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Arbitration proceedings under "delayed payments to small scale & ancillary indl.act 1993 & amdmnts

(Querist) 13 December 2011 This query is : Resolved 
I request the Lawyers Club Members to give their expert opinion on the following. Yesterday by mistake I have not posted my name or identity. It was not intentional. Regards.

In an Arbitration case: details of which are furnished hereunder. Kindly confirm whether my views are correct:

The claimant filed a statement of claim for certain value and for the interest thereon, under “delayed payment receivable” by an SSI Unit. In the statement of claim, they have indicated totally six Invoices raised against six lots of supplies effected on different dates to the respondent company. But out of six (6) invoices, supplies were made against L/C established by the respondent for the partial supplies and three (3) invoices were raised separately. After supplies the claimant negotiated the above said (3) three invoices and received payment through Bank against the L/C terms.

The business relations/transactions between the claimant and the respondent were spread over a period of 4 financial years. The respondent did not pay against certain invoices/supplies as the material supplied by the claimant were defective. Keeping aside the settlement of dispute on defective material value and the resultant loss, the respondent was buying material from the claimant and was releasing payment by means of cheques/DDs/L.C. At times the cheques issued by the respondent were bounced and were made good by issuing fresh cheuqes / DDs in lieu of bounced cheques.

Now when the arbitration proceedings are on, the claimant says that he has adjusted the payments received on first in first out basis viz., against the Invoices which were raised against supplies under L/C terms of payment to those which were payable by the respondent under direct credit basis. Further the claimant in his claim statement showing those invoices which he received payment against L/C as due and claiming interest also.

Also –
An admitted liability is enforceable by law and also obligatory on the part of the debtor to pay the admitted liability to the creditor.

If the creditor admits receipt of payment through an L/C against specific supplies and the relevant invoices how he can again claim payment against those bills in his claim statement filed before an Arbitration Tribunal?

Further to avoid law of limitation for a claim, for a same value of amount against a disputed supply value of earlier bills (for the reasons of defective material), the claimant says he has adjusted the value of L/C value against earlier supply bills as a practice in a running account and now showing the bills paid against an L/C as delayed payment/due.

In my view, as per the accounting practice, unless there is an understanding oral/in writing between the claimant/respondent (creditor & debtor), the claimant can not adjust the amounts received against those bills which he raised against specific L/C with those of other Bills which he raised for supplies under direct credit basis. Please guide me.

Further the claim submitted by the claimant, should not entertained by the Arbitration Tribunal, as the claimant admitted receipt of payment for the bills under an L/C.

Raj Kumar Makkad (Expert) 13 December 2011
Your understanding is accurate as per accounting standard acceptable all over in business community. Otherwise also claimant cannot come back from his own admission when he accepted payment against L/C of some particular consignments/invoices.

It seems that the claimant is beleiving that in war and love, evverything is justified. He has filed the clam on exaggrated side just to make maximum pressure over arbitrator and company.
Guest (Expert) 14 December 2011
Very simple, if the amount of cheques correspond to the amount of specific invoices or if the respondent has specifically made mention about the invoices in forwarding letters of the cheques, that amounts to clearance of those specific invoices.
Narayanarao Murali (Querist) 14 December 2011
Sir, L/C is nothing but Letter of Credit established by the buyer (respondent) through his bank in favour of the supplier (complainant. Hope I havae now clarified and hope that you would give your expert opinion on the above. Regards.

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