Running account limitation and proof of liability control recovery in commercial invoice disputes

In a continuous commercial running account, limitation was computed from the last acknowledged payment, and part-payment under the Limitation Act, 1963 supported timeliness where the suit was filed within three years of that payment. Liability for goods supplied under the invoices was supported by the ledger and invoices, but the alleged hand loan was excluded because it was not proved by pleadings, testimony, or bank records. The claimed set-off and reversal of input tax credit were not established on acceptable evidence, while the contractual interest clause at 18% in commercial transactions justified interest on the proved liability.

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Issues: (i) Whether the suit was within limitation on the basis of a running account and the last payment made by the defendants; (ii) Whether the defendants were liable for the principal amount under the invoices, the alleged hand loan, set-off, and interest.

Issue (i): Whether the suit was within limitation on the basis of a running account and the last payment made by the defendants.

Analysis: The transactions between the parties were found to be continuous and were reflected in a running account. The invoices were issued over a period of time and the ledger showed periodic payments, with the last admitted payment made on 01.09.2020. The Court applied the principle that where payments are made towards an outstanding running account, limitation is computed from the last payment, and also relied on the statutory effect of part-payment under the Limitation Act, 1963. Since the suit was filed within three years of the last payment, the claim was not time-barred.

Conclusion: The suit was held to be within limitation, against the appellants and in favour of the respondent.

Issue (ii): Whether the defendants were liable for the principal amount under the invoices, the alleged hand loan, set-off, and interest.

Analysis: The ledger and invoices established liability for the goods supplied under the running account. The alleged hand loan of Rs. 3 lakhs was not proved by the plaintiff through the pleadings, testimony, or bank records, and that component could not be sustained. The defendants failed to prove any legally acceptable set-off or reversal of input tax credit, and their objection regarding a separate loan transaction also failed for want of supporting material. The invoices contained a stipulation for interest at 18% in commercial transactions, which justified the award of interest on the proved liability. Accordingly, the decree required modification only to exclude the unproved hand-loan component.

Conclusion: The defendants were held liable for the invoice amount proved on record and interest thereon, but not for the alleged hand loan of Rs. 3 lakhs; the decree was modified accordingly, partly in favour of the appellants and substantially in favour of the respondent.

Final Conclusion: The appeal resulted in a limited reduction of the decretal amount, while the finding on limitation and the liability arising from the commercial running account was sustained.

Ratio Decidendi: In a continuous commercial running account with admitted part-payments, limitation runs from the last acknowledged payment, and a claimed money component not proved by evidence cannot be included in the decree.

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