Entries in balance sheets and settlement offers constitute valid acknowledgments extending limitation under Section 18.

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

The Corporate Debtor had executed a Deed of Guarantee on 21.11.1988 for loans availed by its subsidiary, SPCL.

Following default, IDBI invoked the guarantee on 01.07.1994 and later obtained a Recovery Certificate from the 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 (OTS).

Intervening Operational Creditors opposed the closure of proceedings, arguing that CIRP is a proceeding in rem.

Whether the Section 7 application filed by IDBI Bank was barred by limitation, given the 30-year gap since the guarantee invocation.

Whether entries in the Corporate Debtor’s balance sheets and subsequent settlement letters constitute valid acknowledgments 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 v. C. Shivakumar Reddy, establishing that a fresh period of limitation commences from the date of a Recovery Certificate.

It further applied the principles from Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal and IL and FS Financial Services Ltd. v. Adhunik Meghalaya Steels P. Ltd., which hold that entries in audited balance sheets and accompanying notes constitute valid acknowledgments of debt if they reflect a subsisting jural relationship.

Finally, it applied the Suo Moto Writ Petition (C) No. 3 of 2020 directions regarding the exclusion of COVID-19 periods from limitation.

The Tribunal found that the issuance of the Recovery Certificate on 26.07.2018 triggered a fresh three-year limitation period ending 25.07.2021.

However, under the Supreme Court's Suo Moto orders, the period from 15.03.2020 to 28.02.2022 was excluded, extending the limitation for this case to 12.07.2023.

Crucially, the Corporate Debtor’s balance sheets for F.Y. 2019-20 and 2020-21 contained specific notes (Note 33) acknowledging the bank guarantees and counter-guarantees.

Applying Bishal Jaiswal, the Court held these were unequivocal acknowledgments that reset the limitation clock.

Furthermore, the Corporate Debtor’s letters dated 18.04.2022 and 02.06.2022, seeking to settle the dues under an OTS scheme, were issued within the extended limitation period and served as valid acknowledgments under Section 18.

While the admission order was legally sound, the Tribunal acknowledged the post-admission settlement between the parties.

The Appeal was disposed of by: (i) upholding the admission of the Section 7 application; (ii) permitting the Appellant to withdraw the appeal; and (iii) directing IDBI Bank to file a Section 12A withdrawal application through the IRP within four weeks, which the NCLT must then consider in light of the interveners' objections and the Byju Raveendran precedent.