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Daya Chand Uttam Prakash Jain and Anr. Versus Santosh Devi Sharma

1997 (3) TMI 623 - DELHI HIGH COURT

Civil Revision Appeal No. 387 of 1991 - Dated:- 1-3-1997 - S.N. Kapoor And Kuljit Rawal, JJ. JUDGMENT S.N. Kapoor, (1) In this revision petition the primary question is whether a suit under Order 37, Civil Procedure Code could be filed on the basis of an "acknowledgement". (2) The plaintiff/respondent filed a suit of recovery for a sum of ₹ 49,956.00 Along with interest on account of loan advanced and written acknowledgement of liability by the defendant. (3) According to the cas .....

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paid ₹ 20,500.00 on 29th july, 1989 leaving a balance of ₹ 42,927.50. The petitioner claimed this amount Along with interest at the rate of 18 per cent from 29 July, 1989 till 30th June, 1990 and filed a suit under Order 37, Civil Procedure Code (4) The acknowledgement has not been disputed by the petitioner/defendant except by barely saying that the petitioner has filed the present suit on false documents. The learned Counsel for the petitioner Mr. G.L. Rawal has challenged the impu .....

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Anr., 1984 (2) (Del) 761 that suit under Order 37, Civil Procedure Code is not maintainable on the basis of an acknowledgement. (6) 6. Before proceeding further it would be relevant to reproduce Rule 1 of Order 37, Civil Procedure Code It reads asunder: "Subject to the provisions of Sub-section (1), the Order applies to the following classes of suits, namely : (A)suits upon bills of exchange, Hundies and promissory notes; (B)suits in which the plaintiff seeks only to recover a debt or liqui .....

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contract" or not? (8) BLACK'S Law Dictionary (6th Ed.) defines "Debt" as under : "A sum of money due by certain and express agreement. A specified sum of money owning to the person from another, including not only obligations of debtor to pay but right of creditor to receive and enforce payment". State v. Ducey, 25 Ohio App. 50, 266 N.E. . 233. Liability on a claim. Bankruptcy Code $ 101. A fixed and certain obligation to pay money or some other valuable thing or th .....

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owing observations of the Division Bench of this Court in para 7 are relevant here " 7. What there is a debt? Relying in Webb. v. Stenton, (1883) 11 Qbd 518 it was held in Commissioner of Wealth Tax v. Pierce Leslie & Co. Ltd., [1963]48ITR1005(Mad) , that the essential requisites of a debt are, (1) an ascertained or readily calculable amount; (2) an absolute unqualified and present liability in regard to the amount with the obligation to pay forthwith or in future within a time certain; .....

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words of Black's Law Dictionary (6th Ed.) means as under : " A. "written contract" is one in which all its terms is in writing". Commonly referred to as a formal contract." 11.1. According to Black's Law Dictionary an "acknowledgement" means as under: " TO" acknowledge "is to admit, affirm, declare, testify, avow, confess or own as genuine, Favello v. Bank of America Nat. Trust & Savings Ass'n, 24CalApp. 342, 74 P. 1057. Admissio .....

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98." 11.2. According to stroud's Judicial dictionary acknowledgement means as under: (1),"an 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 creditor-shareholder of a Company and signed by the .....

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rs suffices (Re Macdonald [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 "acknowledges the debt or other liquidated pecuniary amounts" (Good v. Parry, [1963] 2 W.L.R. 846. "Acknowledgement" (Section 24(1) means acknowledgement of liability.... -. " (2)"An acknowledgement of a Deed, or Speciality, by writing or part pa .....

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3,24. As to acknowledgement is writing within Civil Procedure Code, 1908, Section 5 see Viscount Burnham v. Atlantic & Pacific fibre Importing & Manufacturing Co. Ltd., 44 T.L.R. 702. 11.3. In Elvira Rodrigues v. Godnicalo Hypolito Constancio, Air 1934 PC 144, it was observed a? under : "Their Lordships think that what has been forgotten is that there are two forms of account stated. An account stated may only take the form of a mere acknowledgement of a debt, and in those circumsta .....

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o have stated the account between them have agreed that the items on one side should be set against the items upon the other side and the balance only should be paid; the items on the smaller side are set off and deemed to be paid by the items on a larger side, and there is a promise for good consideration to pay the balance arising from the fact that the items have been so set off and paid in the way described." Their Lordships were further of the view that : "That was done. The man w .....

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tion - 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 a .....

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es of entries against the other & after doing the same, finally arrive at an agreed balance, the final settlement of accounts thus made constitutes an "account stated." That fact that both the entries relate to the same transaction of loan does not take the transaction out of the category of "account stated", nor does it make the transaction a unilateral one. Such a transaction is really a bilateral one as both the parties have met together and after mutual accounting in .....

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volved in such a transaction for the purpose of arriving at an agreed settlement is truly a bilateral one. The process of "give and take" which such a transaction demands from either side, itself constitute a sufficient consideration which is enough to sustain the fresh agreement as valid in law. Reference in this connection might be made to the case of Bishnu Chand v. Girdhari Lal in which their Lordships of the Privy Council have expounded the law in this regard. Then such an "a .....

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ous rights and liabilities having been swept away by the concerted and agreed Will and action of parties themselves, the previous items which formed the material for arriving at the agreed figure must, for the purposes of the suit, be eliminated from consideration, and a fresh cause of action be deemed to be born on the date on which such a transaction is entered into. In such a situation, it is not open to the Court to reopen the closed transaction and to scrutinize the antecedent entries for t .....

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quot; 11.5.In Shapoor Freedom Mazda v. Durga Prasaal Chamaria, [1962]1SCR140 , it was observed that : " 15. In construing this letter it would be necessary to bear in mind the general tenor of the letter considered as a whole. It is obvious that respondent 2 was requesting respondent I to avoid the sale as he did on an earlier occasion in November, 1931. The previous incident shows that when the property was put to sale by the first mortgagee the mortgagor rushed to the second mortgage to s .....

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e the conclusion that the interest mentioned in the letter is the interest of respondent I as a puisne mortgagee and when the said letter appeals to him to take up the whole it can mean nothing other than the whole of the mortgagee's interest including the interest of the prior mortgagee. An appeal to respondent 1 to stop the sale on payment of ₹ 10,000.00 as he infact had stopped a similar sale in November 1931, is an appeal to ensure his own interest in the security which should be k .....

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put up for sale by the first mortgagee, and appeals to him to assist the avoidance of sale, and thus acquire the whole of the mortgagee's interest. it is common ground that no other relationship existed between the parties at the date of this letter, and the only subsisting relationship was that of mortgagee and mortgagor. This letter acknowledges the existence of the said jural relationship and amounts to a clear acknowledgement under Section 19 of the Limitation Act. It is conceded that i .....

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tanding to accounts with his books. The acknowledgement was signed by H with the following endorsement. After adjusting the accounts ₹ 34,000.00 found correct and payable. The plaintiff brought a suit on the basis of the entry for recovery of the amount. The Supreme Court observed in para 11 as under : " 11. Mr. Bindra next urged that the plaintiff 's suit should have been dismissed because it could not be maintained merely on the basis of an acknowledgement of liability, that suc .....

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niram v. Seth Rupchand, 33 Ind. App. 165 (C) that an unconditional acknowledgement implies a promise to pay because that is the natural inference if nothing is said to the contrary. It is what every honest man would mean to do. In Fateh Mahomed v. Ganga Singh, Air 1920 Lah. 264, the same view was taken. It was held that a suit on the basis of a balance was competent. In Kahanchand Dularam v. Dayaram Amritlal, Air 1929 Lah. 263 , the same view was expressed and it was observed that the three expr .....

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n the ledger of the plaintiffs in which earlier mutual accounts had been entered and truly speaking, the suit was not based merely on this acknowledgment but was based on the mutual dealings and the accounts stated between them and was thus clearly maintainable." 12.1. In Mrs. Sushila Mehta v. Shri Bansi Lal Arora & Anr., (1982) 1 Del 320,the plaintiff paid the allocation money of ₹ 1,00,000.00 for allotment of shares. The defendants accepted the payment as allocation money. The p .....

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lotment for shares. The defendants accepted it, though it is true that defendant No. 2 came into existence a few months later. The payment of ₹ 1,00,000.00 by the plaintiff as application money and its acceptance by the defendants constitutes a contract. It may be labelled as a receipt but that does not mean that it is not a contract. 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 fin .....

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t; leads to a contract, as Lord Cairns said. (Cundy v. Lindsay, (1878) 3 A C 459 . There was promise. There was consideration. There was acceptance. All the elements essential for the formation of the contract are present. What more is needed to make a contract. It was not a nudum pactum." A suit under Order 37 Rule 1, Civil Procedure Code was filed by the plaintiff alleging that the plaintiff paid ₹ 1,00,000.00 to defendant No. 1 as application money for shares in a proposed private .....

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dgment are worth reading. 12.2. An incidental question is "Whether such an agreement should be signed by both the parties?" It is not necessary that written agreement should be signed by both the parties. If any authority is needed one may refer to jugal Kishore v. Goolba Hormusji (S), [1955]2SCR857 . In this case Venkatarama Ayyar, J. observed as under: " 7. But it is settled law that to constitute an arbitration agreement in writing it is not necessary that it should be signed b .....

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that be doubtful, to have regard to the circumstances surrounding the creation of the subject matter to which it was designed and intended that it should apply. It must be seen what is the intention expressed by the words used; but whether the language is imperfect, and it is impossible to know what the intention is without enquiring further, the circumstances with reference to which the words were used should be looked. The contract must be construed as a whole and the intent of the parties mus .....

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ng a business agreement should be construed formally and broadly and there must in such documents imply a term which will give such business efficacy to the transaction as must have been intended by the parties. One cannot add to a contract an implied term inconsistent with or which contradicts express terms of the contract. But in a suitable case one may imply a term if it is necessary to give it a business efficacy (see Gulabchand Gambhirmal v. Kudilal Govindram & Anr., AIR1959MP151 [Full .....

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a formal agreement executed by the parties and signed by them. plaintiffs own version is that it was a verbal contract and the document on the basis of which the suit has been filed merely acknowledges the money due under the aforesaid verbal contract. Such a writing may at best be a written acknowledgement which extends the period of limitation under Section 18 of the Limitation Act, 1963, but no more. Thus, I do not think that such a document would fall within the definition of written contra .....

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e. (14) In the instant case 'statement of account', for the assessment year 1986-87 dated 21st October, 1987 indicated that on 1st November, 1986 there was an outstanding balance of ₹ 50,422.00 payable to Smt.Santosh Sharma, ₹ 8,437.00 had accrued as interest up to 21st October, 1987. Thus, a balance of ₹ 59,856.40 was mentioned as 'baki jama raha'. It is signed by Naveen Kumar, one of the partners of Dayachand Uttam Prakash. Similarly, for the assessment year 1 .....

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d by Sh. Naveen Kumar, partner. If one goes by the judgment of the Privy Council in Elvira Rodrigues (supra) this is second kind of account stated as it is very usual form between merchants in business in which the account stated is a kind which contains entries on both sides and in which the parties, who have stated the account between them, have agreed that the items on one side should be set aside against the items upon the other side and the balance only should be paid and there is a promise .....

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treated as written contract. It appears to me that suit on the basis of written acknowledgement of a pre-existing debt being a written contract could form a basis for recovery of an existing debt based on the said written contract in the shape of written acknowledgement. In view of the observations in Food Corporation of India v. BalKishan Garg, (supra) the amount of the debt had been ascertained between the parties and the interest is also readily calculable amount in view of the past conduct o .....

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tioner firm. There was a promise. There was consideration. There was acceptance. All the elements essential for the formation of a written contract were present. Nothing more is required in this acknowledgement to make it a written contract. Accordingly, I am of the definite opinion that the present suit has been filed on the basis of a "written contract" for the recovery of the existing debt on the basis of this "account stated" and case on the basis of said written contract .....

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as employed with the defendant, resigned from the service of the defendants/ petitioners in November 1989. The husband of the plaintiff wanted to start cloth shop at Jaipur and on his request petitioner/respondents sold goods worth ₹ 40,000.00 to the husband to the plaintiff and allowed the plaintiff to purchase further goods worth ₹ 41,341.00 from M/s. Paras Nath Textiles on 1st December, 1989 on their guarantee. The plaintiff issued a cheque of ₹ 6,341.00 as for payment to M/ .....

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e of the plaintiff to pay the said amount of ₹ 35,000.00 since the said Cheque No. 196311 could not be encased by M/s. Paras Nath Textiles. They also raised the demand of ₹ 35,000.00 and the petitioner/defendant had paid the amount of ₹ 35,000.00 to M/s. Paras Nath Textiles as per undertaking. The application is supported by affidavit of Sh. Naveen Kumar, partner of the defendant-firm'. (16) It is further notable that before filing this suit a legal notice was given. The pa .....

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nd. It is disputed by the other side on affidavit and certain contradictions have also been pointed out in the stand in this case and the plea in suit filed subsequently and numbered as 169/90. Besides, the affidavit filed in support of the application has been verified by maintaining that "the contents of the above affidavit are true and correct to my knowledge". This kind of omnibus statement of verification appeared to be palpably wrong for apart from legal plea, there is informatio .....

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