The NCLT, Kochi bench in February, 2022 in the matter of Ms Pheonix ARC Private Ltd vs Kerela Chamber and Industries reiterated that “the acknowledgement of debt in the balance sheet comes within the purview of acknowledgement u/s 18 of Limitation Act, 1963”. Also the period of limitation for filing an application u/s 7 of Insolvency and Bankruptcy Code, 2016 (“IBC”) would be extended, if the debt is acknowledged in the balance sheet of the corporate debtor.

In the instant case, The Kerela Chamber of Commerce and Industries (“Corporate Debtor”) availed various credit facilities from South Indian Bank, Market Road Branch, Ernakulam (“Financial Creditor”) for business purposes. South Indian Bank sanctioned a loan to the tune of Rs 110 Lakhs and executed the necessary documents.

It was observed that the Corporate Debtor did not dispute the liability, thereby confirmed and acknowledged the indebtness of the liability in the favour of South Indian Bank. The Corporate Debtor, vide its various balance sheets, which were acknowledged by the directors, acknowledged the indebtness of its liability. The application was filed by the Financial Creditor to initiate the Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor u/s 7(4) of IBC. The Corporate Debtor filed a counter stating that there is a bar of limitation, since the right to sue accrues when the default occurs.

In this matter, the NCLT analysed the provisions of Section 238A of the IBC, Section 18 of the Limitation Act, 1963 and Article 137 of the Limitation Act, 1968. In the present case the bench held that since the debt was acknowledged in the balance sheet of the Corporate Debtor and the application filed by the Financial Creditor, it is well within the limitation period of 3 years and thereby dismissed the objection regarding limitation as raised by the Corporate Debtor.