Balance Sheets Can Amount To Acknowledgement Of Debts

Name of the Case

Asset Reconstruction Company (India) Limited v. Bishal Jaiswal

Background Facts

• A three – judge bench of the National Company Law Appellate Tribunal while deciding a case referred to various
precedents.

• The correctness of the V. Padmakumar v. Stressed Assets Stabilization Fund case, in which a 4:1 majority decision
was given stating balance sheet to not be an acknowledgement of debts, was doubted by the bench who referred the
case to a five – judge bench of the Supreme Court to reconsider the case.

Case Facts

• The five­judge bench dismissed the reference of the three – judge bench and stated the reference to be
“inappropriate, incompetent and a misadventure”.

• The bench also stated that such actions would likely shaken up the faith of the people on the law and there should be
strict adherence to the precedents of the Supreme Court.

• The three­judge bench appealed before the Supreme Court against the dismissal of the reference and also to
expunge the statement made by the five­ judge bench.

Question of Law involved

• Taking into consideration the brief facts of the case, three major questions of law were to be answered.

•  Would balance sheet amount to acknowledgement of debt?
• Does Section 18 of Limitation Act extend the period of limitation?
• Was the decision of the five – judge bench justified?

Observation of the Court

• The Apex Court referred to various precedents of the Supreme Court and stated that balance sheet is
acknowledgement of the debts under Section 18 of the Limitation Act but the filing of balance sheet is a compulsion and
acknowledgement of debts is not.

• The Court agreed with the decision of the majority of the cases.

• So the Court was of the opinion that acknowledgement should be decided on the basis of the facts and circumstances
of the cases.

• The judgement of the five – judge bench was set aside as it was given without even considering the case referred by
the three – judge bench. 

What do you think of debt in the balance sheets?