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1. ISSUES PRESENTED AND CONSIDERED
- Whether the suit for price of goods on a running account was within limitation, having regard to the last payment and Section 19 of the Limitation Act.
- Whether the defendants were liable to pay the outstanding amount under the invoices raised in the course of a long-standing commercial relationship.
- Whether the plaintiff proved entitlement to an additional sum of Rs. 3,00,000/- alleged as a hand loan advanced to the defendants.
- Whether the defendants established any valid defence by way of set-off, additional payments, alleged misuse of cheques, or loss of GST input tax credit.
- Whether pendency of proceedings before the National Company Law Tribunal or any prospective moratorium under the Insolvency and Bankruptcy Code required stay or affected maintainability of the suit.
- Whether the Trial Court was justified in awarding interest at 18% per annum on the principal amount.
- Whether the judgment and decree required interference in appeal and, if so, to what extent.
2. ISSUE-WISE DETAILED ANALYSIS
Limitation for the suit on running account
Legal framework discussed: Section 19 and Article 14 of the Limitation Act, 1963; principle applicable to running accounts as explained in a decision of the Delhi High Court.
Interpretation and reasoning: The Court noted that invoices (Exs.P3 to P67) were raised between 18.09.2017 and 21.03.2020 and that parties had a 30-year business relationship in which goods were supplied on credit and payments were made in lump sums, not bill-wise. The ledger extract (Ex.P68) showed a continuous running account: cumulative value of goods supplied, periodic lump-sum payments by the defendants from 06.12.2017 up to 01.09.2020, and carrying forward of balances from year to year. The last payment of Rs. 1,89,060/- was made on 01.09.2020; DW.1 admitted having made online payments on 01.09.2020 and 02.09.2020 towards purchase dues. Relying on the principle that in a running account where deliveries and payments form a continuous, indivisible demand, limitation runs from the date of the last payment under Article 14 read with Section 19, the Court held that the cause of action was one continuous demand, not separate causes per invoice.
Conclusions: The account between the parties was a running account. The last acknowledged payment on 01.09.2020 extended the period of limitation under Section 19. The suit filed on 30.06.2023 was within the three-year limitation period. The finding of the Trial Court on limitation was affirmed.
Liability under invoices / running account balance
Interpretation and reasoning: The plaintiff produced invoices Exs.P3 to P67 for supplies made, each bearing acknowledgment of receipt of goods by the defendants, with date, time, and vehicle number. The ledger extract Ex.P68 reflected aggregate value of goods supplied, successive lump-sum payments by defendants, and the resulting balance carried forward, culminating in an outstanding sum of Rs. 42,54,223.28 as on 01.09.2020 (exclusive of the disputed hand loan). Payments were not tied to specific invoices, confirming the running nature of the account. The defendants admitted long-standing business dealings and payments, and apart from the entries reflected in Ex.P68, produced no documentary material showing any additional payments to the plaintiff. Allegations relating to various cheques issued and alleged misuse did not show that any further monies had been paid which were not accounted for in Ex.P68.
Conclusions: The Court held that, after giving credit for all proved payments reflected in the running account, the defendants were liable for the outstanding amount under the invoices. However, to the extent that the Trial Court's figure included the unproved hand loan of Rs. 3,00,000/-, modification was warranted (see next issue).
Alleged hand loan of Rs. 3,00,000/-
Interpretation and reasoning: The plaintiff alleged having advanced a hand loan of Rs. 3,00,000/- to the defendants. The Court noted that neither the plaint nor PW.1's examination-in-chief specified the date of advancing this loan. The defendants specifically denied at para 26 of the written statement that any such hand loan was given. In cross-examination, PW.1 claimed to have paid the loan amount by cheque, but no bank statement of the plaintiff or any documentary proof of such payment was produced. No independent document evidencing the hand loan was filed. The Trial Court had decreed the claim including this amount without addressing the absence of proof.
Conclusions: The plaintiff failed to discharge the burden of proving the alleged hand loan of Rs. 3,00,000/-. The inclusion of this amount in the decree was erroneous and required correction in appeal. The principal sum recoverable had to be reduced by Rs. 3,00,000/-.
Set-off, alleged additional payments, GST input tax credit and related defences
Legal framework touched upon: GST Rule 46 (with respect to tax invoice copies); input tax credit and its possible reversal; general principles of set-off (no specific provision analysed); Section 138 of the Negotiable Instruments Act, 1881 (only noted as background); Insolvency and Bankruptcy Code, 2016 (Section 14 considered separately below).
Interpretation and reasoning:
- Set-off and cross-claims: The defendants asserted that amounts were due to them from other entities allegedly owned by the plaintiff, and claimed a right of set-off and adjustment. The Court found that no specific relief of set-off was sought in the written statement, nor were supporting documents produced to substantiate the alleged receivables or to show any contractual or legal basis for set-off against the plaintiff's claim.
- Alleged additional payments / cheques: The defendants pleaded that multiple cheques had been issued, some allegedly as security for a promised loan of Rs. 10,00,000/-, and that certain cheques were misused leading to proceedings under Section 138 of the NI Act. The Court observed that, irrespective of such allegations, the defendants did not produce material demonstrating that any amounts beyond those reflected in Ex.P68 had in fact been paid to the plaintiff. DW.1 admitted in cross-examination that there was no agreement between the parties regarding the alleged Rs. 10,00,000/- loan. Acquittals in the Section 138 proceedings did not establish any additional payment or discharge of civil liability in excess of what was recorded in the running account.
- GST input tax credit and Rule 46: The defendants alleged non-compliance with GST Rule 46 (non-supply of two copies of tax invoices) and contended that this would lead to reversal of input tax credit of about Rs. 12,00,000/- and further interest/penalty of Rs. 10-12 lakhs. The Court noted that DW.1, in cross-examination (para 29), specifically admitted that he had received input tax credit in respect of the invoices Exs.P3 to P67. No document was produced to show that input credit had been or would be reversed by GST authorities or that any penalty or interest had been levied. Thus, the plea of prejudice under GST law remained unsubstantiated.
Conclusions: The defendants failed to prove any enforceable set-off, any additional payments beyond those in Ex.P68, any misuse of cheques translating into monetary discharge, or any actual loss of GST input tax credit. These defences did not reduce or extinguish the plaintiff's proved claim.
Pendency of NCLT proceedings / Insolvency and Bankruptcy Code
Legal framework discussed: Section 14 of the Insolvency and Bankruptcy Code, 2016 (moratorium).
Interpretation and reasoning: The defendants relied on the fact that proceedings had been initiated before the National Company Law Tribunal. The Court recorded that the Trial Court had found no order under Section 14 of the IBC declaring a moratorium, and therefore no statutory bar to continuation of the civil suit. The plaintiff had stated that the NCLT proceedings were at a preliminary stage, not listed, and no orders had been passed. The appellants did not produce any material to show the stage or outcome of the NCLT proceedings or existence of any moratorium order.
Conclusions: In the absence of any order under Section 14 IBC, there was no legal impediment to the institution or continuation of the suit. No ground for interference with the decree arose from pendency of NCLT proceedings.
Award of interest at 18% per annum
Interpretation and reasoning: The defendants argued that there was no agreement to pay interest at 18% and that the rate was excessive. The Court noted that each invoice (Exs.P3 to P67) specifically stipulated that interest at 18% per annum would be charged if the invoice amount was not paid within 30 days. The transactions were commercial in nature. The Trial Court had awarded interest at 18% per annum from 01.09.2020 till realization, consistent with the contractual term on the invoices.
Conclusions: The contractual stipulation of 18% interest, coupled with the commercial character of the transaction, justified the award. The rate of 18% per annum was upheld.
Overall result and modification of decree
Interpretation and reasoning: The Court affirmed the Trial Court's findings on limitation, existence of a running account, liability under the invoices, rejection of GST and NCLT-based objections, and entitlement to contractual interest at 18% per annum. However, it found that the plaintiff had not proved the alleged hand loan of Rs. 3,00,000/-, which the Trial Court had nevertheless included in the decretal amount.
Conclusions: The appeal was partly allowed. The decree was modified to exclude the unproved hand loan, reducing the principal recoverable from Rs. 42,54,223/- to Rs. 39,54,223/-, while maintaining interest at 18% per annum from 01.09.2020 till payment and costs. In all other respects, the Trial Court's decree was affirmed.
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