation Act, 1963. [Para 14][541-F-G]

2. An exhaustive judgment of the Calcutta High Court inBengal Silk Mills Co. case held that an acknowledgement ofliability that is made in a balance sheet can amount to an AB

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Aacknowledgement of debt. Importantly, this judgment holds thatthough the filing of a balance sheet is by compulsion of law, theacknowledgement of a debt is not necessarily so. In fact, it is notuncommon to have an entry in a balance sheet with notes annexedto or forming part of such balance sheet, or in the auditor’s report,which must be read along with the balance sheet, indicating thatBsuch entry would not amount to an acknowledgement of debt forreasons given in the said note. [Para 16][543-E-F; 547-B-C]

3. The position under the Companies Act, 2013 qua anycompulsion of law for filing of balance sheets andacknowledgements made therein needs to be examined. SectionC2(40) of the Companies Act, 2013 defines financial statement.Under Section 92, every company is to prepare an annual returncontaining certain particulars. Vide Section 128, every companyshall prepare and keep at its registered office, books of accountsand financial statements for every financial year. Section 129 refersDdirectly to financial statements. Likewise, under Section 134,financial statements are to be approved by the Board of Directorsbefore they are signed, and the auditor’s report, as well as a reportby the Board of Directors, is to be attached to each financialstatement. Under Section 137, copies of financial statements arethen to be filed with the Registrar of Companies. A perusal of theEaforesaid Sections would show that there is no doubt that thefiling of a balance sheet in accordance with the provisions of theCompanies Act is mandatory, any transgression of the same beingpunishable by law. However, what is of importance is that notesthat are annexed to or forming part of such financial statements Fare expressly recognised by Section 134(7). Equally, the auditor’sreport may also enter caveats with regard to acknowledgementsmade in the books of accounts including the balance sheet. Aperusal of the aforesaid would show that the statement of lawcontained in Bengal Silk Mills, that there is a compulsion in law to prepare a balance sheet but no compulsion to make anyGparticular admission, is correct in law as it would depend on thefacts of each case as to whether an entry made in a balance sheetqua any particular creditor is unequivocal or has been enteredinto with caveats, which then has to be examined on a case bycase basis to establish whether an acknowledgement of liabilityH

has, in fact, been made, thereby extending limitation under Section18 of the Limitation Act. [Paras 21, 22][550-F-G; 551-C-D; 553-B-C, G; 555-D-G; 557-A-B; 558-G-H; 559-A-C]

V. Padmakumar v. Stressed Assets Stabilisation Fund,Company Appeal (AT) (Insolvency) No. 57 of 2020(Majority judgment of Full Bench of NCLAT decidedon 12.03.2020) – overruled.

Jignesh Shah v. Union of India, (2019) 10 SCC 750: [2019] 12 SCR 678; Sesh Nath Singh v. BaidyabatiSheoraphuli Co-operative Bank Ltd., 2021 (4) SCALE 499; Laxmi Pat Surana v. Union Bank of India, 2021 (5) SCALE 20; Babulal Vardharji Gurjar v. VeerGurjar Aluminium Industries (P) Ltd., (2020) 15 SCC1; Ambika Prasad Mishra v. State of U.P., (1980) 3 SCC719 : [1980] 3 SCR 1159; Khan Bahadur ShapoorFredoom Mazda v. Durga Prasad, [1962] 1 SCR 140;Mahabir Cold Storage v. CIT, (1991) 1 Suppl. SCC 402: [1990] 3 Suppl. SCR 469; A.V. Murthy v. B.S.Nagabasavanna, (2002) 2 SCC 642 : [2002] 1 SCR 906; and S. Natarajan v. Sama Dharman, 2014 (9)SCALE 3 – relied on.

Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff,(1961) SCC OnLine Cal 128 : AIR 1962 Cal 115;South Asia Industries (P) Ltd. v. General KrishnaShamsher Jung Bahadur Rana, (1972) SCC OnLineDel 185 : ILR (1972) 2 Del 712; Pandam Tea Co. Ltd.,In re, 1973 SCC OnLine Cal 93 : AIR 1974 Cal 170;Hegde & Golay Limited v. State Bank of India, (1985)SCC OnLine Kar 428 : ILR 1987 Kar 2673; BhajanSingh Samra v. M/s. Wimpy International Ltd., (2011)SCC OnLine Del 4888 : (2011) 185 DLT 428; CIT-IIIv. Shri Vardhman Overseas Ltd., (2011) SCC OnLineDel 5599 : (2012) 343 ITR 408; Shahi Exports Pvt.Ltd. v. CMD Buildtech Pvt. Ltd., (2013) SCC OnLineDel 2535 : (2013) 202 DLT 735; N.S. Atwal v. JindalSteel and Power Ltd., (2013) SCC OnLine Del 3902;M/s. Al-Ameen Limited v. K. P. Sethumadhavan, (2017)SCC 50 OnLine Ker 11337: (2017) 4 KLJ 80; Zest A

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

(2019) 10 SCC 353referred toPage 57, Para 1(2008) 12 SCC 577referred toPage 62, Para 3

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 323 of2021.

From the Judgment and Order dated 22.12.2020 of the NationalCompany Law Appellate Tribunal in Company Appeal (AT) InsolvencyNo. 385 of 2020.

With

Civil Appeal Nos. 3228, 3765 of 2020, Civil Appeal No. 3 of 2021,SLP (C) No.1168 of 2021.

Mukul Rohtagi, Shyam Divan, Ramji Srinivasan, Saurabh Kirpal,C.A. Sundaram, Sr. Advs., Sidhartha Barua, Ms. Adity Gupta,Ms. Jasmine Damkewala, Praful Jindal, Ms. Ritika, Ms. Vaishali Sharma,Dinesh Chander Trehan, Sanjay Kapur, V M Kannan, Ms. MeghaKarnwal, Arjun Bhatia, Sanjay Bhatt, Sumit Nagpal, Ms. AkanshaSrivastava, Rabin Majumder, Abhirup Dasgupta, Ishaan Duggal,Ms. Bhavna Sharma, Ms. Rajshree Chaudhary, Mohit D. Ram, MayankJain, Parmatma Singh, Madhur Jain, Abhijeet Sinha, Ms. Rohini Musa,Zafar Inayat, Aditya Shukla, Ms. Pallavi Pratap, Sriram P, Jayesh B.Dolia, R.V. Prabhat, Abhijeet Sinha, Sandeep Bajaj, Soayib Qureshi,Devansh Jain, Aditya Shukla, Ajay Sharma, Sanjeev Kumar, AnshulSehgal, Faisal Sherwani, Advs. for the appearing Parties.

The Judgment of the Court was delivered by

R. F. NARIMAN, J.

Civil Appeal No.323 of 2021

1. In 2009, Corporate Power Ltd. [“the corporate debtor”] setup a thermal power project in Jharkhand, and for so doing, availed ofloan facilities from various lenders, including the State Bank of India[“SBI”]. The account of the corporate debtor was declared as a non-performing asset by SBI on 31.07.2013. On 27.03.2015, SBI issued aloan-recall notice to the corporate debtor in its capacity as the lenders’agent. On 31.03.2015, some of the original lenders of the corporate debtor,namely, India Infrastructure Finance Company Limited, SBI, State Bankof Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Patiala,and State Bank of Travancore assigned the debts owed to them by the A

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Acorporate debtor to the appellant, the Asset Reconstruction Company(India) Limited. On 20.06.2015, the appellant issued a notice underSection 13(2) of the Securitisation and Reconstruction of Financial Assetsand Enforcement of Securities Interest Act, 2002 [“SARFAESI Act”]on behalf of itself and other consortium lenders to the corporate debtor.On 01.06.2016, the appellant took actual physical possession of the projectBassets of the corporate debtor under the SARFAESI Act. On 26.12.2018,the appellant filed an application under Section 7 of the Insolvency andBankruptcy Code, 2016 [“IBC”] before the National Company LawTribunal, Calcutta [“NCLT”] for a default amounting toRs.5997,80,02,973/- from the corporate debtor. As the relevant formCindicating the date of default did not indicate any such date, this wasmade up by the appellant on 08.11.2019 by filing a supplementary affidavitbefore the NCLT, specifically mentioning the date of default and annexingcopies of balance sheets of the corporate debtor, which, according tothe appellant, acknowledged periodically the debt that was due. On19.02.2020, the Section 7 application was admitted by the NCLT,Dobserving that the balance sheets of the corporate debtor, wherein itacknowledged its liability, were signed before the expiry of three yearsfrom the date of default, and entries in such balance sheets beingacknowledgements of the debt due for the purposes of Section 18 of theLimitation Act, 1963 [“LimitationAct”], the Section 7 application is notEbarred by limitation. In an appeal filed to the National Company LawAppellate Tribunal [“NCLAT”], the corporate debtor relied upon theFull Bench judgment of the NCLAT in V. Padmakumar v. StressedAssets Stabilisation Fund, Company Appeal (AT) (Insolvency) No.57 of 2020 (decided on 12.03.2020) [“V. Padmakumar”], in which amajority of four members [Justice (Retd.) A.I.S. Cheema, MemberF(Judicial), dissenting] held that entries in balance sheets would not amountto acknowledgement of debt for the purpose of extending limitation underSection 18 of the Limitation Act. After a preliminary hearing, a three-Member Bench passed an order on 25.09.2020 doubting the correctnessof the majority judgment of the Full Bench and referred the matter to theGActing Chairman of the NCLAT to constitute a Bench of coordinatestrength to reconsider the judgment in V. Padmakumar (supra).

2. A five-Member Bench of the NCLAT, vide the impugnedjudgment dated 22.12.2020, refused to adjudicate the question referred,stating that the reference to the Bench was itself incompetent.

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3. Shri Ramji Srinivasan, learned Senior Advocate appearing onbehalf of the appellant, has assailed the impugned judgment, arguing thatthe majority judgment of the Full Bench of the NCLAT inV. Padmakumar (supra) was clearly per incuriam as it has notconsidered various binding judgments of this Court and that the saidjudgment was wholly incorrect in rejecting the reference out of hand ata preliminary stage. For this purpose, he referred to a number of judgmentsof this Court in which it has been made clear that vide Section 238A ofthe IBC, Section 18 of the Limitation Act is applicable to a proceedingunder Section 7 of the IBC. Also, according to the learned SeniorAdvocate, the judgments of the High Courts and the judgments of thisCourt have expressly held that entries made in signed balance sheets ofthe corporate debtor would amount to acknowledgements of liability andhave, therefore, correctly been relied upon by the NCLT on the facts ofthis case. He argued, relying upon certain judgments, that the referencemade to the five-Member Bench by the three-Member Bench wasperfectly in order and ought to have been answered on merits. He alsoargued that the constitution of the five-Member Bench which passedthe impugned judgment was not in order as three out of the five membersof the said Bench were members who assented with the majority opinionin V. Padmakumar (supra), the dissentient member not being madepart of the Bench so formed. This, according to him, was contrary to theprinciples of natural justice. He also argued that the fact that a balancesheet has to be filed under compulsion of law does not mean that anacknowledgement of debt has also to be made under compulsion of law,and for this purpose, he referred to two High Court judgments.

4. Refuting the aforesaid submissions, Shri Abhijeet Sinha, learnedAdvocate appearing on behalf of the Respondents, argued that theExplanation to Section 7, read with the definition of “default” containedin Section 3(12) of the IBC, would preclude the application of Section 18of the Limitation Act inasmuch as a default in respect of a financial debtwould include a financial debt owed not only to the applicant-financialcreditor, but to all other financial creditors of the corporate debtor. Hethen referred to the rationale for enacting Section 238A by referring tothe Insolvency Committee Report which introduced the aforesaid Sectionand strongly relied upon the fact that in all these cases, recoveryproceedings were ongoing before the Debt Recovery Tribunal and/orthe appellate authority under the Recovery of Debts Due to Banks andFinancial Institutions Act, 1993 [“Recovery of Debts Act”] and that, AB

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Aby not applying Section 18 of the Limitation Act to the IBC, recoverieswill not be thwarted. He also added that the main plank of the submissionof the appellant was that a huge sum of Rs.12,000 crore would otherwisego down the drain if acknowledgements in balance sheets were not tobe looked at, and stressed the fact that this would be relevant only inrecovery proceedings and not in proceedings before the IBC, which areBnot meant to be recovery proceedings at all, as has been held in severaljudgments of this Court. He then relied upon two High Court judgments,from the Andhra Pradesh High Court and Gauhati High Court, to buttresshis submission that via Section 18 of the Limitation Act, entries made inbalance sheets do not amount to acknowledgement of debt. He alsoCstressed the fact that no date of default has been mentioned in the originalform that was submitted with the Section 7 application, and that thiswould, therefore, be a non-curable defect, on account of which theSection 7 application should have been dismissed at the threshold. Hethen took us to various judgments of this Court which made it clear thatif a period of three years had elapsed from the date of declaration of theDaccount of a corporate debtor as a non-performing asset, the claim filedby a creditor is a dead claim which cannot be resurrected having recourseto Section 18 of the Limitation Act. Finally, he argued that the balancesheets in the present case did not amount to acknowledgement of liabilityinasmuch as the auditor’s report, which must be read along with theEbalance sheets, would make it clear that there was no unequivocalacknowledgement of debt, but that caveats had been entered by way ofnotes in the auditor’s report.

5. After hearing counsel for both sides, it is important to first advertto the rationale for the enactment of Section 238A of the IBC, whichFwas enacted by way of the Insolvency and Bankruptcy Code (SecondAmendment) Act, 2018 w.e.f. 06.06.2018. Section 238A of IBC readsas follows:

“238A. Limitation.—The provisions of the Limitation Act, 1963(36 of 1963) shall, as far as may be, apply to the proceedings orGappeals before the Adjudicating Authority, the National CompanyLaw Appellate Tribunal, the Debt Recovery Tribunal or the DebtRecovery Appellate Tribunal, as the case may be.”

6. In Jignesh Shah v. Union of India, (2019) 10 SCC 750, thisCourt referred to the Report of the Insolvency Law Committee of March,H2018, which led to the introduction of Section 238A, as follows:

“8. In para 7 of the said judgment [B.K. Educational Services(P) Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633],the Report of the Insolvency Law Committee of March 2018 wasreferred to as follows: ([B.K. Educational Services (P)Ltd. v. Parag Gupta and Associates, (2019) 11 SCC 633], SCCpp. 644-45, para 11)

“11. Having heard the learned counsel for both sides, it isimportant to first set out the reason for the introduction ofSection 238-A into the Code. This is to be found in the Reportof the Insolvency Law Committee of March 2018, as follows:

‘28. Application of Limitation Act, 1963

28.1. The question of applicability of the LimitationAct, 1963 (“the Limitation Act”) to the Code has beendeliberated upon in several judgments of NCLT and NCLAT.The existing jurisprudence on this subject indicates that if alaw is a complete code, then an express or necessaryexclusion of the Limitation Act should be respected. [RavulaSubba Rao v. CIT, AIR 1956 SC 604] In light of theconfusion in this regard, the Committee deliberated onthe issue and unanimously agreed that the intent of theCode could not have been to give a new lease of life todebts which are time-barred. It is settled law that when adebt is barred by time, the right to a remedy is time-barred.[Punjab National Bank v. Surendra Prasad Sinha, 1993Supp (1) SCC 499 : 1993 SCC (Cri) 149] This requiresbeing read with the definition of “debt” and “claim” in theCode. Further, debts in winding-up proceedings cannot betime-barred [Interactive Media and CommunicationSolution (P) Ltd. v. GO Airlines Ltd., 2013 SCC OnLineDel 445 : (2013) 199 DLT 267] , and there appears to be norationale to exclude the extension of this principle of law tothe Code.

28.2. Further, non-application of the law on limitationcreates the following problems: first, it re-opens the right offinancial and operational creditors holding time-barred debtsunder the Limitation Act to file for CIRP, the trigger forwhich is default on a debt above INR one lakh. The purpose AB

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of the law of limitation is ‘to prevent disturbance ordeprivation of what may have been acquired in equityand justice by long enjoyment or what may have beenlost by a party’s own inaction, negligence or laches’[Rajender Singh v. Santa Singh, (1973) 2 SCC 705].Though the Code is not a debt recovery law, the triggerbeing “default in payment of debt” renders the exclusion ofthe law of limitation counter-intuitive. Second, it re-opensthe right of claimants (pursuant to issuance of a publicnotice) to file time-barred claims with the IRP/RP, whichmay potentially be a part of the resolution plan. Such aresolution plan restructuring time-barred debts and claimsmay not be in compliance with the existing laws for thetime being in force as per Section 30(4) of the Code.

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28.3. Given that the intent was not to package theCode as a fresh opportunity for creditors and claimantswho did not exercise their remedy under existing lawswithin the prescribed limitation period, the Committeethought it fit to insert a specific section applying theLimitation Act to the Code. The relevant entry under theLimitation Act may be on a case-to-case basis. It was furthernoted that the Limitation Act may not apply to applicationsof corporate applicants, as these are initiated by theapplicant for its own debts for the purpose of CIRP and arenot in the form of a creditor’s remedy.’”

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FA perusal of the above would show that considering that theLimitation Act applies only to courts, unless made statutorily applicableto tribunals, the Committee was of the view that such Act should bemade to apply to the IBC as well, observing that though the IBC is not adebt recovery law, the trigger being “default in payment of debt” wouldrender the exclusion of the law of limitation “counter-intuitive”. Thus, itGwas made clear that an application to the IBC should not amount toresurrection of time-barred debts which, in any other forum, would havebeen dismissed on the ground of limitation.

7. From the above, it is clear that the principle of Section 9 of theLimitation Act is to be strictly adhered to, namely, that when time beginsH

to run, it cannot be halted, except by a process known to law. Onequestion that arises before this Court is whether Section 18 of theLimitation Act, which extends the period of limitation depending upon anacknowledgement of debt made in writing and signed by the corporatedebtor, is also applicable under Section 238A, given the expression “asfar as may be” governing the applicability of the Limitation Act to theIBC.

8. The aforesaid question is no longer res integra as two recentjudgments of this Court have applied the provisions of Section 14 andSection 18 of the Limitation Act to the IBC. Thus, in Sesh Nath Singhv. Baidyabati Sheoraphuli Co-operative Bank Ltd., Civil AppealNo. 9198 of 2019 (decided on 22.03.2021), after setting out the issuesthat arose in that case in paragraph 57, and after referring to Section238A of IBC, held:

“66. Similarly under Section 18 of the Limitation Act, anacknowledgement of present subsisting liability, made in writingin respect of any right claimed by the opposite party and signedby the party against whom the right is claimed, has the effect ofcommencing of a fresh period of limitation, from the date on whichthe acknowledgement is signed. However, the acknowledgementmust be made before the period of limitation expires.

67. As observed above, Section 238A of the IBC makes theprovisions of the Limitation Act, as far as may be, applicable toproceedings before the NCLT and the NCLAT. The IBC doesnot exclude the application of Section 6 or 14 or 18 or any otherprovision of the Limitation Act to proceedings under the IBC inthe NCLT/NCLAT. All the provisions of the Limitation Act areapplicable to proceedings in the NCLT/NCLAT, to the extentfeasible.

68. We see no reason why Section 14 or 18 of the Limitation Act,1963 should not apply to proceeding under Section 7 or Section 9of the IBC. Of course, Section 18 of the Limitation Act is notattracted in this case, since the impugned order of the NCLATdoes not proceed on the basis of any acknowledgement.”

9. Nearer home, in Laxmi Pat Surana v. Union Bank of India,Civil Appeal No. 2734 of 2020, a judgment delivered on 26.03.2021, thisCourt, after referring to various judgments of this Court, including the AB

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Ajudgment in Babulal Vardharji Gurjar v. Veer Gurjar AluminiumIndustries (P) Ltd., (2020) 15 SCC 1 [“Babulal”], then held:

“35. The purport of such observation has been dealt with in thecase of Babulal Vardharji Gurjar (II) [Babulal VardharjiGurjar v. Veer Gurjar Aluminium Industries (P) Ltd., (2020)15 SCC 1]. Suffice it to observe that this Court had not ruled outthe application of Section 18 of the Limitation Act to theproceedings under the Code, if the fact situation of the case sowarrants. Considering that the purport of Section 238A of theCode, as enacted, is clarificatory in nature and being a procedurallaw had been given retrospective effect; which included applicationof the provisions of the Limitation Act on case-to-case basis.Indeed, the purport of amendment in the Code was not to reopenor revive the time barred debts under the Limitation Act. At thesame time, accrual of fresh period of limitation in terms of Section18 of the Limitation Act is on its own under that Act. It will not bea case of giving new lease to time barred debts under the existinglaw (Limitation Act) as such.

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36. Notably, the provisions of Limitation Act have been madeapplicable to the proceedings under the Code, as far as may beapplicable. For, Section 238A predicates that the provisions ofELimitation Act shall, as far as may be, apply to the proceedings orappeals before the Adjudicating Authority, the NCLAT, the DRTor the Debt Recovery Appellate Tribunal, as the case may be.After enactment of Section 238A of the Code on 06.06.2018,validity whereof has been upheld by this Court, it is not open tocontend that the limitation for filing application under Section 7 ofFthe Code would be limited to Article 137 of the Limitation Act andextension of prescribed period in certain cases could be only underSection 5 of the Limitation Act. There is no reason to exclude theeffect of Section 18 of the Limitation Act to the proceedingsinitiated under the Code. Section 18 of the Limitation Act readsGthus:

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“18. Effect of acknowledgement in writing.–(1) Where,before the expiration of the prescribed period for a suit orapplication in respect of any property or right, anacknowledgement of liability in respect of such property orright has been made in writing signed by the party against whom H

such property or right is claimed, or by any person throughwhom he derives his title or liability, a fresh period of limitationshall be computed from the time when the acknowledgementwas so signed.

(2) Where the writing containing the acknowledgement isundated, oral evidence may be given of the time when it wassigned; but subject to the provisions of the Indian EvidenceAct, 1872 (1 of 1872), oral evidence of its contents shall not bereceived.

Explanation.–For the purposes of this section,–

(a) an acknowledgement may be sufficient though it omits tospecify the exact nature of the property or right, or aversthat the time for payment, delivery, performance orenjoyment has not yet come or is accompanied by a refusalto pay, deliver, perform or permit to enjoy, or is coupledwith a claim to set off, or is addressed to a person otherthan a person entitled to the property or right; (b) the word “signed” means signed either personally or by anagent duly authorised in this behalf; and

(c) an application for the execution of a decree or order shallnot be deemed to be an application in respect of anyproperty or right.”

37. Ordinarily, upon declaration of the loan account/debt as NPAthat date can be reckoned as the date of default to enable thefinancial creditor to initiate action under Section 7 of the Code.However, Section 7 comes into play when the corporate debtorcommits “default”. Section 7, consciously uses the expression“default” - not the date of notifying the loan account of thecorporate person as NPA. Further, the expression “default” hasbeen defined in Section 3(12) to mean non-payment of “debt”when whole or any part or instalment of the amount of debt hasbecome due and payable and is not paid by the debtor or thecorporate debtor, as the case may be. In cases where the corporateperson had offered guarantee in respect of loan transaction, theright of the financial creditor to initiate action against such entitybeing a corporate debtor (corporate guarantor), would gettriggered the moment the principal borrower commits default due A

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Ato non-payment of debt. Thus, when the principal borrower and/or the (corporate) guarantor admit and acknowledge their liabilityafter declaration of NPA but before the expiration of three yearstherefrom including the fresh period of limitation due to(successive) acknowledgements, it is not possible to extricate themfrom the renewed limitation accruing due to the effect of SectionB18 of the Limitation Act. Section 18 of the Limitation Act getsattracted the moment acknowledgement in writing signed by theparty against whom such right to initiate resolution process underSection 7 of the Code enures. Section 18 of the Limitation Actwould come into play every time when the principal borrowerCand/or the corporate guarantor (corporate debtor), as the casemay be, acknowledge their liability to pay the debt. Suchacknowledgement, however, must be before the expiration of theprescribed period of limitation including the fresh period of limitationdue to acknowledgement of the debt, from time to time, forinstitution of the proceedings under Section 7 of the Code. Further,Dthe acknowledgement must be of a liability in respect of whichthe financial creditor can initiate action under Section 7 of theCode.”

10. Given the aforesaid, it is not possible to accede to the argumentsmade by Shri Sinha that Section 18 of the Limitation Act cannot beEmade applicable by reason of the arguments put forth by him. As hasbeen held in Ambika Prasad Mishra v. State of U.P., (1980) 3 SCC719, every argumentative novelty does not undo a settled position oflaw. Krishna Iyer, J., speaking for a Bench of five learned Judges, statedthus:F“

“5. … But, after listening to the Marathon erudition from eminentcounsel, a 13-Judge Bench of this Court upheld the vires of Article31-A in unequivocal terms. That decision binds, on the simplescore of stare decisis and the constitutional ground of Article 141.Every new discovery or argumentative novelty cannot undo orGcompel reconsideration of a binding precedent. In this view, othersubmissions sparkling with creative ingenuity and presented withhigh pressure advocacy, cannot persuade us to reopen what waslaid down for the guidance of the nation as a solemn propositionby the epic Fundamental Rights case [(1973) 4 SCC 225 : 1973Supp SCR 1]. From Kameshwar Singh [AIR 1952 SC 252 : 1952

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SCR 889 : 1952 SCJ 354] (1952) and Golak Nath [I.C. GolakNath v. State of Punjab, AIR 1967 SC 1643 : (1967) 2 SCR 762: (1967) 2 SCJ 486] (1967) through Kesavananda [(1973) 4 SCC225 : 1973 Supp SCR 1] (1973) and Kanan Devan [Kanan DevanHills Produce Co. Ltd. v. State of Kerala, (1973) 1 SCR 356 :(1972) 2 SCC 218 : AIR 1972 SC 2301] (1972) to Gwalior Rayons[State of Kerala v. Gwalior Rayon Silk Mfg. (Wvg). Co.Ltd.(1973) 2 SCC 713 : (1974) 1 SCR 671] (1976) and after Article31-A has stood judicial scrutiny although, as stated earlier, we donot base the conclusion on Article 31-A. Even so, it is fundamentalthat the nation’s Constitution is not kept in constant uncertainty byjudicial review every season because it paralyses, by perennialsuspense, all legislative and administrative action on vital issuesdeterred by the brooding threat of forensic blow up. This, ifpermitted, may well be a kind of judicial destabilisation of Stateaction too dangerous to be indulged in save where national crisisof great moment to the life, liberty and safety of this country andits millions are at stake, or the basic direction of the nation itself isin peril of a shake-up. It is surely wrong to prove Justice Robertsof the United States Supreme Court right when he said:[Smith v. Allwright, 321 US 649, 669, 670 (1944)]

“The reason for my concern is that the instant decision,overruling that announced about nine years ago, tends to bringadjudications of this tribunal into the same class as a restrictedrailroad ticket good for this day and train only…. It is regrettablethat in an era marked by doubt and confusion, an era whosegreatest need is steadfastness of thought and purpose, this Courtwhich has been looked to as exhibiting consistency inadjudication, and a steadiness which would hold the balanceeven in the face of temporary ebbs and flows of opinion, shouldnow itself become the breeder of fresh doubt and confusion inthe public mind as to the stability of our institutions.”

(emphasis supplied)

11. Section 18 of the Limitation Act reads as follows:

“18. Effect of acknowledgement in writing.—(1) Where,before the expiration of the prescribed period for a suit orapplication in respect of any property or right, an acknowledgement A

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Aof liability in respect of such property or right has been made inwriting signed by the party against whom such property or right isclaimed, or by any person through whom he derives his title orliability, a fresh period of limitation shall be computed from thetime when the acknowledgement was so signed.

B(2) Where the writing containing the acknowledgement is undated,oral evidence may be given of the time when it was signed; butsubject to the provisions of the Indian Evidence Act, 1872 (1 of1872), oral evidence of its contents shall not be received.

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(a) an acknowledgement may be sufficient though it omits tospecify the exact nature of the property or right, or avers thatthe time for payment, delivery, performance or enjoyment hasnot yet come or is accompanied by refusal to pay, deliver,perform or permit to enjoy, or is coupled with a claim to setDoff, or is addressed to a person other than a person entitled tothe property or right, (b) the word “signed” means signed either personally or by anagent duly authorised in this behalf, and

(c) an application for the execution of a decree or order shall notEbe deemed to be an application in respect of any property orright.”

12. In an illuminating discussion on the reach of Section 18 of theLimitation Act, including the reach of the Explanation to the said Section,this Court, in Khan Bahadur Shapoor Fredoom Mazda v. DurgaFPrasad, (1962) 1 SCR 140 [“Shapoor Fredoom Mazda”], afterreferring to Section 19 of the Limitation Act, 1908, which corresponds toSection 18 of the 1963 Act, held:

“It is thus clear that acknowledgement as prescribed by Section19 merely renews debt; it does not create a new right of action. ItGis a mere acknowledgement of the liability in respect of the rightin question; it need not be accompanied by a promise to pay eitherexpressly or even by implication. The statement on which a pleaof acknowledgement is based must relate to a present subsistingliability though the exact nature or the specific character of thesaid liability may not be indicated in words. Words used in the H

acknowledgement must, however, indicate the existence of juralrelationship between the parties such as that of debtor and creditor,and it must appear that the statement is made with the intention toadmit such jural relationship. Such intention can be inferred byimplication from the nature of the admission, and need not beexpressed in words. If the statement is fairly clear then theintention to admit jural relationship may be implied from it. Theadmission in question need not be express but must be made incircumstances and in words from which the court can reasonablyinfer that the person making the admission intended to refer to asubsisting liability as at the date of the statement. In construingwords used in the statements made in writing on which a plea ofacknowledgement rests oral evidence has been expressly excludedbut surrounding circumstances can always be considered. Statedgenerally courts lean in favour of a liberal construction of suchstatements though it does not mean that where no admission ismade one should be inferred, or where a statement was madeclearly without intending to admit the existence of jural relationshipsuch intention could be fastened on the maker of the statement byan involved or far-fetched process of reasoning. Broadly statedthat is the effect of the relevant provisions contained in Section19, and there is really no substantial difference between the partiesas to the true legal position in this matter.”

13. The next question that this Court must address is as to whetheran entry made in a balance sheet of a corporate debtor would amount toan acknowledgement of liability under Section 18 of the Limitation Act.

14. Several judgments of this Court have indicated that an entrymade in the books of accounts, including the balance sheet, can amountto an acknowledgement of liability within the meaning of Section 18 ofthe Limitation Act. Thus, in Mahabir Cold Storage v. CIT, 1991 Supp(1) SCC 402, this Court held:

“12. The entries in the books of accounts of the appellant wouldamount to an acknowledgement of the liability to M/s PrayagchandHanumanmal within the meaning of Section 18 of the LimitationAct, 1963 and extend the period of limitation for the discharge ofthe liability as debt. …”

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A15. Likewise, in a case concerning the dishonour of a chequeunder Section 138 of the Negotiable Instruments Act, 1881, this Court,in A.V. Murthy v. B.S. Nagabasavanna, (2002) 2 SCC 642 [“A.V.Murthy”], held:

“5. … It is also pertinent to note that under sub-section (3) ofBSection 25 of the Indian Contract Act, 1872, a promise, made inwriting and signed by the person to be charged therewith, or byhis agent generally or specially authorized in that behalf, to paywholly or in part a debt of which the creditor might have enforcedpayment but for the law for the limitation of suits, is a valid contract.Moreover, in the instant case, the appellant has submitted beforeCus that the respondent, in his balance sheet prepared for everyyear subsequent to the loan advanced by the appellant, had shownthe amount as deposits from friends. A copy of the balance sheetas on 31-3-1997 is also produced before us. If the amount borrowedby the respondent is shown in the balance sheet, it may amount toDacknowledgement and the creditor might have a fresh period oflimitation from the date on which the acknowledgement was made.However, we do not express any final opinion on all these aspects,as these are matters to be agitated before the Magistrate by wayof defence of the respondent.”

EThe judgment in A.V. Murthy (supra) was followed inS. Natarajan vs. Sama Dharman, Crl. A. No. 1524 of 2014 (decidedon 15.07.2014) as follows:

“7. In this connection, we may usefully refer to a judgment of thisCourt in A.V. Murthy v. B.S. Nagabasavanna [A.V. Murthy v.FB.S. Nagabasavanna, (2002) 2 SCC 642] where the accusedhad alleged that the cheque issued by him in favour of thecomplainant in respect of sum advanced to the accused by thecomplainant four years ago was dishonoured by the bank for thereasons “account closed”. The Magistrate had issued summonsto the accused. The Sessions Court quashed the proceedings onGthe ground that the alleged debt was barred by limitation at thetime of issuance of cheque and, therefore, there was no legallyenforceable debt or liability against the accused under theExplanation to Section 138 of the NI Act and, therefore, thecomplaint was not maintainable. While dealing with the challengeHto this order, this Court observed that Under Section 118 of the NI

Act, there is a presumption that until the contrary is proved, everynegotiable instrument was drawn for consideration. This Courtfurther observed that Section 139 of the NI Act specifically notesthat it shall be presumed unless the contrary is proved, that theholder of a cheque received the cheque of the nature referred toin Section 138 of the NI Act for discharge, in whole or in part, ofany debt or other liability. This Court further observed that underSub-section (3) of Section 25 of the Contract Act, a promise,made in writing and signed by the person to be charged therewith,or by his agent generally or specially authorized in that behalf, topay wholly or in part a debt of which the creditor might haveenforced payment but for the law for the limitation of suits, is avalid contract. Referring to the facts before it, this Court observedthat the complainant therein had submitted his balance sheet,prepared for every year subsequent to the loan advanced by thecomplainant and had shown the amount as deposits from friends.This Court noticed that the relevant balance sheet is also producedin the Court. This Court observed that if the amount borrowed bythe accused therein is shown in the balance sheet, it may amountto acknowledgement and the creditor might have a fresh periodof limitation from the date on which the acknowledgement wasmade. …”

16. An exhaustive judgment of the Calcutta High Court in BengalSilk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal128 : AIR 1962 Cal 115 [“Bengal Silk Mills”] held that anacknowledgement of liability that is made in a balance sheet can amountto an acknowledgement of debt as follows:

“9. In support of the contention that the balance-sheets do notamount to acknowledgements of liability, because they wereprepared under compulsion of law Mr. Banerji relies upon thedecision in Kashinath v. New Akot Ginning and Pressing Co.Ltd., I.L.R. 1950 Nag. 562 at 568 : A.I.R. 1951 Nag. 255. It istrue that the balance-sheets were required to be made both bythe Indian Companies Act, 1913 as also by the articles of associationof the defendant company. There was a compulsion upon themanaging agents to prepare the documents but there was nocompulsion upon them to make any particular admission. Theyfaithfully discharged their duty and in doing so they made honest AB

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Aadmissions of the Company’s liabilities. Those admissions, thoughmade in discharge of their duty, are nevertheless conscious andvoluntary admissions. A document is not taken out of the purviewof section 19 of the Indian Limitation Act merely on the groundthat it is made under compulsion of law, see Venkata v. ParthaSaradhi, 1892 I.L.R. 16 Mad. 220 at 222, Udaya Thevar v.BSubrahmania Chetti, (1896) 6 M.L.J. 266, 269, Good v.Jane Job, 120 E.R. 810 at 812. I am unable to agree with thereasoning of the Nagpur decision that a balance-sheet does notsave limitation because it is drawn up under a duty to set out theclaims made on the company and not with the intention ofCacknowledging liability. The balance-sheet contains admissionsof liability; the agent of the company who makes and signs itintends to make those admissions. The admissions do not ceaseto be acknowledgements of liability merely on the ground thatthey were made in discharge of a statutory duty. I notice that inthe Nagpur case the balance-sheet had been signed by a directorDand had not been passed either by the Board of Directors or bythe company at its annual general meeting and it seems that theactual decision may be distinguished on the ground that the balance-sheet was not made or signed by a duly authorized agent of thecompany.

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10. Mr. Banerji next contends that none of the balance-sheetscontains an admission of liability subsisting on the date of which itis made. According to him the balance-sheet for the year ended30-11-1936 which was made on 1-6-1937 contains an admissionof past liability as on 30-11-1936 but not an admission of liabilityFexisting on 1-6-1937. Mr. Banerji contends that such an admissiondoes not satisfy the test of an acknowledgement under section 19of the Indian Limitation Act. His contention is supported by JwalaPrasad v. Jwala Bank Ltd., A.I.R. 1957 All. 143 at 145. In thatcase the Allahabad High Court held that the balance-sheet did notcontain any acknowledgement of an existing liability and thereforeGcould not be treated as an acknowledgement under section 19.Mr. Banerji also relied upon the decisions in Kandasami Reddi v.Suppammal, I.L.R. 45 Mad. 443, Venkata v. Partha Saradhi,I.L.R. 18 Mad. 220, Rustomji on Limitation, 6th Edition, pages191–193 and the cases collected therein. Now it is well settledHthat in order to satisfy the test of an acknowledgement under

section 19 the admission of liability must be an admission ofsubsisting liability. In Kandasami Reddi v. Suppammal, I.L.R.45 Mad. 443 at 445, Ayling J. said, “Liability can only signify presentliability at the time of acknowledgement and this is clearly laiddown in Venkata v. Parthasaradhi, (1893) 16 Mad. 220.” InVenkata v. Parthasaradhi, I.L.R. 16 Mad. 220 at 223 MuttasamiAyyar, J. said, “It is therefore necessary that upon a reasonableconstruction of the language used by the debtor in writing therelation of debtor and creditor must appear to be distinctly admitted,that it must be admitted also to be a subsisting jural relation, andthen an intention to continue it until it is lawfully determined mustalso be evident.” The section requires a definite admission ofliability in respect of the debt, but even an admission that the debtexisted at a previous date may, having regard to the languageused and the surrounding circumstances, amount to an impliedrepresentation that the debt is still subsisting (see ManiramSeth v. Seth Rupchand, I.L.R. 33 Cal. 1047 P.C.). In my opinionthe balance-sheets satisfy the test of an acknowledgement undersection 19. Each of them contains an admission that balanceshave been struck at the end of the previous year and that a definitesum has been found to be the balance then due to the creditor.The natural inference to be drawn from the balance-sheet is thatthe closing balance due to the creditor at the end of the previousyear will be carried forward as the opening balance due to him atthe beginning of the next year. In each balance-sheet there is thusan admission of a subsisting liability to continue the relation ofdebtor and creditor and a definite representation of a presentintention to keep the liability alive until it is lawfully determined bypayment or otherwise. There is necessarily a time lag betweenthe date of the signing of the balance-sheet and the end of theprevious year. The balance-sheet contains no admission of theamount due on the date of the signature, that amount may be andoften is different from the amount shown as due at the end of theprevious year, but that fact alone does not take the document outof the purview of section 19. Take the case of a banker and itsdepositor. Suppose the banker sends to the depositor a monthlystatement of account made for the month of February 1961 andsigned on March 15, 1961. The statement gives the balance dueon February 28, 1961. The amount due on March 15 may be quite AB

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different; the banker might have been made payments for thecustomer, nevertheless the statement amounts to a sufficientacknowledgement under section 19. I am therefore unable to agreewith the decision in Jwala Prasad v. Jwala Bank Ltd., A.I.R.1957 All. 144.

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11. To come under section 19 an acknowledgement of a debtneed not be made to the creditor nor need it amount to a promiseto pay the debt. In England it has been held that a balance-sheetof a company stating the amount of its indebtedness to the creditoris a sufficient acknowledgement in respect of a specialty debtunder section 5 of the Civil Procedure Act, 1833 (3 and 4 Will —4c. 42), see Re: Atlantic and Pacific Fibre Importing andManufacturing Co. Ltd., 1928 Ch. 836 under section 1 of LordTentenden’s Act, 1828 (9 Geo. 4, c. 14) read with section 13 ofthe Mercantile Law Amendment Act, 1856 (19 and 20 Vict. c.97), see Re: The Coliseum (Burrow) Ltd., (1930) 2 Ch. 44 at 47and under sections 23 and 24 of the Limitation Act, 1939 (c. 21), B

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see Ledingham v. Bermejo Estancia Co. Ltd., (1947) 1 A.E.R.749 and Jones v. Bellgrove Properties Ltd., (1949) 2 K.B. 700,on appeal from (1949) 1 A.E.R. 498. Section 5 of the CivilProcedure Act, 1833 did not require that the acknowledgementshould be given to the claiming creditor and consequently aEbalance-sheet containing an admission of indebtedness to thedebenture holders was a sufficient acknowledgement of liabilityin respect of the debentures under that section, though it was sentonly to the debenture holders who happened to be the shareholdersof the company and not to the other debenture holders, see Re:FAtlantic and Pacific Fibre Importing and Manufacturing Co.Ltd., (1928) 1 Ch. 836. Under Tentenden’s Act, 1828 as also underthe Limitation Act, 1939 (c. 21) the acknowledgement must bemade to the creditor or his agent and if the balance-sheet is sentto a shareholder who is also a creditor the requirements of thoseActs were satisfied, see Re: The Coliseum (Burrow) Ltd., (1930)G2 Ch. 44 at 47, Jones v. Bellgrove Properties Ltd., (1949) 1A.E.R. 498 at 504 affirmed (1949) 2 K.B. 700. The decision inthe last case has been followed in India and it has been held thatan admission of indebtedness in a balance-sheet is a sufficientacknowledgement under section 19 of the Indian Limitation Act,Hsee Raja of Vizianagram v. Official Liquidator, Vizianagram

Mining Co. Ltd., (1951) 2 M.L.J. 535 at 550-1 : A.I.R. 1952Mad. 136 at 145, Lahore Enamelling and Stamping Co.Ltd. v. A.K. Bhalla, A.I.R. 1958 Punjab 341 at 347, First NationalBank Ltd. v. The Mandi (State) Industries Ltd., (1957) 59 PunjabLaw Reports 589 and in an unreported decision of S.R. Das Gupta,J. in matter No. 449 of 1955 Re: Vita Supplies Corporation Ltd.decided on December 7, 1956.”

Importantly, this judgment holds that though the filing of a balancesheet is by compulsion of law, the acknowledgement of a debt is notnecessarily so. In fact, it is not uncommon to have an entry in a balancesheet with notes annexed to or forming part of such balance sheet, or inthe auditor’s report, which must be read along with the balance sheet,indicating that such entry would not amount to an acknowledgement ofdebt for reasons given in the said note.

17. Bengal Silk Mills (supra) also dealt with the judgment inKashinath Sankarappa v. New Akot Cotton Ginning & PressingCo. Ltd., 1949 SCC OnLine MP 123 : AIR 1951 Nag 255 [“Kashinath”]by distinguishing the said judgment on the ground that the balance sheetin that case was not made or signed by a duly authorised agent of thecompany. Quite apart from this, if the said judgment is perused, whatbecomes clear is that the observation made in paragraph 20 is really anobiter observation, as the High Court went on to hold in paragraph 26that the balance sheets that were produced were never proved inaccordance with law, apart from being validly rejected by theshareholders, as a result of which, such balance sheets could not, therefore,operate as acknowledgements of liability under Section 19 of theLimitation Act, 1908.

18. In an appeal to the Supreme Court in Kashinath SankarappaWani v. New Akot Cotton Ginning and Pressing Co. Ltd., 1958SCR 1331, this Court referred to Section 3(b) of the CommercialDocuments Evidence Act (XXX of 1939) and then held that under thesaid Act, the balance sheet of the respondent company for the year1940-1941 should have been admitted in evidence. This Court held that,unfortunately, the provisions of the said Act had not been brought to theattention of the High Court. However, having so held, this Court thenwent on to hold that on the facts of that case, no presumption that thebalance sheet was duly made under Section 3(b) could be raised, as aresult of which there could be no acknowledgement of liability on thefacts of that case.

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A19. Two other judgments – of the Andhra Pradesh High Courtand the Gauhati High Court – were also relied upon by the counsel forthe respondents. So far as the Andhra Pradesh High Court is concerned,in Vijayalakshmi v. Hari Hara Ginning and Pressing, Nandigaon,OS A No. 40 of 1998 (decided on 03.03.1999), Liberhan, C.J. differedfrom a Karnataka High Court judgment which stated that showing of anBamount in a balance sheet would amount to an acknowledgement underSection 18 of the Limitation Act. This was done as follows:

“5. The learned Counsel for the appellant relied on a decision ofthe Karnataka High Court in State Bank of India v. Hegde andGolay Ltd., 1985 SCC OnLine Kar 428 : ILR 1987 Kar 2673,Cwherein it is observed that showing of an amount in a balancesheet amounts to an acknowledgement in terms of the IndianLimitation Act. Consequently, the amount having been admittedand the respondent having not paid the same, the petition requiredadmission as laid down by the said judgment that civil suit as wellDas legal proceedings can continue simultaneously. Withoutexpressing our opinion on the law laid down in the said judgment,though it cannot be categorically laid down that mere showing adebt due in a balance-sheet would amount to acknowledgement,we may observe that it is a well-established law that for giving anacknowledgement, a person has to be conscious of his act to theEknowledge of the other person. Merely showing a debt in abalance-sheet cannot, prima facie, as presently advised, be termedto be an acknowledgement in terms of the Indian Limitation Act.The acknowledgement as envisaged by the Limitation Actcategorically had to be with the intention of accepting the debtFwith the object of extending the limitation for recovery, which isnot the case herein. Thus, we do not find the case in hand to becovered by the law laid down by the said judgment though wehave our own doubts with respect to correctness of the law laiddown in the said judgment.”

GThis judgment does not, in any manner, even purport to lay downthe law. That apart, the statement that an acknowledgement, as envisagedby the Limitation Act, has to be with the intention of accepting the debtwith the object of extending the limitation for recovery is de hors Section18 of the Limitation Act and directly contrary to Shapoor FredoomMazda (supra) which is, in fact, referred to in the very next paragraph H

of the aforesaid judgment. Shapoor Fredoom Mazda (supra) had madeit plain that all that was necessary was that the acknowledgementestablishes a jural relationship of debtor and creditor, which undoubtedlywas established on the facts of that case. This judgment, therefore, cannotavail the respondents.

20. Reliance was also placed on a judgment of the Gauhati HighCourt in Ajit Chandra Bagchi v. Harishpur Tea Company (P.) Ltd.,1990 SCC OnLine Gau 24 : AIR 1991 Gau 92. In particular, paragraphs9 and 10 were relied upon by learned counsel for the respondents. Theseparagraphs state:

“9. I may now turn to the next submission of learned counsel forthe appellants - defendants that the plaintiff failed to prove thatthe amounts in question were due from the defendants. Thecontention of the counsel is that the plaintiff simply produced beforethe court certain books of account and balance sheets. No effortwas made even to prove the individual entries in the said books ofaccount. The claim was sought to be established by the plaintiffsimply on the basis of the balance appearing in the books of accountof plaintiff itself as outstanding against the Tea Estates of thedefendants. It was submitted that the books of account or thebalance sheets showing the amount due from the defendants arenot sufficient without other evidence to prove the debt. The learnedcounsel in this connection relied on section 34 of the EvidenceAct, which provides that even entries in the books of accountregularly kept in the course of business, which are relevant, arealone not sufficient evidence to charge any person with liability.Learned counsel also relied on the Illustration given to the saidsection, which is as follows:

“A sues B for Rs. 1000, and shows entries in his account-books showing B to be indebted to him to this amount. Theentries are relevant, but are not sufficient without other evidenceto prove the debt.”

On the basis of the aforesaid provision it was submitted that theentries in the books of account showing the defendants to beindebted to the plaintiff for certain amount might be relevant butare not sufficient to prove the debt. In the instant case, the learnedcounsel submitted, even the entries have not been proved. What A

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is sought to be proved is the balance appearing in the accounts orin the balance sheet as due from the defendants. Such a course isnot permissible except in a case of “accounts stated”. Admittedly,the present case is not one of “accounts stated”.

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10. I have carefully considered the submissions. I find that neitherBthe individual entries have been proved by the plaintiff nor there isany material whatsoever other than the books of account or thebalance sheet to prove that the transactions in question in facttook place. No decree can therefore, be obtained by the plaintiffmerely on the basis of certain entries in the account books or thebalance shown to be due at the end of the year in such accountsCor in the balance sheets. The admitted position in the instant caseis that no evidence has been adduced by the plaintiff to prove thetransactions which had been categorically denied by the defendantsin their written statement. In that view of the matter even onfacts it has to be held that the plaintiffs failed to prove that theDamount claimed in the suit was due from the defendants. In viewof the aforesaid finding, I am of the opinion that the learned trialcourt was not justified in decreeing the suit. The suit was barredby limitation except in so far as it relates to recovery of a sum ofRs. 30/-. Besides, the plaintiff also failed to prove the debt inaccordance with law. Under the circumstances, the suit shouldEhave been dismissed.”

This judgment also does not take the case of the respondents anyfurther as, like the Nagpur High Court judgment in Kashinath (supra),the entries in the books of accounts were not proved on the facts of thatcase.F

21. We must now examine the position under the Companies Act,2013 [“CompaniesAct”] qua any compulsion of law for filing of balancesheets and acknowledgements made therein. Section 2(40) of theCompanies Act defines financial statement as follows:G“2. Definitions.—In this Act, unless the context otherwiserequires,—

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(40) “financial statement” in relation to a company, includes—

(i) a balance sheet as at the end of the financial year;H

(ii) a profit and loss account, or in the case of a companycarrying on any activity not for profit, an income andexpenditure account for the financial year;

(iii) cash flow statement for the financial year;

(iv) a statement of changes in equity, if applicable; and

(v) any explanatory note annexed to, or forming part of, anydocument referred to in sub-clause (i) to sub-clause (iv):

Provided that the financial statement, with respect to OnePerson Company, small company and dormant company, may notinclude the cash flow statement; xxx xxx xxx”

Under Section 92, every company is to prepare an annual returncontaining certain particulars as follows:

“92. Annual return.—(1) Every company shall prepare a return(hereinafter referred to as the annual return) in the prescribedform containing the particulars as they stood on the close of thefinancial year regarding—

(a) its registered office, principal business activities, particularsof its holding, subsidiary and associate companies; (b)its shares, debentures and other securities and shareholdingpattern;

(c) [* * *];

(d) its members and debenture-holders along with changestherein since the close of the previous financial year; (e)its promoters, directors, key managerial personnel along withchanges therein since the close of the previous financialyear; (f)meetings of members or a class thereof, Board and itsvarious committees along with attendance details; (g)remuneration of directors and key managerial personnel; (h)penalty or punishment imposed on the company, its directorsor officers and details of compounding of offences andappeals made against such penalty or punishment; A

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(i) matters relating to certification of compliances, disclosuresas may be prescribed; A

(j) details, as may be prescribed, in respect of shares held byor on behalf of the Foreign Institutional Investors; and (k)such other matters as may be prescribed, B

and signed by a director and the company secretary, or wherethere is no company secretary, by a company secretary in practice:

Provided that in relation to One Person Company and smallcompany, the annual return shall be signed by the companyCsecretary, or where there is no company secretary, by the directorof the company:

Provided further that the Central Government may prescribeabridged form of annual return for “One Person Company, smallcompany and such other class or classes of companies as may beprescribed.

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(2) The annual return, filed by a listed company or, by a companyhaving such paid up capital or turnover as may be prescribed,shall be certified by a company secretary in practice in theprescribed form, stating that the annual return discloses the factscorrectly and adequately and that the company has complied withEall the provisions of this Act.

(3) Every company shall place a copy of the annual return on thewebsite of the company, if any, and the web-link of such annualreturn shall be disclosed in the Board’s report.

F(4) Every company shall file with the Registrar a copy of theannual return, within sixty days from the date on which the annualgeneral meeting is held or where no annual general meeting isheld in any year within sixty days from the date on which theannual general meeting should have been held together with thestatement specifying the reasons for not holding the annual generalGmeeting, with such fees or additional fees as may be prescribed.

(5) If any company fails to file its annual return under sub-section(4), before the expiry of the period specified therein, such companyand its every officer who is in default shall be liable to a penaltyof ten thousand rupees and in case of continuing failure, with a H

further penalty of one hundred rupees for each day after the firstduring which such failure continues, subject to a maximum of twolakh rupees in case of a company and fifty thousand rupees incase of an officer who is in default.

(6) If a company secretary in practice certifies the annual returnotherwise than in conformity with the requirements of this sectionor the rules made thereunder, he shall be liable to a penalty of twolakh rupees.”

Vide Section 128, every company shall prepare and keep at itsregistered office, books of accounts and financial statements for everyfinancial year, as follows:

“128. Books of account, etc., to be kept by company.—(1)Every company shall prepare and keep at its registered officebooks of account and other relevant books and papers and financialstatement for every financial year which give a true and fair viewof the state of the affairs of the company, including that of itsbranch office or offices, if any, and explain the transactions effectedboth at the registered office and its branches and such books shallbe kept on accrual basis and according to the double entry systemof accounting:

Provided that all or any of the books of account aforesaidand other relevant papers may be kept at such other place inIndia as the Board of Directors may decide and where such adecision is taken, the company shall, within seven days thereof,file with the Registrar a notice in writing giving the full address ofthat other place:

Provided further that the company may keep such books ofaccount or other relevant papers in electronic mode in such manneras may be prescribed.

xxx xxx xxx”

Section 129, which is of importance, refers directly to financialstatements and states as follows:

“129. Financial statement.—(1) The financial statements shallgive a true and fair view of the state of affairs of the company orcompanies, comply with the accounting standards notified under A

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Section 133 and shall be in the form or forms as may be providedfor different class or classes of companies in Schedule III:

Provided that the items contained in such financial statementsshall be in accordance with the accounting standards:

Provided further that nothing contained in this sub-sectionshall apply to any insurance or banking company or any companyengaged in the generation or supply of electricity, or to any otherclass of company for which a form of financial statement hasbeen specified in or under the Act governing such class ofcompany:

Provided also that the financial statements shall not be treatedas not disclosing a true and fair view of the state of affairs of thecompany, merely by reason of the fact that they do not disclose—

(a) in the case of an insurance company, any matters whichare not required to be disclosed by the Insurance Act,1938 (4 of 1938), or the Insurance Regulatory andDevelopment Authority Act, 1999 (41 of 1999); (b) in the case of a banking company, any matters which arenot required to be disclosed by the Banking RegulationAct, 1949 (10 of 1949);

(c) in the case of a company engaged in the generation orsupply of electricity, any matters which are not requiredto be disclosed by the Electricity Act, 2003 (36 of 2003);

(d) in the case of a company governed by any other law forthe time being in force, any matters which are not requiredto be disclosed by that law.

(2) At every annual general meeting of a company, the Board ofDirectors of the company shall lay before such meeting financialstatements for the financial year.

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(5) Without prejudice to sub-section (1), where the financialstatements of a company do not comply with the accountingstandards referred to in sub-section (1), the company shall disclosein its financial statements, the deviation from the accounting

standards, the reasons for such deviation and the financial effects,if any, arising out of such deviation.

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(7) If a company contravenes the provisions of this section, themanaging director, the whole-time director in charge of finance,the Chief Financial Officer or any other person charged by theBoard with the duty of complying with the requirements of thissection and in the absence of any of the officers mentioned above,all the directors shall be punishable with imprisonment for a termwhich may extend to one year or with fine which shall not be lessthan fifty thousand rupees but which may extend to five lakhrupees, or with both.

Explanation.—For the purposes of this section, exceptwhere the context otherwise requires, any reference to thefinancial statement shall include any notes annexed to or formingpart of such financial statement, giving information required to begiven and allowed to be given in the form of such notes under thisAct.”

Likewise, under Section 134, financial statements are to beapproved by the Board of Directors before they are signed, and theauditor’s report, as well as a report by the Board of Directors, is to beattached to each financial statement as follows:

“134. Financial statement, Board’s report, etc.—(1) Thefinancial statement, including consolidated financial statement, ifany, shall be approved by the Board of Directors before they aresigned on behalf of the Board by the chairperson of the companywhere he is authorised by the Board or by two directors out ofwhich one shall be managing director, if any, and the ChiefExecutive Officer, the Chief Financial Officer and the companysecretary of the company, wherever they are appointed, or in thecase of One Person Company, only by one director, for submissionto the auditor for his report thereon.

(2) The auditors’ report shall be attached to every financialstatement.

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A(3) There shall be attached to statements laid before a companyin general meeting, a report by its Board of Directors, which shallinclude—

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(f) explanations or comments by the Board on everyBqualification, reservation or adverse remark or disclaimermade—

(i) by the auditor in his report; and

(ii) by the company secretary in practice in his secretarialaudit report; C

(g) particulars of loans, guarantees or investments underSection 186; xxx xxx xxx Provided that where disclosures referred to in this sub-Dsection have been included in the financial statements, suchdisclosures shall be referred to instead of being repeated in theBoard’s report:

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E(4) The report of the Board of Directors to be attached to thefinancial statement under this section shall, in case of a One PersonCompany, mean a report containing explanations or comments bythe Board on every qualification, reservation or adverse remarkor disclaimer made by the auditor in his report.

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(7) A signed copy of every financial statement, includingconsolidated financial statement, if any, shall be issued, circulatedor published along with a copy each of—

(a) any notes annexed to or forming part of such financialstatement; G

(b) the auditor’s report; and

(c) the Board’s report referred to in sub-section (3).

(8) If a company is in default in complying with the provisions ofHthis section, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shallbe liable to a penalty of fifty thousand rupees.”

Under Section 137, copies of financial statements are then to befiled with the Registrar of Companies as follows:

“137. Copy of financial statement to be filed withRegistrar.—(1) A copy of the financial statements, includingconsolidated financial statement, if any, along with all thedocuments which are required to be or attached to such financialstatements under this Act, duly adopted at the annual generalmeeting of the company, shall be filed with the Registrar withinthirty days of the date of annual general meeting in such manner,with such fees or additional fees as may be prescribed:

Provided that where the financial statements under sub-section (1) are not adopted at annual general meeting or adjournedannual general meeting, such unadopted financial statements alongwith the required documents under sub-section (1) shall be filedwith the Registrar within thirty days of the date of annual generalmeeting and the Registrar shall take them in his records asprovisional till the financial statements are filed with him aftertheir adoption in the adjourned annual general meeting for thatpurpose:

Provided further that financial statements adopted in theadjourned annual general meeting shall be filed with the Registrarwithin thirty days of the date of such adjourned annual generalmeeting with such fees or such additional fees as may beprescribed:

Provided also that a One Person Company shall file a copyof the financial statements duly adopted by its member, along withall the documents which are required to be attached to suchfinancial statements, within one hundred eighty days from theclosure of the financial year:

Provided also that a company shall, along with its financialstatements to be filed with the Registrar, attach the accounts ofits subsidiary or subsidiaries which have been incorporated outsideIndia and which have not established their place of business inIndia.

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AProvided also that in the case of a subsidiary which hasbeen incorporated outside India (herein referred to as “foreignsubsidiary”), which is not required to get its financial statementaudited under any law of the country of its incorporation and whichdoes not get such financial statement audited, the requirements ofthe fourth proviso shall be met if the holding Indian company filesBsuch unaudited financial statement along with a declaration to thiseffect and where such financial statement is in a language otherthan English, along with a translated copy of the financial statementin English.

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(2) Where the annual general meeting of a company for any yearChas not been held, the financial statements along with thedocuments required to be attached under sub-section (1), dulysigned along with the statement of facts and reasons for not holdingthe annual general meeting shall be filed with the Registrar withinthirty days of the last date before which the annual general meetingDshould have been held and in such manner, with such fees oradditional fees as may be prescribed.

(3) If a company fails to file the copy of the financial statementsunder sub-section (1) or sub-section (2), as the case may be, beforethe expiry of the period specified therein, the company shall beEliable to a penalty of ten thousand rupees and in case of continuingfailure, with a further penalty of one hundred rupees for each dayduring which such failure continues, subject to a maximum of twolakh rupees, and the managing director and the Chief FinancialOfficer of the company, if any, and, in the absence of the managingdirector and the Chief Financial Officer, any other director who isFcharged by the Board with the responsibility of complying withthe provisions of this section, and, in the absence of any suchdirector, all the directors of the company, shall be shall be liable toa penalty of ten thousand rupees and in case of continuing failure,with a further penalty of one hundred rupees for each day afterGthe first during which such failure continues, subject to a maximumof fifty thousand rupees.”

22. A perusal of the aforesaid Sections would show that there isno doubt that the filing of a balance sheet in accordance with theprovisions of the Companies Act is mandatory, any transgression of theHsame being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statementsare expressly recognised by Section 134(7). Equally, the auditor’s reportmay also enter caveats with regard to acknowledgements made in thebooks of accounts including the balance sheet. A perusal of the aforesaidwould show that the statement of law contained in Bengal Silk Mills(supra), that there is a compulsion in law to prepare a balance sheet butno compulsion to make any particular admission, is correct in law as itwould depend on the facts of each case as to whether an entry made ina balance sheet qua any particular creditor is unequivocal or has beenentered into with caveats, which then has to be examined on a case bycase basis to establish whether an acknowledgement of liability has, infact, been made, thereby extending limitation under Section 18 of theLimitation Act.

23. The judgment in Bengal Silk Mills (supra) has been referredto with approval in various other judgments. Thus, in South AsiaIndustries (P) Ltd. v. General Krishna Shamsher Jung BahadurRana, 1972 SCC OnLine Del 185 : ILR (1972) 2 Del 712, the DelhiHigh Court held:

“46. Shri Rameshwar Dial argued that statements in the balance-sheet of a company cannot amount to acknowledgement of liabilitybecause the balance-sheet is made under compulsion of theprovisions in the Companies Act. There is no force in this argument.In the first place, section 18 of the Limitation Act, 1963, requiresonly that the acknowledgement of liability must have been madein writing, but it does not prescribe that the writing should be inany particular kind of document. So, the fact that the writing iscontained in a balance-sheet is immaterial. In the second place, itis true that section 131 of the Companies Act, 1913 (section 210of the Companies Act, 1956) makes it compulsory that an annualbalance sheet should be prepared and placed before the Companyby the Directors, and section 132 (section 211 of the CompaniesAct, 1956) requires that the balance-sheet should contain asummary, inter alia, of the current liabilities of the company. But,as pointed out by Bachawat J. in Bengal Silk Mills v. IsmailGolam Hossain Ariff, A.I.R. 1962 Calcutta 115 although therewas statutory compulsion to prepare the annual balance-sheet,there was no compulsion to make any particular admission, and adocument is not taken out of the purview of section 18 of the AB

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Indian Limitation Act, 1963 (section 19 of the Indian LimitationAct, 1908) merely on the ground that it is prepared undercompulsion of law or in discharge of statutory duty. Referencemay also be made to the decisions in Raja of Vizianagramv. Vizianagram Mining Co. Ltd., A.I.R. 1952 Madras136, Jones v. Bellgrove Properties Ltd., (1949) 1 All E.R. 498;and Lahore Enamelling and Stamping Co. v. A.K. Bhalla, A.I.R.1958 Punjab 341, in which statements in balance-sheets ofcompanies were held to amount to acknowledgements of liabilityof the companies.

47. Shri Rameshwar Dial referred to the decision of the PrivyCouncil in Consolidated Agencies Ltd. v. Bertram Ltd., (1964)3 All. E.R. 282. We shall advert to this decision presently whenwe deal with another argument of Shri Rameshwar Dial, and it issufficient to state so far as the argument under consideration isconcerned that even in this decision of the Privy Council it hasbeen recognised that balance-sheets could in certain circumstancesamount to acknowledgements of liability. It cannot, therefore, besaid as a general proposition of law that statements in balance-sheets of a company cannot operate at all as acknowledgementsof liability as contended by Shri Rameshwar Dial.

48. The learned counsel next argued that the words used in theentry in the balance-sheet in the present case did not amount toany acknowledgement of liability. We do not think so. The wordsused in the entry apparently show that in explaining its currentliabilities and the provisions made for the same, it was stated thatthere was a sum of Rs. 7,87,150.42 held in share-holders’ suspenseaccount for payment to the share-holders of the Indian NationalAirways Limited (in voluntary liquidation — since dissolved). Thewords used clearly acknowledge the liability. The learned singleJudge also took the same view as regards the words used in thebalance-sheet. In Lahore Enamelling and Stamping Co. Ltd. v.A.K. Bhalla, Tek Chand J. held that “debts due to creditors notmentioned by name but included in the item relating to “Loans(unsecured)” or as due to “Sundry Creditors” mentioned in thebalance-sheet amount to an “acknowledgement” of liability forthe purposes of section 19 of the Indian Limitation Act, 1908.There was thus no force in the argument of the learned counsel.

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51. The next argument was that the balance-sheet was no doubtsigned by two Directors, but they did not sign as duly authorisedagents of the transferee company as required by explanation (b)to section 18 of the Limitation Act. There is no substance in thisargument. The Companies Act, 1956, came into force in 1956.Section 210 of the Act requires the Board of Directors to lay abalance-sheet before the company at the Annual General Meeting.Section 211 prescribes the form and contents of a balance-sheet.The form of balance-sheet is given in Part 1 of Schedule VI tothe Act, and according to it the current liabilities and provisionshave to be set out in the balance-sheet. Section 215(i)(ii) requiresthat the balance-sheet should be signed on behalf of the Board ofDirectors, inter alia, by the Secretary of the Company and bynot less than two Directors of the company. Section 215(3) providesthat a balance-sheet shall be approved by the Board of Directorsbefore it is signed on behalf of the Board of Directors inaccordance with section 215(i)(ii) and before it is submitted to theAuditors for their report thereon. Thus, the statement of currentliabilities and provisions in the balance-sheet has to be approvedby the Board of Directors before it is signed by the Secretary andtwo Directors on behalf of the Board. In other words, the balance-sheet is signed by the Secretary and two Directors at the instanceand on the approval of the Board of Directors of the company.After the balance-sheet is audited, section 216 requires that theAuditors’ report should be attached to the balance-sheet, andsection 217 requires the Board of Directors also to make a report.The balance-sheet together with the Auditors report and theBoard’s report are then required to be placed before the companyat the annual general meeting for adoption of the balance-sheet.After the balance-sheet has been so laid before the company atthe annual general meeting, section 220 requires that three copiesof the balance-sheet should be filed with the Registrar. In thepresent case, the balance-sheet (Schedule D to Annexure J) wassigned by the Secretary and two Directors, and Annexure Jcontains the Auditors’ report and the Board’s report. It was statedin the judgment of the learned single Judge that the balance-sheetwas adopted by the company and the same was not disputed beforeus. It is thus quite clear that the balance-sheet was signed by dulyauthorised agents of the company.”

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562SUPREME COURT REPORTS

A24. The judgment of Sabyasachi Mukharji, J. (as His Lordshipthen was), sitting singly in the Calcutta High Court, has, in Pandam TeaCo. Ltd., In re, 1973 SCC OnLine Cal 93 : AIR 1974 Cal 170, held asfollows:

“4. Now the question is whether the statements, which areBcontained in the profits and loss accounts and the assets andliabilities side indicating the liability of the petitioning creditor alongwith the statement of the Directors made to the shareholders asDirectors’ report should be read together and if so whether readingthese two statements together these amount to anacknowledgement as contemplated under Section 18 of theCLimitation Act, 1963, or Section 19 of the Limitation Act, 1908. Inmy opinion, both these statements have to be read together. Thebalance-sheet is meant to be presented and passed by theshareholders and is generally accompanied by the Directors’ reportto the shareholders. Therefore in understanding the balance-sheetsDand in explaining the statements in the balance-sheets, the balance-sheets together with the Directors’ report must be taken togetherto find out the true meaning and purport of the statements. Counselappearing for petitioning creditor contended that under the statutethe balance-sheet was a separate document and as such if therewas unequivocal acknowledgement on the balance-sheet theEstatement of the Directors’ report should not be taken intoconsideration. It is true the balance-sheet is a statutory documentand perhaps is a separate document but the balance-sheet notconfirmed or passed by the shareholders cannot be accepted ascorrect. Therefore, in order to validate the balance-sheet, it mustFbe duly passed by the shareholders at the appropriate meetingand in order to do so it must be accompanied by a report, if any,made by the Directors. Therefore, even though the balance-sheetmay be a separate document these two documents in the factsand circumstances of the case should be read together and should be construed together. It was held by the Supreme Court in theGcase of L.C. Mills v. Aluminium Corpn. of India Ltd., (1971) 1SCC 67 : AIR 1971 SC 1482, that it was clear that the statementon which the plea of acknowledgement was founded should relateto a subsisting liability as the section required and it should bemade before the expiration of the period prescribed under theHAct. It need not, however, amount to a promise to pay for an

acknowledgement did not create a new right of action but merelyextended the period of limitation. The statement need not indicatethe exact nature or the specific character of the liability. The wordsused in the statement in question must, however, relate to a presentsubsisting liability and indicate the existence of a jural relationshipbetween the parties such as, for instance, that of a debtor and acreditor and the intention to admit such jural relationship. Such anintention need not, however, be in express terms and could beinferred by implication from the nature of the admission and thesurrounding circumstances. Generally speaking, a liberalconstruction of the statement in question should be given. That ofcourse did not mean that where a statement was made withoutintending to admit the existence of jural relationship, such intentionshould be fastened on the person making the statement by aninvolved and far-fetched reasoning. In order to find out the intentionof the document by which acknowledgement was to be construedthe document as a whole must be read and the intention of theparties must be found out from the total effect of the documentread as a whole. …”

25. In Hegde & Golay Limited v. State Bank of India, 1985SCC OnLine Kar 428 : ILR 1987 Kar 2673, the Karnataka High Courtheld as follows:

“43. Re. Point (e). The acknowledgement of liability contained inthe balance-sheet of a company furnishes a fresh starting point oflimitation. It is not necessary, as the law stands in India, that theacknowledgement should be addressed and communicated to thecreditor.

We are in respectful agreement with the view taken by theLearned Company Judge on the point. The position of law that anacknowledgement of debts in the balance-sheets of a Companydoes furnish fresh starting point of limitation is too well settled toneed any elaborate discussion (See: Jones v. Bellgrove PropertiesLtd. [1949 (1) All ER 498], In Re: Campania de Electricidad[1980 Ch D 146], Babulal Rukmanand v. Official Liquidator[AIR 1968 Rajasthan 214] and Bengal Silk Mills Co. v. IsmailGolam Hossain Ariff [AIR 1962 Calcutta 115]). We see nosubstance in this contention either.”

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A26. In Bhajan Singh Samra v. M/s. Wimpy International Ltd.,2011 SCC OnLine Del 4888 : (2011) 185 DLT 428, the Delhi High Courtheld:

“13. Having heard the parties, this Court is of the opinion that thepetitioning-creditor has to satisfy the Court that the debt on whichthe petition is based was due and payable on the date of the petition.Certainly a time barred debt cannot be the basis of a winding uppetition. However, admission of a debt either in a balance sheetor in the form of a letter duly signed by the respondent, wouldamount to an acknowledgement, extending the period of limitation.Section 18(1) of the Limitation Act, 1963 incorporates the saidprinciple. Section 18(1) of the Limitation Act, 1963 reads as under:

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“18. Effect of acknowledgement in writing.

(1) Where, before the expiration of the prescribed period for asuit or application in respect of any property or right, anacknowledgement of liability in respect of such property orright has been made in writing signed by the party against whomsuch property or right is claimed, or by any person throughwhom he derives his title or liability, a fresh period of limitationshall be computed from the time when the acknowledgementwas so signed.

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xxx xxx xxx”

14. The Allahabad High Court in the case of Fortis FinancialServices Ltd. v. KHSL Industries Ltd., (1999) 95 Company Cases622 (All) held that an acknowledgement by an Assistant Vice-FPresident of the debtor company was sufficient for computing afresh period of limitation from the date of such acknowledgement.

15. The Calcutta High Court in the case of Bengal Silk MillsCo. v. Ismail Golam Hossain Ariff, AIR 1962 Cal. 115 held thatin an appeal arising from a money decree against a company,even statement of a liability in the balance-sheet of the companyamounted to admission/acknowledgement of a debt giving rise toa fresh period of limitation, notwithstanding the fact that thebalance-sheet was prepared under ‘compulsions of statute and ofthe articles of association of the company’.

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16. In Vijaya Kumar Machinery & Electrical Stores v.Alaparthi Lakshmikanthamma, (1969) 74 ITR 224 (AP), theAndhra Pradesh High Court after following Bengal Silk MillsCo. (supra), Raja of Vizianagram v. Official Liquidator,Vizianagram Mining Company Limited, AIR 1952 Mad. 1361,Lahore Enamelling and Stamping Co. Ltd. v. A.K. Bhalla, AIR1958 Punj. 341 and Jones v. Bellgrove Properties Ltd., (1949) 2All.ER 198 held, “What emerges from a consideration of theabove decision is that the date of signing the balance-sheetby the second defendant started a fresh period of limitation”.

17. Consequently, in the present case, the acknowledgement ofthe petitioner’s loan of Rs. 50,000/- by Chartered Accountant ofrespondent-company vide letters dated 23[rd] February, 2002 and21[st] November, 2002, as well as in the respondent-company’sbalance sheets for the years ended 31[st] March, 2004, 31[st] March,2005 and 31[st] March, 2006 not only extends the period of limitationbut also constitutes fresh cause of action for filing a winding uppetition. Accordingly, the present winding up petition is withinlimitation.”

27. In CIT-III v. Shri Vardhman Overseas Ltd., 2011 SCCOnLine Del 5599 : (2012) 343 ITR 408, the Delhi High Court held:

“17. In the case before us, as rightly pointed out by the Tribunal,the assessee has not transferred the said amount from the creditors’account to its profit and loss account. The liability was shown inthe balance sheet as on 31[st] March, 2002. The assessee being alimited company, this amounted to acknowledging the debts infavour of the creditors. Section 18 of the Limitation Act, 1963provides for effect of acknowledgement in writing. It says wherebefore the expiration of the prescribed period for a suit in respectof any property or right, an acknowledgement of liability in respectof such property or right has been made in writing signed by theparty against whom such property or right is claimed, a freshperiod of limitation shall commence from the time when theacknowledgement was so signed. In an early case, in England,in Jones v. Bellgrove Properties, (1949) 2KB 700, it was heldthat a statement in a balance sheet of a company presented to acreditor-share holder of the company and duly signed by thedirectors constitutes an acknowledgement of the debt. In Mahabir AB

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Cold Storage v. CIT (1991) 188 ITR 91 : 1991 Supp (1) SCC402, the Supreme Court held:

“The entries in the books of accounts of the appellant wouldamount to an acknowledgement of the liability to Messrs.Prayagchand Hanumanmal within the meaning of Section 18of the Limitation Act, 1963, and extend the period of limitationfor the discharge of the liability as debt.”

In several judgments of this Court, this legal position has beenaccepted. In Daya Chand Uttam Prakash Jain v. Santosh DeviSharma 67 (1997) DLT 13, S.N. Kapoor J. applied the principlein a case where the primary question was whether a suit underOrder 37 CPC could be filed on the basis of an acknowledgement.In Larsen & Toubro Ltd. v. Commercial Electric Works 67 (1997)DLT 387 a Single Judge of this Court observed that it is wellsettled that a balance sheet of a company, where the defendantshad shown a particular amount as due to the plaintiff, wouldconstitute an acknowledgement within the meaning of Section 18of the Limitation Act. In Rishi Pal Gupta v. S.J. Knitting &Finishing Mills Pvt. Ltd. 73 (1998) DLT 593, the same viewwas taken. The last two decisions were cited by Geeta Mittal, J.in S.C. Gupta v. Allied Beverages Company Pvt. Ltd. (decidedon 30/4/2007) and it was held that the acknowledgement made bya company in its balance sheet has the effect of extending theperiod of limitation for the purposes of Section 18 of the LimitationAct. In Ambika Mills Ltd. Ahmedabad v. CIT Gujarat (1964) 54ITR 167, it was further held that a debt shown in a balance sheetof a company amounts to an acknowledgement for the purposeof Section 19 of the Limitation Act and in order to be so, thebalance sheet in which such acknowledgement is made need notbe addressed to the creditors. In light of these authorities, it mustbe held that in the present case, the disclosure by the assesseecompany in its balance sheet as on 31[st] March, 2002 of theaccounts of the sundry creditors’ amounts to an acknowledgementof the debts in their favour for the purposes of Section 18 of theLimitation Act. The assessee’s liability to the creditors, thus,subsisted and did not cease nor was it remitted by the creditors.The liability was enforceable in a court of law.”

28. In Shahi Exports Pvt. Ltd. v. CMD Buildtech Pvt. Ltd.,2013 SCC OnLine Del 2535 : (2013) 202 DLT 735, the Delhi High Courtheld:

“7. It is hardly necessary to cite authorities in support of the well-established position that an entry made in the company’s balancesheet amounts to an acknowledgement of the debt and has theeffect of extending the period of limitation under section 18 of theLimitation Act, 1963. However, I may refer to only one decisionof the learned single judge of this Court (Manmohan, J.) in BhajanSingh Samra v. Wimpy International Ltd. 185 (2011) DLT 428 forthe simple reason that it collects all the relevant authorities on theissue, including some of the judgments cited before me on behalfof the petitioners. This judgment entirely supports the petitionerson this point.”

29. In N.S. Atwal v. Jindal Steel and Power Ltd., 2013 SCCOnLine Del 3902, the Delhi High Court held:

“11. This Court in ESPN Software India (P) Ltd. v. ModiEntertainment Network Ltd., [2012] 173 Comp Cas 465 (Delhi),noted that:

“17. Admission in balance-sheet is per-se an admission ofliability…

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19. This entry clearly states that an amount of Rs. 8,00,04,000/- is due and payable by the respondent in accordance with theterms of the contract. This document has been signed by thedirectors of the company and its Company Secretary on31.10.2002.”

Similarly, in Bhajan Singh Samra v. Wimpy International Ltd.,[2012] 173 Comp Cas 455 (Delhi), the Court noted:

“13. Having heard the parties, this Court is of the opinion thatthe petitioning-creditor has to satisfy the Court that the debt onwhich the petition is based was due and payable on the date ofthe petition. Certainly a time barred debt cannot be the basisof a winding up petition. However, admission of a debt eitherin a balance sheet or in the form of a letter duly signed by therespondent, would amount to an acknowledgement …”

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Similar findings have also been recorded by the Calcutta HighCourt in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff,AIR 1962 Cal 115, paragraph 12, and Raja of Vizianagram v. TheOfficial Liquidator, Vizianagram Mining Company Limited,Vizagapatam, AIR 1952 Mad 136. Indeed, the entry admits suchliability towards JSPL for the amount claimed, and no explanationthat may be provided, or circumstance surrounding the entry, canalter the fact of that liability. Thus, while this admission establishesliability, the fact is traced to the exchange of letters mentionedabove, thus bringing the case within Order XXXVII CPC.”

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30. In M/s. Al-Ameen Limited v. K.P. Sethumadhavan, 2017CSCC OnLine Ker 11337 : (2017) 4 KLJ 80, the Kerala High Court held:

“7. The inclusion of a debt in a balance sheet duly prepared andauthenticated would amount to admission of a liability and thereforesatisfies the requirement of law for a valid acknowledgement underSection 18 of the Act. We may recapitulate the words of Mr.Justice P. Subramonian Poti in Krishnan Assari v. AkilakeralaViswakarma Maha Sabha [1980 KLT 515 (DB)] and thefollowing is the extract:

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“10. How far the balance sheets could be acted upon in decidingthe claim of the appellant is the next question. The appellantrelies on the balance sheets as acknowledgement of liabilitycontemplated in S. 18 of the Limitation Act, 1963. Under S. 18an acknowledgement of liability signed by the party againstwhom the right is claimed gives rise to a fresh period oflimitation. Under Explanation (b) to the Section the word‘signed’ means signed either personally or by an agent dulyauthorised. A company being a corporate body acts through itsrepresentatives, the Managing Director and the Board ofDirectors. Under S. 210 of the Companies Act it is the statutoryduty of the Board of Directors to lay before the Company atevery annual general body meeting a balance sheet and a profitand loss account for the preceding financial year. S. 211 directsthat the form and contents of the balance sheet should be asset out in Part I of Schedule VI. The said form stipulates forthe details of the loans and advances and also of sundrycreditors. The balance sheet should be approved by the Boardof Directors, and thereafter authenticated by the Manager or E

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the Secretary if any and not less than two directors one ofwhom should be the Managing Director. (See S. 215). TheAct also provides for supply of copies of the balance sheet tothe members before the company in general meeting. Goingby the above provisions, a balance sheet is the statement ofassets and liabilities of the company as at the end of the financialyear, approved by the Board of Directors and authenticated inthe manner provided by law. The persons who authenticatethe document do so in their capacity as agents of the company.The inclusion of a debt in a balance sheet duly prepared andauthenticated would amount to admission of a liability andtherefore satisfies the requirements of law for a validacknowledgement under S. 18 of the Limitation Act, eventhough the directors by authenticating the balance sheet merelydischarge a statutory duty and may not have intended to makean acknowledgement.”

31. In Zest Systems Pvt. Ltd. v. Center for Vocational andEntrepreneurship Studies, 2018 SCC OnLine Del 12116, the DelhiHigh Court held:

“5. In Shahi Exports Pvt. Ltd. v. CMD Buildtech Pvt. Ltd. (supra)this court held as follows:—

“7. It is hardly necessary to cite authorities in support of thewell-established position that an entry made in the company’sbalance sheet amounts to an acknowledgement of the debtand has the effect of extending the period of limitation undersection 18 of the Limitation Act, 1963. However, I may referto only one decision of the learned single judge of this Court(Manmohan, J.) in Bhajan Singh Samra v. WimpyInternational Ltd., 185 (2011) DLT 428 for the simple reasonthat it collects all the relevant authorities on the issue, includingsome of the judgments cited before me on behalf of thepetitioners. This judgment entirely supports the petitioners onthis point.”

6. In view of the legal position spelt out in judgments noted above,the acknowledgement of the debt in the balance sheet extendsthe period of limitation. The acknowledgement is as on 31.3.2015.This suit is filed in 2017. The suit is clearly within limitation. Thepresent application is allowed.”

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A32. In Agni Aviation Consultants v. State of Telangana, 2020SCC OnLine TS 1462 : (2020) 5 ALD 561, the High Court of Telanganaheld:

“107. In several cases, various High Courts have held that anacknowledgement of liability in the balance sheet by a CompanyBregistered under the Companies Act, 1956 extends the period oflimitation though it is not addressed to the creditor specifically. (Zest Systems Pvt. Ltd. v. Center for Vocational andEntrepreneurship Studies, 2018 SCC OnLine Del 12116, BhajanSingh Samra v. Wimpy International Ltd., 2012 SCC OnLineDel 2939, Vijay Kumar Machinery and Electrical Stores v.CAlaparthi Lakshmi Kanthamma, (1969) 74 ITR 224 (AP), andBengal Silk Mills Company, Raja of Vizianagram v. OfficialLiquidator, Vizianagram Mining Company Limited, AIR 1952Mad 1361).

108. Therefore it is not necessary that the acknowledgement ofDliability must be contained in a document addressed to the creditori.e. the petitioners in the instant case.”

33. It is, therefore, clear that the majority decision of the FullBench in V. Padmakumar (supra) is contrary to the aforesaid catena ofjudgments. The minority judgment of Justice (Retd.) A.I.S. Cheema,EMember (Judicial), after considering most of these judgments, has reachedthe correct conclusion. We, therefore, set aside the majority judgment ofthe Full Bench of the NCLAT dated 12.03.2020.

34. The NCLAT, in the impugned judgment dated 22.12.2020,has, without reconsidering the majority decision of the Full Bench inFV. Padmakumar (supra), rubber-stamped the same. We, therefore, setaside the aforesaid impugned judgment also.

35. On the facts of this case, the NCLT, by its judgment dated19.02.2020, recorded that the default in this case had been admitted bythe corporate debtor, and that the signed balance sheet of the corporateGdebtor for the year 2016-2017 was not disputed by the corporate debtor.As a result, the NCLT held that the Section 7 application was not barredby limitation, and therefore, admitted the same. We have already setaside the majority judgment of the Full Bench of the NCLAT dated12.03.2020, and the impugned judgment of the NCLAT dated 22.12.2020in paragraphs 33 and 34. This appeal is, therefore, allowed, and the matterH

is remanded to the NCLAT to be decided in accordance with the lawlaid down in our judgment.

Civil Appeal No.3 of 2021

1. This appeal raises a direct challenge to the majority judgmentof the Full Bench of the NCLAT dated 12.03.2020. Suffice it to say thatShri Shyam Divan, learned Senior Advocate appearing on behalf of theappellant-financial creditor, relied upon this Court’s judgment in VashdeoR. Bhojwani v. Abhyudaya Coop. Bank Ltd., (2019) 9 SCC 158, toargue that limitation starts running from the date a recovery certificatehas been obtained pursuant to proceedings before the Debts RecoveryTribunal under the Recovery of Debts Act. On facts, he argued thatsuch a certificate was issued on 31.08.2009 after which, there wereseveral letters written by the corporate debtor, M/s Uttara FashionKnitwear Ltd., acknowledging liability to pay loans that had been availedby it. He pointed out that whereas the NCLT had, by an order dated21.11.2019, admitted the appellant’s application under Section 7 of theIBC; the NCLAT had, vide the impugned judgment, set aside the NCLTorder on the ground that an entry in a balance sheet cannot amount to anacknowledgement of liability for the purpose of Section 18 of theLimitation Act. As a matter of fact, he argued, in the alternative, thateven if dues were stated to be recoverable on and from the loan-recallnotice dated 31.10.2002, there were balance sheets right from 2002 uptill 2010, followed by various letters from the corporate debtor, whichwould show a consistent course of acknowledgement of liability, therebyextending limitation until the Section 7 application was filed by theappellant on 24.06.2019. He, therefore, argued that the present appealbe remanded to the NCLAT for decision on the point of limitation.

2. Shri Jayesh Dolia, learned advocate appearing on behalf of therespondents, argued that since service was not effected on therespondents, nobody was present before the NCLT when it passed an exparte order admitting the Section 7 application. In any event, he argued,that on the facts of this case, time began to run at least in 2002, and anapplication filed in 2019 obviously cannot be said to be within limitation,as the three-year period under Article 137 of the Limitation Act has longexpired.

3. We have already set aside the Full Bench judgment dated12.03.2020 in Civil Appeal No.323 of 2021. Given the argument of Shri A

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ADolia that service was not properly effected upon the respondents, itwould be in the fitness of things to send the matter back to the NCLT fora de novo hearing. Parties are allowed to amend their pleadings, ifnecessary. The Civil Appeal is allowed in the aforesaid terms.

Civil Appeal No.3765 of 2020B

1. In this appeal, Shri Mukul Rohatgi, learned Senior Advocateappearing on behalf of the appellant, assails a judgment dated 14.10.2020passed by the NCLAT. On the facts of this case, he candidly admits thatdespite the fact that an application under Section 7 of the IBC was filedon 23.07.2018, and amended once, no plea qua any acknowledgementCof liability was made. The NCLT, by an order dated 14.12.2018, heldthat despite the fact that the corporate debtor’s account was declared tobe a non-performing asset from 2010 onwards, since, according to theNCLT, there was a continuing cause of action in the facts of this case,the Section 7 application was admitted. In an appeal filed by the suspendedManaging Director of the corporate debtor to the NCLAT, by an orderDdated 26.09.2019, the NCLAT held that the relevant date from whichlimitation must be determined is 01.12.2016, i.e. the date on which theIBC came into force, and therefore, dismissed the appeal. This Court,by its order dated 21.10.2019, set aside the order of the NCLAT andremanded the matter to the NCLAT to re-examine the question ofElimitation, having regard to the judgments in B.K. Educational Services(P) Ltd. v. Parag Gupta & Associates, (2019) 11 SCC 633 and SagarSharma v. Phoenix Arc (P) Ltd., (2019) 10 SCC 353.

2. The NCLAT, by the impugned order dated 14.10.2020, foundthat the appellant had classified the corporate debtor’s account as aFnon-performing asset on 28.05.2014. However, the said date was changedto 31.01.2010 after an attempt to restructure the corporate debtor’saccount failed. The three other banks forming part of the consortium oflenders, viz., Punjab National Bank, Corporation Bank, and UCO Bank,had also classified the account of the corporate debtor as a non-performingasset on 30.06.2014, 31.12.2014, and 31.12.2014, respectively. Even ifGthe date of default was taken to be the last of these dates, i.e. 31.12.2014,the NCLAT held that the three-year period under Article 137 of theLimitation Act had expired on 30.12.2017, and that since the amendedapplication under Section 7 of the IBC had been filed only on 23.07.2018,it was barred by limitation. The NCLAT, therefore, allowed the appeal.

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3. Shri Rohatgi pointed out that in the written submissions filed bythe appellant on 21.09.2020, after judgment was reserved by the NCLATon 17.09.2020, it was pointed out that the corporate debtor hadacknowledged its liability in its balance sheet for the year 2014-2015,and that 31.01.2010 could not be taken to be the date of default for thereasons given in the written submissions. These written submissions werenot taken into account when the NCLAT delivered the impugnedjudgment.

4. Shri C.A. Sundaram, learned Senior Advocate appearing onbehalf of the respondents, has countered each of thesesubmissions. According to him, written submissions can never be asubstitute for pleadings, and if pleadings are deficient, there ends thematter. Admittedly, on facts, there has never been a pleading beforeeither the NCLT or the NCLAT that an acknowledgement of liabilitycontained in any of the balance sheets extended limitation. He also arguedthat, on merits, if the auditor’s report were to be seen, there is noacknowledgement of liability, as any so-called acknowledgement has, infact, been qualified by notes made by the auditor. This being the case,no opportunity should now be given to the appellant to go back to theNCLAT, the appellant having already amended its pleadings once, andthis Court having already remanded the matter to NCLAT, which, on thesecond round, decided the appeal in favour of the respondents.

5. Shri Rohatgi countered this by presenting an application beforeus to amend the pleadings, stating that this can be allowed even at thisstage, as per the judgments of this Court.

6. There can be no doubt whatsoever that the appellant has beencompletely remiss and deficient in pleading acknowledgement of liabilityon the facts of this case. However, given the staggering amount allegedlydue from the respondents, we afford one further opportunity to theappellant to amend its pleadings so as to incorporate what is stated in thewritten submissions filed by it before the NCLAT, subject to costs ofRs.1,00,000/- to be paid by the appellant to the respondents within aperiod of four weeks from today.

7. We, therefore, allow the appeal, set aside the judgment of theNCLAT dated 14.10.2020, and restore the appeal to the file to be decidedin light of our judgment in Civil Appeal No. 323 of 2021.

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574SUPREME COURT REPORTS

A8. Interim order passed by this Court on 16.12.2020 stands vacated.Civil Appeal No.3228 of 2020

1. In this appeal, the judgment of the NCLAT dated 07.02.2020 isassailed, in which the NCLAT has held that entries made in balancesheets of the corporate debtor for the years ending 2014-2015, 2015-B2016, and 2016-2017 cannot amount to acknowledgements of liability, asa result of which the NCLT order admitting the appellant’s applicationunder Section 7 of the IBC was set aside.

2. Suffice it to say that the basis of the Section 7 application in thiscase was a DRT decree dated 17.08.2018, pursuant to which a recoveryCcertificate dated 19.06.2019 was issued. The Section 7 applicationaverred that the date of the DRT decree furnished the cause of actionand, thus, was the starting point of limitation in this case.

3. Shri Sidhartha Barua, learned counsel appearing on behalf ofthe appellant, has argued that this appeal deserves to be allowed and theDmatter sent back to the NCLAT to be decided in accordance with ourjudgment delivered in Civil Appeal No.323 of 2021.

4. Shri Saurabh Kirpal, learned Senior Advocate appearing onbehalf of the respondents, has argued that no pleading quaacknowledgement of liability was made before either the NCLT or theENCLAT. Instead, the only pleading that was made was that the date ofdefault was the date on which the DRT decree was passed, which iswholly incorrect in law. The Section 7 application being hopelessly timebarred, no opportunity should now be given to the appellant to renege onthis pleading.

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F5. As decided by us in Civil Appeal No.323 of 2021, we give onemore opportunity to the appellant in this case to amend its pleading onpayment of costs of Rs.1,00,000/- to the respondents within four weeksfrom today. The NCLAT judgment dated 07.02.2020 is set aside and thematter is remanded to the NCLAT to decide the matter afresh inaccordance with the law laid down in Civil Appeal No.323 of 2021.G

Civil Appeal arising out of SLP (Civil) No.1168 of 2021

1. Leave granted.

2. This appeal is against the judgment dated 15.10.2020 of theCalcutta High Court which set aside two orders of the NCLT – (i) order H

dated 19.08.2019 whereby the NCLT admitted the appellant’s applicationunder Section 7 of the IBC, and (ii) order dated 20.02.2020, wherebythe NCLT ordered liquidation of the corporate debtor.

3. Shri Sanjay Kapur, learned counsel appearing on behalf of theappellant, assailed the judgment of the Calcutta High Court, and arguedthat an efficacious alternative remedy was available to the respondentbefore the NCLAT, as a result of which the High Court ought not tohave interfered with the judgment of the NCLT. On the other hand, ShriPoddar, learned counsel appearing on behalf of the respondent, has soughtto support the judgment of the High Court with reference to KamleshBabu v. Lajpat Rai Sharma, (2008) 12 SCC 577, and paragraph 23 inparticular, stating that a jurisdictional point was raised as to limitation, asa result of which the Calcutta High Court took up a petition filed underArticle 227 of the Constitution of India and correctly set aside the ordersof the NCLT.

4. There can be no doubt that the NCLT had, in its order dated19.08.2019, stated that Article 63(a) of the Limitation Act would applyinstead of Article 137, contrary to what has been held by us in severaljudgments. It cannot, therefore, be said that the Calcutta High Courtwrongly exercised jurisdiction in setting aside this finding. However, theHigh Court then went on to refer to certain balance sheets that had beenproduced, thereby extending limitation under Section 18 of the LimitationAct, but held that given the judgment in Babulal (supra), such balancesheets could not extend limitation.

5. Given the judgment delivered in Civil Appeal No.323 of 2021,the impugned judgment in this appeal also deserves to be set aside. Theappeal is, therefore, allowed. If the respondent wishes to file an appealbefore the NCLAT against the orders of the NCLT dated 19.08.2019and 20.02.2020, it may do so within a period of four weeks from the dateof this judgment. The appeal will thereafter be decided on its merits,keeping in view the statement of the law laid down in Civil Appeal No.323of 2021.

Devika Gujral

Matters disposed of.

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