In ruling on an appeal filed in M/s. Primee Silicones (Chennai) Pvt. Ltd. v M/s. UCAL Fuel Systems Ltd., the National Company Law Appellate Tribunal ("NCLAT"), Chennai Bench, made up of Justice M. Venugopal (Judicial Member) and Ms. Shreesha Merla (Technical Member), determined that a cheque that has not been cashed does not constitute a "acknowledgement of When ruling on an appeal filed in M/s. Primee Silicones (Chennai) Pvt. Ltd. v M/s. UCAL Fuel Systems Ltd., the National Company Law Appellate Tribunal ("NCLAT"), Chennai Bench, made up of Justice M. Venugopal (Judicial Member) and Ms. Shreesha Merla (Technical Member), determined that a cheque that has not been cashed does not constitute a "acknowledgement of liability’ in terms of Section 18 of the Limitation Act, 1963.
Facts of the past From 2013 onward, M/s. Primee Silicones (Chennai) Pvt. Ltd. (the "Operational Creditor") delivered "Die Coat" to M/s. UCAL Fuel Systems Ltd. (the "Corporate Debtor") and generated invoices for it. The latest payment was received from the Corporate Debtor, according to the Operational Creditor, on November 7, 2019. The Operational Creditor had received an email from the Corporate Debtor on October 23, 2018, requesting that it reconcile the accounts. The email also included a "payment advisory" that listed specific invoice numbers and provided information on a check with a date of March 13, 2017, and a value of Rs. 3 Lakhs. The aforementioned check, however, was never cashed.
On 07.02.2020, the Operational Creditor sent the Corporate Debtor a Demand Notice under the Insolvency and Bankruptcy Code, 2016 ("IBC") as a result of the failure to receive additional payments.
Following that, on February 24, 2020, an operational creditor petitioned the IBC under Section 9 to start the Corporate Insolvency Resolution Process ("CIRP") against the corporate debtor. According to the Corporate Debtor, the application, which was filed on February 24, 2020, is past due because the outstanding debts extend back to 2017. According to the Operational Creditor, the Corporate Debtor's account was a running account and the latter accepted its liability in an email sent on October 23, 2018, therefore the application is not time-barred.
On April 29, 2021, the Adjudicating Authority denied the application while noting that the Operational Creditor had failed to establish a debt and a default. Furthermore, the constraint precluded the payment of 17 of 25 invoices. Before NCLAT, the Operational Creditor contested the 29.04.2021 order. NCLAT Finding The Bench stated that it must be shown that "Debit" and "Credit" entries are occurring simultaneously or on a regular basis, and the balances are struck with some periodicity, for an account to be considered a "running account."
A transaction is not a "running Account" if invoices are not paid or if payment is made without naming a specific invoice. Also, the cheque from March 13, 2017, was issued in relation to bills from May 25, 2015, to September 25, 2015.
These invoices are over their deadline and cannot be arbitrated. Also, it is a well-established legal principle that a check that has not yet been cashed cannot be considered a "acknowledgement of liability" under the wording of Section 18 of the Limitation Act of 1963.
According to this "Tribunal," the emails that the "Appellant" relied upon do not strictly define a "acknowledgement of liability" as required by Section 18 of the Limitation Act, 1963. The Bench decided that, in accordance with Section 18 of the Limitation Act, 1963, a check that has not been paid does not constitute an admission of culpability. The Bench confirmed that 17 of the Operational Creditor's 25 invoices were prohibited by limitation. The appeal was rejected, and the Order from April 29, 2021 was upheld.
Primee Silicones (Chennai) Pvt. Ltd. v. UCAL Fuel Systems Ltd. Company Appeal (AT) (CH) (Ins.) No. 299 of 2021 is the case number. Attorney T. Sri Krishna Bhagavat represents the appellant. Mr. P.H. Arvindh Pandian, Senior Counsel for Ms. R. Ragha Sudha, Counsel, is the respondent's legal representative.
