D.N.V. Srinivasa Raju vs IDBI Bank Ltd. & Anr.

“17.11.2025: Learned counsel for the Bank submits that settlement offer by the Appellant has been accepted and communication has been issued. Learned counsel for the Appellant submits that Appeal be taken up after four weeks to bring relevant material on record for praying for further course of action in the matter. As prayed, list this appeal on 19.12.2025. Learned counsel for the another Operational Creditor - ATO India seeks liberty to file an Intervention Application, which may be done within a week. Interim order to continue.”

“I. The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings.

II. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022.

III. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply. IV. It is further clarified that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under Sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.”

“Note-33: Additional notes on accounts

33.1 (a) Contingent Liabilities and Commitments (To the extent not provided for) Rs. in Lakhs
Particulars	As at 31st	As at 31st
March' 2021	March' 2020
Contingent Liabilities
a) Claims against the company not acknowledged as debts Taxation -Others -	1294.79 157.14	1294.79 157.14
b) Pay Revision Arrear of Officers & Workmen Employees (1.1.2007/1.04.2007 to 27.04.2011)	497.57	506.20
Penal Interest on Govt. Loan @2.75%	690.59	578.27
Commitments
a) Estimated amounts of contracts remaining to be executed on the capital account and not provided for	37.90	105.64
b) Bank Guarantees and Letter of Credit	2,837.79	2,924.38
c) Others	261.71	274.51
TOTAL (A+B)	5,777.49	5,840.93

(b)

Company had provided a counter guarantee of Rs.2,265.00 lakhs in favour of Southern Pesticides Corporation Limited, earlier subsidiary of the company, which got liquidated vide Hon'ble High Court of Andhra Pradesh order dated 2nd April, 2002. As on 31st March 2021 the counter guarantee has no validity. However, if counter guarantee is invoked by Financial Institutions, Govt. of India will provide support, as approved by Cabinet Committee on Economic Affairs (CCEA) on 27th July, 2006.”

“Note-33: Additional notes on accounts

33.1

(a) Contingent Liabilities and Commitments (To the extent not provided for) Rs. In Lakhs

Particulars	As at 31 March' 2022	As at 31 March' 2021
A) Contingent Liabilities
a) Claims against the company not acknowledged as debts	1298.95	1451.93
b) Pay Revision Arrear of Officers & Workmen Employees (1.1.2007/1.04.2007 to 27.04.2011)	497.57	497.57
a) Penal Interest on Govt. Loan 2.75% (Refer Note below)	802.91	690.59
B) Commitments
a) Estimated amounts of contracts remaining to be executed on the capital account and not provided for	57.00	37.90
b) Bank Guarantees and Letter of Credit	3056.22	2,837.79
c) Others	11.99	261.71
TOTAL (A+B)	5724.64	5,777.49

Note- Government of India reserves the right to increase the Interest rate from 11.50% pa to 14.25% pa in case of default in repayment of loan. Since GOI never exercised the right, hence penal interest has been shown under Contingent Liability.

33.1

(b) Company had provided a counter guarantee of Rs.2,265.00 lakhs in favor of Southern Pesticides Corporation Limited, earlier subsidiary of the company, which got liquidated vide Hon'ble High Court of Andhra Pradesh order dated 2^nd April, 2002. As at end of the financial year, the counter guarantee has no validity. However, If counter guarantee is invoked by Financial Institutions, Govt. of India will provide support, as approved by Cabinet Committee on Economic Affairs (CCEA) on 27 July, 2006.”

“21.

The principal question, as highlighted earlier, that arises for consideration is whether the Tribunals below were justified in holding that the section 7 application under the Insolvency and Bankruptcy Code, filed by the appellant on January 15, 2024 was barred by time ? In answering the above question, two incidental questions do arise; (i) Does the entry in the balance-sheet of the financial year 2019-2020 constitute a valid acknowledgment of debt by the respondent under section 18 of the Limitation Act, 1963 ? (ii) If the answer to the above question is in the affirmative, will paragraph 5(I) or 5(III) of the order dated January 10, 2022 passed by this Court in Suo Motu Writ Petition No. 3 of 2020 govern the situation ?”

“26.

The earliest pronouncement of this court was in Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria [1961 SCC OnLine SC 147; (1962) 1 SCR 140.] . Justice P.B. Gajendragadkar (as His Lordship then was) while construing section 19 of the Limitation Act, 1908 which is similar to section 18 of the Limitation Act, 1963 held as under:

“6.

It is thus clear that acknowledgment as prescribed by section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgment of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledgment is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or farfetched process of reasoning. Broadly stated that is the effect of the relevant provisions contained in section 19, and there is really no substantial difference between the parties as to the true legal position in this matter.” (emphasis supplied)

27.

It will be clear from the above passage that an acknowledgment of debt merely renews the debt and does not create a new right of action. It is further essential that the acknowledgment must relate to a subsisting liability and must indicate the jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. It was also held that such intention can be inferred by implication from the nature of the admission and need not be expressed in words. It has also been held that in construing the words used in the statements, surrounding circumstances can always be considered and that courts lean in favour of a liberal construction of such statements, though intention cannot be fastened by an involved or far-fetched process of reasoning.”

“33.

It was not disputed before us that entries in balance-sheets could constitute a valid acknowledgment and in fact it could not have been disputed, in view of the categoric pronouncement of this court in Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal [(2021) 14 Comp Cas-OL 445 (SC); (2021) 6 SCC 366; (2021) 3 SCC (Cri) 23; (2021) 3 SCC (Civ) 605; 2021 SCC OnLine SC 321.] . The only dispute was whether the entry in financial year 2019-2020 did or did not constitute a valid acknowledgment. Among the grounds canvassed was the aspect that the name of the appellant was not mentioned in the balance-sheet of financial year 2019-2020. It is worthwhile to notice certain observations from the judgment in Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal [(2021) 14 Comp Cas-OL 445 (SC); (2021) 6 SCC 366; (2021) 3 SCC (Cri) 23; (2021) 3 SCC (Civ) 605; 2021 SCC OnLine SC 321.] as it does have a bearing for the disposal of the present matter. This court in Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal [(2021) 14 Comp Cas-OL 445 (SC); (2021) 6 SCC 366; (2021) 3 SCC (Cri) 23; (2021) 3 SCC (Civ) 605; 2021 SCC OnLine SC 321.] held that entries in balance-sheet had to be examined on a case-by-case basis to examine whether an acknowledgment of liability exists. paragraph 35 of Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal [(2021) 14 Comp Cas-OL 445 (SC); (2021) 6 SCC 366; (2021) 3 SCC (Cri) 23; (2021) 3 SCC (Civ) 605; 2021 SCC OnLine SC 321.] reads as under [ See page 479 of 14 Comp Cas-OL.] :

“A perusal of the aforesaid sections would show that there is no doubt that the filing of a balance-sheet in accordance with the provisions of the Companies Act, is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by section 134(7). Equally, the auditor's report may also enter caveats with regard to acknowledgments made in the books of account including the balance-sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills Co. (in liquidation) v. Ismail Golam Hossain Ariff [1961 SCC OnLine Cal 128; AIR 1962 Cal 115.] , that there is a compulsion in law to prepare a balance-sheet but no compulsion to make any particular admission, is correct in law as it would depend on the facts of each case as to whether an entry made in a balance-sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgment of liability has, in fact, been made, thereby extending limitation under section 18 of the Limitation Act.”

“38.

We have independently examined the facts of the present matter to construe whether the entries in the balance-sheet of the financial year 2019-2020 constitute a valid acknowledgment. As to whether a certain document in a given case constitutes a valid acknowledgment would depend on the facts and circumstances of each case. We do no better than recall the observations of this court in Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria [1961 SCC OnLine SC 147; (1962) 1 SCR 140.] wherein it was observed as under:

“7.

It is often said that in deciding the question as to whether any particular writing amounts to an acknowledgment as in construing wills, for instance, it is not very useful to refer to judicial decisions on the point. The effect of the words used in a particular document must inevitably depend upon the context in which the words are used and would always be conditioned by the tenor of the said document, and so unless words used in a given document are identical with words used in a document judicially considered it would not serve any useful purpose to refer to judicial precedents in the matter…”

39.

Having said that, the legal principles as to what constitutes a valid acknowledgment as laid down in the precedents, have to be rigorously applied. It should also not be forgotten that this court in Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria [1961 SCC OnLine SC 147; (1962) 1 SCR 140.] has held that surrounding circumstances could be considered and that a liberal construction should be favoured, though the process of reasoning should not be involved or far-fetched. This court in Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad Chamaria had considered the general tenor and context of the document. Further, as noticed in Lakshmirattan Cotton Mills Co. Ltd. and Behari Lal Ram Charan v. Aluminium Corporation of India Ltd. [(1971) 1 SCC 67.] , the previous correspondence and the surrounding circumstances were also taken into consideration. In Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal [(2021) 14 Comp Cas-OL 445 (SC); (2021) 6 SCC 366; (2021) 3 SCC (Cri) 23; (2021) 3 SCC (Civ) 605; 2021 SCC OnLine SC 321.] , this court held that a case-to-case examination will be made with regard to entries made in balance-sheets to decide the question of acknowledgment. In Dena Bank (now Bank of Baroda) v. C. Shivakumar Reddy [(2021) 15 Comp Cas-OL 558 (SC); (2021) 10 SCC 330; 2021 SCC OnLine SC 543.] , this court held that in relation to proceedings under the Insolvency and Bankruptcy Code, 2016, section 18 of the Limitation Act, cannot be construed with pedantic rigidity. In Vidyasagar Prasad v. UCO Bank [(2024) 251 Comp Cas 636 (SC); 2024 SCC OnLine SC 2993.] , this court affirmed the finding of the National Company Law Appellate Tribunal in that case wherein the National Company Law Appellate Tribunal had held that the company's balance-sheet is prepared in the statutory format as per schedule 3 of the Companies Act, which did not provide for giving the specific name of every secured or unsecured creditor.”

“45.

Parties were at daggers drawn on the aspect whether sub-paragraph (I) of paragraph 5 of the order of January 10, 2022 would apply or sub-paragraph (III) would apply. Paragraph 5 of the order dated January 10, 2022 reads as under [ See page 426 of 230 Comp Cas.] :

“Taking into consideration the arguments advanced by learned counsel and the impact of the surge of the virus on public health and adversities faced by litigants in the prevailing conditions, we deem it appropriate to dispose of M.A. No. 21 of 2022 with the following directions:

(I)

The order dated March 23, 2020 is restored and in continuation of the subsequent orders dated March 8, 2021, April 27, 2021 and September 23, 2021, it is directed that the period from March 15, 2020 till February 28, 2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings.

(II)

Consequently, the balance period of limitation remaining as on October 3, 2021, if any, shall become available with effect from March 1, 2022.

(III)

In cases where the limitation would have expired during the period between March 15, 2020 till February 28, 2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from March 1, 2022. In the event the actual balance period of limitation remaining, with effect from March 1, 2022 is greater than 90 days, that longer period shall apply.

(IV)

It is further clarified that the period from March 15, 2020 till February 28, 2022 shall also stand excluded in computing the periods prescribed under sections 23(4) and 29A of the Arbitration and Conciliation Act, 1996, section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of section 138 of the Negotiable Instruments Act, 1881and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or Tribunal can condone delay) and termination of proceedings.”

46.

We have no manner of doubt that sub-paragraph (I) of paragraph 5 of the order of this court dated January 10, 2022 would apply and the entire period from March 15, 2020 to February 28, 2022 would stand excluded, which would mean that the limitation would, reckoning the acknowledgment of August 12, 2020, commence on March 1, 2022 and continue till February 28, 2025. Since the application has been filed on January 15, 2024 the same is within time. Limitation, in view of the acknowledgment as found above, having commenced only on August 12, 2020, the question of limitation expiring between March 15, 2022 and February 28, 2022 cannot arise. Hence, paragraph 5(III) of the order of this court dated January 10, 2022, has no application to the facts of this case.

47.

In view of the observations made hereinabove, the judgments of the National Company Law Appellate Tribunal dated March 25, 2025 [IL and FS Financial Services Ltd. v. Adhunik Meghalaya Steels P. Ltd., (2025) 259 Comp Cas 430 (NCLAT); 2025 SCC OnLine NCLAT 569.] and National Company Law Tribunal dated May 16, 2024 [IL and FS Financial Services Ltd. v. Adhunik Meghalaya Steels P. Ltd., (2025) 259 Comp Cas 423 (NCLT).] are set aside. The appeal is allowed. The matter is remitted to the Adjudicating Authority to proceed with and decide in accordance with law, treating the application under section 7 of the Insolvency and Bankruptcy Code, 2016, filed by the appellant, as one filed within limitation. No order as to costs.”

“35.

A perusal of the aforesaid sections would show that there is no doubt that the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7). Equally, the auditor's report may also enter caveats with regard to acknowledgments made in the books of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills [Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal 128 : AIR 1962 Cal 115] , that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law as it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgment of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act.”

“11.

An acknowledgment in a balance sheet without a qualification can be relied upon for the purpose of the proceedings under the IBC. This principle also emerges from the decision in Asset Reconstruction Co. [Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal, (2021) 6 SCC 366 : (2021) 3 SCC (Civ) 605 : (2021) 3 SCC (Cri) 23] , which noted the decisions in Sesh Nath Singh [Sesh Nath Singh v. Baidyabati Sheoraphuli Coop. Bank Ltd., (2021) 7 SCC 313 : (2021) 4 SCC (Civ) 113] and Laxmi Pat Surana [Laxmi Pat Surana v. Union Bank of India, (2021) 8 SCC 481 : (2021) 4 SCC (Civ) 315] . This Court held : (Asset Reconstruction Co. case [Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal, (2021) 6 SCC 366 : (2021) 3 SCC (Civ) 605 : (2021) 3 SCC (Cri) 23] , SCC pp. 399-400, para 35)

“35.

A perusal of the aforesaid sections would show that there is no doubt that the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7). Equally, the auditor's report may also enter caveats with regard to acknowledgments made in the books of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills [Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal 128 : AIR 1962 Cal 115] , that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law, as it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case-by-case basis to establish whether an acknowledgment of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act.”

“In terms of the aforestated provision, there must be an 'acknowledgment of liability in respect of the property or right in question' and even if such an acknowledgment is accompanied by refusal to pay, it would mean that the period of limitation would have to be computed from the time when such acknowledgment is signed. In the case on hand, the respondent never acknowledged the sum claimed by the appellant in its notice dated 14.03.1992. On the other hand, the respondent clearly asserted that the contract value was much lesser, being just 1,55, 223/- (Rupees one lakh fifty five thousand two hundred twenty three only), and went on to state that only a sum of 27,874.10 (Rupees twenty seven thousand eight hundred seventy four and ten paisa only) was due and payable by it. In effect, there was never an acknowledgment of the total suit claim of ₹3,07,115.85 (Rupees three lakhs seven thousand one hundred fifteen and eighty five paisa only), whereby the appellant could avail the benefit of extended period of limitation for the entire amount claimed.

Learned counsel for the appellant placed reliance on the judgment of this Court in Food Corporation of India vs. Assam State Cooperative Marketing & Consumer Federation Ltd. & Ors. However, this decision is distinguishable on facts, as there was a clear admission therein of the receipt of ₹2 crores, which formed the very basis for the suit claim in that case. Once such an acknowledgment was there, this Court held that the benefit of extended period of limitation would be available under Section 18 of the Act, 1963.”

“Ref No. AC-69/SPEC Dated: 18.04.2022 To The Asstt General Manager, IDBI Bank Limited, NPA Management Group #5-9-89/1&S Chapel Road, Hyderabad 500001 Kind Attn: Mr. Mallikarjun, AGM Re. Offer for settlement to Guarantor under SARAL KARJ BHUGTRAN YOJNA- II (SKBY-II) 2020-21 Southern Pesticides Corporation Ltd (SPCL) (Under Liquidation) Dear Sir, Please refer to your letter No. IDBI/NMG-Hyd/333/SPCL/2020-21 dated 30.12.2020 on the above subject. Being a Government Organisation no such settlement/payment can be made without the approval of Board and Administrative Ministry. In response to your settlement offer, with the approval of Board of HIL, we have approached our Administrative Ministry le. Ministry of Chemicals & Fertilizers, Govt. of India for settling the matter as per clause No. IV of letter No. 52/3/2005-CH.III dated Aug.4th, 2006(copy enclosed) Ministry will provide support to HIL, in case corporate guarantee furnished by HIL are invoked by Financial Institutions who have lent funds to SPEC which had gone into liquidation. As you are also aware that due to the COVID-19 pandemic situations, all matter dealt by Govt or Statutory Bodies are badly effected and the above mentioned case is also one of them. Now some positive response are coming from Administrative Ministry for settlement of offer as proposed by you. As per your settlement offer, an amount of Rs.30,90,143.28 can be paid upto 31.03.2021 and after that Rs.32,52,782.40 is payable You are, therefore, requested to consider our request favourably and inform the settlement amount. Thanking you, Yours faithfully. (SP Mohanty) Chairman & Managing Director Enclo: as above”

“i.

Allow the present application and permit withdrawal of the present appeal; ii. Set aside and close the Corporate Insolvency Resolution Process initiated against Respondent No. 2 pursuant to the impugned order dated 30.07.2025; Pass appropriate consequential directions for closure of CIRP proceedings; and iv. Pass any other order(s) as this Hon'ble Tribunal may deem fit and proper in the interest of justice.”