Unpaid dues: a buyer’s balance sheet can keep your claim alive, says the Supreme Court

• The case. A contractor did building work for a housing society under a 2000 contract and was not paid; the society’s cheques bounced. He sued in 2014. The amount appeared in the society’s balance sheets from 2004-05 to 2012-13. The High Court threw the suit out as too late; the Supreme Court restored it.
• The rule. An acknowledgement in writing, signed by the debtor, made before the limitation period runs out, starts a new period. Balance-sheet entries can count, read as a whole with the notes and the auditor’s report. The acknowledgement need not name the creditor in a set form, but it must show that the debt still stands.
• What it does not decide. The acknowledgement keeps the claim alive; the amount actually due still has to be proved at trial.

What to do Copy link

For any customer who has not paid for a long time, keep every written acknowledgement: a signed balance confirmation, a letter or email accepting the amount, a part-payment, and, for a company, its filed financial statements showing the dues. Ask for a signed balance confirmation every year so the three-year clock keeps restarting. If you are a registered micro or small enterprise, the 45-day payment rule and the MSME Samadhaan portal may also help.

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