TMI Blog2004 (7) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... public sector undertaking, Hindustan Petroleum Corporation Ltd. (HPCL) was in need of such material. In order to facilitate this import for HPCL, the respondent-company placed an order dated January 11, 1990, on the principals. The purchase order also specifies the HPCL as the consignee and the port of discharge of goods was Bombay whereas the port of loading was North Sea Port. In fact before placing this order, the respondent-company had floated Tenders Enquiry No. MMTC/99/Tender-262 A/HRSH/89 dated November 1, 1989, and accepting the tender of the principals, the order in question was placed. Total quantity ordered was 4000 M.T. deep drawing quality H. R. Steel sheets as per IS : 6240-1976 Grade B specification for manufacture of low pressure gas cylinders for a price of DM 37,52,000. In column 8 of the purchase order the name of the petitioner-company is stated as an authorised representative of the principals. In column 18 it is mentioned that the agency commission would be DM 18,760, i.e. , at the rate of 0.5 per cent, of C F value. The purchase order was duly executed with the petitioner-company providing agency services in India, representing the principals. The consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions from HPCL to its bankers. In these circumstances, the respondent-company wrote another letter dated July 1,1991, to the bank expressing its surprise over the stand of the bank in asking the petitioner to receive the amount directly from HPCL. However, still the needful was not done. Even the principals wrote letter dated January 20, 1992, to the respondent-company requesting it to make the payment of the agency commission to the petitioner-company. Interestingly, in the last paragraph of this letter the principals also stated that if the respondent-company fails to make the payment, the principals would be constrained to ask for refund of DM 18,760 deducted from its total price of material for agency commission to enable it to discharge its financial obligation towards the petitioner-company. This shows that the total price which was payable for the material, including this agency commission as well and the principals had agreed that the amount of agency commission should be paid to the petitioner and for this reason it had reduced this amount from the total price received by the principals. This is so stated by the petitioner in its letter dated August 27, 1992, to the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der also HPCL was shown as consignee of the goods and therefore being the beneficiary it was the liability of HPCL. Supplementary affidavit is filed by the respondent-company making an attempt to demonstrate how HPCL was concerned with making the payment and the petitioner was made aware of the same by series of correspondence. ( iii )HPCL seems to have relied on some guidelines of the Finance Ministry of the Government of India which requires public sector undertakings/corporation/enterprises to stop payment of agency commission to Indian agents unless for reasons it was unavoidable. It was for this reason the HPCL had instructed State Bank of India to delete the clause regarding payment of agency commission to the Indian agents and accordingly LoC dated January 10, 1990, shows the said deletion. ( iv )The winding up petition was, in any case, not maintainable as it was used as "arm-twisting tactics" to effect recovery of debts, more so when the date itself was in dispute. The respondent-company was a solvent company earning crores of rupees in foreign exchange for the country and it could not be wound up for a paltry claim of Rs. 3.96 lakhs. In view of the stand taken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this issue hinges on the determination of the question as to whether letter dated July 18, 1994, constitutes acknowledgment of the debt of the petitioner within the meaning of section 19 of the Limitation Act. It would, therefore, be apposite to reproduce this letter in its entirety : "Please ref D.O. letter No. MMTC/DIR(RK)/209/93 dated September 21, 1993, from our director to Shri Zutshi your director marketing. We are yet to receive a reply to this letter. You are aware that this letter has been written by our director in connection with payment of agency commission to M/s. Hansa Industries Ltd., agents of M/s. Thyssen Stahlunion GmbH. We had imported HR sheets for Hindustan Petroleum in December, 1989/January, 1990 vide our purchase order No. MMTC/Steel/HRSH/ 7345/2669/89 dated January 1, 1990. For payment of agency commission we also received a letter from HPCL bearing No. PUR : HN dated December 20, 1989, undertaking to authorise your bankers to release the agency commission amount to the Indian agents in equivalent rupees immediately on issue of the letter of authorisation by MMTC in this regard to their bankers. We had thereafter provided the necessary letter of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or HPCL. Whether this amounts to acknowledgment of debt within the meaning of section 18 of the Limitation Act ? Section 18 is in the following terms : "18.(1) Effect of acknowledgment in writing. (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed." In the case of Shapoor Freedom Mazda v. Durga Prosad Chamaria, AIR 1961 SC 1236 the apex court while interpreting corresponding section 19 of the Limitation Act, 1908, which was identically worded, held that the relevant essential requirement of valid acknowledgment are : ( a ) It must be before the relevant period of limitation has expired, ( b ) it must be in regard to the liability and respect of the right in question and ( c ) it must be in writing and must be signed by the party against whom such right is claimed. In paras. 6 to 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itably depend upon the context in which the words are used and would always be conditioned by the tenor of the said document, and so unless words used in a given document are identical with words used in a document judicially considered it would not serve any useful purpose to refer to judicial precedents in the matter. However, since decisions have been cited before us both by the learned Attorney General and Mr. Viswanatha Sastri we propose to refer to them very briefly before turning to the document in question. Para 8 : The question as to what is an acknowledgment has been answered by Fry, L.J., as early as 1884 A.D. in Green v. Humphreys [1884] 26 Ch D 474 at page 481. This answer is often quoted with approval, 'What is an acknowledgment', asked Fry, L.J., and he proceeded, 'in my view an acknowledgment is an admission by the writer that there is a debt owing by him, either to the receiver of the letter or to some other person on whose behalf the letter is received but it is not enough that he refers to a debt as being due from somebody. In order to take the case out of the statute there must upon the fair construction of the letter, read by the light of the surrounding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratan Cotton Mills Co. Ltd. v. Aluminium Corporation of India Ltd., AIR 1971 SC 1482 while acknowledging that a liberal construction of the statement contained alleged acknowledgment, is to be given, the court held that that would not mean where a statement is made without intending to admit the existence of jural relationship such intention should be fastened on the person in the case of making the statement by an involved and far-fetched reasoning. We can deduce the following principles from the aforesaid judgments which shall have to be applied in a given case to ascertain as to whether writing constitutes an acknowledgment or not : ( a )Acknowledgment means an admission by the writer that there is a debt owed by him either to the receiver of the letter or to some other person on whose behalf it is received. It is not enough he refers to a debt as being due from somebody. He must admit that he owes the debts. ( b )The statement on which a plea of acknowledgment is based must relate to a present subsisting liability though the exact nature of the specific character of the said liability may not be indicated in words. ( c )Words used in the acknowledgment indicate the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es an acknowledgment of debt by the respondent-company. The relevant consideration therefore would be to examine as to whether the respondent-company is assuming its liability to pay. If it is not admitting this liability, for the purpose of section 18 of the Limitation Act, we cannot determine the justification of such a stand. That enquiry would have been relevant had the issue in hand been as to whether the commission is payable by the respondent-company or HPCL. However, the fact remains that in so far as letter dated July 18, 1994, is concerned, the respondent-company has not admitted any liability on its part and has tried to fasten the liability on the HPCL and therefore such a letter cannot be treated as acknowledgment of debt by the respondent-company as there is no admission on its part that it owes the debt to the petitioner. In order to constitute an acknowledgment under section 18 of the Limitation Act, it was necessary to establish that the respondent-company accepted expressly or impliedly its liability to pay the debt. Learned counsel for the petitioner wanted this court to take into consideration the admissions contained in the said letter as pointed in para. 13 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that it had a gross profit before tax in excess of Rs. 86 crores ; reserves to the tune of Rs. 578.52 crores ; annual turnover of Rs. 6224.00 crores and was on going solvent company with a number of work force. In a petition filed under section 433(e) of the Act, not only is it required to be proved that there must be a debt, but one has also to come to a finding that the respondent-company must be unable to pay the said debt. Even if these two conditions are satisfied, still it is not necessary that the winding up order has to be passed as an order under clause (e) of section 433 is discretionary. (See Pradeshiya Industrial and Investment Corporation of U. P. v. North India Petro Chemical Ltd. [1994] 79 Comp. Cas. 835 ; [1994] 3 SCC 348). The respondent-company disputed its liability to pay the debt on the ground that it was payable by HPCL. HPCL is disputing on the ground that the payment of such agency commission is not permissible by a Government of India undertaking having regard to the Government guidelines in this behalf. In these circumstances, the proper course for the petitioner was to file a civil suit as it is trite law that machinery for winding up will not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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