### Entries in Audited Balance Sheets and Settlement Offers Constitute Valid Acknowledgment of Debt Extending Limitation Summary of the Judgment: The National Company Law Appellate Tribunal (NCLAT) upheld the admission of a Section 7 application against HIL (India) Ltd., a Government of India enterprise. The Appellant challenged the admission on the grounds of limitation, arguing that the default originated decades ago. Key Findings: * Limitation & Recovery Certificate: The Tribunal reaffirmed that the issuance of a Recovery Certificate by the Debt Recovery Tribunal (DRT) grants a fresh three-year period of limitation. * Acknowledgment under Section 18: Following the Supreme Court's ratio in *Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal*, the NCLAT held that entries in the Corporate Debtor’s audited balance sheets (FY 2019-20 and 2020-21) acknowledging the corporate guarantee constituted a valid acknowledgment of debt under Section 18 of the Limitation Act, 1963. * Settlement Offers: Letters issued by the Corporate Debtor offering a settlement (OTS) within the extended limitation period (including the benefit of the Supreme Court's *Suo Moto* extension during COVID-19) further served as valid acknowledgments to extend limitation. * Post-Admission Settlement: While the parties reached a settlement during the appeal, the NCLAT maintained that the CIRP remains in rem and cannot be closed through a simple withdrawal of appeal. It directed the parties to follow the Section 12A procedure via the IRP for the formal withdrawal of the insolvency proceedings through the NCLT.

The Appellant, a suspended director of M/s. HIL (India) Ltd. (Corporate Debtor), challenged an order dated 30.07.2025 passed by the NCLT admitting a Section 7 application under the IBC filed by IDBI Bank.

The Corporate Debtor had executed a deed of guarantee in 1988 for loans taken by its subsidiary, SPCL.

Following SPCL’s default, IDBI invoked the guarantee in 1994 and subsequently obtained a Recovery Certificate (RC) from the Debt Recovery Tribunal (DRT) on 26.07.2018.

The Financial Creditor filed the Section 7 application on 13.06.2024.

During the pendency of the appeal, the parties entered into a settlement wherein the Bank accepted an OTS of Rs. 1.78 Crore.

The Appellant sought to set aside the CIRP on grounds of limitation, while several intervenors (Operational Creditors) opposed the closure of the process.

Whether the Section 7 application filed by IDBI Bank was barred by limitation.

Whether the CIRP can be closed and the insolvency order set aside following a settlement between the Financial Creditor and the Corporate Debtor at the appellate stage.

The court applied Section 18 of the Limitation Act, 1963, regarding the extension of limitation through written acknowledgment.

It relied on the precedent in Dena Bank vs. C. Shivakumar Reddy, establishing that a Recovery Certificate issued by a DRT triggers a fresh period of limitation.

It further applied the principles from Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal and IL and FS Financial Services Ltd. vs. Adhunik Meghalaya Steels P. Ltd., which clarify that entries in a balance sheet (including notes and caveats) constitute valid acknowledgment under Section 18 if they reflect a subsisting jural relationship.

The court also utilized the Suo Moto Writ Petition (C) No. 03 of 2020 directions regarding the exclusion of the COVID-19 period from limitation calculations.

Finally, it referenced Glas Trust Company LLC vs. Byju Raveendran regarding the procedure for withdrawal under Section 12A of the IBC.

The Tribunal first determined that the DRT’s Recovery Certificate dated 26.07.2018 provided a fresh three-year window ending 25.07.2021.

By applying the Supreme Court’s Suo Moto extension, which excluded the period between 15.03.2020 and 28.02.2022, the remaining limitation period was extended to 12.07.2023.

Furthermore, the court scrutinized the Corporate Debtor's balance sheets for FY 2019-20 and 2020-21, which expressly noted the "Bank Guarantees" and "counter-guarantee".

Despite the Corporate Debtor’s note that the guarantee had "no validity," the court held this was a valid acknowledgment of a subsisting liability, further extended by settlement offer letters dated 18.04.2022 and 02.06.2022.

Consequently, the application filed on 13.06.2024 was within the legally extended timeframe.

Regarding the settlement, the court observed that since third-party intervenors (Operational Creditors) were involved, the process could not be summarily closed without following the statutory route.

It permitted the Appellant to withdraw the appeal due to the settlement.

However, it directed that the CIRP cannot be closed automatically; instead, the Financial Creditor must file an application under Section 12A of the IBC read with Regulation 30A of the CIRP Regulations through the IRP within four weeks.

The IRP was directed not to take further steps until the Section 12A application is decided, and intervenors were granted liberty to file objections to said application before the Adjudicating Authority.