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State Bank of India vs Krishidhan Seeds Pvt. Ltd.

Civil Appeal · 2022 INSC 428Decided 18 Apr 2022
Civil Appeal No. 910 of 2021
Dr Dhananjaya Y. Chandrachud · Surya Kant

Background

Krishidhan Seeds had taken credit facilities from SBI since 2006, and by 2013 owed over Rs 102 crores. After the account was declared a Non-Performing Asset (NPA) in June 2014, settlement talks continued but broke down. SBI filed an application under Section 7 of the IBC in September 2018 to start insolvency proceedings, claiming a default of about Rs 189 crores. Both the NCLT and the NCLAT rejected SBI's application as time-barred, holding (relying on an NCLAT ruling in V. Padmakumar) that the three-year limitation period ran strictly from the 2014 NPA date and that acknowledgments in balance sheets could not extend it.

Decision Breakdown

The Supreme Court allowed SBI's appeal and sent the case back to the NCLT for fresh consideration. It held that the V. Padmakumar ruling relied on by the NCLT and NCLAT had since been expressly overruled by a three-judge Bench of the Supreme Court in Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal, which held that an unqualified acknowledgment of debt in a company's balance sheet can extend the limitation period under Section 18 of the Limitation Act. This position was reinforced by other Supreme Court rulings (Sesh Nath Singh, Laxmi Pat Surana, and others) confirming that Section 18's "acknowledgment of liability" principle applies to IBC proceedings. Since neither tribunal had examined SBI's evidence of later acknowledgments/settlement offers in light of this now-settled law, the matter was restored to the NCLT to decide afresh, keeping all factual contentions open.

Lesson Learnt

A company's own balance sheet entries and settlement correspondence acknowledging a debt can restart the limitation clock for creditors seeking to initiate insolvency proceedings: a debtor cannot rely on the bare NPA date alone to claim a claim is time-barred if later acknowledgments exist.

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

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