SC sets aside NCLAT ruling, allows IL&FS appeal in insolvency case
The case involved a loan default by Adhunik Meghalaya Steels Pvt. Ltd., and the key issue was whether entries in the company's 2019–20 balance sheet could be treated as an acknowledgment of debt.
IFIN argued that this acknowledgment extended the limitation period under Section 18 of the Limitation Act, 1963, allowing them to initiate insolvency proceedings under the Insolvency and Bankruptcy Code (IBC).
The Supreme Court agreed with IFIN, holding that the balance sheet entries indicated that the debt was still unpaid even though IFIN's name was not directly mentioned.
The Court said that acknowledgment of liability does not need to name the creditor, as long as it shows the existence of a debt.
The Bench also addressed confusion over its earlier COVID-related orders on extension of limitation.
It clarified that the correct clause to apply was Para 5(I) of its suo motu judgment in In Re: Cognisance for Extension of Limitation.
As a result, the period between March 15, 2020, and February 28, 2022, would not be counted in calculating the deadline.
Thus, IFIN's application filed on January 15, 2024, was held to be well within the extended limitation period.
The Court referred to and reaffirmed earlier rulings, including Asset Reconstruction Co. v. Bishal Jaiswal (2021) and Vidyasagar Prasad v. UCO Bank (2024), stating that balance sheet entries should be interpreted in a broad, contextual manner to determine acknowledgment of debt.
Setting aside the findings of both the NCLT and NCLAT, the Supreme Court sent the matter back to the NCLT for a fresh decision on the merits.
Senior Advocate Ritin Rai, along with a legal team from Cyril Amarchand Mangaldas, represented IFIN.
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