Bombay HC: If Adjustment Is Made Towards A Particular Invoice, It Can't Extend Limitation For Other Outstanding Invoices

 The claimant though urged before this Court vehemently that the respondent having issued a cheque of Rs. 50 lakhs, which was dishonored, the entire outstanding claim under various invoices stood revived on the ground that there was fresh period of limitation under section 18 of the Limitation Act, the claimant having exercised the option under section 60 of the Indian Contract Act, no such inconsistent plea can be permitted.

55. Under section 60 of the Indian Contract Act, where the debtor has omitted to intimate and there are no settled circumstances undertaking the debt to be applied, the creditor may apply at his discretion to any lawful debt actually due and payable to him from the creditor, whether is regular or is not barred by law in force for the time being as to the limits of the suit. In this case, admittedly the respondent did not intimate the claimant that the said sum of Rs. 50 lakhs was made towards any particular invoice or was by way of part payment towards all the outstanding invoices on the date of such part payment.

56. At this stage, it would be apposite to refer to section 61 of the Indian Contract Act which provides that where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionably. In our view, since the claimant in this case has invoked section 60 of the Indian Contract Act, 1872, section 61 of the Indian Contract Act cannot be invoked.

 IN THE HIGH COURT OF BOMBAY

Commercial Appeal No. 574 of 2019 in Commercial Arbitration Petition No. 987 of 2018

 Anmol Steel Processors Private Limited  Vs. Colour Roof (India) Limited

Hon'ble Judges/Coram:

R.D. Dhanuka and R.N. Laddha, JJ.

Decided On: 19.01.2022

Author: R.D. Dhanuka, J.

Citation: MANU/MH/0167/2022.

Read full Judgment here: Click here

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Will limitation extend if part payment of debt or acknowledgement of liability is made after the expiry of the limitation period?

It is thus clear that even according to the claimant the cause of action arose for payment of interest as well as principle amount after expiry of 45 days from the date of each invoice. The last invoice is dated 2nd June, 2011, the alleged part payment of Rs. 16 lakhs on 28th July, 2015 thus would not extend the period of limitation. It is clear that the entire claim had already become barred by law of limitation prior to 28th July, 2015 and was not a legally enforceable debt as on 28th July, 2015.

51. Learned single Judge in the impugned judgment dated 5th September, 2019 considered the issue of limitation in detail and has rightly held that the supplies were payable respectively at the expiry of 45 days of each individual notice. The arbitration agreement was arrived at between the parties on 22nd November, 2016 and accordingly the terminus ad quem in respect of the claim in the arbitration was 22nd November, 2016. It is with reference to that date the bar of limitation has to be construed. Learned single Judge also held that there was no dispute that the last acknowledgment before 25th May, 2015 came on 5th January, 2012. It was thus not made before expiration of the prescribed limitation period for the suit or application, as the case may be.

52. Learned single Judge rightly held that if according to the claimant itself, adjustment was made towards a particular outstanding invoice, that payment cannot enure to the benefit of claimant so as to extend the period of limitation for other outstanding invoices. 

53. Under section 18 of the Limitation Act, 1963, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed only where, before the expiration of the prescribed period for a suit of 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. It is thus clear that the acknowledgment, if any, has to be prior to the expiration of the prescribed period for filing the suit. In our view, since the limitation for filing a suit or arbitration proceedings for recovery of the outstanding invoices had already expired much prior to the period of three years prior to the date of commencement of the arbitral proceedings, limitation would not revive under section 18 of the Limitation Act even if there is any part payment or acknowledgment of liability after expiry of the period of limitation. Fresh limitation would arise only during subsistence of the claim i.e. within the period of limitation, if any part payment is made or liability is acknowledged and not after the claim already having become time barred.

 IN THE HIGH COURT OF BOMBAY

Commercial Appeal No. 574 of 2019 in Commercial Arbitration Petition No. 987 of 2018

 Anmol Steel Processors Private Limited  Vs. Colour Roof (India) Limited

Hon'ble Judges/Coram:

R.D. Dhanuka and R.N. Laddha, JJ.

Decided On: 19.01.2022

Author: R.D. Dhanuka, J.

Citation: MANU/MH/0167/2022

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Delhi HC: In the absence of specific direction from the Debtor, Creditor can apply money received by him to any lawful debt

The counsel for the petitioner has argued on the lines of his petition. His main thrust of argument is that since respondent No. 1 admittedly received a sum of Rs. 5 million US Dollars from one of the debtors of the respondent No. 2 company, therefore, after adjustment of this amount, no debt is left and 5 complaints U/s. 138 NI Act are liable to be quashed.

11. The counsel for the respondent No. 1 who appears on advance notice submits that firstly, there is no infirmity in the order dated 30.08.2018 passed by the Ld MM wherein it has been observed that the amount so received by respondent No. 1 was not with respect to the cheques in dispute. He further submits that it is the settled law that it is the discretion of the creditor to apply the money so received to any lawful recoverable debt. He further argued that there was no such directions from the side of the respondent No. 2 company of whose petitioner is one of the directors, to apply the sum of 5 million US Dollars to a particular debt, more specifically against the cheques in respect of which the complaints U/s. 138 NI Act are pending.

12. Section 60 of the Indian Contract Act, 1872 reads as follows:

"60. Application of payment where debt to be discharged is not indicated.- Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitations of suits."

13. In the instant case, though admittedly, an amount of 5 million US Dollars have been received by respondent No. 1 from M/s. Roseberry Global FZE, Sharjah, who according to the petitioner is one of the debtor(s) of respondent No. 2 company but there is nothing on record to suggest that there were any such directions from the side of respondent No. 2 company to apply the said amount so received against the cheques in question in respect of which the complaints are pending.

14. Liability against the respondent No. 2 company is around 14 Hundred Crores and the cheque(s) amount are only part of the money payable by the respondent No. 2 company. Moreover, in view of Section 60 of the Indian Contract Act, in a case, where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, it is the discretion of the creditor to adjust the payment against any lawful debt actually due and payable to him from the debtor.

IN THE HIGH COURT OF DELHI

Crl. M.C. 5942/2019 and Crl. M.A. 40857/2019

Decided On: 27.05.2020

 Rajesh Kumar Gulati Vs. National Agricultural and Ors.

Hon'ble Judges/Coram:

Rajnish Bhatnagar, J.

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