IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH **** RSA-1427-2012 (O&M) M/s v. M/s Mahalakshmi Rice and General Mills and Ors
Case Details
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH **** RSA-1427-2012 (O&M) M/s Ram Ji Dass & Co. …..Appellant Vs. M/s Mahalakshmi Rice and General Mills and Ors. .….Respondents **** Reserved on: 27.01.2025 Pronounced on: 03.02.2025 CORAM:- HON'BLE MR. JUSTICE DEEPAK GUPTA Argued By:- Ms. Rupinder Kaur, Advocate for the appellant. Mr. Anish Verma, Advocate for respondent Nos.1 and 2. Mr. APS Rehan, Advocate for respondent No.3. **** DEEPAK GUPTA, J. Plain&ff of the suit is before this Court in the present Regular Second Appeal against concurrent findings of the Court below, inasmuch as suit filed by the said firm for recovery has been dismissed by the trial Court on 25.09.2009 and the appeal filed by it (plain(cid:7)ff-appellant firm) was dismissed by the first Appellate Court on 06.06.2011. 2. Trial record was called. Same has been perused. In order to avoid confusion, par&es shall be referred as per their status before the trial Court. 3. Plain&ff is a partnership concern running its business of commission agents at Mandi Mallian Kalan, Tehsil Nakodar, District Jalandhar. Defendant No.1 is a firm, with defendant Nos.2 and 3 as its partners, which used to purchase paddy from the plain&ff on credit basis. According to plain&ff, it supplied paddy to the defendants in the year 1998 NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 1 of 13 pages RSA-1427-2012 (O&M) worth ₹17,36,342.31/-, out of which defendants have paid ₹7,52,000/- to the plain&ff through various cheques and cash up to January, 2000 and that an amount of ₹9,84,342.31/- was s&ll due and outstanding against the
Facts
defendant, which had not been paid despite repeated requests. By adding interest of ₹5,23,292/- to this principal amount, plain&ff sought decree for recovery of ₹15,07,634.31/- along with pendente lite and future interest. 4. Defendants contested the suit by raising various preliminary objec&ons, the material being that suit was barred by limita&on. On merits, it was submi=ed that paddy of the plain&ff was of different varie&es belonging to different farmers and thus, was of inferior quality. Defendants also denied having made payment to the plain&ff on 10.01.2000. They further denied that any interest was se=led between the par&es. Prayer was made for dismissal of the suit. 5. Necessary issues were framed. Evidence produced by the par&es was taken on record. 6.1 Trial court, on the basis of evidence produced by the par&es found that defendants used to purchase paddy from the plain&ff in 1998 and that an amount of ₹9,84,342.31/- was outstanding against the defendant payable to the plain&ff. However, suit was held to be barred by limita&on by observing that last bill issued by the plain&ff was of 24.10.1998, whereas the suit was filed on 24.10.2002. It was also held that alleged payment of ₹10,000/- on 10.01.2000 in cash by the defendants to the plain&ff was not proved and even otherwise, it did not amount of acknowledgment within the meaning of Sec&on 19 of the Limita&on Act, 1963 so as to extend the period of limita&on. As such, the suit was dismissed being barred by limita&on. 6.2 The Appellate Court vide its judgment dated 06.06.2011 affirmed the findings as returned by the trial Court. NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 2 of 13 pages RSA-1427-2012 (O&M) 7.1
Legal Reasoning
This Court in the above cited case i.e. Punjab Na(onal Bank v. M/s K.L. Malhotra & Brothers also referred to a similar case, which had come up before Division Bench of Calcu=a High Court &tled as “Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff”, AIR 1962 Calcu3a 115. In that case, the balance-sheet showed the amount in the suit as debt owed by the company to the plain&ff. However plea was raised that the same was not sufficient acknowledgment within the meaning of Sec&on 19 of the Limita&on Act (of 1908 - similar to Sec(cid:7)on 18 of Limita(cid:7)on Act, 1963) and that same could not be deemed to be admission of liability as exis&ng on the day on which the admission was made. Repelling the conten&on, the Court had held as under: "... In my opinion the balance sheets sa&sfy the test of an acknowledgement under sec&on 19. Each of them contains an admission that balances have been struck at the end of the previous year and that a definite sum has been found to be the balance then due to the creditor. The natural inference to be drawn from the balance sheets is that the closing balance due to the creditor at the end of the previous year will be carried forward as the opening balance due to him at the beginning of the next year. In each balance sheet there is thus an admission of a subsis&ng liability to con&nue the rela&on of debtor and creditor, and a definite representa&on of a present inten&on to keep the liability alive un&l it is NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 11 of 13 pages RSA-1427-2012 (O&M) lawfully determined by payment or otherwise. There is necessarily a &me lag between the date of the signing of the balance-sheet and the end of the previous year. The balance sheet contain no admission of the amount due on the date of the signature. That amount may be and oRen is 'different from the amount shown as due at the end of the previous year, but that fact alone does not take the amount out of the purview of Sec&on 19. Take the case of a banker and its depositor. Suppose the banker sends to the depositor a monthly statement of account made for the month of February, 1961 and signed on March 15, 1961. The statement gives the balance due on February 28, 1961. The amount due on March 15 may be quite different; the banker might have been made payments for the customer; nevertheless the statement amounts to a sufficient acknowledgement under sec&on 19. I am therefore unable to agree with the decision in AIR 1957 All 143." 23. Having no&ced the above legal posi&on as explained by Hon’ble Supreme Court in Shapoor Fredoom Mazda v. Durga Prosad Chamaria case; and Lakshmiratan Co3on Mills Co. Ltd. v. Aluminium Corpora(on of India Ltd. and also by this Court in Punjab Na(onal Bank v. M/s K.L. Malhotra & Brothers, this Court has no hesita&on to hold that the balance-sheet filed by the defendant company (copy Annexure P-5) on 20.10.2000 along with the list of sundry creditors in its Income Tax Return, showing the balance of ₹9,84,342.31/- outstanding towards the plain&ff, amounts to acknowledgment of liability within the meaning of Sec&on 18 of the Limita&on Act, 1963 and as such, suit filed on 24.10.2002 (within 3 years from the date of above acknowledgement) was well within limita&on. Both the Courts below have clearly erred in holding the suit to be barred by limita&on by ignoring the legal posi&on in this regard. 24. Consequently, the present appeal is hereby allowed with costs. The impugned judgments passed by the Courts below are hereby set aside. Suit of the plain&ff-appellant firm for recovery of ₹9,84,342.31/- is hereby NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 12 of 13 pages RSA-1427-2012 (O&M) decreed along with pendente lite interest from the date of filing of the suit &ll date of this decision @ 7.5 % per annum; and future interest from the date of this decision &ll actual realiza&on @ 6% per annum. Plain&ff- appellant shall also be en&tled to the cost throughout. Decree-sheet be prepared accordingly. (DEEPAK GUPTA) JUDGE February 03, 2025 Nee(ka Tuteja Whether Speaking/reasoned Whether Reportable Yes Yes NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 13 of 13 pages
Arguments
Assailing the abovesaid concurrent findings, it is contended by learned counsel for the appellant-plain&ff that both the Courts below commi=ed grave error in holding the suit to be barred by limita&on, by ignoring the documentary evidence showing that defendants in their Income Tax Return filed for the assessment year 1999-2000 and 2000-01 had clearly shown plain&ff firm in the list of creditors for an amount of ₹9,84,342/- as outstanding, which clearly amounted to acknowledgment within the meaning of Sec&on 18 of the Limita&on Act, 1963. It is pointed out that the Income Tax Return for the year 1999-2000 (Ex.P-5) was filed by the defendant on 20.10.2000 bearing the signature of Pawan Kumar (DW- 1), the partner of the defendant firm, which extended the period of limita&on and as such, the suit filed on 24.10.2002 was within limita&on. 7.2 Learned counsel has referred to “Shapoor Fredoom Mazda v. Durga Prosad Chamaria” 1961 AIR (Supreme Court) 1236; “Punjab Na(onal Bank v. M/s K.L. Malhotra & Brothers” 1995 PLJ 151. With these submissions, prayer is made for seGng aside the judgments passed by the Courts below and to decree the suit of the plain&ff-applicant by allowing this appeal. 7.3 Learned counsel also made statement before this court that plain&ff-appellant confines its claim to ₹9,84,342.31/-, which had been shown by the defendants in their Income Tax Return, along with pendente lite and future interest. 8. To refute the aforesaid conten&ons, learned counsel for the respondents has filed wri=en submissions, wherein it is submi=ed that learned trial Court rightly concluded that an amount of ₹9,84,342.31/- was due towards the respondents-defendants and that cash payment allegedly made on 10.01.2000 was unsubstan&ated and did not cons&tute acknowledgment under Sec&on 19 of the Limita&on Act and as such, the Courts have rightly held the suit filed on 24.10.2002 to be barred by NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 3 of 13 pages RSA-1427-2012 (O&M) limita&on. Prayer is accordingly made for dismissal of the appeal. 9. I have considered submissions of both the sides and have perused the record. 10. This is not in dispute that defendants had purchased paddy from the plain&ff in 1998 by virtue of bills (Ex.P-11 to P-14). Last bill is dated 24.10.1998 (Ex.P-14). It has also not been disputed and rather, admi=ed in the wri=en submissions by the defendants that trial Court has rightly concluded that an amount of ₹9,84,342/- was due towards the defendants- respondents payable to the plain&ff-appellant. 11. The sole ques&on to be decided by the Court is as to whether the suit filed on 24.10.2002 is within limita&on. 12. Plain&ff claimed that an amount of ₹10,000/- had been paid in cash by the defendants on 10.01.2000. However the said conten&on of the plain&ff was not substan&ated and as rightly held by both the Courts below, even if the said payment is assumed, it did not amount to acknowledgment within limita&on of Sec&on 19 of the Limita&on Act, 1908, as the acknowledgment should be wri&ng. 13. However learned counsel for the appellant-plain&ff has heavily relied upon the Income Tax Returns, which were filed by the defendant firm along with balance-sheets, for the year 1999-2000 and 2000-01. 14. Ex.P-5 is the list of sundry creditors of the defendant firm as on 31.03.2000, forming part of balance-sheet of the defendant firm, duly cer&fied by the chartered accountants and signed by one of the partner of the defendant firm namely Pawan Kumar on 20.10.2000. DW-1 Pawan Kumar (defendant No.2) and partner of the defendant firm has candidly admi=ed his signature on the said document Ex.P-5. In the said list of sundry creditors, the name of plain&ff firm appears with outstanding dues NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 4 of 13 pages RSA-1427-2012 (O&M) of ₹9,84,342.31/-, which tallies with the principal amount as claimed by the plain&ff firm, as has been rightly held so by the trial Court. Even in the Income Tax Return for the year 2000-01, the balance-sheet along with list of creditors was filed by the defendant firm, filed on 01.10.2001, copies of which are Ex.P-7 and P-8, the name of plain&ff finds place in the list of sundry creditors as on 31.03.2001 with an amount of ₹9,76,341.3/- outstanding. 15. It is apparent that in the abovesaid documents par&cularly Ex.P-5, the defendant firm through its partner has acknowledged the plain&ff firm to be one of the creditors in the list of sundry creditors as on 20.10.2000. Though this acknowledgment of the defendant in the form of balance sheet is not specifically addressed to the plain&ff but nevertheless it is an acknowledgment, duly cer&fied by the chartered accountant and filed before the income tax authori&es. The ques&on is that whether the said balance sheet filed along with income tax return, would come within the scope of Sec&on 18 of the Limita&on Act, 1963. 16. Sec&on 18 of the Limita&on Act, 1963 reads as under:- “18. Effect of acknowledgment in wri@ng. - (1) Where, before the expira&on of the prescribed period for a suit or applica&on in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in wri&ng signed by the party against whom such property or right is claimed, or by any person through whom he derives his &tle or liability, a fresh period of limita&on shall be computed from the &me when the acknowledgment was so signed. (2) Where the wri&ng containing the acknowledgment is undated, oral evidence may be given of the &me when it was signed; but subject to the provisions of the Indian Evidence Act, 1872 (1 of 1872), oral evidence of its contents shall not be received. Explana(cid:7)on.—For the purposes of this sec&on,— NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 5 of 13 pages RSA-1427-2012 (O&M) (a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the &me for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set off, or is addressed to a person other than a person en@tled to the property or right, (b) the word "signed" means signed either personally or by an agent duly authorised in this behalf, and (c) an applica&on for the execu&on of a decree or order shall not be deemed to be an applica&on in respect of any property or right.” 17. The abovesaid provision will show that following pre-requisites should be there, before fresh period of limita&on starts on the basis of an acknowledgment in wri&ng:- (i) Acknowledgment should have been made before the expira&on of the prescribed period for the suit/applica&on in respect of any property or right. (ii) Such acknowledgment or liability should be made in wri&ng signed by the party, against whom such property or right is claimed, or by any person through whom he derives his &tle or liability. (iii) An acknowledgment may be sufficient though – (cid:1) it omits to specify the exact nature of the property or right, or (cid:1) avers that the &me for payment, delivery, performance or enjoyment has not yet come or (cid:1) is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or (cid:1) is coupled with a claim to set off, or NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 6 of 13 pages RSA-1427-2012 (O&M) (cid:1) is addressed to a person other than a person en&tled to the property or right. 18. If the above condi&ons are fulfilled, a fresh period of limita&on shall be computed from the &me, when the acknowledgment was made. It is very important to no&ce that Sec&on 18 of the Limita&on Act, as reproduced above, does not require that acknowledgment of liability on behalf of the party against whom the right of property is claimed should be in favour of the party claiming the right on property. Rather, explana&on to the sec&on makes it clear that acknowledgment of liability may even be addressed to a person other than the person en&tled to the property or right. 19. In present case, the acknowledgment of liability has been addressed by the defendants to income tax authori&es i.e., a person other than the plain&ff, which is en&tled to the recovery of acknowledged amount. 20. Similar provision in Sec&on 19 was contained in Limita&on Act, 1908. Interpre&ng the said provision it was held by Hon’ble Supreme Court in Shapoor Fredoom Mazda v. Durga Prosad Chamaria case (supra) as under: “5. Sec&on 19(1) says, inter alia, that where before the expira&on of the period prescribed for a suit in respect of any right, an acknowledgment of liability in respect such right has been made in wri&ngs signed by the party against whom such right is claimed, a fresh period of limita&on shall be computed from the &me when the acknowledgment was so signed. It would be no&ced that some of the relevant essen&al requirements of a valid acknowledgment are that it must be made before the relevant period of limita&on has expired, it must be in regard to the liability in respect of the right in ques&on and it must be made in wri&ng and must be signed by the party against whom such right is claimed. Sec&on 19(2) provides that NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 7 of 13 pages RSA-1427-2012 (O&M) where the wri&ng containing the acknowledgment is undated, oral evidence may be given about the &me when it was signed but it prescribed that subject to the provisions of the Evidence Act, 1872, oral evidence of its contents shall not be received; in other words, though oral evidence may be given about the date, oral evidence about the contents of the document is excluded. Explana&on 1 is also relevant. It provides, inter alia, that for the purpose of Sec&on 19, an acknowledgment may be sufficient, though it omits to specify the exact nature of the right or avers that the &me for payment has not yet come, or is accompanied by a refusal to pay, or is coupled with a claim to a set off, or is addressed to a person other than person en(cid:7)tled to the right. 6. It is thus clear that acknowledgment as prescribed by Sec&on 19 merely renews debt; it does not create a new right of ac&on. It is a mere acknowledgment of the liability in respect of the right in ques&on; it need not be accompanied by a promise to pay either expressly or even by implica&on. The statement on which a plea of acknowledgment is based must relate to a present subsis&ng liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgment must, however, indicate the existence of jural rela&onship between the par&es such as that of debtor and creditor, and it must appear that the statement is made with the inten&on to admit such jural rela&onship. Such inten&on can be inferred by implica&on from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the inten&on to admit jural rela&onship may be implied from it. The admission in ques&on need not be express but must be made in circumstances and in words from which the Court can reasonably infer that the person making the admission intended to refer to a subsis&ng liability as at the date of the statement. In construing words used in the statement made in wri&ng on which a plea of acknowledgment rests oral evidence has been expressly excluded but surrounding circumstances can always be considered……….” NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 8 of 13 pages RSA-1427-2012 (O&M) 21. Similar ques&on also arose before this Court in Punjab Na(onal Bank v. M/s K.L. Malhotra & Brothers (supra). In that case, Punjab Na&onal Bank was seeking recovery. Suit was dismissed on the ground of limita&on by the Courts below. Ma=er went in Regular Second Appeal before this Court, where acknowledgment of debt by way of part payment; and balance-sheet of the defendant company were relied so as to extend the period of limita&on. This Court, by referring to Sec&on 18 of the Limita&on Act, besides “Lakshmiratan Co3on Mills Co. Ltd. v. Aluminium Corpora(on of India Ltd.” AIR 1971 Supreme Court 1482; and “Shapoor Fredoom Mazda v. Durga Prosad Chamaria” AIR 1961 Supreme Court 1236, held as under:- “9. Sec&on 18 of the Limita&on Act deals with the effect of acknowledgement in wri&ng. According to sec&on 18, where, before the expira&on of the prescribed period for a suit, an acknowledgement of liability in respect of such property or right has been made in wri&ng signed by the party against whom such property or right is claimed, a fresh period of limita&on shall be computed from the &me when the acknowledgement was so signed. According to this Sec&on, an acknowledgement to give fresh star&ng point of limita&on is to be before the expira&on of period of limita&on for the suit, appeal or applica&on. The acknowledgement is to be clear and unambiguous acknowledgement admiGng the liability. It is to be signed by the par&es or his authorised agent and lastly it is to be of a subsis&ng liability. 10. In the present case, the dispute between the par&es only relate whether the acknowledgement is in respect of a subsis&ng liability or not. The basis of the claim of the plain&ff is documents Exhibit P-6, P-7 and P- 33. Exhibit P-33 is a document duly signed by the defendant admiGng his liability for a sum of Rs. 1,16,507-18 as on 30.12.1980. Confirma&on by the defendant is dated 2.2.1981. Vide Exhibit P-7, defendant confirmed the balance amount of Rs. 78,669.78 as on 31.12.1981. This acknowledgement is dated 8.3.1982. Similarly, vide Exhibit P-6, defendant admi=ed amount NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 9 of 13 pages RSA-1427-2012 (O&M) due i.e. a sum of Rs. 77,496.21 as on 31.12.1982. The acknowledgement is dated 9.8.1983. The suit was filed on 15.2.1984. It is the case of the appellant that vide all the above noted documents, the defendant acknowledged the liability to pay the amount due along with interest and so these documents are valid acknowledgements in terms of sec&on 18 of the Act. Both the Courts have erred in misconstruing the validly executed acknowledgements thereby denying the plain&ff the benefit of the extended period of limita&on. The counsel further urged that even the decision of the apex Court supports the case of the appellant. Elabora&ng the counsel urged that as per banking prac&ce, the accounts are finalised in the end of the Year and so in all these documents balance amount due towards the defendants as on 30.12.1980, 31.12.1981 and 31.12.1982 was duly reflected which was also confirmed by the defendants. The acknowledgements made by the defendants in respect of these amounts were clearly within the period of limita&on. Examined so, the suit in respect of the amount due as on 30.12.1980 could validly be brought by the plain&ff within a period of three years from the date of acknowledgement. Since a part of the amount has been paid to the plain&ff during the subsequent period the amount due as on 31.12.1981 was again acknowledged by the defendants on 8.3.1982, Exhibit P-7, and finally on the balance amount of Rs. 77,496.21 (Exhibit P-6) acknowledgement was made by the defendants on 9.8.1983. Thus, the last acknowledgement in respect of the amount due as on-31.12.1982 was within the limita&on as the suit was ins&tuted on 15.2.1984. According to the counsel, both the Courts have misconstrued the decisions of the apex court in Lakshmiratan Co3on Mills case (Supra) and Shapoor Fredoom Mazda's case (Supra). 11. The apex Court in Lakshmiratan Co3on Mills case (Supra) has held that the statement on which the plea of acknowledgement is founded need not amount to promise and need not indicate the exact nature or the specific character of the liability. It must, however, relate to a present subsis&ng liability. Subsis&ng liability in common parlance mean the NEETIKA TUTEJA 2025.02.03 16:59 I attest to the accuracy and integrity of this document Page 10 of 13 pages RSA-1427-2012 (O&M) exis&ng liability. Iden&cal expression has been used in Shapoor Fredoom Mazda's case (supra). A perusal of the aforesaid two judgments of the apex Court makes it abundantly clear that acknowledgement so made renews the debt. The apex Court further held, "stated generally, courts lean in favour of a liberal construc&on of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural rela&onship such inten&on could be fastened on the maker of the statement by an involved or far-fetched process of reasoning.” 22.