### Entries in Audited Balance Sheets and Settlement Offers Constitute Valid Acknowledgment of Debt Extending Limitation Period Summary of the Judgment: The NCLAT dismissed the appeal of a Suspended Director against the admission of a Section 7 application under the IBC. The Tribunal held that despite the original guarantee being invoked decades ago, the issuance of a Recovery Certificate by the DRT in 2018 triggered a fresh period of limitation. Crucially, the Tribunal ruled that specific entries in the Corporate Debtor’s balance sheets (Notes on Accounts acknowledging counter-guarantees) and subsequent settlement offer letters (OTS) constituted valid acknowledgments under Section 18 of the Limitation Act, 1963. These entries, combined with the benefit of the Supreme Court’s *Suo Motu* extension of limitation during the COVID-19 pandemic, ensured the application filed in 2024 was within time. Having upheld the admission order, the Tribunal permitted the withdrawal of the appeal following a settlement with the Financial Creditor, directing the parties to follow the Section 12A withdrawal process.

The Corporate Debtor (HIL India Ltd.) executed a Deed of Guarantee on 21.11.1988 for loans availed by its subsidiary, SPCL, from IDBI Bank.

Following default and liquidation of SPCL, IDBI invoked the guarantee on 01.07.1994 and later obtained a Recovery Certificate from the Debt Recovery Tribunal (DRT) on 26.07.2018.

The Corporate Debtor mentioned this guarantee in its balance sheets for F.Y. 2019-20 and 2020-21.

Between April and June 2022, the Corporate Debtor sent letters to IDBI discussing settlement offers.

IDBI filed a Section 7 application under the IBC on 13.06.2024, which the Adjudicating Authority admitted on 30.07.2025, holding the debt was not barred by limitation.

During the pendency of this appeal, the parties entered into an Out of Court Settlement (OTS).

1. Whether the Section 7 application filed by IDBI Bank was barred by limitation under the Limitation Act, 1963.

2. Whether entries in the Corporate Debtor’s balance sheets and subsequent settlement correspondence constitute a valid "acknowledgment of debt" under Section 18 of the Limitation Act.

The court applied Section 7 of the IBC and Section 18 of the Limitation Act, 1963 regarding the extension of limitation through acknowledgment.

It relied on *Dena Bank vs. C. Shivakumar Reddy*, establishing that a DRT Recovery Certificate creates a fresh cause of action and a three-year limitation period.

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 balance sheets and annexed notes constitute valid acknowledgments of subsisting liability.

Finally, it utilized the Supreme Court’s *Suo Moto Writ Petition No. 03 of 2020* orders, which excluded the period from 15.03.2020 to 28.02.2022 from limitation calculations due to the COVID-19 pandemic.

The Tribunal first determined that the DRT Recovery Certificate dated 26.07.2018 triggered a fresh three-year limitation period ending 25.07.2021.

However, because this expiry fell within the COVID-19 exclusion period (15.03.2020–28.02.2022) mandated by the Supreme Court, the limitation was legally extended to July 2023.

The Tribunal further noted that the Corporate Debtor’s balance sheets for F.Y. 2019-20 and 2020-21 explicitly listed the "counter guarantee" as a liability.

Applying *Bishal Jaiswal*, the court held these entries were unequivocal acknowledgments that renewed the limitation period.

Additionally, the letters dated 18.04.2022 and 02.06.2022, written within the extended limitation period, sought a settlement of the debt, further constituting valid acknowledgments under Section 18.

Consequently, the filing on 13.06.2024 was within the legally permissible timeframe.

However, in light of the settlement reached between the parties, the Appellant was permitted to withdraw the Appeal.

The Tribunal directed IDBI Bank and the IRP to file a Section 12A application for withdrawal of the CIRP before the Adjudicating Authority within specific timelines, with liberty granted to intervening Operational Creditors to file objections to said withdrawal.