The Supreme Court on May 18, 2022 in the case of State Bank of India v. Krishidhan Seeds Private Limited observed that the provisions of Section 18 of the Limitation Act are applicable to proceedings under the Insolvency and Bankruptcy Code, 2016 (“IBC”).

In the instant case, the NCLT rejected the application filed by the State Bank of India under Section 7 of the IBC for initiation of the Corporate Insolvency Resolution Process (“CIRP”) on the ground of limitation. It held that a statement contained in the balance sheet cannot be treated as an acknowledgement of liability under Section 18 of the Limitation Act, 1963. While upholding this order, the NCLAT held that recourse to Section 18 of the Limitation Act (effect of acknowledgment in writing) was not available.While considering the appeals filed against these orders, the Apex court bench noted that the judgments relied on by the NCLT and NCLAT has been specifically overruled by the Supreme Court.

Referring to Laxmi Pat Surana v. Union Bank of India (2021) 8 SCC 481, Asset Reconstruction Company (India) Limited v. Bishal Jaiswal (2021) 6 SCC 366, Sesh Nath Singh v. Baidyabati Sheoraphuli Coop. Bank Ltd. (2021) 7 SCC 313 and other judgments , the bench observed-

“(i) The provisions of Section 18 of the Limitation Act are not alien to and are applicable to proceedings under the IBC; and (ii) An acknowledgement in a balance sheet without a qualification can furnish a legitimate basis for determining as to whether the period of limitation would stand extended, so long as the acknowledgement was within a period of three years from the original date of default.”

Therefore, the bench allowed the appeal and restored the proceedings back to the NCLT for fresh adjudication.