FA, 2020 amendment increasing...
The corporate debtor had availed a loan from the lenders, and it failed to repay dues and banks assigned debt in favour of Asset Reconstruction (the financial creditor).
The Financial creditor filed an application for initiation of CIRP against corporate debtors under section 7 of the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority acknowledged the request on the grounds that debt and default were not subject to defiance and the request was made within limitation.
The Corporate Debt (Appellant) in Appeal said the request was prohibited by limitation and based on the decision in V. Padmakumar v. Stressed Assets Stabilization Fund (SASF) Stated that entries made in the company's balance sheet could not be considered as a recognition under section 18 of Limitation Act, 1963.
In V. Padmakumar's case (supra) it was held that the balance sheet should be prepared under section 92 of the Companies Act, 2013 and, consequently, an entry made in the company's balance sheet may not amount to an acknowledgment of debt for section 18 of Limitation Act, 1963.
Since there was a consistent view of Hon'ble Supreme Court and various High Courts that entries in various Balance Sheet of Company be treated as an acknowledgment of debt for purpose of Section 18 of Limitation Act, the 1963 decision in V. Padmakumar's case (supra) required reconsideration and, therefore, the matter was to be referred to as a Bench of Five Members of the Appellate Tribunal.
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