TMI Blog2010 (2) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... h were duly entered in the account of the appellant maintained by the respondent in his books of account. The appellant was also issuing 'C' Forms in the prescribed format of the Sales Tax Department to the respondent. On 28.05.1988, allegedly a sum of ₹ 95,335.28 was due from the appellant as per the books of account maintained by the respondent in the regular course of business. The appellant allegedly did not pay the aforesaid amount despite repeated requests made in this regard and a legal notice dated 23.04.1991 served upon it. The respondent accordingly instituted a suit for the recovery of the balance amount claiming interest @ 18% per annum in accordance with custom, usage and trade practice, that is to say, ₹ 95,335.28 as principal and ₹ 52,210.74 as interest up to the date of the filing of the suit. 4. The appellant was proceeded ex parte in the suit on 28.02.1994 when it failed to appear despite service of summons upon it. An application moved under Order IX Rule 7 of the CPC by the appellant was dismissed by order dated 22nd May, 1995. The appellant preferred Civil Revision No. 670/1995 before the High Court, which too was dismissed by a det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... current account, where there have been reciprocal demands between the parties, and that the only Article for computation of limitation applicable in the instant case was Article 14. Assailing the finding of the learned Additional District Judge that the 'C' Forms amounted to acknowledgment of liability for the payment of the amounts mentioned therein within the meaning of Section 19 of the Indian Limitation Act, the learned senior counsel for the appellant next contended that the issuance of 'C' forms did not amount to acknowledgment of debt as the same were issued in the due course of business, which were meant for paying tax to the Government and not for extending the period of limitation. 8. Adverting to the first contention of the learned senior counsel for the appellant, there is no manner of doubt that Section 3 of the Limitation Act places a statutory obligation on the Courts to examine whether the suit is filed within limitation or not, even if no such plea has been taken by the opposite party. If the suit is filed beyond limitation and is clearly time barred, it cannot be decreed in the teeth of Section 3 of the Limitation Act and the Court has to dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y because there is a running, open or current account in respect of the transactions between the parties does not mean that Article 1 of the Limitation Act, 1963 would apply. It has been so held by the Supreme Court in the case of Kesharichand Jaisukhlal v. Shilong Banking Corporation Ltd. (1965) 3 SCR 110, after referring to the leading case on mutual accounts Hirada Basappa v. Gadigi Muddappa (1871) VI MHCR 142, wherein it is observed as under: To be mutual there must be transactions on each side creating independent obligations on the other, and not merely transactions which create obligations on the one side, those on the other being merely complete or partial discharges of such obligations. 12. A Division Bench of this Court in the case of Manish Garg v. East India Udyog Ltd. 2001 III AD (Delhi) 493, after referring to the judgment of the Supreme Court in Kesharichand Jaisukhlal's case (supra) and in the case of Hindustan Forest Co. v. Lal Chand and Ors. (1960) 1 SCR 563, held as follows: 8. Thus for an account properly to be called Mutual Account there must be mutual dealing in the sense that both the parties come under liability under each other. In this case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no prescribed format for acknowledgment, the learned trial court, while taking note of the fact that the amount of the aforesaid three Declarations was more than ₹ 1,80,000/- as against the liability of the appellant which was only ₹ 95,000/- and odd, held that the Declarations nonetheless must be construed as acknowledgment in view of the unrebutted and unchallenged testimony of the respondent made on oath, though it held that the respondent was entitled for a decree in the sum of ₹ 95,335.28 only, that is, amount remaining due against the appellant as per the books of account of the respondent with interest amounting to ₹ 52,210.74 @ 18% per annum. 15. In my considered opinion, the learned trial court clearly erred in construing the 'C' Forms as acknowledgments of liability and in relying upon them for extending the period of limitation, inter alia, for the reason that when exemption from limitation is prayed for, it is essential for the plaintiff to very specifically plead such an exemption in the plaint. As a matter of fact, under Order VII Rule 6 CPC, it is obligatory, as a matter of pleading, to show the ground on which the exemption from l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is thus clear that acknowledgment as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgment of the liability in respect of the right in question. It need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledge is based must relate to a present subsisting 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 relationship between the parties such as that of debtor or creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question 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 subsisting liability as at the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... still remained unpaid and also that the mortgagor had a subsisting right of redemption which he could enforce against the mortgagee. In this view of the matter the contention on behalf of the appellant that the recitals in the document of November 1, 1913 constituted an acknowledgment of liability for redemption within the meaning of Section 19 of the Limitation Act deserves to be accepted. 20. The aforesaid principles relating to Section 19 of the Old Act, the provisions of which are similar to Section 18 of the New Act, were reiterated by the Supreme Court in the case of Prabhakaran and Ors. v. M. Azhagiri Pillai (Dead) by LRs. and Ors. (2006) 4 SCC 484. 21. In Valliamma Champaka Pillai v. Sivathanu Pillai and Ors. (1979) SCC 429, it was held as under: Under Section 18 of the Limitation Act, 1908, one of the essential requirements for a valid 'acknowledgment' is that the writing concerned must contain an admission of a 'subsisting liability'. A mere admission of the past liability is not sufficient to constitute such an 'acknowledgment'. Hence a mere recital in a document as to the existence of a past liability, coupled with a statement of its di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of the report as well, i.e., 27th November 1996. For even if the position of debtors or creditors had undergone a change between April to November 1996, the same would not have found place in the said report. 24. In Taipack Limited and Ors. v. Ram Kishore Nagar Mal 2007 (3) ARB. LR 402 (Delhi), a similar question arose as in the instant case as to whether 'C' Form supplied by the petitioner therein constituted acknowledgment of debt owed to the respondent so as to give a fresh lease to the commencement of limitation. A learned Single Judge of this Court answered the question in the negative giving the following reasons: 32. Firstly, there is no acknowledgment of a present and subsisting liability. The said form can at the most be treated as an acknowledgment of the goods received under the contract of supply of goods and the price fixed to be paid for them. Whether or not payments were effected thereafter, or any amount remains due or outstanding cannot be inferred from the said 'C' form in the facts and circumstances of this case. Secondly, no intention to acknowledge a liability can be inferred from the contents of the said 'C' form. Thirdl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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