NCLAT to reconsider balance sheet as an acknowledgement under Section 18 of the Limitation Act, 1963.
While hearing an appeal petition in the case of Bishal Jaiswal Vs Asset Reconstruction Company (India) Ltd &amp; Anr (Company Appeal (AT) (Insolvency) No. 385 of 2020) the three- judge bench referred the case of V. Padamakumar Vs. Stressed Assets Stabilization Fund (SASF) &amp; Anr. (Company Appeal (AT) (Ins) No. 57 of 2020) for reconsideration. The latter’s verdict was decided by a five-judge bench in the appellate court without giving due consideration for the precedent laid down by Supreme Court as well as various High Courts. In the present matter the appellant had advanced a loan from a consortium of lenders which the corporate debtor could not pay back and the accounts were declared as Non-Performing Asset in 2014 but the application in NCLT was filed in 2018. The adjudicating authority had accepted the application and held that it was not time-barred. Aggrieved by this decision the corporate debtor had filed an appeal. The Corporate Debtor contended that the balance sheet cannot be considered as an acknowledgement under Section 18 of the Limitation Act, 1963. And that the application was filed with a delay of 5 years thus being time-barred. This issue was considered explicitly by the Five Hon’ble Members of this Appellate Tribunal in the case of V. Padamakumar (Supra) and held that the Books of Accounts are required to be prepared under the obligation casted Section 92 of the Companies Act, 2013. Therefore, it cannot amount to an acknowledgement for Section 18 of the Limitation Act, 1963. The Respondents contested that the appellant has acknowledged the debt in its balance sheet and thus right to sue stood extended in terms of Section 18 of the Limitation Act, 1963. It was noted by the Adjudicating Authority that in the Balance Sheet the Corporate Debtor, admitted its liability, which was signed before the expiry of three years from the date of default. The Respondents relied on various precedents of Supreme Court and High Court where it was submitted that it is settled law that the entries made in the Balance Sheet of the Company amounts to an acknowledgement of debt under Section 18 of the Limitation Act, 1963. NCLAT listed the reasons for reconsideration of V. Padmakumar’s Judgment (Supra) as follows: For all the above reasons NCLAT has referred the matter to a Bench of Five Hon’ble Members of this Appellate Tribunal.
NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI Company Appeal(Insolvency) No. 3820 IN THE MATTER OF: Bishal Jaiswal Residing at: Balarampur Purulia Rangadih West Bengal 723143 2. Corporate Power Limited Asset Reconstruction CompanyLtd Having its Registered Office at: The Ruby 10th Floor 29 Senapati Bapat Marg DadarMumbai 400028 E mail: cs@arcil.co.in Phone Number: 022 66581300 Through Interim Resolution Professional Shri Pankaj Dhanuka Residing at: FE 328 Sector III Salt Lake City Kolkata 700 106 West Bengal E mail: pankajdhanuka@gmail.com Registration Number: IBBI IPA 001 IP P 01205 2018 19 11911 Having its Registered Office: FE 83 Sector III Salt Lake City Ground Floor Kolkata 700106 West Bengal Respondent No.1 Respondent No.2 For Appellant For Respondent Mr Abhijeet Sinha Mr Sandeep Bajaj and Mr Devansh Jain Advocates for Appellant. Mr Ramji Srinivasan Sr. Advocate Mr Abhirup Das Gupta and Mr Rishub Kapoor Mr Varun Gupta Advocates for R1. Mr Sanjeev Kumar Sr. Advocate Mr Pankaj Dhanuka Mr Anshul Sehgal Advocates for R2. 2 25.09.2020 We have heard the arguments in this Appeal. During the course of argument a Judgment rendered by Five Hon’ble Members of this Appellate Tribunal in the Case of V. Padamakumar Vs. Stressed Assets Stabilization Fund& Anr. in Company Appeal(Ins) No. 520 has been cited before us. After hearing the arguments of Learned Counsel for the parties we with the great respect to the Hon’ble Members of the Judgment thought it proper to refer V. Padmakumar’s Case reconsideration. We shall proceed further in this Appeal after receiving answer of the The Registrar is directed to place the attached reference alongwith V. Padmakumar’s Case before the Hon’ble Acting Chairperson for constituting appropriate Bench. Justice Jarat Kumar Jain) MemberBalvinder Singh) MemberV.P. Singh) MemberCompany Appeal(Insolvency) No. 3820 Before Hon’ble National Company Law Appellate Tribunal New Delhi. Reference: Three Members Bench of NCLAT. We Three Members Bench of this Appellate Tribunal heard the arguments in Company Appeal(Ins) No. 3820. During the course of arguments a Judgment rendered by Five Hon’ble Members of this Appellate Tribunal in the Case of V. Padma Kumar Vs. Stressed Assets Stabilization Fund& Anr. in Company Appeal(Ins) No. 520 has been cited before us. After hearing the arguments of Learned Counsel for the parties. We with the great respect to the Hon’ble Members of the Judgment thought it proper to refer the V. Padmakumar’s case for reconsideration. The issue is of great importance which is as follows: “Hon’ble Supreme Court and various Hon’ble High Courts have consistently held that an entry made in the Company’s Balance Sheet amounts to an acknowledgement of debt under Section 18 of the Limitation Act 1963 in view of the settled law V. Padmakumar’s Case requires reconsideration.” Brief facts of the case are that the Corporate Debtorhad availed the loan from the Consortium Lenders for setting up 1080 MW coal based plant at Chandwa of Latehar District in the State of Jharkhand in two phases comprising of 2x270 MW in each phase by executing common loan agreement with the lender s bank. The Corporate Debtor has availed loan facilities aggregating to Rs.2175 00 00 000 for the Phase I project and availed Rs.2387 00 000 for PhaseII project for setting up another 540 MW coal based plant from the various bankers referred above and loan agreements have been executed between the Corporate Debtor and the above referred Banks. However the Corporate Debtor failed to repay the dues under the facilities granted by the above mentioned Banks. Thereafter State Bank of India issued a loan recall notice dated 27th March 2015 which was replied by the Corporate Debtor on 28th March 2015. The Consortium Lenders issued notices on 20th June 2015 under Section 13(2) of the SARFAESI Act 2002 demanding a total amount of Rs.5997 80 02 973 but the Corporate Debtor failed to repay the loan amount. The above mentioned Banks had assigned the debt in favour of Asset ReconstructionTherefore the Financial Creditor has filed the Application for initiation of CIRP against the Corporate Debtor under Section 7 of the I&B Code. The Corporate Debtor contends that the Financial Creditor has no cause of action to initiate and proceed against the Corporate Debtor. The purported amount claimed by the Financial Creditor is yet to be ascertained and proceedings in that regard are already pending before the DRT Kolkata. The Corporate Debtor has also raised the issue of Limitation. The Adjudicating Authority has admitted the Application on the ground that the debt and default are not under challenge and the Application is filed within Limitation. Being aggrieved with the order the Corporate Debtor filed the Appeal. The Appeal is filed mainly on the ground that the Learned Adjudicating Authority has failed to consider that the State Bank of India the predecessor in interest of Financial Creditorhad declared the accounts of the Corporate Debtor as NPA on 28th February 2014. The Application under Section 7 of the I&B Code was filed in December 2018 i.e. after a delay of almost five years. The Application is barred by Limitation. The Adjudicating Authority has failed to appreciate that the Balance Sheet produced by Financial Creditor does not hold the Corporate Debtor in any way liable as there is no categorical mention of the name of the Financial Creditor therein. Learned Counsel for the Corporate Debtor submitted that the Application is barred by Limitation. The Corporate Debtor’s balance sheet cannot be considered as an acknowledgement under Section 18 of the Limitation Act 1963. The issue was considered explicitly by the Five Hon’ble Members of this Appellate Tribunal in the case of V. Padamakumarand held that the Books of Accounts are required to be prepared under the obligation casted under Section 92 of the Companies Act 2013. Therefore it cannot amount to an acknowledgement for Section 18 of the Limitation Act 1963. The acknowledgement to extend the period of limitation should be of any penalty punishment. voluntary and cannot be given under the compulsion of law or with the threat Learned Counsel for the Corporate Debtor submitted that the Judgment passed in V. Padmakumar Case does not require reconsideration because in the dissenting Judgment by one of the Hon’ble Members of the Bench has referred the Judgment of Hon’ble Supreme Court in the case of M s Mahavir Cold Storage Vs. CIT Patna A.V. Murthi Vs. B.S. Nagabasavanna and S. Natrajan Vs. Sama Dharman. Hence it cannot be said that these precedents are not brought to the notice of the Bench. Therefore the Judgment still holds the field and is binding on this Bench. Learned Counsel for the Corporate Debtor further submitted that Hon’ble Supreme Court in the case of Babulal Vardharji Gurjer Vs. Veer Gurjer Aluminium Industries Pvt. Ltd. & Anr. SCC Online SC 647 finally settled that Section 18 of the Limitation Act 1963 is not applicable to Insolvency Cases. Therefore there is no question for referring V. Padmakumar’s case for reconsideration. The Learned Counsel for the Financial Creditor contends that in this case the right to sue for the first time accrued upon the classification of the account as NPA on 31st July 2013. Thereafter the Corporate Debtor has time and again admitted and unequivocally acknowledged its debt in the Balance Sheets for the years ending 31st March 2015 31st March 2016 and 31st March 2017. Hence the right to sue stood extended in terms of Section 18 of the Limitation Act 1963. Regarding the issue of Limitation in the present matter it is pleaded that entries in the Balance Sheet amounts to an acknowledgement of debt in terms of Section 18 of Limitation Act. The Adjudicating Authority observed that in the Balance Sheet the Corporate Debtor admitted its liability which was signed before the expiry of three years from the date of default. It is an acknowledgement of debt in terms of Section 18 of the Limitation Act and is therefore not barred by Limitation. Therefore the Adjudicating Authority admitted the Application for initiation of CIRP of the Corporate Debtor. 11. Learned Counsel for the Financial Creditor submitted that in Babulal Vardharji Gurjerji case Hon’ble Supreme Court formulated a question whether Section 18 of the Limitation Act 1963 could be applied to the present case After elaborate discussion Hon’ble Supreme Court held that the Respondent No. 2 has not pleaded in regard to an acknowledgment. Therefore Hon’ble Supreme Court declined the benefit of Section 18 of Limitation Act 1963. Hon’ble Supreme Court has not said that the provisions of Section 18 of Limitation Act 1963 are not applicable to the Insolvency cases. 12. The Learned Senior Counsel for the Financial Creditor submitted that it is settled law that the entries made in the Balance Sheet of the Company amounts to an acknowledgement of debt under Section 18 of the Limitation Act for the same he placed reliance on the law laid down by Hon’ble Supreme Court in case of Mahavir Cold Storage Vs. CIT 1991 SuppSCC 402 12. The entries in the books of accounts of the appellant would amount to an acknowledgement of the liability to M s Prayagchand Hanumanmal within the meaning of Section 18 of the Limitation Act 1963 and extend the period of limitation for the discharge of the liability as debt. Section 2(47) of the Act defines transfer in relation to a capital asset under clause the sale exchange or relinquishment of the asset or the extinguishment of any right thereof or —toare not relevant hence omitted].” In the case of A.V. Murthy v. B.S. Nagabasavanna 2 SCC 642 at page 644 Hon ble the Supreme Court of India held “Moreover in the instant case the appellant has submitted before us that the respondent in his balance sheet prepared for every year subsequent to the loan advanced by the appellant had shown the amount as deposits from friends. A copy of the balance sheet as on 31 3 1997 is also produced before us. If the amount borrowed by the respondent is shown in the balance sheet it may amount to acknowledgment and the creditor might have a fresh period of limitation from the date on which the acknowledgment 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 way of defence of the respondent." In the Case of Usha Rectifier Corporation Ltd. Vs. CCE 11 SCC 571:4 SCC387 at Page 574 Hon’ble Supreme Court held “10. The aforesaid position is further corroborated by the Directors Report appearing at P.2 of the annual report for the year ending December 1988 wherein it was mentioned that during the year the Company developed a large number of testing equipments on its own for using the same for the testing of semi conductors. Once the appellants have themselves made admission in their own balance sheet which was not rebutted and was further substantiated in the Director’s Report the appellant now cannot turn around and make submission which are contrary to their own admissions.” In Case of S. Natarajan Vs. Sama Dharma: MANU SC 0698 2014 Hon’ble the Supreme Court of India held that “Referring to the facts before it this Court observed that the complainant therein had submitted his balance sheet prepared for every year subsequent to the loan advanced by the complainant and had shown the amount as deposits from friends. This Court noticed that the relevant balance sheet is also produced in the Court. This Court observed that if the amount borrowed by the accused therein is shown in the balance sheet that it may amount to acknowledgement and the creditor might have a fresh period of limitation from the date on which the acknowledgement was made. After highlighting further facts of the case this Court held that at this stage of proceedings to say that the cheque drawn by the accused was in respect of a debt or liability which was not legally enforceable was clearly illegal and erroneous. In the circumstances this Court set aside the order passed by the High Court upholding the Sessions Court s order quashing the entire proceedings on the ground that the debt or liability is barred by limitation and hence the complaint was not maintainable. It is therefore clear that the contention urged by the Appellant herein can be examined only during trial since it involves examination of facts." 16. The Learned Counsel for the Financial Creditor further placed reliance on Judgments of various Hon’ble High Courts. In the case of Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff 1961 SCC Online Cal 128:65 CWN 856 : AIR 1962 Cal 115 at page 862 Hon ble High Court of Calcutta has held 11. To come under section 19 an acknowledgement of a debt need not be made to the creditor nor need it amount to a promise to pay the debt. In England it has been held that a balance sheet of a company stating the amount of its indebtedness to the creditor is a sufficient acknowledgement in respect of a specialty debt under section 5 of the Civil Procedure Act 1833see Re: Atlantic and Pacific Fibre Importing and Manufacturing Co. Ltd. 1928 Ch. 836 under section 1 of Lord Tentenden s Act 1828read with section 13 of the Mercantile Law Amendment Act 1856see Re: The ColiseumLtd. (1930) 2 Ch. 44 at 47 and under sections 23 and 24 of the Limitation Act 1939 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 1 A.E.R. 498.Section 5 of the Civil Procedure Act 1833 did not require that the acknowledgement should be given to the claiming creditor and consequently a balance sheet containing an admission of indebtedness to the debenture holders was a sufficient acknowledgement of liability in respect of the debentures under that section though it was sent only to the debenture holders who happened to be the shareholders of the company and not to the other debenture holders see Re: Atlantic and Pacific Fibre Importing and Manufacturing Co. Ltd.(1928) 1 Ch. 836.Under Tentenden s Act 1828 as also under the Limitation Act 1939 the 10 Burrow) Ltd. acknowledgement must be made to the creditor or his agent and if the balance sheet is sent to a shareholder who is also a creditor the requirements of those Acts were satisfied see Re: The 1930) 2 Ch. 44 at 47 Jones v. Bellgrove Properties Ltd. (1949) 1 A.E.R. 498 at 504 affirmed2 K.B. 700.The decision in the last case has been followed in India and it has been held that an admission of indebtedness in a balance sheet is a sufficient acknowledgement under section 19 of the Indian Limitation Act see The Rajah of Vizianagram v. Official Liquidator Vizianagram Mining Co. Ltd. 12) 2 M.L.J. 535 at 550 1 : A.I.R. 1952 Mad. 136 at 145 Lahore Enamelling and Stamping Co. Ltd. v. A.K. BahallaA.I.R. 1958 Punjab 341 at 347 First National Bank Ltd. v. The MandiIndustries Ltd. (1957) 59 Punjab Law 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." In Case of South Asia IndustriesLtd. vs. Krishna Shamsher Jung Bahadur Rana and Ors. 14.07.1972 DELHC): MANU DE 0372 1972 Hon ble High Court of Delhi has held that 46. Shri Rameshwar Dial argued that statements in the balance sheet of a company cannot amount to acknowledgment of liability because the balance sheet is made under compulsion of the provisions in the Companies Act. There is no force in this argument. In the first place section 18 of the Limitation Act 1963 requires only that the acknowledgment of liability must have been made in writing but it does not prescribe that the writing should be in any particular kind of document. So the fact that the writing is contained in a balance sheet is immaterial. In the second place it is true that section 131 of the Companies Act 1913 makes it compulsory that an annual balance sheet should be prepared and placed before the Company by the Directors and section 132 section 211 of the Companies Act 1956) requires that the balance sheet should contain a summary inter alia of the current liabilities of the company. But as pointed out by Bachawat J. in Bengal Silk Mills v. Ismail Golam Hossain Ariff MANU WB 0033 1962: A.I.R. 1962 Calcutta 115 although there was statutory compulsion to prepare the annual balance sheet. there was no compulsion to make any particular admission and a document is not taken out of the purview of section 18 of the Indian Limitation Act 1963merely on the ground that it is prepared under compulsion of law or in discharge of statutory duty. Reference may also be made to the decisions in Raja of Vizianagaram v. Vizianagaram Mining Co. Ltd. MANU TN 0116 1952: A.I.R. 1952 Madras 136. Jones v. Bellegrove Properties Ltd. 1 All E.R. 498 and Lahore Enamelling and Stamping Co. v. A.K. Bhalla. MANU PH 0099 1958: A.I.R. 1958 Punjab 341 in which statements in balance sheets of companies were held to amount to acknowledgments of liability of the companies. 19. Hon’ble High Court of Karnataka in the case of Hedge and Golay Limited Vs. State Bank of India KA 0225 1985 held as under: law stands “The acknowledgement of liability contained in the balance sheet of a company furnishes a fresh starting point of Limitation. It is not necessary as the India that the acknowledgment should be addressed and communicated to the We are in respectful agreement with the view taken by the Learned Company Judge on the point. The position of law that an acknowledgment of debts in the balance sheets of a Company does furnish fresh starting point of limitation is too well settled to need any elaborate discussion. All. ER 498 In Re. Compania de Electric dad 1980 Ch. Dn. 146 Babulal Rukmanand v. Official Liquidator Manu RH 0043 1968 and Bengal Silk Mills Co. v Ismail Golam Hossain Ariff. Manu WB 0033 1962: AIR 1962 Cal 115.” In case of Bhajan Singh Samra v. Wimpy International Ltd. 2011 SCC OnLine Del 4888. Hon ble High Court of Delhi has held that “13. Having heard the parties this Court is of the opinion that the petitioning creditor has to satisfy the Court that the debt on which the 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 up petition. However admission of a debt either in a balance sheet or in the form of a letter duly signed by the respondent would amount to an acknowledgement extending the period of limitation. Section 18(1) of the Limitation Act 1963 incorporates the said principle. Section 18(1) of the Limitation Act 1963 reads as under: 15. The Calcutta High Court in the case of Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff AIR 1962 Cal. 115 held that in 12 an appeal arising from a money decree against a company even statement of a liability in the balance sheet of the company amounted to admission acknowledgement of a debt giving rise to a fresh period of limitation notwithstanding the fact that the balance sheet was prepared under compulsions of statute and of the articles of association of the company . In Vijaya Kumar Machinery & Electrical Stores v. Alaparthi Lakshmikanthamma 74 ITR 224 the Andhra following Bengal Silk Mills Pradesh High Court after Co.Rajah Liquidator Vizianagaram Mining Company Limited AIR 1952 MAD. 1361 Lahore Enamelling and Stamping Co. Ltd. v. A.K. Bhalla AIR 1958 Punj. 341 and Jones v. Bellgrove Properties Ltd. 1949) 2 All.ER 198 held "What emerges from a consideration of the above decision is that the date of signing the balance sheet by the second defendant started a fresh period of limitation". In case of the Commissioner of Income Tax v. Shri Vardhman Overseas of Vizianagaram v. Official Ltd. 2011 SCC Online Del 5599. Hon ble High Court of Delhi has held that this amounted 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 in the balance sheet as on 31st March 2002. The assessee being a limited company acknowledging the debts in favour of the creditors. Section 18 of the Limitation Act 1963 provides for effect of acknowledgement in writing. It says where before the expiration of the prescribed period for a suit in respect of any property or right an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed a fresh period of limitation shall commence from the time when the acknowledgement was so signed. In an early case in England in Jones v. Bellgrove Properties 2KB 700 it was held that a statement in a balance sheet of a company presented to a creditor share holder of the company and duly signed by the directors constitutes an acknowledgement of the debt.” 22. Hon’ble High Court of Delhi in the case of Shahi Export Pvt. Ltd. Vs. CMD Built Tech Pvt. Ltd.SCC Online Del 2535 held as under: 13 “7.It is hardly necessary to cite authorities in support of the well established position that an entry made in the company’s balance sheet amounts to an acknowledgement of the debt and has the effect of extending the period of limitation under Section 18 of the Limitation Act 1963. However I may refer to only one decision of the learned Single Judge of this Courtin Bhajan Singh Samra V. Wimpy International Ltd. 185 2011) DLT 428 for the simple reason that it collects all the relevant authorities on the issue including some of the Judgments cited before me on behalf of the petitioners. This Judgment entirely supports the petitioners on this point.” In the case of N.S. Atwal v. Jindal Steel and Power Ltd. 2013 SCC Online Del 3902. Hon ble Delhi High Court has held that “11. Indeed that was also the plea taken by JSPL: that the exchange of letters in this case establishes an agreement for the amount claimed. Not only have these letters not been contested by the appellant but instead of probing this route further in order to establish the debt the learned Single Judge relied on the admission in the balance sheets presented by the defendant before the Court. On that question of admissions of debt through balance sheet while the circumstance surrounding the entry may be relevant for other purposes the fact that the amount claimed in the present suit is admitted as a debt due as a loan from JSPL is sufficient in order for the Court to reach a finding that the liability is established. 12. This Court in ESPN Software India Ltd. v. Modi Entertainment Network Ltd. 173 Comp Cas 465noted that: 17. Admission in balance sheet is per se an admission of XXXXXX XXXXXXXXXXXX 19. This entry clearly states that an amount of Rs. 8 00 04 000 is due and payable by the respondent in accordance with the terms of the contract. This document has been signed by the directors of the company and its Company Secretary on 31.10.2002." 14 In the case of Al Ameen Limited v. K.P. Sethumadhavan 2017 SCC Online Ker 11337. Hon ble High Court of Kerala at Ernakulam has held that “7. The inclusion of a debt in a balance sheet duly prepared and authenticated would amount to admission of a liability and therefore satisfies for a valid the requirement of acknowledgment under Section 18 of the Act. We may recapitulate the words of Mr. Justice P. Subramonian Poti in Krishnan Assari v. Akilakerala Viswakarma Maha Sabhaand the following is the extract: 10. How far the balance sheets could be acted upon in deciding the claim of the appellant is the next question. The appellant relies on the balance sheets as acknowledgment of liability contemplated in S. 18 of the Limitation Act 1963. Under S. 18 an acknowledgment of liability signed by the party against whom the right is claimed gives rise to a fresh period of limitation. Under Explanation to the Section the word signed means signed either personally or by an agent duly authorized. A company being a corporate body acts through its representatives the Managing Director and the Board of Directors. Under S. 210 of the Companies Act it is the statutory duty of the Board of Directors to lay before the Company at every annual general body meeting a balance sheet and a profit and loss account for the preceding financial year. S. 211 directs that the form and contents of the balance sheet should be as set out in Part I of Schedule VI. The said form stipulates for the details of the loans and advances and also of sundry creditors. The balance sheet should be approved by the Board of Directors and thereafter authenticated by the Manager or the Secretary if any and not less than two directors one of whom should be the Managing Director. See S. 215). The Act also provides for supply of copies of the balance sheet to the members before the company in general meeting. Going by the above provisions a balance sheet is the statement of assets and liabilities of the company as at the end of the financial year approved by the Board of Directors and authenticated in the manner provided by law. The persons who authenticate the document do so in their capacity as agents of the company. The inclusion of a debt in a balance sheet duly prepared and authenticated would amount to admission of a liability and therefore satisfies the requirements of law for a valid acknowledgment under S. 18 of the Limitation Act even though the directors by authenticating the balance sheet merely discharge a statutory duty and may not have intended to make an acknowledgment." 15 25. Hon’ble High Court of Delhi in the case of Zest Systems Pvt. Ltd. Vs. Center for Vocational and Entrepreneurship Studies & Anr. SCC Online Del 12116 held as under: “ 7. It is hardly necessary to cite authorities in support of the well established position that an entry made in the company’s balance sheet amounts to an acknowledgement of the debt and has the effect of extending the period of limitation under Section 18 of the Limitation Act 1963. However I may refer to only one decision of the Learned Single Judge of this Courtin Bhajan Singh Samra Vs. Wimpy International Ltd. 185 2011) DLT 428 for the simple reason that it collects all the relevant authorities on the issue including some of the supports the petitioners on this point” 6. In view of the legal position spelt out in Judgments noted above the acknowledgment of the debt in the balance sheet extends the period of limitation. The acknowledgement is as on 31.03.2015. This suit is filed in 2017. The suit is clearly within In case of Agni Aviation Consultants and Ors. vs. State of Telangana and Ors.74 ITR 224and Bengal Silk Mills Company Rajah of Vizianagaram Vs. Official Liquidator Vizianagaram Mining Company Limited AIR 1952 Madras 1361). 101. Therefore it is not necessary that the acknowledgment of liability must be contained in a document addressed to the creditor i.e. the petitioners in the instant case.” is applicable to Insolvency Cases 27. Firstly we have considered whether Section 18 of Limitation Act 1963 28. We have carefully gone through the Judgment of Hon’ble Supreme Court in the case of Babulal Vardharji Gurjarrequires reconsideration on following reasons: I. There is consistent view of the Hon’ble Supreme Court and High Court of Allahabad Calcutta Delhi Karnataka Kerala and Telangana that the entries in the Balance Sheet of the Company be treated as an acknowledgement of debt for the purpose of Section 18 of Limitation Act 1963. The majority view in V. Padmakumar’s Case is just contrary to settled law. In V. Padamakumar’s Case minority view is in the line of settled law that Balance Sheet of the Company be treated as acknowledgement of debt for the purpose of Section 18 of the Limitation Act 1963. In the majority Judgment no reasons have been assigned for disagreement In support of majority Judgment in V. Padamakumar’s Case none of with this view. the precedent cited before us. In V. Padamakumar’s Case it is discussed that the Balance Sheet of the Company is prepared pursuant to Section 92 of the Companies Act 2013 and filing of Balance Sheet Annual Return being mandatory under Section 92(4) of the Companies Act 2013 failing of which attracts penal action under Section 92(5) and of the Act. In our humble opinion Balance Sheet is not Annual Return but is a Financial Statement. Financial Statement is defined under Section 2(40) of the Companies Act 2013. In V. Padamakumar’s Case it is held that the Balance Sheet is required to be prepared under the obligation casted under Section 92 of the Companies Act 2013. Therefore it cannot amount to an acknowledgement for Section 18 of the Limitation Act 1963. The Acknowledgement should be voluntary and cannot be given under compulsion of law or with the threat of any penalty punishment. Hon’ble Calcutta High Court in the case of Bengal Silk Mills Co.and Hon’ble High Court of Delhi in the case of South Asia Industries Pvt. Ltd.held that merely on the ground that the Balance Sheet of the Company is prepared under the compulsion of law or in discharge of statutory duty it cannot be held that the Balance Sheet of the Company cannot amount to an acknowledgement of liability. VI. The Balance Sheet is a material document attached with sanctity that must be submitted to ROC and is used for obtaining a business loan or investments. Relevant provisions in regard to Balance Sheet of the Company provided in Section 129 130 131 134 137 143 and 397 of the Companies Act. Section 130 and 131 provides that a Company cannot reopen its Books of Account and Financial Statement without the Order made by the Court of Competent Jurisdiction or the Tribunal. Directors of the Company after making Judgments and estimates that are reasonable and prudent cannot resile without permission of Tribunal. VII. Section 397 of the Companies Act provides that the documents filed for the purpose of Companies Act and Rules made thereunder by a Company with the Registrar shall be admissible in any proceedings thereunder. Without proof or production of original as evidence of any contents of the original or of any fact stated therein of which direct evidence is admissible. 31. With the aforesaid reasons we are of the considered view with all great respect to the Hon’ble Five Members Bench of this Appellate Tribunal that V. Padmakumar’s Judgment requires reconsideration. Hence we are referring the matter. 32. Learned Senior Counsel for the Financial Creditor submitted that the Hon’ble Supreme Court in the case of Pradeep Chandra & Ors. Vs. Promod Chandra & Ors.1 SCC 1 has dealt with a situation when the Bench of two learned Judges of Supreme Court has in the terms doubted the correctness of a decision of a Bench of three learned Judges. They have therefore referred the matter directly to a Bench of Five Judges however Judicial discipline and propriety demands that a Bench of Two Learned Judges should follow decision of a Bench of three learned Judges. But if a Bench of two learned Judges concludes that an earlier Judgment of three learned Judges is so very incorrect that in no circumstances can it be followed the proper course for it to adopt is to refer the matter before it to a Bench of three learned Judges setting out as has been done here the reasons why it could not agree with the earlier Judgment. 33. With the aforesaid we are of the view that the matter be referred to a Bench of Five Hon’ble Members of this Appellate Tribunal. Justice Jarat Kumar Jain] MemberBalvinder Singh] MemberV.P. Singh] Member