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IL&FS Financial Services Limited v. Adhunik Meghalaya Steels Private Limited

Civil Appeal · 2025 INSC 911Decided 30 Jul 2025
Civil Appeal No. 5787 of 2025
Justice Manoj Misra · Justice K.V. Viswanathan

Background

IL&FS had given a Rs. 30 crore term loan to Adhunik Meghalaya Steels in 2015, secured by a pledge of shares. The borrower's account was declared a Non-Performing Asset on 1 March 2018. IL&FS filed an insolvency application (Section 7 of the IBC) against the company only in January 2024, arguing that entries in the company's own audited Balance Sheet for 2019-20 amounted to a fresh "acknowledgment of debt" that restarted the limitation clock. Both the NCLT and NCLAT rejected the application as time-barred, partly because the Balance Sheet did not name IL&FS specifically.

Decision Breakdown

The Supreme Court held that a company's Balance Sheet entries can count as a valid acknowledgment of debt even without naming the specific creditor, so long as the entry, read together with earlier years' balance sheets and the cash-flow statement, clearly shows a continuing, unpaid liability. Tracing the borrowing figures across the 2015-16 through 2019-20 balance sheets, the Court found the same secured loan reflected throughout, which was enough to renew the limitation period from the date the 2019-20 Balance Sheet was signed (12 August 2020). Applying the Supreme Court's own COVID-19 limitation-extension order, the period from 15 March 2020 to 28 February 2022 was excluded entirely, meaning limitation ran until 28 February 2025, well after the January 2024 filing. The NCLAT and NCLT orders were set aside and the case sent back to be decided on merits.

Lesson Learnt

A company cannot escape old debts just because its balance sheet does not spell out a specific creditor's name. Courts will look at the full financial picture across years to see if a debt is being implicitly acknowledged, and India's COVID-era limitation extension can meaningfully revive claims that would otherwise appear time-barred.

Official source (sci.gov.in)View Judgment (PDF)

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