Holding

The balance‑sheet entry is a valid acknowledgment of a subsisting liability, the limitation period is governed by Para 5(i) of the 10 January 2022 order, and the Section 7 application was filed within time.

Summary

The appellant, IL & FS Financial Services Ltd., entered into a term loan agreement with the respondent, Adhunik Meghalaya Steels Pvt. Ltd., in 2015, which became a non‑performing asset on 1 March 2018. The appellant filed a Section 7 application under the Insolvency and Bankruptcy Code on 15 January 2024, relying on the balance‑sheet entry for FY 2019‑20 signed on 12 August 2020 as an acknowledgment of the debt. The NCLT and NCLAT held that the balance‑sheet did not constitute a valid acknowledgment and that the application was barred by limitation, applying Para 5(III) of the Supreme Court’s 10 January 2022 order. The Supreme Court examined the nature of acknowledgment under Section 18 of the Limitation Act, the case‑by‑case approach to balance‑sheet entries, and the effect of the COVID‑19 limitation‑extension orders, concluding that the balance‑sheet entry was a valid acknowledgment and that Para 5(i) of the 2022 order applied. Consequently, the limitation period was deemed to run from 1 March 2022 to 28 February 2025, making the Section 7 application timely. The Court set aside the NCLT and NCLAT judgments and remitted the matter to the adjudicating authority, treating the application as filed within limitation.

Issues considered

Whether the entry in the FY 2019‑20 balance sheet constitutes a valid acknowledgment of debt under Section 18 of the Limitation Act, 1963.
Whether the limitation period for filing a Section 7 application under the IBC is barred, considering the acknowledgment and the Supreme Court’s 10 January 2022 limitation‑extension order (Para 5(i) vs Para 5(iii)).
Whether the NCLT and NCLAT were justified in holding the Section 7 application as time‑barred.

Legislation cited

Companies Act
Insolvency and Bankruptcy Code, 2016s. 238A, s. 7
Limitation Act, 1963s. 18

Headnote

Issue for Consideration Whether the Tribunals below were justified in holding that the s.7 application under the IBC filed by the appellant on 15.01.2024 was barred by time; does the entry in the Balance Sheet of F.Y. 2019-20 constitute a valid acknowledgement of debt by Limitation Act, 1963; will Para 5(I) or 5(III) of the order dated 10.01.2022 passed by the Supreme Court in Suo Moto Writ Petition No. 3 of 2020 govern the situation. Headnotes† Insolvency and Bankruptcy Code, 2016 – ss.7, 238A – Limitation Act, 1963 – s.18 – Effect

Subjects

valid acknowledgement of debtbalance sheet acknowledgementSection 7 IBC applicationsection 18 Limitation Actlimitation period extensionCOVID‑19 limitation ordersNCLTNCLATremittance to adjudicating authority

Judgment

[2025] 7 S.C.R. 1823 : 2025 INSC 911

IL & FS Financial Services Limited
v.
Adhunik Meghalaya Steels Private Limited
(Civil Appeal No. 5787 of 2025)
30 July 2025
[Manoj Misra and K.V. Viswanathan,* JJ.]

Issue for Consideration
Whether the Tribunals below were justified in holding that the s.7
application under the IBC filed by the appellant on 15.01.2024 was
barred by time; does the entry in the Balance Sheet of F.Y. 2019-20
constitute a valid acknowledgement of debt by the respondent
u/s.18, Limitation Act, 1963; will Para 5(I) or 5(III) of the order
dated 10.01.2022 passed by the Supreme Court in Suo Moto Writ
Petition No. 3 of 2020 govern the situation.

Headnotes†
Insolvency and Bankruptcy Code, 2016 – ss.7, 238A – Limitation
Act, 1963 – s.18 – Effect of acknowledgment in writing –
Loan Agreement entered into between the appellant and
respondent – Respondent’s account was declared as a non-
performing asset on 01.03.2018 – Application u/s.7, IBC filed
by the appellant on 15.01.2024 setting out a default amount of
Rs. 55 crores – Appellant relied on the entries in the Balance
Sheet of F.Y. 2019-20 signed by the Directors on 12.08.2020
to aver that it constituted an acknowledgment of debt – NCLT
held that there was no acknowledgement of liability in the
Balance Sheet of F.Y. 2019-20 since the name of the financial
creditor-appellant did not appear in the Balance Sheet; s.7
application was held to be barred by limitation – Appeal filed
by appellant, dismissed by NCLAT – Challenge to:
Held: Judgments of NCLAT and NCLT set aside – Whether a certain
document in a given case constitutes a valid acknowledgement
would depend on the facts and circumstances of each case – In
the present case, it is not disputed that entries in Balance Sheets
could constitute a valid acknowledgement – Further, the company’s
Balance Sheet is prepared in the statutory format as per schedule

* Author
1824 [2025] 7 S.C.R.

Supreme Court Reports

3 of the Companies Act which did not provide for giving the specific
name of every secured or unsecured creditor – On facts, balance
Sheet of F.Y. 2019- 20, and other admitted documents, including
the financial statements of the previous years, clearly constitutes
a valid acknowledgment of a subsisting liability and indicated
the existence of a jural relationship and an admission as to the
existence of such relationship – The Balance Sheet of F.Y. 2019-20
was admittedly signed by the board of directors on 12.08.2020 –
This date was within the subsisting period of limitation for the
reason that taking 01.03.2018 as the commencement of limitation,
limitation ordinarily would have continued till 28.02.2021 – Since
an acknowledgment came into effect on 12.08.2020, limitation
would have stood extended till 11.08.2023 – However, Covid-19
intervened resulting in Supreme Court passing a series of orders
extending the period of limitation – The relevant order applicable
in the instant case is the order of 10.01.2022 – Sub-Para 1 of
Para 5 thereof would apply and the entire period from 15.03.2020
to 28.02.2022 would stand excluded thus, the limitation would,
reckoning the acknowledgment of 12.08.2020, commence on
01.03.2022 and continue till 28.02.2025 – Since the application was
filed on 15.01.2024 the same is within time – Limitation, in view of
the acknowledgment, having commenced only on 12.08.2020, the
question of limitation expiring between 15.03.2020 and 28.02.2022
cannot arise – Hence, Para 5(III) of the order of the Supreme Court
dated 10.01.2022, has no application to the facts of the instant
case – Matter is remitted to the adjudicating authority to proceed
with and decide in accordance with law, treating the application
u/s.7 of the IBC, filed by the appellant, as one filed within limitation.
[Paras 33, 38, 39, 41, 44, 46, 47]
Limitation Act, 1963 – s.18 – Effect of acknowledgment in
writing – ‘A valid acknowledgment’ – What constitutes –
Discussed. [Paras 26, 27]

Case Law Cited
Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal and Another
[2021] 3 SCR 524 : (2021) 6 SCC 366; Khan Bahadur Shapoor
Fredoom Mazda v. Durga Prasad Chamaria and Others, 1961
SCC OnLine SC 147; Lakshmirattan Cotton Mills Co. Ltd. and
M/s Behari Lal Ram Charan v. Aluminium Corporation of India
Ltd. [1971] 3 SCR 840 : (1971) 1 SCC 67; Vidyasagar Prasad v.
[2025] 7 S.C.R. 1825

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

UCO Bank and Anr., 2024 SCC OnLine SC 2993; OPG Power
Generation Private Ltd. v. Enexio Power Cooling Solutions
(India) Private Ltd. And Anr. [2024] 9 SCR 490 : (2025) 2 SCC
417 – relied on.
Gaurav Hargovindbhai Dave v. Asset Reconstruction Co. (India)
Ltd. and Anr. [2019] 13 SCR 224 : (2019) 10 SCC 572; B.K.
Educational Services (P) Ltd. v. Parag Gupta & Associates [2018]
12 SCR 794 : (2019) 11 SCC 633; Jignesh Shah and Anr. v. Union
of India and Anr. [2019] 12 SCR 678 : (2019) 10 SCC 750; Laxmi
Pat Surana v. Union Bank of India [2021] 2 SCR 924 : (2021) 8
SCC 48; Rajendra Narottamdas Sheth and Anr. v. Chandra Prakash
Jain and Anr. [2021] 7 SCR 838 : (2022) 5 SCC 600; Dena Bank
(Now Bank of Baroda) v. C. Shivakumar Reddy and Anr. [2021]
8 SCR 1061 : (2021) 10 SCC 330 – referred to.

List of Acts
Insolvency and Bankruptcy Code, 2016; Limitation Act, 1963;
Companies Act.

List of Keywords
Valid acknowledgement of debt; Entry in the Balance Sheet
constituted a valid acknowledgement of debt; Section 7,
Insolvency and Bankruptcy Code, 2016 (IBC) application;
Section 7, IBC application not barred by time/limitation; Section
18, Limitation Act, 1963; Effect of acknowledgment in writing;
Name of the financial creditor not in the Balance Sheet;
Specific name of every secured or unsecured creditor not to be
given in Balance Sheet; Financial statements of the previous
years; Valid acknowledgment of a subsisting liability; Jural
relationship; Admission as to the existence of a jural relationship;
Acknowledgment; Acknowledgement of liability; Barred by time;
Barred by limitation; Benefit of the extension orders; Period of
limitation; Commencement of limitation; Extending the period of
limitation; Expiration of limitation; Acknowledged the liability and
its default; Balance Sheet; Term loan; Pledge; Non-Performing
Asset; Unable to meet debt obligations; Default; Loan facility;
Proceeds from borrowings; Cash flow statement; Repayment of
existing borrowings; Date of signing the Balance Sheet; Date of
uploading the Balance Sheet.
1826 [2025] 7 S.C.R.

Supreme Court Reports

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5787
of 2025
From the Judgment and Order dated 25.03.2025 of the National
Company Law Appellate Tribunal in CAAT(I) No. 1379 of 2024

Appearances for Parties
Advs. for the Appellant:
Ritin Rai, Sr. Adv., Raunak Dhillon, Ms. Aishwarya Gupta, Ms.
Niharika Shukla, Jeezan Pakhliwal, M/S. Cyril Amarchand
Mangaldas Aor.
Advs. for the Respondent:
Ramji Srinivasan, Sr. Adv., Pranav Sachdeva, D.N. Sharma, Nilay
Sengupta, Arjun Bhatia, Ms. Shefali Munde.

Judgment / Order of the Supreme Court

Judgment

K.V. Viswanathan, J.

1. The short question that arises for consideration is whether the
National Company Law Appellate Tribunal (for short ‘NCLAT’) and
the National Company Law Tribunal (for short ‘NCLT’) were justified
in dismissing the Section 7 application filed by the appellant against
the respondent under the Insolvency and Bankruptcy Code, 2016
(for short ‘IBC’), on the ground that the same was being barred by
limitation.

BRIEF FACTS: -
2. According to the appellant, on 27.02.2015, a Loan Agreement was
entered into between the appellant and the respondent for a term
loan facility of Rs. 30 crores. The loan was secured, inter alia, by
way of a pledge of 8,10,804 shares of Adhunik Metaliks Ltd. in favour
of the appellant by virtue of a Pledge Agreement dated 27.02.2015.
3. On 01.03.2018, the account of the respondent was admittedly
declared as a Non-Performing Asset (NPA) as the respondent was
unable to meet its debt obligations.
[2025] 7 S.C.R. 1827

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

4. In the Section 7 IBC application filed by the appellant on 15.01.2024,
a default amount of Rs. 55,45,97,395/- was set out and it was
mentioned therein that the date of default was 01.03.2018; that it
was duly recorded in the information utility as annexed; that a recall
facility notice was issued on 10.08.2018 for which there was no
response; that ever since the loan facility was extended in February
2015, the respondent acknowledged the liability and its default in
all its year to year audited financial statements from 2015 till the
latest available Balance Sheet for the financial year 2019-20; that
the financials were duly filed by the respondent with the Registrar
of Companies; that the Balance Sheet of F.Y. 2019-20 was duly
approved by the Board of Directors and the date of signing of the said
financial statement was 12.08.2020; the Balance Sheet of 2019-20
was made available to the public on 14.02.2021 and it was averred
that the Section 7 application in view of the acknowledgement was
filed on time. Reliance was also placed on the order dated 10.01.2022
of this Court in Suo Moto Writ Petition (C) No. 3 of 2020 in In Re :
Cognizance for Extension of Limitation (read with earlier orders dated
23.03.2020, 08.03.2021 and 27.04.2021). It was contended that the
period between 15.03.2020 till 28.02.2022 ought to be excluded.
5. In short, the stand of the appellant was that if 12.08.2020, the date
on which the Balance Sheet of 2019-20 was signed, is taken as
the date of acknowledgment (which was within the 3 years from
01.03.2018) limitation would expire only on 11.08.2023. However, in
view of the benefit of the extension orders passed by this Court on
10.01.2022, the entire period up to 28.02.2022 ought to be excluded
and if that were so limitation was available till 27.02.2025. Hence,
the Section 7 application filed on 15.01.2024 was well within time.
6. It will be necessary to advert to the Balance Sheet as annexed for
the years 2015-16, 2016-17, 2017-18 and 2019-20. The entire case
revolves around the question as to whether at all there was a valid
acknowledgment of the debt under Section 18 of the Limitation Act
1963, in view of the entries in the Balance Sheet of F.Y. 2019-20.
7. In the Balance Sheet of 2015-16 under the head “Textual Information
(14) - Disclosure of sub classification and notes on liabilities and
assets explanatory (Text Block)”, it was shown as follows: -

From IL & FS Financial Services Ltd. 24,57,40,400 24,57,40,400
1828 [2025] 7 S.C.R.

Supreme Court Reports

Under borrowings for 2015-16, the amount was shown as Rs.
24,57,40,400/- and the following endorsement occurred in the table: -

“Secured by Pledge of 8,10,804 shares of Adhunik Metaliks
Limited”.
8. Similarly, in the Balance Sheet of F.Y. 2016-17, under Textual
Information (16), the above information and the identical amount is
reflected. Here again, in the table under borrowings, the identical
amount is shown with the following endorsement under nature of
security. “Secured by Pledge of 8,10,804 shares of Adhunik Metaliks
Limited.”
9. The following table occurs in the financial statement, for the F.Y.
2017-18.
Classification of borrowings [Table]

Classification based on Long Term (Member)
time period (Axis)

Classification of Term Loans from others Rupee term loans from
Borrowings(Axis) [Member] others [Member]

Subclassification of Secured Borrowings Secured Borrowings
borrowings[Axis] [Member] [Member]

01/04/2017 01/04/2016 01/04/2017 01/04/2016
to to to to
31/03/2018 31/03/2017 31/03/2018 31/03/2017

Borrowings notes [Abstract]

Details of borrowings
[Abstract]

Details of borrowings
[LineItems]

Borrowings 23,68,91,933 24,57,40,400 23,68,91,933 24,57,40,400

Nature of Security
[Abstract]

Nature of Security Secured Secured Secured Secured
by Pledge by Pledge by Pledge by Pledge
of 8,10,804 of 8,10,804 of 8,10,804 of 8,10,804
shares of shares of shares of shares of
Adhunik Adhunik Adhunik Adhunik
Metaliks Metaliks Metaliks Metaliks
Ltd. Ltd. Ltd. Ltd.
[2025] 7 S.C.R. 1829

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

Details on Loans
guaranteed [Abstract]

Aggregate amount of loans 0 0 0 0
guaranteed by directors

Aggregate amount of loans 23,68,91,933 24,57,40,400 23,68,91,933 24,57,40,400
guaranteed by others

Details on defaults on
borrowings [Abstract]

Outstanding amount of 0 0 0 0
continuing default principal

Outstanding amount of 0 0 0 0
continuing default interest

The above table under the column - Secured borrowings for both
2016-17 and 2017-18 shows that the amount of borrowings secured
by the same pledge of shares has marginally come down for the
year 2017-18.
10. The Balance Sheet of 2018-19 is not on record. However, from the
Balance Sheet of F.Y. 2019-20, the figure under the head borrowings
for the F.Y. 2018-19 is also discernible. The table appended to the
Balance Sheet of F.Y. 2019-20 is as follows:-

Classification of borrowings (Table)

Unless specified otherwise, all monetary
values are in INR

Classification based on time Long Term [Member]
Period [Axis]

Classification of borrowings Borrowings [Member]
[Axis]

Sub Classification of borrowings Secured Borrowings Unsecured Borrowings
[Axis] [Member] [Member]

01/04/2019 01/04/2018
to to 31/03/2020 31/03/2019
31/03/2020 31/03/2019

Borrowings notes [Abstract]

Details of borrowings [Abstract]

Details of borrowings [Line
Items]
1830 [2025] 7 S.C.R.

Supreme Court Reports

Borrowings 24,41,22,835 24,41,22,835 2,95,84,659 3,24,84,659

Nature of Security [Abstracts]

Nature of Security

Details on defaults on
borrowings [Abstract]

Outstanding amount of 0 0 0 0
continuing default principal

Outstanding amount of 0 0 0 0
continuing default Interest

It will be clear that under the heading “Secured Borrowings” the
amount shown for 2018-19 and 2019-20 is the same.
11. It is, no doubt, true that there was no mention of the name of the
appellant or any reference to the pledge of shares. Along with the
Balance Sheet, as required under the Indian Accounting Standards
(Ind AS) 7, a cash flow statement, (indirect) is also appended. The
cash flow statement, (indirect) is set out hereunder: -
Cash flow Statement, indirect

01/04/2019 01/04/2018 31/03/2018
to to
31/03/2020 31/03/2019

Statement of cash flows [Abstract]

Whether cash flow statement is applicable Yes Yes
on company

Cash flows from used in operating activities
[Abstract]

Profit before extraordinary items and tax -9,52,02,961 -29,34,997

Adjustments for reconcile profit (loss)
[Abstract]

Adjustments to profit (loss) [Abstract]

Adjustments for depreciation and 6,45,289 6,80,044
amortisation expense

Total adjustments to profit (loss) 6,45,289 6,80,044

Adjustments for working capital [Abstract]

Adjustments for decrease (increase) in 0 20,77,089
trade receivables
[2025] 7 S.C.R. 1831

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

Adjustments for increase (decrease) in -38,02,634 (A)
other current liabilities -11,60,73,898

Total adjustments for working capital -38,02,634 -11,39,96,809

Total adjustments for reconcile profit (loss) -31,57,345 -11,33,16,765

Net cash flows from (used in) operations -9,83,60,306 -11,62,51,762

Net cash flows from (used in) operating -9,83,60,306 -11,62,51,762
activities before extraordinary items

Net cash flows from (used in) operating -9,83,60,306 -11,62,51,762
activities

Cash flows from used in investing activities
[Abstract]

Cash payment for investment in partnership 0 -50,57,854
firm or association of persons or limited
liability partnerships

Cash advances and loans made to other 8,23,30,679 11,34,73,820
parties

Other inflows (outflows) of cash -1,97,29,900 0

Net cash flows from (used in) investing -10,20,60,579 -10,84,15,966
activities before extraordinary items

Net cash flows from (used in) investing -10,20,60,579 -10,84,15,966
activities

Cash flows from used in financing
activities [Abstract]

Proceeds from borrowings 0 72,30,902

Net Cash flows from (used in) financing 0 72,30,902
activities before extraordinary items

Net Cash flows from (used in) financing 0 72,30,902
activities

Net increase (decrease) in cash and cash -20,04,20,885 -21,74,36,826
equivalents before effect of exchange rate
changes

Net increase (decrease) in cash and cash -20,04,20,885 -21,74,36,826
equivalents

Cash and cash equivalents cash flow 40,63,021 3,62,748 11,62,151
statement at end of period

(Emphasis supplied)

12. The appellant has a case that the amount shown as secured
borrowing is Rs 24,41,22,835/- since to the original amount of
1832 [2025] 7 S.C.R.

Supreme Court Reports

Rs. 23,68,91,933/- as reflected in the 2017-18 Balance Sheet, a sum
of Rs. 72,30,902/- has been added as proceeds from borrowings
raised by the respondent in F.Y. 2018-19. According to the appellant,
if Rs. 72,30,902/- is added to Rs. 23,68,91,933/- a figure of
Rs. 24,41,22,835/- would be arrived at. The appellant further argues
that, as is clear from the cash flow statement, no part of cash flow
proceeds was utilized in repayment of existing borrowings under the
financial activities, since the amount under the head “Cash flows from
(used in) financial activities” is Nil. According to the appellant, this
lends support to the fact that the debt owed by the respondent to the
appellant in the previous years remained unpaid even in 2019-20.
It is by this process of reasoning that the appellant contended that
there was clear acknowledgement of debt and the jural relationship
in the Balance Sheet of F.Y. 2019-20.
13. The respondent filed a reply affidavit to the Section 7 application. It
was contended that the Section 7 application was barred by limitation.
Para 10, 23 and 24 of the reply are reproduced hereunder: -
“10. Admittedly date of default, as per the own averment
in the said application is 1st March 2018. Admittedly the
Financial Creditor had declared the account of the CD as
non performing asset on 1st March 2018 and had also
issued Recall facilities Notice to the CD on 10th August
2018. Hence, the Limitation period of 3 (three) years under
the Limitation Act 1963 to initiate any action against the
CD from 10th August 2018 has already been expired on
9th August 2021. Further, in terms of the order dated 10th
January 2022, passed by the Hon'ble Supreme Court in
Suo Moto Writ Petition (C) No: 3 of 2020, the limitation
period of 90 days after 28.02.2022 also expired on 29th
May 2022. Therefore, filing of the present Application at
this belated stage for claiming a debt which is time barred
is non est in law and is only arm twisting tactic to extort
money.
23. Thus I deny each and every allegations made, in the
said Application and not accepting any of the allegations
made in contradiction of the aforesaid averments and
documents submitted herein. There is no live claim of the
Financial Creditor, as on date. I am denying any debts in
favour of the Financial Creditor.
[2025] 7 S.C.R. 1833

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

24. Further, I state that the limitation for filing of the present
application must be considered from the date of default,
i.e, 1st March 2018, which clearly makes the claim of FC
hopelessly time barred and the same cannot be revived
at this later stage. (Sic) deny that Balance Sheet of CD
can be treated as acknowledgment of debt, as wrongfully
alleged or at all.”
14. For the sake of completion of facts, it may also be mentioned
that further in the record of financial information with the national
e-governance service, submitted by the appellant, as on 04.10.2023,
against the sanctioned limit of Rs.30 crores to the respondent the
amount due is reflected as Rs.54,03,08,748.54. On 15.01.2024
when the Section 7 application was filed, the outstanding amount
was quantified as Rs.55,45,97,395/-.
15. The NCLT, Guwahati Bench held that there was no acknowledgement
of liability in the Balance Sheet of F.Y. 2019-20, since the name of
the financial creditor did not appear in the Balance Sheet. It also
held that the application under Section 7 filed by the appellant was
barred by limitation, since, according to the NCLT, the application
ought to have been filed on or before 30.05.2022 applying Para 5(III)
of the order of this Court dated 10.01.2022 extending the period of
limitation.
16. The appellant aggrieved filed an appeal before the NCLAT. The NCLAT
held that as far as the Balance Sheet of F.Y. 2017-18 was concerned,
it was signed on 02.09.2018 and the three-year period would have
ended on 01.09.2021. According to the NCLAT, limitation would have
extended in view of the order of this Court dated 10.01.2022. According
to the NCLAT, limitation would stand extended under Para 5(III) up
to 30.05.2022. The NCLAT further held that even if the entry in the
Balance Sheet of F.Y. 2019-20 is taken, since the said Balance Sheet
was signed on 12.08.2020, limitation would have extended only up to
30.05.2022. Thereafter, the NCLAT examined the argument whether
the date of signing the Balance Sheet would be the relevant date
or whether the date of uploading the Balance Sheet on the website
of the Ministry of Corporate Affairs would be the relevant date for
commencement of time. On this issue, it was held that the date of
signing the Balance Sheet would be the relevant date and, on that
basis, concluded that the Section 7 petition ought to have been filed
1834 [2025] 7 S.C.R.

Supreme Court Reports

on or before 30.05.2022. Holding so, it dismissed the appeal of the
appellant. Aggrieved, the appellant is before us in appeal.

CONTENTIONS OF LEARNED COUNSEL: -
17. We have heard Mr. Ritin Rai, learned Senior Counsel for the appellant
and Mr. Ramji Srinivasan, learned Senior Counsel, for the respondent.
We have also perused the records of the case.
18. Mr. Ritin Rai, learned Senior Advocate, after adverting to the facts
and the documents submitted that there was a clear acknowledgment
of the debt within the meaning of Section 18 of the Limitation Act in
the Balance Sheet of F.Y. 2019-20. According to the learned Senior
Counsel, even taking 12.08.2020, the date of signing of the financial
statements of F.Y. 2019-20 as the commencement date, limitation
was available in the ordinary course till 11.08.2023. According to the
learned Senior Counsel, under the extension of limitation orders of
this Court dated 10.01.2022, Para 5(1) would apply and the whole
of the period from 15.03.2020 to 28.02.2022 would stand excluded.
According to the learned Senior Counsel, in which case, time was
available till 27.02.2025 to file the Section 7 application and the
Section 7 application has been filed on 15.01.2024, well within time.
The learned Senior Counsel relied on certain judgments of this Court
in support of his propositions.
19. Mr. Ramji Srinivasan, learned Senior Counsel, submitted that in the
Balance Sheet of F.Y. 2019-20 the name of the appellant is nowhere
mentioned and thus it cannot be construed as an acknowledgment
of any jural relationship between the appellant and the respondent.
It is also argued that the scope of enquiry under Section 7 of IBC is
extremely limited and the adjudicating authority has to only see the
existence of financial debt, acknowledgement, if any, and existence
of default and also whether the procedural requirements have been
fulfilled. It is argued that there is mismatch between the debt claimed
in the Section 7 application and in the Balance Sheet of F.Y. 2019-20
which was relied upon. Learned Senior Counsel contends that there
was no clear acknowledgment as neither the specific loan amount nor
the loan agreement has been mentioned. Learned Senior Counsel
contends that the name of the appellant has not been referred to.
Learned Senior Counsel cited certain judgments, in support of his
contentions, while defending the orders of the Tribunals below.
[2025] 7 S.C.R. 1835

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

20. Distinguishing the judgment in Vidyasagar Prasad v. UCO Bank
and Anr., 2024 SCC OnLine SC 2993 cited by the appellant, learned
Senior Counsel contended that the said judgment was passed in the
facts of that case and does not lay down any law of general application.
Further, it was argued that in Vidyasagar Prasad (supra) there was
an OTS proposal given which was construed as an acknowledgement
in that case. Learned Senior Counsel contended that the Tribunals
below have correctly applied Para 5(III) of the order of this Court
dated 10.01.2022 in Suo Moto Writ Petition (C) No. 3 of 2020 and,
as such, the limitation for filing the application expired on 30.05.2022,
and the application having been filed on 05.01.2024, it has rightly
been held to be barred by limitation.

QUESTION FOR CONSIDERATION: -
21. The principal question, as highlighted earlier, that arises for
consideration is whether the Tribunals below were justified in holding
that the Section 7 application under the IBC filed by the appellant on
15.01.2024 was barred by time? In answering the above question,
two incidental questions do arise; (i) Does the entry in the Balance
Sheet of F.Y. 2019-20 constitute a valid acknowledgement of debt by
the respondent under Section 18 of the Limitation Act, 1963 ? (ii) If
the answer to the above question is in the affirmative, will Para 5(I)
or 5(III) of the order dated 10.01.2022 passed by this Court in Suo
Moto Writ Petition No. 3 of 2020 govern the situation?
22. It is now well settled in view of Section 238A of the IBC that the
Limitation Act, 1963 shall, as far as may be, apply to the proceedings
under the Code. It is also well settled that Article 137 of the first
schedule to the Limitation Act providing a period of three years from
the date when the right to apply accrues will govern the situation.
[Dena Bank (Now Bank of Baroda) v. C. Shivakumar Reddy
and Anr., (2021) 10 SCC 330 following Gaurav Hargovindbhai
Dave v. Asset Reconstruction Co. (India) Ltd. and Anr., (2019)
10 SCC 572, B.K. Educational Services (P) Ltd. v. Parag Gupta
& Associates, (2019) 11 SCC 633, and Jignesh Shah and Anr. v.
Union of India and Anr., (2019) 10 SCC 750].
23. In this case, it is not disputed that the account of the respondent
was declared as a non-performing asset on 01.03.2018. However,
the appellant is relying on the entries adverted to hereinabove in the
1836 [2025] 7 S.C.R.

Supreme Court Reports

Balance Sheet of F.Y. 2019-20 signed by the Directors on 12.08.2020.
Does the entry adverted to hereinabove in the Balance Sheet of F.Y.
2019-20 constitute an acknowledgment of debt, as contemplated
under Section 18 of the Limitation Act, is the primary question that
arises for consideration?
24. Section 18 of the Limitation Act reads as under: -
“18. Effect of acknowledgment in writing.—(1) Where,
before the expiration of the prescribed period for a suit
or application in respect of any property or right, an
acknowledgment 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, or by any person
through whom he derives his title or liability, a fresh period
of limitation shall be computed from the time when the
acknowledgment was so signed.
(2) Where the writing containing the acknowledgment is
undated, oral evidence may be given of the time when
it was signed; but subject to the provisions of the Indian
Evidence Act, 1872 (1 of 1872), oral evidence of its contents
shall not be received.
Explanation.—For the purposes of this section,—
(a) an acknowledgment may be sufficient though it omits
to specify the exact nature of the property or right, or
avers that the time for payment, delivery, performance or
enjoyment has not yet come or is accompanied by refusal
to pay, deliver, perform or permit to enjoy, or is coupled
with a claim to set off, or is addressed to a person other
than a person entitled to the property or right,
(b) the word “signed” means signed either personally or
by an agent duly authorised in this behalf, and
(c) an application for the execution of a decree or order
shall not be deemed to be an application in respect of
any property or right.”
25. The question as to what constitutes a valid acknowledgment has
come up for consideration before this Court both under the Limitation
Act, 1908 and the Limitation Act, 1963.
[2025] 7 S.C.R. 1837

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

26. The earliest pronouncement of this Court was in Khan Bahadur
Shapoor Fredoom Mazda v. Durga Prasad Chamaria and Others,
1961 SCC OnLine SC 147. Justice P. B. Gajendragadkar (as His
Lordship then was) while construing Section 19 of the Limitation
Act, 1908 which is similar to Section 18 of the Limitation Act, 1963
held as under: -
“6. It is thus clear that acknowledgment as prescribed
by Section 19 merely renews debt; it does not create
a new right of action. It is a mere acknowledgment
of the liability in respect of the right in question; it
need not be accompanied by a promise to pay either
expressly or even by implication. The statement on
which a plea of acknowledgment is based must
relate to a present subsisting liability though the
exact nature or the specific character of the said
liability may not be indicated in words. Words used
in the acknowledgment must, however, indicate the
existence of jural relationship between the parties
such as that of debtor and creditor, and it must
appear that the statement is made with the intention
to admit such jural relationship. Such intention can
be inferred by implication from the nature of the
admission, and need not be expressed in words.
If the statement is fairly clear then the intention to
admit jural relationship may be implied from it. The
admission in question need not be express but must
be made in circumstances and in words from which
the court can reasonably infer that the person making
the admission intended to refer to a subsisting liability
as at the date of the statement. In construing words
used in the statements made in writing on which a
plea of acknowledgment rests oral evidence has been
expressly excluded but surrounding circumstances
can always be considered. Stated generally courts
lean in favour of a liberal construction of such
statements though it does not mean that where no
admission is made one should be inferred, or where
a statement was made clearly without intending to
admit the existence of jural relationship such intention
1838 [2025] 7 S.C.R.

Supreme Court Reports

could be fastened on the maker of the statement
by an involved or far-fetched process of reasoning.
Broadly stated that is the effect of the relevant
provisions contained in Section 19, and there is really
no substantial difference between the parties as to
the true legal position in this matter.”
(Emphasis supplied)

27. It will be clear from the above passage that an acknowledgment
of debt merely renews the debt and does not create a new right of
action. It is further essential that the acknowledgment must relate to
a subsisting liability and must indicate the jural relationship between
the parties such as that of debtor and creditor, and it must appear
that the statement is made with the intention to admit such jural
relationship. It was also held that such intention can be inferred
by implication from the nature of the admission and need not be
expressed in words. It has also been held that in construing the words
used in the statements, surrounding circumstances can always be
considered and that Courts lean in favour of a liberal construction of
such statements, though intention cannot be fastened by an involved
or far-fetched process of reasoning.
28. After setting out the law, the Court in Khan Bahadur Shapoor
(supra) took up for consideration the question whether the letter of
05.03.1932 written by respondent no. 2 mortgagor in that case, to
the respondent no. 1 mortgagee construed an acknowledgement.
While construing the said letter of 05.03.1932, the Court found it
appropriate to read it in the context of an earlier letter of 26.11.1931
written by R-2 mortgagor to R-1 Mortgagee and used the earlier
letter to construe the letter of 05.03.1932 and particularly the phrase
“interested” mentioned in the letter of 05.03.1932. This Court, while
construing the letter of 05.03.1932 as an acknowledgment in favor
of the Mortgagee respondent no. 1, held as under: -
“12. It is now necessary to consider the document on which
the plea of acknowledgment is based. This document was
written on 5-3-1932. It, however, appears that on 26-11-
1931, another letter had been written by Respondent 2
to Respondent 1; and it would be relevant to consider
this letter before construing the principal document.
[2025] 7 S.C.R. 1839

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

In this letter Respondent 2 had told Respondent 1 that the
Chandni Bazar property was being sold the next morning
at the Registrar's sale on behalf of the first mortgagee and
that the matter was urgent, otherwise the property would
be sacrificed. It appears that the said property was subject
to the first prior mortgage and Respondent 2 appealed
to Respondent 1 to save the said threatened sale at the
instance of the prior mortgagee. It is common ground that
Respondent 1 paid to Respondent 2 Rs 2500 on 27-11-
1931, and the threatened sale was avoided. This fact is
relevant in construing the subsequent letter.
13. The said property was again advertised for sale on 11-
3-1932, and it was about this sale that the letter in question
came to be written by Respondent 2 to Respondent 1 on
March 1932. This is how the letter reads:
“My dear Durga prosad,
Chandni Bazar is again advertised for sale on Friday the
11th instant. I am afraid it will go very cheap. I had a private
offer of Rs 2,75,000 a few days ago but as soon as they
heard it was advertised by the Registrar they withdrew.
As you are interested why do not you take up the whole.
There is only about 70,000 due to the mortgagee — a
payment of 10,000 will stop the sale.
Yours sincerely,
sd-
J.C. Galstaun
14. Does this letter amount to an acknowledgment of
Respondent 1's right as a mortgagee? That is the question
which calls for our decision. The argument in favour of
Respondent 1's case is that when the document refers to
Respondent 1 as being interested it refers to his interest
as a puisne mortgagee and when it asks Respondent 1
to take up the whole it invites him to acquire the whole
of the mortgage interest including the interest of the prior
mortgagee at whose instance the property was put up
for sale. On the other hand, the appellant's contention is
1840 [2025] 7 S.C.R.

Supreme Court Reports

that the word “interest” is vague and indefinite and that
Respondent 1 may have been interested in the property
in more ways than one……”
Thereafter, this Court concluded as under: -
15. In construing this letter it would be necessary
to bear in mind the general tenor of the letter
considered as a whole. It is obvious that Respondent 2
was requesting Respondent 1 to avoid the sale as he did
on an earlier occasion in November, 1931. The previous
incident shows that when the property was put to sale by
the first mortgagee the mortgagor rushed to the second
mortgagee to stop the sale, and this obviously was with
a view to persuade the second mortgagee to prevent the
sale which would otherwise affect his own interest as such
mortgagee. The theory that the letter refers to the interest
of Respondent 1 as an intending lessee or purchaser is
far-fetched, if not absolutely fantastic. Negotiations in
that behalf had been unsuccessful in 1926 and for nearly
five years thereafter nothing was heard about the said
proposal. In the context it seems to us impossible to
escape the conclusion that the interest mentioned in
the letter is the interest of Respondent 1 as a puisne
mortgagee and when the said letter appeals to him
to take up the whole it can mean nothing other than
the whole of the mortgagee's interest including
the interest of the prior mortgagee. An appeal to
Respondent 1 to stop the sale on payment of Rs 10,000
as he in fact had stopped a similar sale in November 1931
is an appeal to ensure his own interest in the security
which should be kept intact and that can be achieved
only if the threatened sale is averted. We have carefully
considered the arguments urged before us by the learned
Attorney-General but we see no reason to differ from the
conclusion reached by the court of appeal below that this
letter amounts to an acknowledgment. The tenor of the
letter shows that it is addressed by Respondent 2
as mortgagor to Respondent 1 as puisne mortgagee,
it reminds him of his interest as such mortgagee in
the property which would be put up for sale by the
[2025] 7 S.C.R. 1841

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

first mortgagee, and appeals to him to assist the
avoidance of sale, and thus acquire the whole of the
mortgagee's interest. It is common ground that no other
relationship existed between the parties at the date of
this letter, and the only subsisting relationship was that
of mortgagee and mortgagor. This letter acknowledges
the existence of the said jural relationship and amounts
to a clear acknowledgment under Section 19 of the
Limitation Act. It is conceded that if this letter is held to
be an acknowledgment there can be no other challenge
against the decree under appeal.
(Emphasis supplied)

29. What is significant about this judgment is that this Court construed
the primary document of 05.03.1932 in the context of an earlier letter
of 26.11.1931 and thereby considered the surrounding circumstances
and considered the general tenor of the letter keeping in mind the
context.
30. In Lakshmirattan Cotton Mills Co. Ltd. and M/s Behari Lal Ram
Charan v. Aluminium Corporation of India Ltd., (1971) 1 SCC 67,
this Court followed the judgment in Khan Bahadur Shapoor (supra)
and reiterated the ratio laid down in the said judgment. In the said
case, the appellant claimed that the letter dated 16.04.1946 claimed
to be addressed on behalf of the respondent therein constituted
an acknowledgment of liability which ensured that the suit was
within time. The Trial Court found for the appellants but the High
Court held that the letter of 16.04.1946 was “merely explanatory”
and did not amount to an acknowledgement. On appeal to this
Court, the question whether the letter of 16.04.1946 constituted a
valid acknowledgement was examined including the question as to
whether the signatories had the authority to bind the respondent.
In examining this question, this Court as a preface to the enquiry
set out as follows: -
“12. Before we proceed to inquire into the correctness
or otherwise of the High Court's view in regard to the
letter (Exh. 1), it would be necessary to examine the
correspondence which previously ensued between
the parties and the surrounding circumstances which
led to that letter.”
1842 [2025] 7 S.C.R.

Supreme Court Reports

Thereafter, after examining the correspondence, this Court concluded
as under in Para 18:-
“18. It must follow from these facts that there was a
subsisting account in the name of the appellant-company
in the books of the corporation in which interest on the
balance shown therein from time to time was being
credited and in which amounts in respect of items
passed during the course of reconciliation were also
being credited. The statement in the letter (Exh. 1) that
“after all the above adjustments the position will be
as per statement attached”, that is to say, that there
was a balance of Rs 1,07,447-13-11 due and payable
to the appellant-company, must clearly amount to an
acknowledgment within the meaning of Section 19(1).
In our view if the letter (Exh. 1) were to be looked
at in the background of the controversy between
the parties, which controversy was as aforesaid,
limited to the question as to the correctness of the
amount claimed by the appellant-company, as also the
correspondence which ensued in regard to it, it would
be impossible to say that the letter (Ex. 1) and the
statement of account enclosed therewith were merely
explanatory and did not amount to an admission of
the jural relationship of debtor and creditor and of
the liability to pay the amount found due at the foot
of the account on finalisation.”
(Emphasis supplied)

31. Thereafter, the other objections with regard to the conditional
nature of the offer and the authority of Mr. Subramanyam to
make the acknowledgements were examined and it was ruled in
favor of the appellant. The letter of 16.04.1946 was held to be an
acknowledgement. The appeals of the appellants were allowed and
the matter remitted to the High Court to examine the other questions.
32. The facts of the above two precedents are relevant only to repel an
express argument raised by the respondent herein that the Balance
Sheet of F.Y. 2019-20 has to be read as a standalone document
and the other documents cannot be looked at to construe the said
document.
[2025] 7 S.C.R. 1843

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

33. It was not disputed before us that entries in Balance Sheets could
constitute a valid acknowledgement and in fact it could not have
been disputed, in view of the categoric pronouncement of this Court
in Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal and
Another, (2021) 6 SCC 366. The only dispute was whether the entry
in F.Y. 2019-20 did or did not constitute a valid acknowledgement.
Among the grounds canvassed was the aspect that the name of the
appellant was not mentioned in the Balance Sheet of F.Y. 2019-20.
It is worthwhile to notice certain observations from the judgement in
Bishal Jaiswal (supra) as it does have a bearing for the disposal of
the present matter. This Court in Bishal Jaiswal (supra) held that
entries in Balance Sheet had to be examined on a case-by-case
basis to examine whether an acknowledgment of liability exists. Para
35 of Bishal Jaiswal (supra) reads as under: -
“35. A perusal of the aforesaid sections would show
that there is no doubt that the filing of a balance sheet
in accordance with the provisions of the Companies
Act is mandatory, any transgression of the same being
punishable by law. However, what is of importance is
that notes that are annexed to or forming part of such
financial statements are expressly recognised by Section
134(7). Equally, the auditor's report may also enter caveats
with regard to acknowledgments made in the books of
accounts including the balance sheet. A perusal of the
aforesaid would show that the statement of law contained
in Bengal Silk Mills [Bengal Silk Mills Co. v. Ismail Golam
Hossain Ariff, 1961 SCC OnLine Cal 128 : AIR 1962
Cal 115] , that there is a compulsion in law to prepare a
balance sheet but no compulsion to make any particular
admission, is correct in law as it would depend on the
facts of each case as to whether an entry made in a
balance sheet qua any particular creditor is unequivocal
or has been entered into with caveats, which then has
to be examined on a case by case basis to establish
whether an acknowledgment of liability has, in fact,
been made, thereby extending limitation under Section
18 of the Limitation Act.”
(Emphasis supplied)
1844 [2025] 7 S.C.R.

Supreme Court Reports

34. The other aspect which remains to be examined is the contention of
the respondent that the name of the appellant is nowhere mentioned
in the Balance Sheet of F.Y. 2019-20 and as such the Balance Sheet
of F.Y. 2019-20 cannot be construed as an acknowledgement of any
jural relationship between the parties. To Counter this aspect, appellant
has drawn attention to the judgment of this Court in Vidyasagar
Prasad (supra). In Vidyasagar Prasad (supra), this Court, at the
outset, dealt with the earlier judgments in Laxmi Pat Surana v.
Union Bank of India, (2021) 8 SCC 481, Dena Bank (now Bank
of Baroda) v. C. Shivakumar Reddy and Anr., (2021) 10 SCC 330,
and Rajendra Narottamdas Sheth and Anr. v. Chandra Prakash
Jain and Anr., (2022) 5 SCC 600 to reiterate that Section 18 of
the Limitation Act dealing with acknowledgment of debt applies to
proceedings under the IBC in view of Section 238A.
35. Thereafter, this Court, on facts, recorded the following findings: -
“10. Having considered the specific facts and
circumstances of this case, the Adjudicating Authority
as well as the National Company Law Appellate
Tribunal have concurrently held that the entries in
the balance-sheets amount to clear acknowledgment
of debt. We agree with the findings. Further, note 3.4
appended to said balance-sheet entry dated March 31,
2017 mentions that “company has made certain defaults
in the repayment of term loans and interest.” It further
mentions of a continuing default. The entry also mentions
long-term borrowings. The conclusions of the National
Company Law Tribunal and National Company Law
Appellate Tribunal that there is acknowledgment of
debt are unimpeachable.
10.1. Following the principles as expounded in the case
of Bishal Jaiswal, (2021) 6 SCC 366, the Adjudicating
Authority as well as the National Company Law Appellate
Tribunal have examined the case in detail and have come
to the conclusion that the entry made in the balance-sheet
coupled with the note of the auditor of the appellant clearly
amounts to acknowledgment of the liability. We see no
reason whatsoever to take a different view of the
matter. Their findings are fortified when we examine
the matter from another perspective.
[2025] 7 S.C.R. 1845

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

11. The Adjudicating Authority and National Company Law
Appellate Tribunal have also considered the corporate
debtor's proposal of one-time settlement (OTS) to UCO
Bank. The proposal made by letter dated June 7, 2016
acknowledges that there were prior debts owed to UCO
Bank. To substantiate the argument that such one-time
settlement constituted acknowledgment of debt since it
relates to present and subsisting liability and indicates
existence of a jural relationship between the parties, UCO
Bank relied on judgment of this court in Lakshmirattan
Cotton Mills Co. Ltd. v. Aluminium Corporation of India
Ltd. [(1971) 1 SCC 67……”
(Emphasis supplied)

36. It will be noticed that even in Vidyasagar Prasad (supra) a similar
argument about the name of creditor not being mentioned was repelled
and additionally the aspect of the proposal given by the corporate
debtor therein for a one-time settlement was taken into account as
an additional aspect in favour of acknowledgment of debt.
37. The respondent herein contends that Vidyasagar Prasad (supra)
could not be said to have laid a law for general application with
regard to entries in Balance Sheet wherein the names of the
creditor are mentioned and additionally contended that in that
case an OTS proposal was also available to buttress the point of
acknowledgment.
38. We have independently examined the facts of the present matter to
construe whether the entries in the Balance Sheet of F.Y. 2019-20
constitute a valid acknowledgement. As to whether a certain document
in a given case constitutes a valid acknowledgement would depend
on the facts and circumstances of each case. We do no better than
recall the observations of this Court in Khan Bahadur Shapoor
(supra) wherein it was observed as under: -
“7. It is often said that in deciding the question as
to whether any particular writing amounts to an
acknowledgment as in construing wills, for instance,
it is not very useful to refer to judicial decisions on
the point. The effect of the words used in a particular
document must inevitably depend upon the context
1846 [2025] 7 S.C.R.

Supreme Court Reports

in which the words are used and would always be
conditioned by the tenor of the said document, and so
unless words used in a given document are identical
with words used in a document judicially considered it
would not serve any useful purpose to refer to judicial
precedents in the matter…….”
(Emphasis supplied)

39. Having said that, the legal principles as to what constitutes a
valid acknowledgment as laid down in the precedents, have to be
rigorously applied. It should also not be forgotten that this Court
in Khan Bahadur Shapoor (supra) has held that surrounding
circumstances could be considered and that a liberal construction
should be favoured, though the process of reasoning should
not be involved or far-fetched. This Court in Khan Bahadur
Shapoor (supra) had considered the general tenor and context
of the document. Further, as noticed in Lakshmirattan Cotton
Mills (supra), the previous correspondence and the surrounding
circumstances were also taken into consideration. In Bishal
Jaiswal (supra), this Court held that a case-to-case examination
will be made with regard to entries made in Balance sheets to
decide the question of acknowledgment. In Dena Bank (supra),
this Court held that in relation to proceedings under the IBC,
Section 18 of the Limitation Act cannot be construed with pedantic
rigidity. In Vidyasagar Prasad (supra), this Court affirmed the
finding of the NCLAT in that case wherein the NCLAT had held
that the company’s Balance Sheet is prepared in the statutory
format as per schedule 3 of the Companies Act which did not
provide for giving the specific name of every secured or unsecured
creditor.
40. In OPG Power Generation Private Ltd. v. Enexio Power Cooling
Solutions (India) Private Ltd. And Anr., (2025) 2 SCC 417, this
Court speaking through one of us (Manoj Misra J.,) while reiterating
the holding in Khan Bahadur Shapoor (supra) summarised the
essence of Section 18 of the 1963 Act as under: -
“132. Section 18 of the 1963 Act deals with the effect
of acknowledgment in writing. Sub-section (1) thereof
provides that where, before the expiration of the prescribed
[2025] 7 S.C.R. 1847

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

period for a suit or application in respect of any right, an
acknowledgment of liability in respect of such right has
been made in writing signed by the party against whom
such right is claimed, a fresh period of limitation shall be
computed from the time when the acknowledgment was
so signed. The Explanation to this section provides that
an acknowledgment may be sufficient though it omits
to specify the exact nature of the right or avers that the
time for payment has not yet come or is accompanied by
a refusal to pay, or is coupled with a claim to set-off, or
is addressed to a person other than a person entitled to
the right.”
41. Keeping all these principles in mind, if we examine the facts of the
present case, it will be clear that the Balance Sheet of F.Y. 2019-20,
viewed in the background of the other admitted documents, including
the financial statements of the previous years, clearly constitutes
a valid acknowledgment of a subsisting liability and indicated the
existence of a jural relationship and an admission as to the existence
of such relationship. We say so for the following reasons:-
i) The general tenor and context of the balance sheet of F.Y. 2019-20
considered in the background of surrounding circumstances
arising from the balance sheets of F.Y. 2015-16, 2016-17 &
2017-18 clearly points to the fact that the entry in the balance
sheet of F.Y. 2019-20 constitutes a valid acknowledgement and
pertains to the same borrowing as was reflected in the balance
sheet of F.Y. 2015-16, 2016-17 & 2017-18.
ii) Under the Indian Accounting Standards (Ind AS) 7, a cash flow
statement is appended to the financial statement. The cash flow
statement indicates that in F.Y. 2018-19 there was proceeds from
borrowings of Rs.72,30,902/- and added to Rs.23,68,91,933/-,
a figure of Rs.24,41,22,835/- is arrived at.
iii) More importantly, in the cash flow statement it was indicated
that no part of cash flow proceeds was utilised in the repayment
of existing borrowings under the financial activities since the
amount under the head “cash flows from (used in) financial
activities” is nil. This clearly indicates that the debt remained
unpaid even in 2019-20.
1848 [2025] 7 S.C.R.

Supreme Court Reports

42. In addition to the above, it is significant to note that in this case
in the reply filed to the Section 7 application, apart from a general
objection as to the application being barred by limitation only a bare
denial was made in the following terms:-
“(sic) deny that Balance Sheet of CD can be treated as
acknowledgment of debt as wrongfully alleged or at all.”
43. In the application under Section 7 detailed averments were made
referring to a series of audited financial statements and Balance
Sheet from F.Y. 2015-16 to F.Y. 2019-20 to make out a case that
the entry in F.Y. 2019-20 constituted an acknowledgment under
Section 18 of the Limitation Act by the respondent. In any event,
we have not based our finding on the mere factum of non-denial
but have construed the entry in the Balance Sheet of F.Y. 2019-20
to conclude that the entry in the F.Y. 2019-20 constitutes a valid
acknowledgment.
44. The Balance Sheet of F.Y. 2019-20 was admittedly signed by
the board of directors on 12.08.2020. This date was within the
subsisting period of limitation for the reason that taking 01.03.2018
as the commencement of limitation, limitation ordinarily would
have continued till 28.02.2021. Since an acknowledgment
came into effect on 12.08.2020, limitation would have stood
extended till 11.08.2023. However, Covid-19 intervened resulting
in this Court passing a series of orders extending the period of
limitation. The relevant order applicable in this case is the order of
10.01.2022.
45. Parties were at daggers drawn on the aspect whether sub Para (I)
of Para 5 of the order of 10.01.2022 would apply or sub Para (III)
would apply. Para 5 of the order dated 10.01.2022 reads as under: -
"5. Taking into consideration the arguments advanced by
learned counsel and the impact of the surge of the virus
on public health and adversities faced by litigants in the
prevailing conditions, we deem it appropriate to dispose
of the M. A No. 21 of 2022 with the following directions:
I. The order dated 23.03.2020 is restored and in
continuation of the subsequent orders dated 08.03.2021,
27.04.2021 and 23.09.2021, it is directed that the period
[2025] 7 S.C.R. 1849

IL & FS Financial Services Limited v.
Adhunik Meghalaya Steels Private Limited

from 15.03.2020 till 28.02.2022 shall stand excluded for
the purposes of limitation as may be prescribed under
any general or special laws in respect of all judicial or
quasi-judicial proceedings.
II. Consequently, the balance period of limitation remaining
as on 03.10.2021, if any, shall become available with effect
from 01.03.2022.
III. In cases where the limitation would have expired
during the period between 15.03.2020 till 28.02.2022,
notwithstanding the actual balance period of limitation
remaining, all persons shall have a limitation period
of 90 days from 01.03.2022. In the event the actual
balance period of limitation remaining, with effect from
01.03.2022 is greater than 90 days, that longer period shall
apply.
IV. It is further clarified that the period from 15.03.2020
till 28.02.2022 shall also stand excluded in computing the
periods prescribed under Section 23(4) and 29A of the
Arbitration and Conciliation Act, 1996, Section 12A of the
Commercial Courts Act, 2015 and provisos (b) and (c) of
Section 138 of the Negotiable Instruments Act, 1881 and
any other laws, which prescribe period(s) of limitation
for instituting proceedings, outer limits (within which the
court or tribunal can condone delay) and termination of
proceedings"
46. We have no manner of doubt that sub-Para 1 of Para 5 of the order
of this Court dated 10.01.2022 would apply and the entire period
from 15.03.2020 to 28.02.2022 would stand excluded, which would
mean that the limitation would, reckoning the acknowledgment of
12.08.2020, commence on 01.03.2022 and continue till 28.02.2025.
Since the application has been filed on 15.01.2024 the same is within
time. Limitation, in view of the acknowledgment as found above,
having commenced only on 12.08.2020, the question of limitation
expiring between 15.03.2020 and 28.02.2022 cannot arise. Hence,
Para 5(III) of the order of this Court dated 10.01.2022, has no
application to the facts of this case.
1850 [2025] 7 S.C.R.

Supreme Court Reports

47. In view of the observations made hereinabove,the judgments of the
NCLAT dated 25.03.2025 and NCLT dated 16.05.2024 are set aside.
The appeal is allowed. The matter is remitted to the adjudicating
authority to proceed with and decide in accordance with law, treating
the application under Section 7 of the IBC, filed by the appellant, as
one filed within limitation. No order as to costs.

Result of the case: Appeal allowed.

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Headnotes prepared by: Divya Pandey