NCLT Mumbai: Amendment Of Default Date In IBC Pleadings Permissible Before Final Adjudication; Balance Sheet Acknowledgment Extends Limitation
Pranav B Prem
The National Company Law Tribunal (NCLT), Mumbai Bench, comprising Sushil Mahadeorao Kochey (Judicial Member) and Prabhat Kumar (Technical Member), has held that the amendment of the default date in insolvency pleadings is permissible before the final adjudication of the case, and that acknowledgment of debt in the company’s balance sheet constitutes a valid acknowledgment under Section 18 of the Limitation Act, thereby extending the limitation period. The Tribunal admitted the insolvency petition filed by Central Bank of India against Vibrant Content Pvt. Ltd. (Corporate Debtor), holding that the debt and default stood proved and that the petition was within limitation.
Background
The Central Bank of India filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against Vibrant Content Pvt. Ltd. The bank claimed outstanding dues of approximately ₹47 crore arising out of three term loans sanctioned to the Corporate Debtor. The company’s account was classified as a Non-Performing Asset (NPA) on 29 August 2018, and a demand notice was issued on 14 July 2020. The bank subsequently filed the Section 7 petition on 27 July 2024.
The Corporate Debtor opposed the petition, contending that it was barred by limitation, as it was filed more than six years after the NPA classification. It further argued that the bank’s later amendment of the date of default was impermissible as it altered the foundation of the case. It was also contended that the balance sheet entries merely reflected the NPA status and did not constitute a valid acknowledgment of debt under Section 18 of the Limitation Act. The Corporate Debtor relied on Vasavai Power Services (P) Ltd. to argue that such an amendment was not permissible once the limitation had expired.
Bank’s Submissions
The Central Bank of India argued that the audited financial statements of the Corporate Debtor for FY 2018–19, FY 2019–20, and FY 2022–23 constituted valid acknowledgments of debt, thereby extending limitation under Section 18 of the Limitation Act. The Bank also contended that under the procedural flexibility of the IBC, amendment of pleadings before final adjudication is permitted to bring the correct facts on record. Reliance was placed on Puneet P. Bhatia v. ASREC (India) Ltd. & Anr. where it was held that amendments in IBC proceedings are maintainable prior to final orders.
Tribunal’s Findings
After hearing both sides, the NCLT held that the entries in the Corporate Debtor’s balance sheets clearly indicated an acknowledgment of a subsisting liability and thus renewed the jural relationship between the parties. Referring to IL&FS Financial Services Ltd., the Tribunal reiterated that entries in the balance sheet constitute a valid acknowledgment of debt, even if the creditor’s name is not explicitly mentioned. It observed:“The balance sheets for FY 2018–19, FY 2019–20, and FY 2022–23 clearly indicate acknowledgment of a subsisting liability and renewal of a jural relationship.” Applying Section 18 of the Limitation Act, the Tribunal held that acknowledgment of debt in the FY 2022–23 balance sheet extended the limitation period, making the petition filed in July 2024 well within time.
On the issue of amendment of the default date, the Bench observed that the IBC does not bar such an amendment before final adjudication. It cited Puneet P. Bhatia v. ASREC (India) Ltd. & Anr. (three-member NCLAT bench), which ruled that the NCLT is empowered to permit amendment of pleadings at any stage before final orders are passed. The Tribunal distinguished Vasavai Power Services (P) Ltd. relied upon by the Corporate Debtor, noting that it was a two-member bench decision, whereas Puneet P. Bhatia was rendered by a larger three-member bench and therefore had higher precedential value. “Since a decision rendered by a larger constitution has higher precedence, accordingly, we are bound to follow the decision in Puneet P. Bhatia. We find no merit in the contention that the insertion of date of default could not have been permitted by this Tribunal,” the Bench observed.
Decision
The Tribunal held that:
The petition was filed within limitation, as acknowledgment in the balance sheet extended the period under Section 18.
The amendment of the default date before final adjudication was permissible and did not prejudice the Corporate Debtor.
The debt and default stood established, satisfying the requirements of Section 7 of the IBC.
Accordingly, the CIRP was admitted against Vibrant Content Pvt. Ltd., and the Tribunal appointed an Interim Resolution Professional (IRP) to take charge of the company’s affairs. The NCLT Mumbai clarified that procedural amendments, such as correcting the default date, are permissible under the IBC before final adjudication, and that acknowledgment of debt in financial statements validly extends limitation under Section 18 of the Limitation Act.
Appearance
Counsel for Financial Creditor: Adv. Mily Ghoshal a/w Adv. Aditya Mishra
Counsel for Corporate Debtor: Adv. Pallav Pakale i/b Anjali S.
Cause Title: Central Bank of India Ltd. v. Vibrant Content Pvt. Ltd.
Case No: C.P. (IB)/907(MB)/2024
Coram: Sushil Mahadeorao Kochey (Judicial Member), Prabhat Kumar (Technical Member)
