Anil Kumar Mittal, RP of Surya Kant Jaipuria - We are of the considered view that the receipt or distribution of sale proceeds in the course of liquidation is merely a statutory consequence of the insolvency process and cannot, by itself, amount to an acknowledgment of debt by the Personal Guarantor or the Corporate Debtor. Such realisation does not satisfy the legal requirements of a conscious and voluntary acknowledgment capable of extending the period of limitation. Accordingly, the said contention of the Applicant is untenable.

  NCLT ND (2026.02.26) in Anil Kumar Mittal, RP of Surya Kant Jaipuria [(2026) ibclaw.in 285 NCLT, IA (I.B.C)/883(ND)2024 and IA (I.B.C)/ 4716(ND)2024 and IA (I.B.C)/232(ND) 2024 in C.P. (IB)/9(ND)2023] held that;

• We are of the considered view that the receipt or distribution of sale proceeds in the course of liquidation is merely a statutory consequence of the insolvency process and cannot, by itself, amount to an acknowledgment of debt by the Personal Guarantor or the Corporate Debtor. Such realisation does not satisfy the legal requirements of a conscious and voluntary acknowledgment capable of extending the period of limitation. Accordingly, the said contention of the Applicant is untenable.

• Once the Corporate Debtor stands liquidated and its assets have been dealt with in accordance with the provisions of the Code, the subsequent invocation of the Personal Guarantee, in the manner sought, would effectively amount to initiating a recovery proceeding under the guise of insolvency.

Excerpts of the Order;

# 1. The present petition is filed under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 by Canara Bank for initiation of Insolvency Resolution Process qua the Respondent/Personal Guarantor i.e., Mr. Surya Kant Jaipuria. This Adjudicating Authority vide order dated 21.12.2023 initiated Interim Moratorium under Section 96 of the Code and appointed Mr. Anil Kumar Mittal bearing registration no. IBBI/IPA-002/IP-N00742/2018-2019/12263 as the Resolution Professional to submit a Report within a stipulated time as per Section 99 of the Code. In compliance of order dated 21.12.2023, the Resolution Professional submitted a report under section 99 of the Code through IA/883/ND/2024. However, since the report was found to be under defect, the RP refiled its report under section 99 of the Code through IA (I.B.C)/4716(ND)2024.

# 2. FACTS OF THE CASE

a. The Canara Bank, vide its Sanction Letter dated 28.02.2015, bearing Reference No. SYNB/NOTICE/ICPL/2018, sanctioned various Working Capital Facilities in favour of the Corporate Debtor, M/s Integrated Caps Pvt. Ltd., aggregating to Rs. 33,95,43,000/- (Rupees Thirty-Three Crores Ninety-Five Lakhs Forty-Three Thousand only). The said facilities were stipulated to fall due for repayment on or before 27.09.2017.

b. It is submitted that the Corporate Debtor defaulted in the repayment of the Working Capital Facilities sanctioned by Canara Bank and, consequently, the loan accounts were classified as Non-Performing Assets (NPA) on 27.09.2017. Pursuant to the default, Canara Bank, vide its Guarantee Invocation Notice dated 09.03.2018 bearing No. SYNB/NOTICE/ICPL/2018, invoked the personal guarantee furnished by the Personal Guarantor and called upon him to discharge the outstanding dues under the said facilities. Thereafter, Canara Bank, through its Demand Notice in Form B dated 22.07.2022 issued to the Personal Guarantor, once again demanded repayment of the amounts due and payable under the sanctioned facilities.

c. It is submitted that a Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 was filed by Shri Bal Pratap Srikent against the Corporate Debtor, M/s Integrated Caps Private Limited, and the said Petition, bearing C.P. (IB) 74/ND/2018, was admitted by this Tribunal (New Delhi, Court–IV) vide Order dated 06.03.2018, thereby commencing the Corporate Insolvency Resolution Process (“CIRP”). Subsequently, an Application under Section 33 of the Code was filed by the Resolution Professional seeking initiation of the Liquidation Process of the Corporate Debtor, which was allowed by this Bench vide Order dated 01.02.2019.

d. The Applicant stated that an application under Section 54 of the Code was filed by the Liquidator of M/s Integrated Caps Private Limited seeking dissolution of the Corporate Debtor, which was allowed by this Bench vide Order dated 01.07.2021.

e. Canara Bank has claimed a total debt of Rs. 24,07,59,668.25 in its application filed under Section 95 of the Insolvency and Bankruptcy Code, 2016. In terms of Section 99 of the Code, the Resolution Professional is required to submit a report within ten working days of appointment, recommending admission or rejection of the said application. Pursuant thereto, the Resolution Professional called upon the Personal Guarantor, Mr. Surya Kant Jaipuria, to furnish proof and details of any repayment made to Canara Bank, by e-mail dated 29.12.2023 and by courier dated 28.12.2023.

f. The Personal Guarantor submitted a reply dated 01.01.2024 to the Resolution Professional, inter alia, raising the following contentions:

i. The application under Section 95 was filed on or about 10.11.2022, beyond three years from the date of declaration of NPA (27.09.2017) and invocation of the alleged guarantee (09.03.2018), and is therefore barred by limitation.

ii. Canara Bank had filed an Original Application before the DRT on 27.03.2018 claiming an outstanding amount of Rs. 28,79,95,483.98. Subsequently, the Bank received Rs. 19,92,99,267/- towards liquidation proceeds of the Corporate Debtor by December 2020, leaving a balance of Rs. 8,86,96,216.93. Accordingly, the present claim is disputed.

iii. The Bank has levied interest at 17.2% per annum, compounded monthly, allegedly contrary to the terms of the agreement and RBI guidelines, and has failed to give due credit of Rs. 19,92,99,267/-.

g. Upon consideration of the submissions of the Personal Guarantor, the Resolution Professional submitted that it formed the opinion that the application filed by Canara Bank on 10.11.2023 was within the period of limitation, as the cause of action subsisted until the dissolution of the Corporate Debtor vide Order dated 01.07.2021, and the limitation period of three years is to be reckoned therefrom. It was further observed that the amount claimed in the Original Application before the DRT was computed up to the date of its filing and, since the dues remained unpaid, interest continued to accrue. During the liquidation proceedings in 2021, amounts were disbursed to the Bank in three tranches and credited to three separate bank accounts in the following manner:

I. Account No. VAAOSLB192840472

i. Rs. 1.00 crore on 31.12.2019

ii. Rs. 10.00 lakh on 23.12.2020

II. Account No. VAAOSLB1928404745

i. Rs. 2.95 crore on 22.11.2019

ii. Rs. 32.99 lakh on 30.12.2019

iii. Rs. 50.00 lakh on 30.03.2020

III. Account No. 90491250001606

i. Rs. 10.00 crore on 01.10.2019

ii. Rs. 5.04 crore on 21.11.2019

These payments were duly appropriated towards the outstanding liability in accordance with banking norms and the applicable provisions of law.

h. It is submitted that a total sum of Rs. 19,92,99,267/- was recovered by Canara Bank through the liquidation proceedings of the Corporate Debtor up to the year 2020, which recovery was duly recorded and certified by this Hon’ble Tribunal vide Order dated 01.07.2021. However, owing to the continued accrual of interest on the unrecovered portion of the debt, the outstanding liability has increased substantially, and the total amount presently due and recoverable stands at Rs. 28,33,36,763.51/-, the bifurcation of which is set out hereinbelow.

i. In light of the above, and considering that the Personal Guarantee dated 27.03.2015 secures an amount of Rs. 34,06,00,000/-, the Bank is legally entitled to recover the outstanding sum of Rs. 28,33,36,763.51/- from the Personal Guarantors of the Corporate Debtor.

j. In compliance with the order dated 21.12.2023 of the Adjudicating Authority, the Resolution Professional submitted a report under Section 99 of the Code recommending for admission of the Application.

k. Submissions of the Resolution Professional with regards to the present application, is as extracted below: –

i. That this Tribunal, vide Order dated 21.12.2023, had appointed Applicant as the Resolution Professional in respect of the Respondent–Personal Guarantor.

ii. In compliance with the aforesaid Order and in discharge of his statutory duties, the Applicant issued a communication to the Personal Guarantor, Ms. Bubbles Sabharwal, calling upon her to furnish documentary proof and complete particulars of any repayments made to the Financial Creditor, Canara Bank. However, despite such request, no written response has been received from the Personal Guarantor.

iii. That the Financial Creditor, Canara Bank, vide its e-mail dated 27.12.2023, has furnished the relevant records and statements, which clearly demonstrate that no repayment whatsoever has been made by the Personal Guarantor towards the outstanding dues.

iv. In view of the above facts, and in compliance with the Order dated 21.12.2023 passed by this Hon’ble Tribunal, and in accordance with Section 99 of the Insolvency and Bankruptcy Code, 2016, the Applicant hereby submits his Report recommending admission of the Application filed by Canara Bank under Section 95 of the Code against the Personal Guarantor.

l. The Applicant has placed its reliance on the judgment of the Hon’ble NCLT, New Delhi Bench-II, in UCO Bank vs. Smt. Nishu Goel (IB-355/ND/2024), wherein it was held that payment made by a liquidator towards the dues of a creditor amounts to acknowledgment of debt, thereby extending the period of limitation. This principle has been further affirmed by the Hon’ble High Court of Kerala in CP Sreelal vs. District Collector, Thiruvananthapuram & Ors. [AIR 2007 KER 131], holding that the repayment of amount of debt to Creditor in any situation would amount to payment in terms of the provisions of Section 19 of Limitation Act, 1963, constitutes a valid acknowledgment for the purpose of limitation.

# 3. Reply on behalf of the Respondent/ Guarantor

a. The Respondent/ PG in its reply contended that the petition filed by the Bank is an abuse of the process of law, having been instituted by suppression and misrepresentation of material facts before this Hon’ble Tribunal. It is submitted that the Bank misled the Tribunal into taking cognizance of the petition and appointing the Resolution Professional, despite no case being made out or disclosed. The maintainability of the petition has accordingly been challenged by the Respondent by filing I.A. No. 232 of 2024, in which notice was issued by this Tribunal on 17.01.2024.

b. The Respondent submitted that it is neither an insolvent person nor is the present petition intended for resolution under the Code. The petition is a coercive and recovery-oriented measure adopted by the Bank, despite its receipt of Rs. 19,92,99,267/- pursuant to the liquidation of the Borrower Company. This material fact has been deliberately suppressed, as there is no disclosure in the petition regarding receipt of the said amount. The Bank has further suppressed the minutes of the CoC meeting pursuant to which the said sum was received in full and final settlement.

c. The PG submitted that the Bank has failed to disclose the manner in which the amount of Rs. 19,92,99,267/- has been adjusted. In any event, such adjustment is improper, as the Bank’s statement of account contains unauthorised entries and is not duly maintained. Further, for an alleged unliquidated debt, the Bank has simultaneously initiated insolvency proceedings against three Personal Guarantors, including two Directors of the Borrower Company, namely Mr. Biren Sabharwal and Mrs. Bubble Sabharwal, who are alleged beneficiaries of the loan amounts. No cause of action arises against the Respondent alone in respect of an unliquidated debt, and there is no basis to contend that any liquidated sum is outstanding solely from the Respondent.

d. The Respondent in its reply stated that that as per Article 137 of the Limitation Act applies to applications under the Insolvency and Bankruptcy Code, prescribing a limitation period of three years. For the purpose of computing limitation, the relevant dates, as submitted by the Respondent, are as follows: the account of M/s Integrated Caps Private Limited was declared NPA on 27.09.2017; a demand notice under Section 13(2) of the SARFAESI Act, 2002 was issued on 19.12.2017; upon receipt of the Respondent’s reply dated 02.01.2018, the Bank issued a further demand notice through its counsel on 17.01.2018; representations were made by the Respondent and his counsel on 31.01.2018 and 13.02.2018; and the Bank invoked the alleged personal guarantee vide letter dated 09.03.2018, which, according to the Respondent, was vague and did not specify the guarantee invoked, to which a reply was submitted on the same date.

e. The PG stated that the present petition, filed on or about 10.11.2022, has been instituted beyond three years from the date of declaration of NPA (27.09.2017), as well as the revocation and invocation of the alleged guarantee on 02.01.2018 and 09.03.2018, and is therefore barred by limitation and not maintainable. The Bank has consciously omitted any pleading on limitation to avoid scrutiny and summary rejection, and the petition is completely silent on this aspect.

f. The PG submitted that the RP has erroneously opined that the petition filed by Canara Bank on 10.11.2022 is within limitation, without citing any statutory provision or settled principle to support the conclusion that the cause of action subsisted until the dissolution of the Corporate Debtor on 01.07.2021. It is settled law that the cause of action to proceed against a Personal Guarantor arises within three years from the declaration of the borrower’s account as NPA and from the invocation or revocation of the deed of guarantee. In the present case, the guarantee was revoked on 02.01.2018 and invoked on 09.03.2018; consequently, the cause of action, if any, last arose on 09.03.2018 and the limitation period expired on 08.03.2021. The conclusion recorded by the Learned RP that the cause of action continued until dissolution is therefore without legal basis.

IA (I.B.C)/232(ND)2024

g. The Respondent further submitted that in the present case, the liquidation proceedings of the borrower company stand concluded and the borrower company was liquidated vide order dated 01.07.2021. The present application was filed by the Bank on or about 10.11.2022, i.e., after completion of the liquidation process. Therefore, this Tribunal lacks jurisdiction, and Section 60 of the Insolvency and Bankruptcy Code, 2016. The competent adjudicating authority, therefore, continues to be the Debt Recovery Tribunal.

h. It is submitted that the Bank is claiming a fictitious and unsubstantiated amount of Rs. 24,07,59,688.25 from the Respondent. In the Original Application dated 27.03.2018 filed before the DRT, the Bank had claimed a sum of Rs. 28,79,95,483.93. Subsequently, the Bank admitted to having received Rs. 19,92,99,267/- by 23.12.2020 pursuant to the liquidation of the Borrower Company and informed the DRT that the balance amount due was Rs. 8,86,96,216.93, as stated in the affidavit of its Chief Manager, Mr. Sachendra Kumar Vimal, filed in the proceedings pending before the DRT. The relevant potion is annexed herewith:

i. Despite the above, the Bank has, in the present proceedings, claimed an amount of Rs. 24,07,59,688.25 without disclosing the basis or manner of computation. No explanation has been furnished as to how, after receipt of Rs. 19,92,99,267/- against the earlier claim of Rs. 28,79,95,483.93, the alleged outstanding has been escalated to Rs. 24,07,59,688.25. Even assuming, without admitting, that a balance of Rs. 8,86,96,216.93 remained due after adjustment, the Bank has failed to justify how the said amount has been inflated to Rs. 24,07,59,688.25 in the application dated 10.11.2022.

j. The Applicant further submits that the Respondent is a businessman of repute, enjoying considerable goodwill in the public domain in India, and was never a Director of Integrated Caps Private Limited. The said company was at all relevant times controlled, managed, and operated by its directors, namely Mr. Biren Sabharwal and Mrs. Bubbles Sabharwal, with Mr. Biren Sabharwal acting as the Managing Director.

ANALYSIS AND FINDINGS

# 4. We have heard the learned counsel appearing for the respective parties and have meticulously examined the pleadings, submissions, and documents brought on record.

# 5. The issue for consideration is whether the present petition is within the limitation or not?

# 6. The Canara Bank, vide its Sanction Letter dated 28.02.2015 bearing Reference No. SYNB/NOTICE/ICPL/2018, sanctioned various Working Capital Facilities in favour of the Corporate Debtor aggregating to Rs. 33,95,43,000/- (Rupees Thirty-Three Crores Ninety-Five Lakhs Forty-Three Thousand only). The said facilities fell due for repayment on or before 27.09.2017.

# 7. That while availing the aforesaid facilities, as per the submissions of the RP, the Personal Guarantor, Mr. Surya Kant Jaipuria, executed a Personal Guarantee Agreement dated 27.03.2015 in favour of Canara Bank, thereby guaranteeing the due repayment of the facilities sanctioned to the Corporate Debtor.

# 8. That the Corporate Debtor, M/s Integrated Caps Private Limited, was admitted into the Corporate Insolvency Resolution Process in C.P. (IB) 74/ND/2018 vide Order dated 06.03.2018 passed by this Adjudicating Authority. Thereafter, the Resolution Professional of the Corporate Debtor filed an Application under Section 33 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of the Liquidation Process. The said Application was allowed, and the Corporate Debtor was ordered to be liquidated vide Order dated 01.02.2019 passed by this Bench.

# 9. That the Corporate Debtor defaulted in repayment of the debt sanctioned by Canara Bank and, having failed to regularize the account, was consequently classified as a Non-Performing Asset (NPA) on 27.09.2017. Accordingly, the date of default would be 29.06.2017.

# 10. We note, as per the submissions of the Learned Counsel for the Resolution Professional, that the quantum owed to Canara Bank at the time of initiation of the Original Application (OA) before the Debt Recovery Tribunal (DRT) was computed only up to the date of filing of the said application. It is pertinent to observe that, owing to the continued non-recovery of the outstanding dues, interest accrued on the principal amount, thereby enhancing the total liability of the Corporate Debtor. It is further recorded that a sum of Rs. 19,92,99,267/- was realised by the Bank through the liquidation process by the year 2020. Further, we take note of the affidavit filed by the Bank’s Chief Manager, Mr. Sachendra Kumar Vimal, in the proceedings pending before the DRT, wherein it is stated that the balance amount due was Rs. 8,86,96,216.93.

# 11. On the issue of limitation, we note that the Corporate Debtor initially defaulted in repayment of its financial obligations, pursuant to which the loan account was classified as a Non-Performing Asset (NPA) on 27.09.2017. Accordingly, the date of default computed would be 29.06.2017. Consequent thereto, Canara Bank invoked the Personal Guarantee furnished by the Personal Guarantor vide Guarantee Invocation Notice dated 09.03.2018.

# 12. The Applicant has placed reliance on the judgment rendered by the Hon’ble Kerala High Court concerning the enforceability of a personal guarantee issued in favour of the Kerala Financial Corporation. However, we find that the facts of the present case are distinguishable from those obtaining in the said judgment, and therefore, the ratio laid down therein is not applicable to the facts of the instant case.

# 13. The Article 137 of the Limitation Act, 1963 provides a 3 (Three) year of Limitation Period from the date when “Right to Apply” accrues. “The Right to Apply”, accrues when a default occurs. If the default has occurred over three years before the date of filing of the application, the application would be barred under Article 137 of the Limitation Act. The period of limitation is 3 years from the date of default. In the present case, the default occurred on 27.09.2017 (default occurred on 29.06.2017, 90 days prior to NPA). In absence of any acknowledgement, limitation expired on 27.09.2020 and we note from the perusal of record that Applicant has filed this present application on 10.11.2022. Further as per the facts of the case, the NPA was declared on 27.09.2017, so accordingly the date of default would be 29.06.2017 and the guarantee was revoked on 02.01.2018 by the PG on receipt of notice, thereafter, the bank invoked the alleged guarantee vide letter dated 09.03.2018.

# 14. The Hon’ble Supreme Court in Re: Cognizance for Extension of limitation (2022) directed that the period 15.03.2020 to 28.02.2022 be excluded in computing limitation. Applying this exclusion, even if we construe the date of NPA as default date, the limitation period stood extended upto only September 2022 and the Application was filed on application on 10.11.2022.

# 15. Further, upon perusal of the petition and the documents annexed thereto, we find that no acknowledgment of debt, as contemplated under Section 18 of the Limitation Act, 1963, has been placed on record. The Applicant has sought to rely upon the realisation of sale proceeds during the liquidation of the Corporate Debtor as constituting an acknowledgment of liability for the purposes of extending the limitation period. We are of the considered view that the receipt or distribution of sale proceeds in the course of liquidation is merely a statutory consequence of the insolvency process and cannot, by itself, amount to an acknowledgment of debt by the Personal Guarantor or the Corporate Debtor. Such realisation does not satisfy the legal requirements of a conscious and voluntary acknowledgment capable of extending the period of limitation. Accordingly, the said contention of the Applicant is untenable.

# 16. The PG has stated that vide sanction letter dated 28.02.2015, the ILC/FLC limit of Rs. 1,500 lakhs was restructured and was valid only up to 28.02.2016. However, despite expiry of the sanctioned period, the Borrower Company, in collusion with Bank officials, continued to utilise the LC facility thereafter without the consent, knowledge, or guarantee of the Personal Guarantor. It is submitted that the LC outstanding of Rs. 15,90,53,678.60 as on 15.03.2018 arose solely due to LCs aggregating approximately Rs. 31.85 crores opened after 28.02.2016. The outstanding amount, which stood at Rs. 6.04 crores as on 31.03.2016, escalated only due to such unauthorized extensions, which were contrary to the sanction terms. The issues raised involve disputed questions of fact and cannot be adjudicated by this Adjudicating Authority, rendering the present forum inappropriate for determination of the same.

# 17. Moreover, we note that an Original Application was filed before the Learned DRT in 2018, followed by the admission of a Section 9 application under the Code in 2018, culminating in the passing of a liquidation order against the Corporate Debtor. In this backdrop, it is evident that the present application filed by the Applicant does not partake the character of a resolution process in any manner; rather, it is in substance an attempt to recover the outstanding dues.

# 18. Once the Corporate Debtor stands liquidated and its assets have been dealt with in accordance with the provisions of the Code, the subsequent invocation of the Personal Guarantee, in the manner sought, would effectively amount to initiating a recovery proceeding under the guise of insolvency. Such an approach is impermissible, as the Insolvency and Bankruptcy Code, 2016 is not a forum for debt recovery but a mechanism aimed at time-bound resolution, failing which liquidation ensues. The intent and scheme of the Code cannot be permitted to be circumvented for the purpose of mere recovery.

# 19. In the matter B.K. Educational Services Private Limited v. Parag Gupta & Associates (2019)11SCC633 it was held that limitation cannot be extended except by operation of Section 18 or 19 of the Limitation Act. Thus, in absence of acknowledgment, the petition filed in 2023 is accordingly held to be barred by limitation.

# 20. In view of the foregoing discussion and for the reasons recorded hereinabove, this Adjudicating Authority holds that the report submitted by the Resolution Professional under Section 99 of the Insolvency and Bankruptcy Code, 2016 in IA (I.B.C)/4716(ND)2024 does not merit acceptance and is accordingly rejected. Since the report field by the Applicant/RP in IA (I.B.C)/883(ND)2024 was not on board, accordingly, the application stands dismissed and Application/objection filed by the Personal Guarantor i.e. IA (I.B.C)/ 232(ND)2024 stands allowed. Further, the application filed by the Applicant under Section 95 of the Insolvency and Bankruptcy Code, 2016 i.e. C.P. (IB)/9(ND)2023 stands dismissed as barred by limitation.

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M/s. Primee Silicones (Chennai) Pvt. Ltd. Vs. M/s. UCAL Fuel Systems Ltd.- It is also a settled proposition of law that a cheque which has not been encashed cannot amount to an ‘acknowledgement of liability’ in terms of Section 18 of the Limitation Act, 1963.

 NCLAT Chennai (17.02.2023) In M/s. Primee Silicones (Chennai) Pvt. Ltd. Vs. M/s. UCAL Fuel Systems Ltd.  [Company Appeal (AT) (CH) (Ins.) No. 299 of 2021] held that;. 

• It can be clearly seen that the amounts were paid towards specific invoices and therefore keeping in view the ratio of the aforenoted Judgements the said ‘Account’ cannot be termed as a ‘running Account’.

• It is also a settled proposition of law that a cheque which has not been encashed cannot amount to an ‘acknowledgement of liability’ in terms of Section 18 of the Limitation Act, 1963.

Excerpts of the order; 

# 1. Dissatisfied with the ‘Order’ dated 29.04.2021 passed by the Learned Adjudicating Authority, (National Company Law Tribunal, Division Bench – II, Chennai) in IBA No.364/2020, M/s. Primee Silicones (Chennai) Private Limited/the ‘Operational Creditor’ preferred this ‘Appeal’, challenging the ‘Order’ of dismissal of the Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as ‘The Code’). While dismissing the Section 9 Application, the ‘Adjudicating Authority’ observed as follows:

• “6. Further, the account is not a “Running Account” as stated in reply by respondent. Clearly, 17 out of 25 invoices are beyond the period of limitation. The applicant has not filed any documents to satisfy that the old invoices are valid and enforceable in the eye of law. The respondent has stated in para-8 of the reply, the payment was made to exact amount of each invoice. Hence, on perusal of pleadings and documents, we conclude that the account cannot be termed as “running account” as evidence in Invoices at Page 18 to page 42, calculation sheet at page.43. The Operational Creditor has claimed interest at the rate of 24% per annum since earlies invoice dated 29.04.2015. The claim of Applicant included principal and interest since 29.04.2015. Admittedly, out of 25 invoices 17 are barred by limitation. The applicant has failed to prove “debt” and “default” as stated in application. However, this order does not bar the applicant to approach Civil Court for recovery, if any.”

# 2. It is stated that the ‘Operational Creditor’ is involved in the business of manufacturing Metal Forming Fluid Lubricant and Industrial Oils and in the due course of business, the ‘Corporate Debtor’ had placed several ‘Orders’ and accordingly the ‘Appellant’/‘Operational Creditor’ has supplied ‘Die Coat’ to the ‘Corporate Debtor’ from the Year 2013 onwards and corresponding Tax Invoices were raised from time to time. It is the case of the ‘Appellant’ that the last payment was received from the ‘Corporate Debtor’ on 07.11.2019 and despite several emails sent for seeking payment, the ‘Corporate Debtor’ did not respond. It is submitted that a ‘Demand Notice’ was issued on 07.02.2020, which was received by the ‘Corporate Debtor’, but the ‘Company’ has not made any further payments. It is the case of the ‘Operational Creditor’ that the ‘Corporate Debtor’ is required to pay a sum of Rs.13,24,275/- (Rs.8,03,815/- towards ‘principal amount’ and Rs.5,20,460/- towards ‘interest’ at 24% p.a.) and with further interest of 24% p.a. till the date of payment.

# 3. Learned Counsel for the ‘Appellant’ strenuously contended that the ‘Operational Creditor’ is a registered MSME; that the ‘Corporate Debtor’ has not disputed the receipt of goods or raised any disputes prior to the receipt of ‘Statutory Notice’ dated 07.02.2020, but their only contention is that some of the invoices are dated prior to 2017 and are hence ‘time barred’. It is submitted that the Account is a ‘running Account’ and the ‘claim’ is well within the period of ‘Limitation’. It is the case of the ‘Appellant’ that even if the Accounts are not construed to be a ‘running Account’, the email sent by the ‘Corporate Debtor’ on 23.10.2018, asking the ‘Appellant’ to reconcile the Accounts and share of ‘payment advice’ mentioning Invoice Number very specifically and also mentioning the details of the cheque dated 13.03.2017 drawn on Bank of India for Rs.3 Lakhs/- would show that the Respondent Company had admitted the liability. It is argued that since the payment was not received by the ‘Appellant’ as on 13.03.2017 or on any other subsequent dates, the communication between the ‘parties’ in October 2018 should be construed as an actual date of acknowledgment of default and therefore the ‘Right to Sue’ accrues on that date, and the Section 9 Application having been filed on 24.02.2020 was well within the period of ‘Limitation’.

# 4. Learned Counsel for the ‘Appellant’ submitted that during the pendency of the case on 06.03.2021, at 4:00 PM, an amount of Rs.3,23,723.36/- was transferred to the Account of ‘Appellant’ without seeking leave of the ‘Tribunal’ and without giving any ‘Notice’ to the ‘Appellant’. Therefore, the ‘Appellant’ as per Section 60 of the Contract Act, 1872, has adjusted the amount paid towards the interest dues. It is contended that the Respondent had served a memo on 08.03.2021 that 8 invoices, which are not ‘barred by Limitation’ have been paid, but the same was objected to on the ground that the amount was apportioned towards interest. As far as interest is concerned, the ‘terms’ and ‘conditions’ of the invoice attract ‘Penal Interest’ at 24% p.a. after the Credit period of 90 days. It is also submitted that the Hon’ble Supreme Court has held that any acknowledgement in the Balance Sheet of the ‘Corporate Debtor’ is an ‘acknowledgement of debt’, and in the present case, the ‘Corporate Debtor’ having admitted to the invoices in October 2018, would only show that ‘Corporate Debtor’ has acknowledged their liability to pay the amounts. Further, the earliest unpaid invoice is dated 29.04.2015, for which the ‘Limitation’ of three Years, expires on 28.04.2018, but the cheque payment alleged by the ‘Corporate Debtor’ is dated 13.03.2017 which construes an intention to pay and therefore the Application is well within the period of ‘Limitation’.

# 5. Learned Sr. Counsel Mr Pandian argued that the Application was clearly ‘barred by Limitation’ and that the Account cannot be termed as a ‘running Account’ as the ingredients of a ‘running Account’ would include:

• (a) the value of the goods supplied to be debited in the Debit Column;

• (b) when amounts are paid by the ‘buyer’ to the ‘seller’, they are entered in the Credit Column; and

• (c) the difference is continuously maintained in the column for balance.

# 6. It is argued by the Learned Sr. Counsel for the Respondent/‘Corporate Debtor’, that non-payment of invoices and payment without specifying a particular invoice does not make the transaction a ‘running Account’, which in any case is not the position in the present matter. The ‘Appellant’ for the first time in these proceedings, contended that the amount of Rs.3,23,723.36/- paid by the ‘Corporate Debtor’ has been appropriated in the manner provided in Section 60 of the Contract Act 1872, as the payment was made only towards the ‘principal amount’ in respect of the 8 invoices thereby eliminating any question of it being appropriated towards any alleged interest amounts and hence Section 60 of the Contract Act, 1872, is inapplicable to the facts of this case. It is only to overcome the bar of ‘Limitation’, that the ‘Appellants’ have resorted to this argument that the amount was apportioned towards interest, when many of the invoices do not carry the interest component. The ‘interest rate’ has been stipulated as 24% p.a. on every invoice, except the invoices raised between the Years 2017 & 2019, which are already paid by the ‘Corporate Debtor’. The ‘Appellant’ themselves have calculated the number of days and delay and interest in respect of each ‘individual invoice’ clearly recognising that the transactions were on an individual ‘invoice to invoice’ basis and not a ‘running Account’. It is the case of the Respondent/‘Corporate Debtor’, that the ‘Appellant’ cannot claim an interest on all the 17 invoices, in respect of which all claims are clearly ‘time-barred’. With respect to the balance 8 invoices which have already been cleared, they do not stipulate for payment of any interest and therefore the question of any interest liability in respect of these payments does not arise.

# 7. It is the case of the ‘Corporate Debtor’ that the email communications relied upon by the ‘Appellant’ does not construe ‘acknowledgement of debt’, but only contain a ‘payment advice’ from the Respondent. Further, the cheque which was issued by the Respondent in respect of these amounts was not even cleared by the Bank. The email includes a ‘payment advice’ from the Respondent that they have made payments to the tune of Rs.3 Lakhs/- towards certain invoices by a cheque dated 13.03.2017. It is the case of the Respondents that the email can at best be treated as a Statement of payment and not an acknowledgement of a subsisting debt. Learned Sr. Counsel placed reliance on the Judgement of the Hon’ble High Court of Madras in ‘Karamadai Naicken’ Vs. ‘R. Raju Pillai & Anr.’1, in support of his submissions that a Statement made by the Debtor that he was under a liability, coupled with a Statement that he has discharged the debt, would not amount to an ‘acknowledgement’ of a subsisting liability. It is also contended that a cheque which is dishonoured, cannot be construed as part payment within the meaning of Section 20 of the Limitation Act, 1963. It is the case of the Respondent that the issue of Balance Sheets and ‘acknowledgement’ therein was raised by the ‘Appellant’ for the very first time in these ‘Appeals’ and the said Balance Sheets have also not been filed. Nor is there any attempt made by the ‘Appellant’ to show as to how ‘Asset Reconstruction Company India Limited’ Vs. ‘Bishal Jaiswal and Anr.’2, is applicable to the facts of this case.

Assessment:

# 8. The main point for consideration in this ‘Appeal’ is whether the ‘Adjudicating Authority’ was justified in dismissing the Application filed under Section 9 of the Code, as ‘barred by Limitation’. At the outset, the question as to whether the ‘Account’ between the ‘parties’ could be construed as a ‘running Account’ is being decided. Learned Sr. Counsel for the Respondent/‘Corporate Debtor’ has strenuously argued that the basic requirements of the Account having clear ‘Debit’ and ‘Credit’ entries was not satisfied in the present case and that all payments have been made towards ‘individual invoices’ and therefore the Account cannot be construed as a ‘running Account’. At this juncture, the Respondent placed reliance on the Judgement of the Hon’ble Delhi High Court in ‘Bharat Skins Corporation’ Vs. ‘Taneja Skins Corporation Private Limited’3 in which, para 19, reads as follows:

• “19. In case of a running and non-mutual account between the buyer and seller, when goods are delivered by the seller to the buyer, the value of the goods is debited in the debit column and when amounts are paid by the buyer to the seller, they are entered in the credit column. The difference is continuously struck in the column for balance. In such a case, when the buyer defaults to make balance payment, the seller’s action is not for the price of goods sold and delivered but for the balance due at the foot of an account. Thus, Article 14 would have no application in suits of recovery of money due on a running and a non-mutual current account between the buyer and seller.”

# 9. The Hon’ble High Court of Bombay in ‘Wilsons Jacobs’ Vs. ‘Lucid Prints & Ors.’4, has observed as hereunder:

• “7. There is then an argument that between the parties there was a running account. The fact that there were continuous transactions does not make it a running account. Again the concept of a running account in commercial practice is well-known. It must be demonstrated that there are debits and credits going on simultaneously or on a regular basis and that balances are struck with some periodicity; not that there are a number of invoices, some of which remain unpaid. Non-payment of invoices and payment without specifying a particular invoice does not make the transactions a “running account”.”    (Emphasis Supplied)

# 10. From the aforenoted Judgements it is clear that for an Account to be termed a ‘running Account’ it must be demonstrated that there are ‘Debits’ and ‘Credits’ entries going on simultaneously or on a regular basis and the balances are struck with some periodicity. Non-payment of invoices and payment without specifying a particular invoice does not make the transaction a ‘running Account’. As can be seen from the invoices/communication dated 18.04.2018, 24.04.2018, 12.05.2018, 12.10.2018, 26.10.2018, 15.11.2018, 11.12.2018 & 24.12.2018, it can be clearly seen that the amounts were paid towards specific invoices and therefore keeping in view the ratio of the aforenoted Judgements the said ‘Account’ cannot be termed as a ‘running Account’.

# 11. Learned Counsel for the ‘Appellant’ placed reliance on the email dated 23.10.2018 in support of his contention that the said email specifies that the ‘Corporate Debtor’ had acknowledged their liability and the dishonouring of the cheque dated 13.03.2017 further strengthens his case. At this juncture, this ‘Tribunal’ finds it relevant to reproduce the email dated 23.10.2018:

# 12. From the aforenoted email, it is clear that the subject of the email was ‘payment advice’ and the cheque was dated 13.03.2017 and the payments were towards the specific invoices the amount is for Rs.3 Lakhs/-:

# 13. It is also relevant to reproduce the email dated 29.10.2018:

# 14. From the aforenoted email it is established that the cheque was never realised and the amount was not paid. This cheque was meant for invoices dated 25.05.2015 to 25.09.2015, as can be seen from the aforenoted Statement of Account.

# 15. It is clear from the para 14 Statement of Account that these invoices pertain to the period from 25.05.2015 to 25.09.2015 and therefore pertain to the period 3 Years prior to the filing of the Application. The Section 9 Application was filed on 24.02.2020 and it is the case of the ‘Appellant’ that during the pendency of the proceedings on 08.03.2021, a sum of Rs.3,23,723.36/- was also paid by the Respondent. Section 18 of the Limitation Act, 1963 reads as follows:

• “18. Effect of acknowledgment in writing.—

• (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.

• (2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received.

• Explanation.—For the purposes of this section,—

• (a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the property or right,

• (b) the word “signed” means signed either personally or by an agent duly authorised in this behalf, and  

• (c) an application for the execution of adecree or order shall not be deemed to be an application in respect of any property or right.”

# 16. In the instant case, the contention of the Learned Counsel for the ‘Appellant’ that the email dated 29.05.2019 should be construed as ‘acknowledgement’ is also not within 3 Years of the dates of invoices. It is also a settled proposition of law that a cheque which has not been encashed cannot amount to an ‘acknowledgement of liability’ in terms of Section 18 of the Limitation Act, 1963. This ‘Tribunal’ is of the considered view that the emails relied upon by the ‘Appellant’ do not strictly construe an ‘acknowledgement of liability’ as provided for under Section 18 of the Limitation Act, 1963. Though it is mentioned by the ‘Appellant’ in the ‘Notes of Submissions’ that these amounts have been ‘acknowledged’ in the Balance Sheets, the same has neither been produced before the ‘Adjudicating Authority’ or before this ‘Tribunal’. This Pleading is not even a part of the grounds of ‘Appeal’ or pleaded before the ‘Adjudicating Authority’.

# 17. This ‘Tribunal’ is also conscious of the fact that some of the invoices does not carry the interest component. Be that as it may, it is seen from the record that majority of the invoices are beyond the period of ‘Limitation’ and that interest claimed by the ‘Appellant’/‘Operational Creditor’, as can be seen from the Statement made in Part-IV of the Application @24% p.a. is from the invoices dated 29.04.2015. The amounts said to be ‘due and payable’ include the ‘principal and interest’ calculated from the Year 29.04.2015 and therefore this ‘Tribunal’ agree with the finding of the ‘Adjudicating Authority’ that out of 25 invoices, 17 are ‘barred by Limitation’.

# 18. The Hon’ble Apex Court in a catena of Judgements has laid down that IBC is not a Recovery Proceeding but is meant for Resolution. The ‘Adjudicating Authority’, exercising powers under Section 7 or Section 9 of IBC, is not a ‘Debt Collection Forum’. The IBC tackles and/or deals with Insolvency and Bankruptcy. It is not the object of the IBC that CIRP should be initiated to penalize ‘Solvent Companies’ for non-payment of disputed dues claimed by an ‘Operational Creditor’.

# 19. Needless to mention that the ‘Appellant’ may avail such other remedies or may be available in accordance with law.

# 20. For all the foregoing reasons, this ‘Tribunal’ is of the earnest view that there is no ‘illegality’ or ‘infirmity’ in the ‘Well Considered and Reasoned Order’ of the `Tribunal’ (`NCLT’) in IBA No.364/2020 and therefore this ‘Tribunal’ hold that Comp. App. (AT) (CH) (Ins.) No. 299/2021 is accordingly ‘dismissed’. No costs.

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