A division bench of the Hon'ble Supreme Court of India, comprising of Hon'ble Ms Justice Indira Banerjee and Hon'ble Mr Justice V. Rama Subramanian on August 1st 2022 in Asset Reconstruction Company (India) Limited v. Tulip Star Hotels Limited & Ors. has held that the Hon’ble National Company Law Appellate Tribunal (hereinafter “NCLAT”) erred in law in holding that the Books of Account of a company could not be treated as an acknowledgement of liability in respect of debt payable to a financial creditor.
Section 18 of the Limitation Act, 1963 provides that acknowledgement of subsisting liability made in writing concerning any right claimed, and if the same has been signed by a party against whom the right is claimed, has an effect of commencing a fresh period of limitation from the date of signing such acknowledgement.
The Hon’ble Apex Court has further held that the judgement passed in Babulal Vardharji Gurjar v. Veer Gurjar Aluminium Industries (P) Ltd is not an authority for the proposition that the book of accounts of a Corporate Debtor is not to be treated as an acknowledgement of liability to a Financial Creditor. Neither does the judgment laid down the proposition that any affidavits or documents filed during the pendency of the proceedings under the Insolvency Bankruptcy Code, 2016 (hereinafter “IBC”) cannot be taken into consideration. Moreover, it is well-settled that the entries in the books of accounts and/or balance sheets of a Corporate Debtor would amount to an acknowledgement under Section 18.
Relying upon its judgement passed in Laxmi Pat Surana vs. Union Bank of India, the Hon’ble Apex Court stated that there was no reason to exclude the effect of Section 18 to the proceedings initiated under the IBC and held that the question of applicability of Section 18 to such proceedings was no longer res integra.
It was observed by the Hon’ble Apex Court that the Corporate Debtor in the present matter acknowledged its liabilities in its financial statements from 2008-09 till 2016-17. The application under Section 7(2) of the IBC was filed on April 3rd 2018, well within the extended period of limitation. Further, it was observed that the impugned judgment and order passed by the Hon'ble NCLAT was unsustainable in law and facts. The appeals filed by the Financial Creditors were accordingly allowed, and the impugned judgment and order of the NCLAT were set aside.
 Civil Appeal Nos. 84-85 OF 2020, Hon’ble Supreme Court of India
 18. Effect of acknowledgement in writing.—(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed. (2) Where the writing containing the acknowledgement is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), the oral evidence of its contents shall not be received. Explanation.—For the purposes of this section— (a) an acknowledgement may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the property or right, (b) the word "signed" means signed either personally or by an agent duly authorised in this behalf, and (c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.
 (2020) 15 SCC 1
 (2021) 8 SCC 481