The Supreme Court overturn decision of the a 5-Judge Bench order of the NCLAT that balance sheet entries do not amount to the acknowledgment of a debt and thus do not extend limitation under Section 18.
Balance sheets can be considered as acknowledgment of debt, the judgment was delivered by a three-Judge Bench of Justice.
There is a certainty that the time-barred debt can be revived even after the lapse of an initial period of limitation which is 3 years.
Hon’ble Supreme court declared that the provisions of IBC (Code) to be interpreted liberally to expand the objective of the Statute.
Directing the Appellate Tribunal to reconsider the matter, the apex court said that the NCLAT must have notified the bank (Financial Creditor) before closing the CIRP initiated by the NCLT.
The apex court held that the Code isn’t a machinery for recovery though its usage in several perspectives still be within the nature of a recovery system.
NCLAT said that if there was deficiency in pleading, the same could be corrected by giving opportunity before this Appellate Tribunal to amend the pleadings. In Appeal naturally pleadings could be by filing Application and reply supported by documents.
The limitation period cannot be extended, given the statutory provision under Section 19 of the Limitation Act as the Corporate Debtor has made part payment after expiration of the period of limitation.
There has been no further clarification as to whether the home buyers are secured financial creditors or unsecured financial creditors, but in consideration of the recent developments, one thing is sure that the result will be in the interest of homebuyers only.
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