The Supreme Court of India, in a significant ruling on 29 July 2025, held that IL&FS Financial Services Ltd.'s Section 7 IBC application against Adhunik Meghalaya Steels Pvt. Ltd. was filed within the limitation period, effectively overturning prior dismissals by both the NCLT and the NCLAT.
The case revolved around the interpretation of limitation under the Insolvency and Bankruptcy Code, 2016, specifically whether the balance sheet entry in FY 2019-20 constituted a valid acknowledgment of debt under Section 18 of the Limitation Act, 1963.
“The balance sheet of FY 2019-20, when viewed in the context of previous years’ financials and surrounding circumstances, clearly amounts to an acknowledgment of debt,” — Supreme Court observed.
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Case Background
On 27 February 2015, IL&FS extended a ₹30 crore loan facility to Adhunik Meghalaya, secured by a pledge of over 8 lakh shares. The account was declared NPA on 1 March 2018. IL&FS issued a recall notice on 10 August 2018, but no payment followed.
IL&FS filed a Section 7 IBC petition on 15 January 2024, declaring an outstanding debt of over ₹55 crore. The application heavily relied on balance sheets from FY 2015–2020 and Supreme Court’s COVID limitation extension orders dated 10 January 2022.
However, both the NCLT (May 2024) and NCLAT (March 2025) dismissed the application, holding that the limitation expired on 30 May 2022, applying Para 5(III) of the Supreme Court’s 2022 order.
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The Apex Court took a contextual and liberal approach, ruling that:
- The 2019-20 balance sheet, signed on 12 August 2020, acknowledged the outstanding debt through secured borrowings figures consistent with prior years.
- The name of the creditor need not be expressly mentioned if the figures, security terms, and financial pattern establish continuity.
- The entire COVID period (15 March 2020 to 28 February 2022) stands excluded under Para 5(I) of the 2022 order, not Para 5(III) as wrongly applied earlier.
- Therefore, limitation runs until 28 February 2025, and the 15 January 2024 filing is well within time.
“The entry in the balance sheet reflects a subsisting liability and jural relationship; it need not be a fresh promise to pay,” — Justice Viswanathan clarified.
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The Supreme Court allowed the appeal, set aside NCLT and the NCLAT. rulings, and remitted the matter back to the adjudicating authority to proceed with the insolvency case on merits.
Case Title: IL&FS Financial Services Ltd. vs. Adhunik Meghalaya Steels Pvt. Ltd.
Case Type: Civil Appeal
Appeal Number: Civil Appeal No. 5787 of 2025
Judgment Date: 29 July 2025
