SOA/balance sheet/financial statements made within the period of limitation constitutes acknowledgement of debt: SC

In Dena Bank vs Shivakumar Reddy and Another, the Supreme Court held that the statement of accounts/balance sheet/financial statements and the offer of a one-time settlement of a claim made within the period of limitation constituted an acknowledgement of debt under Section 18 of the Limitation Act, 1963 (Limitation Act). The Supreme Court even stated that a judgment and/or decree for money in favor of the financial creditor, passed by the Debt Recovery Tribunal, or any other Tribunal or Court or the issuance of a certificate of recovery in favour of the financial creditor, would give rise to a fresh cause of action for the financial creditor, to initiate proceedings under Section 7 of the Code.

Relevant Extract:

Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of One Time Settlement of a live claim, made within the period of limitation, should not also be construed as an acknowledgment to attract Section 18 of the Limitation In Gaurav Hargovindbhai Dave (supra) cited by Mr. Shivshankar, this Court had no occasion to consider any proposal for one time settlement. Be that as it may, the Balance Sheets and Financial Statements of the Corporate Debtor for 2016-2017, as observed above, constitute acknowledgement of liability which extended the limitation by three years, apart from the fact that a Certificate of Recovery was issued in favour of the Appellant Bank in May 2017. The NCLT rightly admitted the application by its order dated 21^st March, 2019.