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TMI Blog2007 (4) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... 31st January, 2002. 3. The plaintiff advanced to the defendant several amounts as loan account payee cheques or demand drafts between the period 16th December, 1998 to 13th September, 2000 totalling an amount of Rs. 41 lakhs. The amount which was advanced by the plaintiff wasreflected and acknowledged by the defendant as such loan in their books of account, balance sheets and profit and loss accounts, which were prepared and filed before the Registrar of Companies as well as the income tax authorities. 4. In partial discharge of its liability, the defendant paid an amount of Rs. 4 lakh by way of cheque in September, 2000 which was credited to the plaintiff's account on 16th September, 2000. Further loan was requested and between 21st September, 2000 and 25th April, 2001, the plaintiff advanced a further amount of Rs. 37,30,000/-. Details of payments made to the defendant by the plaintiff have been detailed in para 5 of the plaint. Thereafter, the defendant repaid a sum of Rs. 1.50 lakhs by two cheques dated 2nd March and 15th March, 2001. At the time of filing of the suit, the defendant was owing a sum of Rs. 72,80,000/- to the plaintiff for which the plaintiff filed the sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31st March, 1999, 31st March, 2000, 31st March, 2001 and 31st March, 2002, the plaintiff originally filed the suit on 26th March, 2004 for a principal sum of Rs. 72,80,000/-. 9. The defendant entered appearance on receipt of summons in the suit. The plaintiff thereafter sought summons for judgment to be issued in the prescribed form. The present application has been filed on 13th of October, 2004 seeking leave to defend. 10. A preliminary objection has been taken by the plaintiff to maintainability of this application on the ground of limitation. Before dealing with the pleas of the defendant in the application, it would be appropriate to consider this objection. The advance copy of the I.A. No. 6307/2004, whereby the plaintiff had sought issuance of summons for judgment, was served upon counsel for the defendant against receipt on 20th September, 2004. Based on this service, it is urged that the leave to defend ought to have been filed within ten days thereof on or before 30th September, 2004. The same having been filed on 13th October, 2004, according to the plaintiff the present application seeking leave to defend is barred by limitation. Reliance is placed on the pronouncemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by time. 13. The defendant has contended that he received the summons for judgment on 4th October, 2004 and has filed the application on 13th October, 2004. There is no material on record to the contrary. I am therefore inclined to accept the contention of the defendant on this ground and reject the objection of the plaintiff to the effect that this application deserved to be rejected on the ground that the same is barred by limitation. 14. So far as the grounds on which leave to defend has been sought by the defendant, by way of the present application, the defendant raises the following pleas:- (i) the suit of the plaintiff is barred under the provisions of Punjab Registration of Money Lenders' Act, 1938. (ii) The money claimed by the plaintiff is not a debt or a liquidated demand under contract and consequently, the present suit filed under Order 37 of the Code of Civil Procedure, 1908 is not maintainable. (iii) The suit claim is barred by limitation inasmuch as each cheque allegedly paid by the plaintiff was an independent transaction and consequently gave rise to independent causes of action. The suit having been filed more than three years beyond the date of the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is application, apart from a bald allegation that the suit is barred under the Punjab Registration of Money Lenders' Act, 1938, there is nothing further. I find that the plaintiff has contested the claim of the defendant that the amount given to it was advanced by the plaintiff as a Director of the company. Even assuming that the investment was made by the plaintiff in the capacity of a director of the defendant-company in the form of a loan to the company. I find that there is no plea in the application that the plaintiff is a money lender by profession within the meaning of expression under Section 2 (9) of the statute. 17. In AIR 1952 Punjab 207 Amar Singh Vs. Kuldeep Singh, it was held by the court that a man does not become a 'money lender' merely by reason of casual loans to relations, friends or acquaintances, whether interest be charged or not nor does a man become a money lender merely because he may, upon one or several occasions, lend money to a stranger. There must be a business of money lending and the 'business' imports the notion of system, repetition and continuity to be covered under the definition of money lender under this statute. 18. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16th December, 1998 to 13th September, 2000. The plaintiff became a director of the defendant-company and remained its director with effect from 31st May, 2000 till 31st January, 2002. From the statements of accounts placed before this court, it is evident that the plaintiff has made payments to the defendant before the date he became the director of the defendant and even thereafter. 21. Before this court the plaintiff has placed certified copies of the balance sheet duly certified by a chartered accountant. Perusal of the balance sheet of the defendant-company as on 31st March, 1999 shows that it was owing an amount of Rs. 17,00,000/- to Shri S.C. Gupta who has given unsecured loan in the category of 'unsecured loans from others' as on 31st March, 1999. The amount due to the plaintiff has been so reflected even in the balance sheet of 31st March, 2000 and the same amount has been shown. As on 31st March, 2001, Shri S.C. Gupta is shown to have advanced an unsecured loan of Rs. 62,30,000/- while in the balance sheet as on 31st March, 2002, Shri S.C. Gupta is shown to have advanced unsecured loan to the tune of Rs. 72,80,000/-. Thus, the amounts payable to the plaintiff a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duty authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made: Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgement of the payment appears in the handwriting of, or in a writing signed by, the person making the payment. Explanation - For the purposes of this section (a) where mortgaged land is in the possession of the mortgagee, the receipt of the rent or produce of such land shall be deemed to be a payment; (b) "debt" does not include money payable under a decree or order of a court." 24. My attention has been drawn to the judgment of the Gujarat High Court reported at AIR 1964 Gujarat 208 Ambika Mills Ltd., Ahmedabad Vs. Commissioner of Income Tax, Gujarat, wherein the court has held that a debt shown in a balance-sheet is an acknowledgment within the meaning of S.19 of the Limitation Act, and in order to be so, a balance-sheet in which such acknowledgment is made need not be addressed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the defendants apart from arguing on merits submitted that the suit was barred by time. Mr. Kohli the learned Counsel for the plaintiff relied upon the letter written by the Income Tax Officer in January 1981 to the defendants wherein the Income Tax Officer had said that the defendants had shown in the balance sheet for the year ended 31.3.78 a sum of Rs. 1,74,000/- as due from the defendants to the plaintiff and the plaintiff, therefore, filed an application for a direction to the defendants to file the balance sheet. Mr. Kohli learned Counsel for the plaintiff contends that the balance sheet wherein the defendants itself had shown that particular amount is due to the plaintiff would constitute an acknowledgment within the meaning of Section 18 of the Limitation Act, 1963. As I had already noticed that the last payment by cheque by the defendants was on 1.8.80, the plaint was presented on 14.12.81, therefore, the suit is in time. I need not go into the question of acknowledgment but it is well settled in ILR 33 Cal 1033 that such a statement in accounts would constitute acknowledgment of liability. In any view of the matter the suit is in time." 28. Section 18 of the Limitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted at AIR 1958 Punjab 341 Lahore Enamelling and Stamping Co. Ltd. Vs. A.K. Bhalla & Ors., the court laid down the principles thus: "37. All the claims mentioned above are acknowledged in the balance sheet for the year ending 31-12-1950. In two cases the specific amounts are shown to be due to the Managing Director (Shri Bhagwan Das) and to technical expert (Shri A.K. Bhalla). Loans due to unsecured creditors are stated to be Rs. 1,22,099/10/9. There is evidence on the record to show that the above amount includes sums due to Shrimati Yash Kumari Bhalla and Dr. Tara Chand, vide Exhibit P.1. All these entries constitute an acknowledgment of the debts due to the claimants within the meaning of S.19 of the Indian Limitation Act. Debts due to creditors not mentioned by name but included in the item relating to "Loans (unsecured)" or as due to "Sundry Creditors" mentioned in the balance sheet amount to an acknowledgment within the provisions of S.19 of the Indian Limitation Act, so as to extend the period of Limitation Act with effect from the date of the signing of the acknowledgment. For this proposition, reference may be made to Rajah of Vizianagaram v. Vizianagaram Mining Co. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in three years from the last payments which were made by the defendant vide cheque nos. 690246 and 690248 dated 12th April and 15th April, 2004 respectively as also dishonouring of the cheque no. 690427 which was dishonoured on 22nd July, 2004. 31. It is noteworthy that each of these payments was within three years of the last payment and on each date limitation would require to be computed afresh from the date when the payments were rendered. On these facts alone, the present suit having been filed on 29th March, 2004 would have to be held within limitation. 32. The defendant can claim no benefit from the act of dishonouring of the cheque. It is well settled that dishonouring of the cheque would not wipe out an advantage of extension of limitation which is earned by the creditor on the issuance of such cheque. (Ref: AIR 1998 Delhi 80 para 6-15 Rajesh Kumari Vs. Prem Chand Jain; decision dated 5th September, 2005 rendered in CS(OS) No. 2342/1998 Hindustan Petroleum Corporation Vs. Tajiskstan International Airlines). 33. There is yet another aspect to the objection relating to the suit being barred by limitation. The defendant has admittedly issued a letter dated 2nd September, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he plaintiff has maintained a running account so far the transactions with the defendant are concerned. The loan transactions have been made through cheques and demand drafts and repayments have come through the same mode. The plaintiff has extended amounts to the defendant-company from time to time and the defendant has made partial payments from time to time. Thus, in the instant case, in my view, the limitation would not commence on expiry of the prescribed period from date of issuance of each cheque. 37. There is yet another angle to this case. It is well settled that in order to maintain a suit against the defendant, there must accrue cause of action for filing the same. In the instant case, there was no occasion for the plaintiff to believe that the loan taken by the defendant would not be repaid. The defendant did tender some cheques which were honoured. The defendant had also acknowledged the amounts due in its letter dated 2nd September, 2001. Therefore, inasmuch as the defendant kept acknowledging the loan, the same would amount to a promise to pay the plaintiff towards the loan. The first time that the cheques were dishonoured were on 19th February, 2004, and 9th March, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the cheques that the plaintiff would have got an indication that the defendant did not intend to honour its commitment. As such, the plaint as initially filed and the amended plaint within three years of the accrual of the cause of action is clearly within limitation. 39. It is equally well settled that bouncing of cheque would not have any effect on the impact of the tender of cheque so far as limitation is concerned. In this behalf, the pronouncement of this court reported at AIR 1998 Delhi 80 para 6-15 Rajesh Kumari Vs. Prem Chand Jain; and decision dated 5th September, 2005 rendered in CS(OS) No. 2342/1998 Hindustan Petroleum Corporation Vs. Tajiskstan International Airlines (para 13) deserve to be adverted to. 40. The defendant has urged at great length that so far as the amount actually due and payable by the defendant is concerned, it cannot be determined from the pleadings or the documents as filed and that evidence requires to be led in this behalf before ascertainment of the liability. It is contended that the defendant is entitled to challenge such evidence and cross examine the plaintiff and his witnesses. Mr. T. Nath, learned counsel for the defendant has urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in writing. These objections were negatives and the relevant paragraphs read as follows:"Regarding the objection as to the maintainability of the suit raised by the appellant appellants, we are of the view that where the suit is for recovery of the price of the goods, it should be construed as a suit for enforcing payment of a debt, within the amended clause (b) of sub-rule (2) of Rule 1 of Order 37, C.P.C. which covers a few more categorises of suits and not being inconsistent with Rule 1 of Chapter XV of the Original Side Rules will govern the present suit, vide Rule 12 of the said Rules, as explained in M/s.Printpack Machinery Ltd. v. M/s.Jay Kay Paper Congeters, AIR 1979 Delhi 217, Avadh Behari J. in Sushila Mehta v. Shri Bansi Lal Arora and another, I.A. 3032/81 in suit No.93/81, decided on 26.10.1981, has held that the amendment of Order 37, CP.C. is neither repugnant nor inconsistent with Chapter XV of the Original Side Rules, and a suit on a debt arising out of a written contract can be brought under the summary procedure. We are in respectful agreement with that view. What then, is a debt? Relying in Webb v. Stention, (1883) 11 OBD 518 it was held in Commissioner of Wealth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be read along with the word 'interest' and since no interest was payable under the contract the suit is not covered by clause (b) of Rule 2 of Order 37 Code of Civil Procedure, 1908. This is an argument totally unsupportable. The words 'arising on a written contact' apply to the word 'debt' which may be 'with or without interest'. We therefore, without any hesitation reject this contention of the appellant." 45. It would also be appropriate to advert to the observations of the High Court of Judicature at Madras in its pronouncement reported at AIR 1963 Madras 356 which reads thus: "7. Debt is a common expression and it is difficult to believe that it can give rise to any controversy in interpreting it. Broadly stated it is a liquidated money obligation for the recovery of which an action will lie. It is an ascertained liquidated quantified obligation enforceable 'in praesenti' or 'in futuro'. A debt must be a "debitum" that is due. The fact that the time for payment will arise in future does not make it any the less a debt. 'Debitum in praesenti, solvendum in futuro' - this is not repugnant to the conception of a debt, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgo, vis-a-vis the amount for which they were insured, and, therefore, the damage in percentage is a 'liquidated demand' within the meaning of Order XXXVII of the Code of Civil Procedure. xxxx xxxx xxxx 12. In view of the provisions of the insurance policy, the provisions of item 14 of the Schedule to the Insurance Act, the provisions of Section 64-UM of the Insurance Act, the percentage loss suffered to the dry dates as evidenced by the report of the surveyor, in my view, is capable, by an arithmetical calculation, of arriving at a determinable sum, which sum would constitute a 'liquidated demand' within the meaning dicta in Rifkin Vs. Safenovitz (supra), and the provisions of Order XXXVII of the Code of Civil Procedure." In the preceding paragraphs, I have noticed the computation of the amounts claimed is based on additions and subtractions of the amounts of the cheques which is enabled by simple arithmetical calculation ascertainment of the amount payable by the defendant. 47. My attention has been drawn to the pronouncement of this court reported in 67 (1997) DLT 13 Daya Chand Uttam Prakash Jain Vs. Santosh Devi Sharma. The court has extensively considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acknowledgement, in writing of a debt...so as to take such debt out of the Limitation Act....(1) must admit that debt is due, and (2) promise, or justify the inference of promise, of payment unconditionally, or (if conditionally) it must be shown that the condition has been accomplished....A statement in a balance sheet presented to a creditorshareholder of a Company and signed by the Directors or their agents is sufficient acknowledgement (Jones v. Bellgrove Properties, (1949) 2 K.B.700), and an acknowledgement is within the section if it indicates that a debt is due, even if it does not state the amount (Dungate v. Dungate, (1965) 1 W.L.R. 1577). But a signature on a balance sheet, notwithstanding that the debt appeared therein, was held not to be a sufficient acknowledgement (Consolidated Agencies v. Bertram, (1965) to be a sufficient acknowledgement by one of the several executors suffices (ReMacdonald [1897] 2 Ch. 181, distinguishing Tullick v. Dunn, Ry. & Moo. 416, and Scholey v. Walton, 13 L.J. Ex. 122; see Astbury v. Astbury, infra). "Acknowledges the claim" (Section 23(4) means "acknowledgement the debt or other liquidated pecuniary amounts" (Good v. Parry, [1963] 2 .W.L.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the servant to know what his final remuneration was to be. To make quite clear that it was intended to express something in the nature of an obligation he authenticated the document and that can be the only effect of that particular part of the transaction-by writing his signature over two 10 cent stamps. In their Lordships' view, that was a plain case of a promise made to pay the balance for a good consideration. One cannot help thinking that if an account stated in those circumstances did not give rise in Kenya to the promise to pay, and for a good consideration, Kenya would be certainly without one of the most ordinary business facilities which has been common to everybody who carries on business under any system which incorporates any of the ordinary principles of English contract law."(Emphasis supplied) 11.4 In Gharabharan v. Sri Radha Kishan & Ors., AIR 1958 All.313, a Division Bench of the Allahabad High Court about 'account' stated as under : "(12)...Where the accounts contain a series of cross-entries, one evidencing payment of loans advanced at various times by the creditor and the other evidencing payment of amounts paid towards the same loans at vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction is entered into. In such a situation, it is not open to the Court to reopen the closed transaction and to scrutinise the antecedent entries for the purpose of applying the bar of limitation. Such a procedure would be the very negation of the real purpose of "account stated" and would constitute a violation of fundamental principles underlying the legal doctrine of "account stated". In the present case, there is also no manner of doubt that this "account stated" was signed by a partner of the firm. Every partner of a firm has in law an inherent right to do it, and must, therefore, be presumed to act as such." ...... 11. It was said that it has not been pleaded that the suit is based on a written contract. This is not required by any provision of law. The Court has to find out whether the suit has been brought upon a negotiable instrument or a written contract or an enactment should guarantee to which Order 37, C.P.C. applies. The acknowledgement of Rs. 1,00,000/- by the defendants for the purposes allotment of shares as application money therefore clearly amounts to a contract. Because it is their own case that the plaintiff paid allotment of shares and they accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the amount shown as bonus in its balance sheet and profit and loss account for the year in question could therefore, be at best an estimated amount. For this reason, the amount reflected as bonus was held not to be an admission of liability to pay. In the instant case, there is no estimate involved in the amount reflected by the company as its owings to other persons and the admission of the amount is clear and unequivocal. 51. In (1983) 3 SCC 410 Central Bureau of Investigation Vs. V.C. Shukla & Ors., the court was considering the probative value of entries in the books of accounts. Furthermore, the court considered the entries made by certain persons in notebooks. The court had held that such entries were in the nature of statements which could be treated as an admission against the accused persons provided that they related to any fact in issue or to a relevant fact. So far as the books of accounts were concerned, the court had stated that the rationale behind the law of admissibility of books of accounts is that the regularity of habit, the difficulty of falsification and the fair certainty of ultimate detection give them in a sufficient degree a probability of trustwort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial he may be able to establish a defence to the plaintiff's claim, the court may impose conditions at the time of granting leave to defend the conditions being as to time of trial or mode of trial but not as to payment into court or furnishing security. (d) If the defendant has no defence, or if the defence is sham or illusory or practically moonshine, the defendant is not entitled to leave to defend. (e) If the defendant has no defence or the defence is illusory or sham or practically moonshine, the court may show mercy to the defendant by enabling him to try to prove a defence but at the same time protect the plaintiff imposing the condition that the amount claimed should be paid into court or otherwise secured." 54. These principles were reiterated by the Apex Court in JT 1998 (3) SC 341 M/s Sunil Enterprises & Anr. Vs. SBI Commercial and International Bank Ltd. 55. The defendants have admitted liability in the balance sheets, correspondence and the Memorandum of Understanding. The plaintiff has filed a detailed affidavit clearly setting out the owings of the defendants. No other payment is claimed by the defendants. There is also no material dispute nor any issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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