Entries in Corporate Debtor’s financial statements to be treated as acknowledgement of debt

A Division bench of the Hon’ble Supreme Court of India (SC), comprising of Hon’ble Ms. Justice Indira Banerjee and Hon’ble Mr. Justice J.K. Maheshwari, in their judgment dated 01.08.2022 in Asset Reconstruction Company (India) Limited v. Tulip Star Hotels Limited & Ors., held that an application under Section 7 of IBC would not be barred by limitation, on the ground that it had been filed beyond a period of 3 years from the date of declaration of the loan account as NPA, if there was an acknowledgement of the debt by the corporate debtor (including acknowledgment of liabilities in its financial statements) before expiry of the period of limitation of 3 years; in such cases, the period of limitation would get extended by a further period of 3 years. The SC relied on its earlier judgment in Asset Reconstruction Company (India) Limited. v. Bishal Jaiswal and Anr. ((2021) 6 SCC 366) to opine that entries in books of accounts and/or balance sheets of a Corporate Debtor would amount to an acknowledgment under Section 18 of the Limitation Act.