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2023 (2) TMI 735 - AT - Insolvency and BankruptcyInitiation of CIRP - Corporate Debtor failed to make repayment of its dues - application was dismissed on the ground of time limitation - whether the Account between the parties could be construed as a running Account? - HELD THAT - From the Judgement in Bharat Skins Corporation Vs. Taneja Skins Corporation Private Limited 2011 (12) TMI 716 - DELHI HIGH COURT 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 Judgement the said Account cannot be termed as a running Account. From the email (produced) 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 Statement of Account - 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. 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 - 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. 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. Appeal dismissed.
Issues Involved:
1. Whether the account between the parties can be construed as a "running account." 2. Whether the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, is barred by limitation. 3. Whether the email communications and cheque payments can be considered as an acknowledgment of debt under Section 18 of the Limitation Act, 1963. 4. Whether the interest claimed by the Operational Creditor is valid. Issue-wise Detailed Analysis: 1. Running Account: The primary issue was whether the account between the parties could be considered a "running account." The Adjudicating Authority concluded that the account was not a running account. The Tribunal noted that for an account to be considered a running account, there must be continuous debits and credits with balances struck periodically. The Tribunal cited judgments from the Hon'ble Delhi High Court and the Hon'ble High Court of Bombay, which clarified that non-payment of invoices and payments without specifying a particular invoice do not constitute a running account. The Tribunal observed that the payments made by the Corporate Debtor were towards specific invoices, and therefore, the account could not be termed a running account. 2. Barred by Limitation: The Tribunal examined whether the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, was barred by limitation. The Adjudicating Authority had dismissed the application on the grounds that 17 out of 25 invoices were beyond the period of limitation. The Tribunal agreed with this finding, noting that the earliest unpaid invoice dated 29.04.2015 had a limitation period that expired on 28.04.2018. The application was filed on 24.02.2020, making it time-barred for those invoices. The Tribunal emphasized that the Insolvency and Bankruptcy Code is not a debt collection forum but is meant for resolution and not for penalizing solvent companies for non-payment of disputed dues. 3. Acknowledgment of Debt: The Tribunal assessed whether email communications and cheque payments could be considered an acknowledgment of debt under Section 18 of the Limitation Act, 1963. The Operational Creditor argued that an email dated 23.10.2018 and a cheque dated 13.03.2017 should be construed as acknowledgments of debt. However, the Tribunal found that the emails were merely payment advice and did not constitute an acknowledgment of liability. The Tribunal also noted that a cheque which has not been encashed cannot amount to an acknowledgment of liability. Moreover, the balance sheets allegedly acknowledging the debt were neither produced before the Adjudicating Authority nor the Tribunal. 4. Interest Claim: The Tribunal examined the validity of the interest claimed by the Operational Creditor. The interest was claimed at a rate of 24% per annum from the invoices dated 29.04.2015. The Tribunal noted that some invoices did not carry the interest component and that the majority of the invoices were beyond the period of limitation. The Tribunal agreed with the Adjudicating Authority that out of 25 invoices, 17 were barred by limitation, and therefore, the interest claim was not valid for those invoices. Conclusion: The Tribunal upheld the Adjudicating Authority's decision to dismiss the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, as barred by limitation. The Tribunal found no illegality or infirmity in the well-considered and reasoned order of the Adjudicating Authority. The appeal was dismissed, and the appellant was advised to avail other remedies in accordance with the law.
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