Delhi High Court: In an appeal filed under Section 13 of the Commercial Courts Act, 2015 by the appellant challenging the order dated 28-04-2023, passed by the District Judge wherein the suit was dismissed on the ground of limitation, a division bench of Subramonium Prasad and Harish Vaidyanathan, JJ., held that that while most of the plaintiff’s claims were barred by limitation under Article 18 of the Limitation Act, the claim against two invoices was saved by a valid TDS payment under Section 19. Accordingly, the Court directed the defendants to pay Rs. 24,27,000 with 6% annual interest from the date of invoice till payment.
The dispute arose from a series of advertisement campaigns undertaken by Planet Advertising Pvt. Ltd. (the appellant/plaintiff) on behalf of Ambience Pvt. Ltd. and its affiliates (the respondents/defendants), pursuant to purchase orders issued in June and July 2014. The first such order was placed on 10.06.2014, pursuant to which advertisements were displayed in June 2014 and an invoice for Rs. 18,73,667 was raised on 02.07.2014. While Rs. 16,18,960 was paid by cheque, a balance of Rs. 2,54,707 remained outstanding. Being satisfied with the initial services, the defendants placed another purchase order on 16.07.2014, expanding the campaign to additional sites across Delhi-NCR. The plaintiff continued raising invoices from July to December 2014. Ten additional invoices raised during this period cumulatively amounted to Rs. 1,01,38,691 including the unpaid balance from the first invoice, the total outstanding claimed was Rs. 1,03,93,398.
In an unusual turn, Defendant 2 allegedly called the Plaintiff to its office, handed over back-dated cheques linked to altered purchase orders dated 01.07.2014 and 01.08.2014, and requested that invoices be raised in the name of another group company Ambience Projects and Infrastructure Pvt. Ltd. which allegedly had funds available. The plaintiff, acting on the assurance that payment would be made within two days, re-issued backdated invoices totaling Rs. 53,66,278, splitting the total outstanding into Rs. 45,11,305 and Rs. 53,66,278, excluding service tax. It was understood that if payment for the latter was not made, the full original liability of Rs. 1,03,93,398 would revive.
On seeing no payment forthcoming, the plaintiff sent a legal notice dated 20.08.2015 under Sections 433, 434, and 439 of the Companies Act 1956, demanding the full outstanding amount with interest. In response, the defendants denied liability and made adverse allegations against the plaintiff. Consequently, a winding up petition was filed. Though the petition was admitted, the High Court deferred appointment of a liquidator subject to the defendants depositing Rs. 53,66,278, which the plaintiff was permitted to withdraw. The petition was disposed of on 17.09.2018, granting liberty to the plaintiff to pursue a civil recovery suit.
Subsequently, the plaintiff instituted a suit to recover the full outstanding amount with interest.
On issuance of summons, the defendants entered appearance and the matter was first referred to mediation, which failed. Meanwhile, the defendants underwent Corporate Insolvency Resolution Process (CIRP), which caused some delay. After resumption of the suit, the Defendants filed written statements asserting that the suit was barred by limitation. They argued that the invoices were dated between July and November 2014, while the suit was filed in September 2018, well beyond the three-year limitation period. It was further contended that since the Plaintiff had withdrawn Rs. 53,66,278 in the winding-up proceedings, a fresh claim was not maintainable.
The Plaintiff countered that acknowledgment of debt through deposit of the said sum and issuance of TDS certificates constituted valid extensions under Sections 18 and 19 of the Limitation Act. The Plaintiff also urged that the time spent in pursuing the winding-up petition should be excluded under Section 14 of the Limitation Act.
The Trial Court rejected these arguments, holding that neither the TDS deposit nor the liberty granted in the winding-up proceedings extended the period of limitation. It concluded that the suit, filed more than three years after the invoices, was barred by limitation and therefore dismissed it.
The Court first rejected the invocation of Article 113 and observed that that the present claim clearly fell under Article 18 of the Limitation Act, which prescribes a limitation of three years from the date when the work was done, or the invoice raised. Since the invoices were dated between July and November 2014, and the suit was filed only in September 2018, the suit was prima facie time barred.
The Court further addressing the invocation of Section 14, noted that winding-up proceedings and money recovery proceedings operate in distinct legal spheres. Winding-up is not aimed at recovering a specific debt but at determining whether a company is unable to pay its debts generally. The Court drew on authoritative precedent including Natesan Agencies v. State, (2019) 15 SCC 70 to hold that Section 14 could not apply in this context, as the subject matter and reliefs in the two proceedings were not the same.
The Court then turned to Section 19 of the Limitation Act and considered whether a deposit of TDS could extend its limitation. Thus, drawing extensively from its own coordinate bench rulings in Ansal Housing Ltd v. Samyak Projects Pvt. Ltd., 2023 SCC OnLine Del 2387 and Samyak Projects (P) Ltd v. Ansal Housing Ltd, 2024 SCC OnLine Del 3778 the Court held that TDS deposited with the Income Tax Department constitutes a payment made on account of the creditor and thus triggers a fresh period of limitation under Section 19. It emphasized that such payments are deemed as income received by the payee under Section 198 of the Income Tax Act, satisfying the dual conditions required under Section 19.
In the present case, a TDS certificate dated 24.09.2015 in relation to invoices amounting to Rs. 14,52,000 and Rs. 9,75,000 respectively was held to be sufficient to revive limitation from that date. As the suit was filed on 13.09.2018, these claims were found to be within limitations. However, other invoices had TDS deductions prior to that date and were therefore deemed time barred.
Thus, the Court partially allowed the appeal and held that the plaintiff was entitled to recover Rs. 24,27,000 under invoices for which valid TDS acknowledgment had extended limitation and the rest of the claim remained barred by limitation. Accordingly, the Court directed the defendants to pay the said sum to the appellant, noting that Rs. 48,450 had already been deposited as TDS. The plaintiff was held entitled to interest at 6% per annum on Rs. 24,27,000 from the date of invoice till the date of payment.
[Planet Advertising Pvt Ltd v. Ambience Pvt Ltd, 2025 SCC OnLine Del 4886, decided on 02-07-2025]
Advocates who appeared in this case:
Mr. Nalin Kohli, Sr. Advocate with Mr. Suraj Raj Kesherwani, Mr. Manu Kumar, Ms. Kavya Kumar, Ms. Nimisha Menon, Advocates Mr Akash Sharma, Advocate for appellant
Mr P. K. Agrawal, Ms Sanjoli Gupta, Mr Akshay Chitkara, Mr Rishabh Tomar, Advocates