The National Company Law Tribunal (NCLT), Kolkata has ruled that the absence of a financial creditor’s name in the corporate debtor’s balance sheet does not invalidate the acknowledgment of debt, as long as the figures disclosed correspond with the outstanding liabilities.
The Tribunal allowed a petition filed by the State Bank of India (SBI) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), thereby commencing the Corporate Insolvency Resolution Process (CIRP) for S R Timber Products Private Limited.
The corporate debtor, incorporated in 2004, had availed working capital credit facilities from the State Bank of India (SBI) between 2008 and 2014, with limits rising to ₹57.25 crores by 2011. These were secured through multiple loan agreements and mortgages. Despite this, the debtor defaulted, and the account was classified as a Non-Performing Asset (NPA) on 31.03.2014. SBI issued a demand notice in 2015, with dues totaling ₹111.70 crores by 2023.
The Tribunal held that the balance sheets from 2016 to 2021, though not explicitly naming SBI, consistently reflected the debt figures, thus constituting valid acknowledgments under Section 18 of the Limitation Act. Additionally, a One Time Settlement (OTS) offer by the debtor in 2023 further affirmed the debt acknowledgment.
The NCLT Special Bench, consisting of Smt. Bidisha Banerjee (Judicial Member) and Shri Sameer Kakar (Technical Member) held, “The moratorium shall have effect from the date of this order till the completion of the CIRP or until this Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 of the IBC or passes an order for liquidation of Corporate Debtor under section 33 of the IBC, as the case may be.”
The NCLT Kolkata, relying on key Supreme Court rulings, held that acknowledgment of debt in balance sheets qualifies as valid acknowledgment under Section 18 of the Limitation Act. Citing Asset Reconstruction Co. v. Bishal Jaiswal, Anuj Jain v. Axis Bank, and Indus Biotech v. Kotak Fund, the Tribunal emphasized that financial debt requires disbursal with time value of money and a clear debtor-creditor relationship. It also upheld the validity of the debt based on consistent financial disclosures and equitable mortgage through title deed deposits.
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