Case Law Details
Asset Reconstruction Company (India) Limited Vs Bishal Jaiswal & Anr. (Supreme Court)
An exhaustive judgment of the Calcutta High Court in Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal 128 : AIR 1962 Cal 115 [“Bengal Silk Mills”] held that an acknowledgement of liability that is made in a balance sheet can amount to an acknowledgement of debt.
Importantly, this judgment holds that though the filing of a balance sheet is by compulsion of law, the acknowledgement of a debt is not necessarily so. In fact, it is not uncommon to have an entry in a balance sheet with notes annexed to or forming part of such balance sheet, or in the auditor’s report, which must be read along with the balance sheet, indicating that such entry would not amount to an acknowledgement of debt for reasons given in the said note.
Likewise, under Section 134, financial statements are to be approved by the Board of Directors before they are signed, and the auditor’s report, as well as a report by the Board of Directors, is to be attached to each financial statement.
Under Section 137, copies of financial statements are then to be filed with the Registrar of Companies.
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