Acknowledgment Of Liabilities Through Balance Sheet For Initiating Proceeding Under IBC: Dilemma Resolved

A balance sheet is a financial statement that summarizes the company's accounts, prepared to specify the liabilities and assets. The financial statement of a company certifies the "true and fair value" of the state of affairs¹. In recent past, there has been an unending saga regarding the entries on the balance sheet to be treated as an acknowledgement of debt/liability for the purposes of proceedings qua Section 18 of the Limitation Act, 1963 ("the Act") and especially for proceedings which are initiated against corporate debtors under Insolvency and Bankruptcy Code 2016 ("IBC"). The provisions of Section 18 Act provides that if a party acknowledges a debt/liability in writing prior to expiry of the limitation period, then a fresh period of limitation shall be computed from time such acknowledgment of debt/liability was made by the debtor.²