TMI Blog2007 (4) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, we are not concerned here with an implied contract, but an implied term in a written contract. The Defendants would be right to contend that an implied contract is not a written contract. Is a summary suit maintainable on an implied term in a written contract with an implied term to pay. We have noted that the expression implied term is used in different senses. In some contract it would not depend on actual intention of the parties, but on a rule of law, such as the terms, warranties or conditions, which if not expressly excluded the law imports, as for instance under the Sale of Goods Act, Marine Insurance Act, Master and Servant and Landlord and Tenant. To imply a term in the contract as implied term in our opinion the test laid down by Kim Lewison in 'Interpretation of Contract would be relevant. At the same time the Court would have to note that the general presumption is, however, against the implying of terms into a written contract. It is, therefore, again not possible to lay down a general Rule as to when an implied term in a contract can be the subject matter of a summary suit. The issue before us is limited to an implied promise to pay. That would nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such facts may be sufficient to entitle him to defend, that is, if the affidavit discloses that at the trial he may be able to establish a defence to the plaintiffs 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 in to Court or furnishing security. (d) If the defendant has no defence, or if the defence is sham or illusory or practically moon-shine, 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 moon-shine, 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. Thus, the issues referred to us are accordingly answered. The Registry to place the matters before the Learned Bench assigned to hear the matters - In the circumstances of the case there shall be no orders as to costs. - F.I. Rebello, V.K. Tahilramani and Abhay Shreeniwas Oka, JJ. For the Appellant : A.R. Gyani and Vatsal Verma, Advs., i/b., Halwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 61 and 69 in S.J. Nos. 355 to 373 of 2004, H.V. Chande, Adv. for Defendant Nos. 1 and 5 in Summons for Judgment No. 452 of 2005 in Summary Suit No. 1272 of 2005, Shyam Mehta, Adv.,i/b., Kanga Co. in Summons for Judgment No. 524 of 2005 in Summary Suit No. 1126 of 2005, Anoop Sharma, Adv. in Summons for Judgment No. 549 of 2005 in Summary Suit No. 1691 of 2005, C.S. Balsara and P.S. Colabawala, Advs.,i/b., Ramesh Makhija Co. in Summons for Judgment No. 568 of 2005 in Summary Suit No. 1261 of 2005 JUDGMENT F.I. Rebello, J. 1. A learned Single Judge noticing apparent inconsistencies or conflicts in judgments of learned Single Judges and of the Division Benches, as to whether a suit based on a writing or a receipt or an acknowledgement of liability, or honoured cheque or a settled account is maintainable as a summary suit, referred the matter to the Hon'ble the Chief Justice, who has placed the matter for consideration before the Full Bench. The issues which arise for our consideration and as referred to us, arise under Order XXXVII, Rule 2 (Summary Suit), in cases where the suit is based : i) On a settled account duly confirmed by the Defendants; ii) On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in the nature of a debt other than a penalty, or on a guarantee, where the claim against the principal is in respect of a debt or a liquidated demand only, may, in case the plaintiff desires to proceed hereunder, be instituted by presenting a plaint with a specific averment therein that the suit is filed under this Order, and that no relief not falling within the ambit of this rule has been claimed, and with the inscription within brackets (Under Order XXXVII of the Code of Civil Procedure, 1908) just below the number of the suit in the title of the suit, but the summons shall be in Form No. 4, in Appendix B or in such other form as may be from time to time prescribed. 5. The Code of Civil Procedure, 1908, subsequently came to be amended by amendment of the Code of Civil Procedure in 1976. The relevant amended provision of Order XXXVII rule (1)(2) reads as under: (2) Subject to the provisions of Sub-rule (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 liquidated demand in money payable by the defendant, with or without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to us, we shall have to answer the issues referred for our consideration. The issue whether the reference has to be answered, in its entirety or in some aspects will be considered with reference to the provisions of Order XXXVII, the statement of objects and reasons, the law declared by the Hon'ble Supreme Court, precedents of this Court, the opinions of other High Courts and the various commentaries which would shed light on the subject, to which our attention was invited. 8. The notes on clauses in so far as Order XXXVII, reads as under: Clause 87-Sub-clause (i). Order XXXVII provides for a summary procedure in respect of certain suits. The essence of the summary suit is that the defendant is not, as in any ordinary suit, entitled as of right to defend the suit. He must apply for leave to defend within ten days from the date of the service of the summons upon him and such leave will be granted only if the affidavit filed by the defendant discloses such facts as will make it incumbent upon the plaintiff to prove consideration or such other facts as the Court may deem sufficient for granting leave to the defendant to appear and defend the suit. If no leave to def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. v. CIT, Kesavananda Bharati v. State of Kerala and Onkarlal Nandlal v. State of Rajasthan.) 91. It is furthermore well known that when the statute makes a distinction between two phrases and one of the two is expressly deleted, it is contrary to the cardinal principle of statutory construction to hold that what is deleted is brought back into the statute and finds place in words which were already there in the first place. 92. In Charles Bradlaugh v. Henry Lewis Clarke, Lord Watson as regards conscious omission from the statute stated the law, thus: I see no reason to suppose that all these omissions were accidental, and as little reason to suppose that the enactments with regard to personal disabilities were intentionally left out, whilst the express mention made of common informers was omitted through accident or inadvertence. 93. It is also a well-settled principle of law that common-sense construction rule should be taken recourse to in certain cases as has been adumbrated in Halsburys Laws of England, (4th Edn.), Vol. 44(1) (Reissue). We would refer to the said principle in some detail later. 11. On behalf of the Plaintiffs, it has been submitted, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts the same, the Plaintiff accepts the contents of the said document with all the legal implication contained therein. Thus, the implied promise to pay, which accompanies that document is accepted by the Plaintiff, giving rise to a contract. It is submitted that it is not correct to look at a document ignoring the legal implication thereof. The contract is in writing inasmuch as the implied promise arises directly from the written document and does not stand alone or de-hors the written document. In a contract to pay money, the ingredients required are (i) the amount that is agreed to be paid (ii) the time when it is agreed to be paid; (iii) interest, if any, payable on the amount; and (iv) the obligation to pay. The first three ingredients out of the above four are contained in the written document of acknowledgement, receipt or accounts stated. It is only the fourth ingredient of obligation to pay which is implied by law. The consideration for such a written contract is what flows to the Defendant prior to his executing the receipt, acknowledgement or accounts stated. The money that the Defendant acknowledges to be due is for some consideration that he received before the executi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of liability, but was based on mutual dealings and the account stated between the parties and was therefore maintainable. Whilst holding that an unconditional acknowledgement implied a promise to pay the Supreme Court did not say that each and every such unconditional acknowledgement carried with it an implied promise to pay. In that case it was concealed by the Defendant that some amount was payable and it only question was with regard to the quantum. It is submitted that it is a settled position that every acknowledgement of liability does not carry an implied promise to pay. An implied promise is not a written contract and, therefore, the implied promise to pay is not a written contract. This becomes clearer on considering the provisions of Section 9 of the Contract Act which reads as under: 9. Promises, express and implied : In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied. Section 9 makes it clear that there are basically two types of contract, express and implied. Express contracts can be further div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it must follow the summary suit can be filed on an implied promise to pay whether it arises out of a document or on an oral contract or otherwise as there will be no justification for excluding any particular kind of implied contract and all the various kinds of implied contracts will also be covered. These are the consequences that will follow if it is held that summary suit is maintainable as an implied promise to pay. Dealing with the issue of the effect of a document not being duly stamped, it is submitted that the document which is not duly stamped is inadmissible in evidence. A document may in certain circumstances be admitted in evidence after payment of stamp duty and penalty. However, bills of exchange and promissory notes, if not duly stamped, cannot at all be admitted in evidence, as the defect is incurable. (See Section 34 of the Bombay Stamp Act, 1958 and Section 35 of the Indian Stamp Act, 1899). Consequently no summary suit would be maintainable on the Bill of Exchange or promissory note not duly stamped. In so far as other documents are concerned, if a document is not properly stamped by following the procedure it would be admitted in evidence. If the document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Division Bench found that the intention of the Plaintiff was to sue for recovery of the loan and not to sue for the moneys due on the dishonoured cheques. The Court further noted that it was common ground that there is no written contract between the parties. In the light of that the Court held that the Summary Suit was not maintainable. The fourth judgment was in Appeal No. 865 of 1994 in Summons for Judgment No. 411 of 1992 in Summary Suit No. 1742 of 1997 decided on 31.8.1995. The contention urged was that a letter saying that a sum of ₹ 6,00,000/- was sent as a deposit to be kept by the Appellants towards the purchase of grey cloth from time to time for the quantities, specifications and other details as may be finalised by the Sales Department by itself does not bring the suit within the scope of Order XXXVII CPC. On behalf of the Respondents, it was contended, that on a proper interpretation, Order XXXVI has to embrace all sorts of business transactions which may sometime arise only out of correspondence acknowledgements or merely receipts. Again, on facts, the Court while answering the issue in paragraph 15, was pleased to observe as under: We agree with Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sider some ancillary issues by referring to some other judgments. In our opinion, it is not required to go into those aspects considering the issue referred. 16. To answer the questions raised certain provisions and expressions need to be considered. Let us first understand the expression 'Contract in Writing' Section 10 of the Indian Contract Act, 1872 as reproduced below sets out, what agreements are contracts: 10. What agreements are contracts. All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in 1[India] and not hereby expressly repealed, by which any contract is required to be made in writing 2 or in the presence of witnesses, or any law relating to the registration of documents. Contract has been defined under Section 2(1) as an agreement enforceable by law . Agreement has been defined in Section 2(e) as every promise or every set of promises forming the consideration of each other is an agreement. Written contract in Black's Law Dictionary (8th Ed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uing Section 2(a) of the Arbitration Act, 1940, the Supreme Court observed that it is well settled law that to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties and it is sufficient if the terms are reduced to writing and the agreement of the parties is established. In the Arbitration Act of 1966, Section 7 specifically provides that the arbitration agreement shall be in writing. A learned Single Judge in an unreported judgment in Jaishree Chemicals v. Esskay Dyeing and Printing Works Summons for Judgment No. 23/1976 In Suit No. 1405 of 1975, decided on 19th April, 1976, considering the expression written contract , under the amended provision, held that it must be given an extended meaning and if it is possible to spell out an agreement enforceable at law to do something to be found in the writing, which binds the parties, it is possible to hold that such an agreement is a contract in writing. These are some indicators of understanding the expression a contract in writing . 17. We may now consider the expression implied term of a contract . Whether or not a term is implied is usually said to depend upon the inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these three kinds of implied term, (i) is an effort to arrive at actual intention; (ii) is an effort to arrive at hypothetical or conditional intention-the intention that the parties would have had if they had foreseen the difficulty; (iii) is not concerned with the intention of the parties except to the extent that the term implied by the court may be excluded by an expression of positive intention to the contrary. We may note a distinction between the two types of 'implied term' in the speech of Lord Cross of Chelsea in House of Lords in Liverpool City Council v. Irvin (1977) A.C., 239, as under: When it implies a term in a contract the court is sometimes laying down a general rule that in all contracts of a certain type-sale of goods, master and servant, landlord and tenant, and so on-some provision is to be implied unless the parties have expressly excluded it. In deciding whether or not to lay down such a prima facie rule the court will naturally ask itself whether in the general run of such cases the term in question would be one which it would be reasonable to insert. Sometimes, however, there is no question of laying down any prima facie rule applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term into the contract may arise because the parties have not expressly stated them, out of forgetfulness, or because of bad drafting, or because they may have thought the obligation so 'obvious' that it 'went without saying'. They may be content to state expressly only the most important terms agreed between them, leaving the others to be understood. They may have had the terms in their mind but did not express them or would probably have expressed them if the question had been brought to their attention. Otherwise, they may have understood the obligations according to the practices already established between them, or arising out of custom or trade usage applicable to their business. Later disputes will show that they did not provide for some contingencies in their contract. It may then become necessary to find out whether terms can be implied to provide for the contingency. Courts are required to imply a term to give efficacy to the contract to prevent 'the enjoyment of the rights conferred by the contract (being) rendered nugatory, worthless, or, perhaps,...seriously undermined'. (Nullagine Investments Pty Ltd. v. Western Australia Club Inc. (1993) 177 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50, 266 N.E. 2d. 233, 235.... A fixed and certain obligation to pay money or some other valuable thing or things, either in the present or in the future. In a still more general sense, that which is due from one person to another, whether money, goods or services. The essential requirement 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; (3) the obligation must have accrued and be subsisting and should not be that which is merely accruing. A contingent liability or a contingency debt is, therefore, neither a liability nor a debt. A debt is a 'debitum in present solvendum in future.' We therefore hold that the amount covered by the suit is an ascertained amount payable liability. The obligation has accrued and subsists. It is a debt accruing under a written contract. See Commissioner of Wealth Tax v. Pierce Leslie Co. Ltd. AIR 1963 Med. referred in Webb v. Stention 1883 (3) Q.B.D. 518. In J. Jermons v. Aliammal and Ors. AIR1999SC3041 , the Supreme Court was considering the ordinary meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omise. The Court held ; An acknowledgment of a debt is a unilateral act of the debtor; it is not an agreement or a contract; it merely states that a debt is due and it contains no express promise to pay the debt acknowledged and, indeed, under Article 1, Schedule 1, Stamp Act, such a promise is excluded from the scope of an acknowledgment. The Court also noted that There is a clear distinction between an acknowledgment of a debt simpliciter and an acknowledgment coupled with a statement that the debt acknowledged shall in future carry a certain rate of interest. In the former case there is no promise to pay the debt and the promise to pay the debt can only be implied; in the latter case the statement that the debt shall bear interest means and can only mean that the interest shall be paid and therefore exhibits a promise to pay the interest in express terms, and if there is a promise to pay interest there exists clearly an agreement to pay principal. Taking this view, it is now generally held that when an acknowledgment of debt also contains a statement that the acknowledged debt will bear future interest at a certain rate it ceases to be a mere acknowledgment and becomes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledgment considering Section 19 of the Limitation Act, 1908. While answering the issue, the Supreme Court in paragraph 7 observed as under: (7) It is often said that in deciding the question as to whether any particular writing amounts to an acknowledgment as in constructing wills, for instance it is not very useful to refer to judicial decisions on the point. The effect of the words used in a particular document must inevitably 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. The Court then posed to itself a question as to what is an acknowledgment and referring to English authorities, held as under: (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. This answer is often quoted with approval. What is an acknowledgment... he proceeded, in my view an acknowledgment is an admission by the writer that there is a debt ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te i.e. on account would be repaid by the debtor signing the writing. The learned Judge thereafter while considering 'implied obligation' and the effect of Rule 2, held as under: It is quite clear that previously a written contract was not a necessary condition for institution of a summary suit to recover debt or liquidated demand in money. Where express or implied obligation to pay debt or liquidated demand in money arose, even on an oral contract, a summary suit could be instituted. Under the amended Rule, summary suits cannot be instituted when such debt or demand in money arises on oral contracts. Mr. Karanee, however, is not right in his submission that the deletion of the phrase express or implied from amended Rule 2 indicates that when implied obligation to pay debt or liquidated demand in money arises on a written contract, a summary suit cannot be filed. Obligations arising on a written contract can in some parts be express and in other parts be implied by law or otherwise. Such implied obligations, if they create a liability to pay debt or liquidated demand in money, can be enforced by instituting a summary suit having regard to the language of the amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween merchants in business in which the account stated is an account 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 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 the 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. This judgment was considered by the Supreme Court, in Gordon Woodroffe Co. (Madras) Ltd. v. Shaikh M.A. Majid Co. A.I.R. 1976 Sup Cou 181. The second question in issue before the Supreme Court was whether there was a settled account between the parties and whether it was open for the Plaintiff to reopen it. It was an admitted fact that to the statement of accounts, no objections were raised by the Plaintiff any time nor was a single document produced to show that the Plaintiff ever wrote to the Defendant raising an objection to the statements of account. At one stage, the Plaintiff sent a memorandum to the Defendant, accepting the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntains entries on both sides and parties who have stated the account between them have agreed that the items on one side should be set off against the items on the other side and the balance amount should be paid, would amount to a written contract for good consideration arising from the fact that the items have been so set off. Such an account stated gives cause to a contract in writing on a fresh cause of action, with an implied promise to pay. 26. Reference may now be made to a judgment on honoured cheque, in the case of Purnima Jaitly v. Ravi Bansi Jaisingh AIR2003Bom494 . In that case, it was contended that a suit for recovery of loan which was advanced by a Plaintiff by a cheque, would be a suit based on a bill of exchange. Negating the said contention, the Court held that ; It is true that a cheque is a bill of exchange, a special type of bill of exchange which is drawn on a bank. However, a suit upon a cheque (bill of exchange) means a suit to recover money due on a cheque (bill of exchange) drawn by the defendant, which is dishonoured. In such a case, the suit must be for recovery of money on a cheque drawn in favour of or endorsed to the plaintiff. A suit, however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract it would not depend on actual intention of the parties, but on a rule of law, such as the terms, warranties or conditions, which if not expressly excluded the law imports, as for instance under the Sale of Goods Act, Marine Insurance Act, Master and Servant and Landlord and Tenant. To imply a term in the contract as implied term in our opinion the test laid down by Kim Lewison in 'Interpretation of Contract would be relevant. At the same time the Court would have to note that the general presumption is, however, against the implying of terms into a written contract. It is, therefore, again not possible to lay down a general Rule as to when an implied term in a contract can be the subject matter of a summary suit. The issue before us is limited to an implied promise to pay. That would necessarily depend on the facts of each case. The two issues as formulated may now be answered. 29. In so far as the 'settled account is concerned,' it is no doubt true as noticed by the learned single Judge, that the various judgments adverted to, for holding that the summary suit would lie on a settled account, either of the Privy Council or of the Supreme Court did not arise f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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