Dear sir, this is called set off under section 173 of code, 2016.
Mutual credit / mutual debit under IBC 2016
What is mutual credit / mutual debit under insolvency and bankruptcy code 2016 ? under what conditions balance payable of one entity be adjusted from the balance receivable by another while filing claim under ibc 2016 ?
Asked 6 years ago in Business Law
9 Answers
Section 173: Mutual credit and set-off
173. (1) Where before the bankruptcy commencement date, there have been mutual dealings between the bankrupt and any creditor, the bankruptcy trustee shall
(a) take an account of what is due from each party to the other in respect of the mutual dealings and the sums due from one party shall be set-off against the sums due from the other; and
(b) only the balance shall be provable as a bankruptcy debt or as the amount payable to the bankruptcy trustee as part of the estate of the bankrupt.
(2) Sums due from the bankrupt to another party shall not be included in the account taken by the bankruptcy trustee under sub-section (1), if that other party had notice at the time they became due that an application for bankruptcy relating to the bankrupt was pending.
Section 173 of IBC
There might be instances where debt may also be owed by the creditor towards the Corporate Debtor. Such debts may be referred to as mutual debts/credits between the Corporate Debtor and creditor, which may be set off against the debt/claim of the creditor. In such case, the creditor shall mention the particulars of such mutual debt in the specified space provided in the respective Form for filing proof of claim.
IS DEBIT CREDIT OF SAME ENTITY CAN SET OFF BALANCE ? OR TWO SEPARATE ENTITIES CAN SET OFF BALANCE BETWEEN THEM AND THE NET BALANCE CAN BE CLAIMED FROM CORPORATE DEBTOR OR PAID TO THE CORPORATE DEBTOR , AS THE CASE MAY BE .
Asked 6 years ago
Debit credit of same entity can be set off
Section 173(1) of IBC is quite self explanatory to give reply to your query.
Fro example a business entity in pursuance of its trade may fail to pay price of one one product while paying the another.
So ultimately the actual amount remaining sue can be sought for under the Code irrespective of payment made by the debtor in lieu of other business dealings between the same business entity.
Please refer to Section 173 IBC:
Mutual credit and set off
(1) Where before the bankruptcy commencement date, there have been mutual dealings between the bankrupt and any creditor, the bankruptcy trustee shall
(a) take an account of what is due from each party to the other in respect of the mutual dealings and the sums due from one party shall be set-off against the sums due from the other; and
(b) only the balance shall be provable as a bankruptcy debt or as the amount payable to the bankruptcy trustee as part of the estate of the bankrupt.
(2) Sums due from the bankrupt to another party shall not be included in the account taken by the bankruptcy trustee under sub-section (1), if that other party had notice at the time they became due that an application for bankruptcy relating to the bankrupt was pending.
Yes it can be mutually set off.
Section 173: Mutual credit and set-off:
173. (1) Where before the bankruptcy commencement date, there have been mutual dealings between the bankrupt and any creditor, the bankruptcy trustee shall—
(a) take an account of what is due from each party to the other in respect of the mutual dealings and the sums due from one party shall be set-off against the sums due from the other; and
(b) only the balance shall be provable as a bankruptcy debt or as the amount payable to the bankruptcy trustee as part of the estate of the bankrupt.
(2) Sums due from the bankrupt to another party shall not be included in the account taken by the bankruptcy trustee under sub-section (1), if that other party had notice at the time they became due that an application for bankruptcy relating to the bankrupt was pending.
Section 173: Mutual credit and set-off:
173. (1) Where before the bankruptcy commencement date, there have been mutual dealings between the bankrupt and any creditor, the bankruptcy trustee shall—
(a) take an account of what is due from each party to the other in respect of the mutual dealings and the sums due from one party shall be set-off against the sums due from the other; and
(b) only the balance shall be provable as a bankruptcy debt or as the amount payable to the bankruptcy trustee as part of the estate of the bankrupt.
(2) Sums due from the bankrupt to another party shall not be included in the account taken by the bankruptcy trustee under sub-section (1), if that other party had notice at the time they became due that an application for bankruptcy relating to the bankrupt was pending.
You may go through the provisions of section 173 of the act which clearly provides an answer to your subsequent question too.