The Supreme Court held that Section 18 of the Limitation Act applies to actions brought under the Insolvency and Bankruptcy Code.
“An acknowledgement in a balance sheet without a qualification can furnish a legitimate basis for determining as to whether the period of limitation would stand extended, so long as the acknowledgement was within a period of three years from the original date of default, Justices DY Chandrachud and Surya Kant of the bench remarked.”
The National Company Law Tribunal denied the State Bank of India’s application for beginning of the Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016 on the grounds of limitation. It was decided that a balance sheet statement could not be considered an acceptance of responsibility under Section 18 of the Limitation Act of 1963. The National Company Law Appellate Tribunal upheld the ruling, but said there was no recourse to Section 18 of the Limitation Act [Effect of acknowledgment in writing].
The Apex court bench noted that the decisions relied on by the NCLT/NCLAT had been specifically overturned by the Supreme Court when evaluating the appeals filed against these decrees. The panel noted the following in
- Laxmi Pat Surana v Union Bank of India (2021) 8 SCC 481,
- Asset Reconstruction Company (India) Limited v Bishal Jaiswal (2021) 6 SCC 366,
- Sesh Nath Singh v Baidyabati Sheoraphuli Coop. Bank Ltd. (2021) 7 SCC 313 and other judgements:
“(i) The provisions of Section 18 of the Limitation Act are not alien to and are applicable to proceedings under the IBC; and (ii) An acknowledgement in a balance sheet without a qualification can furnish a legitimate basis for determining as to whether the period of limitation would stand extended, so long as the acknowledgement was within a period of three years from the original date of default.
As a result, the bench granted the appeal and remanded the case to the NCLT for further proceedings.
Case details
State Bank of India vs Krishidhan Seeds Private Limited | CA 910 of 2021 | 18 April 2022
Coram: Justices DY Chandrachud and Surya Kant
Counsel: Sr. Adv Niranjan Reddy for appellant, Sr. Adv Shyam Divan for respondent
Headnotes
Insolvency and Bankruptcy Code, 2016 – Limitation Act, 1963 ;
Section 18 – The provisions of Section 18 of the Limitation Act are not alien to and are applicable to proceedings under the IBC; and (ii) An acknowledgement in a balance sheet without a qualification can furnish a legitimate basis for determining as to whether the period of limitation would stand extended, so long as the acknowledgement was within a period of three years from the original date of default. [Referred to Laxmi Pat Surana v Union Bank of India (2021) 8 SCC 481, Asset Reconstruction Company (India) Limited v Bishal Jaiswal (2021) 6 SCC 366, Sesh Nath Singh v Baidyabati Sheoraphuli Coop. Bank Ltd. (2021) 7 SCC 313 et al.] (Para 13)
