Gauhati High Court
Sachindra Prasad Chakravarty And Anr. vs Ahmed Ali And Ors. on 18 July, 1986
Equivalent citations: AIR1988GAU33, AIR 1988 GAUHATI 33, (1988) 1 GAU LR 90
Author: K.N. Saikia
Bench: K.N. Saikia, S.N. Phukan
JUDGMENT K.N. Saikia, J.
1. The three defendants, of whom two are appellants before us were sued in Money Suit No. 26/76 by the two plaintiffs-respondents for recovery of Rs. 30,632.25 with 12% interest thereon, being price of timber supplied to them and hire charges of trucks lent to them averring, inter alia, that they had timber business and a truck for hire at Lakhipur; that the three defendants were contractors by occupation and they purchased timber from the plaintiffs and also hired the truck for the purposes of their contract; that on 7-6-1976 the total outstanding due to them amounted to Rs. 48,000/- and the amount received till then was Rs. 17,367.75, and after adjustment the outstanding balance struck amounted to Rs. 30,632.25, which was acknowledged by the defendants putting signature at the foot of the account stated, which was annexed as Annexure-1 to the plaint. The adjustment according to them was done taking into account the different slips for supplying goods, namely, Annexures 2, 3, 4 to the plaint.
2. The three defendants the first being the father of the second and third, resisted the suit filing a joint written statement stating, inter alia, that the suit was not maintainable; that there was no right to sue; that the suit was bad for mis-joinder of the defendants and non-joinder of plaintiffs and mis-joinder of causes of action; that there was no cause of action for the plaintiffs, the plaintiff No. 1 having been only an agent of one Rogai Marak; that the defendants never did any joint contract works for which any timber was necessary; and that they never acknowledged any liability of Rs. 30,632.25 p. on 7-6-76, as alleged. Their version was that the plaintiff No. 1 on behalf of Rogai Marak agreed to supply timbers to defendants 1 and 2 whenever necessary but the plaintiff No. 1 failed to procure transit passes and for that reason could not supply timbers agreed to be supplied and hence no truck was hired: and that the suit had been filed only to harass the defendants.
3. On the pleadings the following issues were settled :
"1. Whether there is any cause of action?
2. Whether suit is maintainable?
3. Whether plaintiffs have got any right to sue?
4. Whether suit is bad for non-joinder of plaintiff and mis-joinder of Defendants and misjoinder of causes of action?
5. Whether plaintiffs Nos. 1 and 2 have got joint business? and whether they can sue jointly?
6. Whether plaintiff No. 2 filed this suit?
7. Whether plaintiff supplied the timbers and carried the timbers as alleged in plaint?
8. Whether defendants acknowledged any liability of Rs. 30,632.25?
9. Whether defendants are independent contractors as alleged in the W.S.?
10. Whether plaintiffs are entitled to the amount claimed?
11. Whether there was any ground of attachment before judgment? If not whether defendants are entitled to get compensation under Section 96. If so how much?
12. To what relief, if any, are the plaintiffs entitled?"
4. At the trial the plaintiffs examined 4 witnesses while the defendants examined 3. The plaintiffs also exhibited a few documents.
5. The learned trial Court, on consideration of the evidence on record and hearing arguments decided, inter alia, that the plaintiffs had cause of action; that issue No. 11 should not have been framed at all; that the plaintiffs' case came within the provision of Order 1 Rule 1 so as to enable the plaintiffs to sue jointly; that the plaintiffs had the right to sue; that the balance struck on the basis of the slips in Annexure 1 to the plaint amounted to account stated and it provided the foundaition for the suit; that the striking of the balance by the defendants in Annexure 1 having been proved by the evidence of P.W. 1 taken along with circumstances appearing in the evidence of D.W. 1, and the defendants having failed to explain that it was signed otherwise, the plaintiffs were entitled to a decree; that the suit did not suffer from any defect of parties or causes of action; and that mere procedural irregularity in the absence of proof of prejudice to the defendants could not have any adverse effect on the claim of the plaintiffs. The suit was accordingly decreed for Rs. 30,632.25 with interest @10% from date of decree till realisation, on contest with full costs. Hence this d efendants' first appeal.
6. Mr. K.P. Sen, the learned counsel for the appellants submits that the trial Court erred in law in decreeing the suit only on the basis of Annexure I and Ext. 6 without the plaintiffs producing any books of accounts as required under Section 34 of the Evidence Act; and that there was no liability by the defendants-appellants in the eye of law. Mr. Sen does not urge any other point and fairly states that if the liability can be fastened on the basis of Annexure I alone, the defendants-appellants may have no case to defend. Mr. D.N. Choudhury, the learned counsel for the respondents counters Mr. Sen submitting that Annexure I amounted to acknowledgment of liability by the defendants and it having borne the signature of one of the defendants, Ext. 6, there is no escape from the conclusion that the defendants owned the balance struck in Annexure I.
7. The precise questions to be decided, therefore, are whether Annexure I amounts to an account stated, and whether it implies any liability to pay the balance amount? Annexure I is to the following effect :
ANNEXURE-I 7-6-76
1) Sal Scandaling
-
1912 C.F.T. at the rate of Rs. 13.00 per C.F.T.
-
Rs. 24,356.00
2) Pile
-
177 C.F.T. Per C.F.T. Rs. 12.00
-
Rs. 9,324.00
3) Long Bim
-
42.5 "
Per C.F.T. Rs. 4.00
-
Rs. 170.00 4) Post - 4 Pair " per pair Rs. 30.00 - Rs. 120.00 Carriage 1) Rongsai to Lakhipur camp shifting - 1 trip - Rs. 40.00 2) Kurung to Rongsai - 7 " per trip Rs. 65.00 - Rs. 455.00 3) Talttola Road - 65 " Per trip Rs. 75.00 - Rs. 4,875.00 4) Chunari Road - 25 trip per trip Rs. 80.00 - Rs. 2,000.00 5) Suleway - 28 " " " Rs. 80.00 - Rs. 2,240.00 6) Goleshwar Road - 30 trips per trip 80.00 - Rs. 2,400.00 7) Gosaidubi - 9 " " " Rs. 60.00 - Rs. 540.00 8) Rongsai to Goalpara (Pile engine) - 2 " " " Rs.175.00 - Rs. 350.00 9) Rongsai to Pandoba - 4 " " " Rs. 60.00 - Rs. 240.00 10) Rongsai to Goalpara (Pile engine) - 2 " " " Rs. 175.00 - Rs. 350.00 11) Bambod (Phalimari to Rangsai) - 1 " - Rs. 40.00 Total - Rs. 48,000.00 Less paid by Father's A/c- - Rs. 17,357.75 Sd/- P. Chakravarty 7-6-76 Rs. 30,632.25
8. The necessary averments relating to Annexure I were made in paras 4 and 5 of the plaint. At the trial P.W. 1, Ahmed Ali, deposed that the defendants took the truck on hire and also purchased timbers from him. He himself did not keep any account and asked the defendants themselves to keep the accounts. The defendants from time to time made payments towards the dues and ultimately the balance was struck in the house of the defendants, in his presence and in the presence of witness Deochand Tewari (P.W. 4), Pacharu Sk and all the three defendants. Annexure I is in the hand of the defendant Bagish Prasad Chakravarty and was signed only by defendant Pranab Chakravarty. The signature, Ext. 6, has been admitted by D.W. 1, Pranab Chakrabarty, to be his signature. This tallied with para 4 of the plaint where it has been clearly stated that on 7-6-76 when the balance was struck the total amount on the credit side in favour of the plaintiffs was Rs. 48,000/- and after deducting an amount of Rs. 17,376.75 on footing of payments from time to time by the defendants the outstanding balance was Rs. 30,632.25P. which was claimed in the suit. The plaintiffs also averred that the slips (Annexures 2, 3 and 4) containing supply orders of timbers and supplies made thereunder also have been taken into account in striking the said balance. In the written statement nothing has been stated about the paymentofRs. 17,367.75, as alleged in para 4 of the plaint. The trial court observed that the defendants did not deny it and, therefore, must be taken to have admitted it. It appears that P.W. 1 who stated that it was defendant No. 3, Bagish Prasad Chakrabarty, who wrote the account (Annexure I) and gave him the paper was let off with mere suggestion that the defendant did not give P.W. 1 any accounts. Both Sachindra Chakravarty and Pranab Chakravarty examined themselves as D.Ws 2 and 1 respectively. They did not deny that the writing was of defendant Bagish Prasad Chakravarty and the signature itself (Ext. 6) was not denied by the defendant Pranab. The defendantsgave no explanation as to how otherwise Annexure I happened to be signed (Ext. 6) by defendant Pranab. In face of the categorical admission in the evidence of D.W. 1 that he signed the Annexure I putting Ext. 6, the trial Court rightly concluded that the denial of the defendants about the timber transaction with, and hiring of the truck of, the plaintiffs could not be believed. Details of the transactions given by the plaintiffs were not rebutted reliably by the defendants.
9. We have perused the depositions of the witnesses and do not find any misreading or misinterpretation of the evidence by the learned trial Judge. Mr. Sen also has not submitted as to any such misrepresentation and/or misreading of the evidence, his only submission being that Annexure I could not have any binding effect on the parties and no sufficient evidence was led in support thereof.
10. What is an account stated? An account may be open or current account, where the balance is not struck or is not accepted by all the parties. An 'account stated' means an account no longer open or current, but closed by the statement, agreed to by both the parties, of a balance due to one or other of them whereupon action can be brought. An 'account settled' means an account stated. According to Osborn's Concise Law Dictionary 'account stated' means an admission of a sum of money being due from one person to another, who are under no duty to account to each other, from which a promise to pay is implied by law; e.g. an IOU. It also means an account which contains entries on both sides of it, and in which the parties have agreed that the items on one side should be set against the items on the other side, and the balance should be paid. The items on the smaller side are set off and deemed to be paid by the items on the larger side, from which arises a promise for good consideration to pay the balance.
11. An account, according to the Black's Law Dictionary, means, a detailed statement of the mutual demands in the nature of debit and credit between parties, arising out of contracts or some fiduciary relation. A statement in writing; of debts and credits, or of receipts and payments; a list of items of debits and credits, with their respective dates. A statement of pecuniary transactions; a record or course of business dealings between parties; a list of statement of monetary transactions, such as payments, losses, sales, debits, credits, etc., in most cases showing a balance or result of comparison between items of an opposite nature. Account thus means any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper, whether or not it has been earned by a performance. A balance of the account means difference between debit and credit sides of an account. Question of an account stated arises where there have been transactions between debtor and creditor resulting in the creation of matured debts and the parties by agreement compute a balance which the debtor promises to pay and the creditor promises to accept in full payment for the items of account.
12. In Halsbury's Laws of England, 3rd. Ed., Vol. 8, para 439 we read :
"Meaning of account stated. Where parties mutually agree that a certain sum is due from one to the other an "account stated" is said to arise, and the law implies a promise on the part of the one from whom such sum has been agreed to be due to pay the same, on which the other party may sue without being put to proof of the details or correctness of the account.
The amount due must be specified and not left uncertain, but a promise to make out an account and pay the balance found due is evidence to support the claim, and an action on an account stated may be maintained on proof of an acknowledgment of one item of debt. The admission of liability and of the amount due must, however, be absolute, and not qualified by any condition or reservation. An unaccepted offer to pay a sum of money being less than the amount claimed is not an account stated.
An oral admission of a debt due under written agreement is sufficient to support a claim on an account stated, and an admission may be inferred from conduct. All that is necessary is that the defendant should have shown either by express words or by his conduct that he recognised a specified sum as being due from himself to the plaintiff. The admission must be made by the defendant himself or by his agent authorised to make the admission, and must be made to the plaintiff or his agent authorised to receive the admission; an admission to a third person is not sufficient to create an account stated. The admission must be accepted by the party to whom it is made, or there is no account stated".
13. According to Wharton's Law Lexicon, 'account stated' is an admission of balance due from one party to another and that balance being due there is a debt; the statement of the account and the admission of the balance implies a promise in law to pay it. Thus there should first be a statement of account between the parties and an admission of a balance due from one party to another to make it an account stated. It is one thing for a defendant to admit the correctness of certain items on debit and credit sides of his account with the plaintiff, and it is a different thing for him to acknowledge adjustment of accounts or to admit his liability to pay a certain amount. Account means a statement of money showing balance due by one party to another or it may show only the goods supplied and services rendered in respect of which money is due to the other. An account is open or current, where the balance is not struck or is not accepted by all the parties. An account, no longer open or current, but closed by the statement, agreed by both the parties, of a balance due is called an account stated and a promise to pay is implied in law. An account stated may not necessarily be binding; it may be shown to have been given in mistake, or for a debt for which the consideration has failed or was illegal. In the absence of such averment proof it is necessarily binding.
14. Baron Alderson said in Ashby v. James (1848) 11 M & W 542 : "Here the striking of a balance between the parties is evidence of an agreement that the items of the defendant's account should be set off against the earlier items of the plaintiff's leaving the case unaffected either by the statute of limitation or the set off". The essence of account stated, as was held in Bishun Chand v. Girdhari Lal, AIR 1934 PC 147, is not the character of the items on one side or the other but the fact that there are cross items of account and that the parties mutually agree the several amounts of each and, by treating the items so agreed on the one side as discharging the items on the other side pro tanto, go on to agree that the balance only is payable. Such a transaction is in truth bilateral, and creates a new debt and a new cause of action. There are mutual promises, the one side agreeing to accept the amount of the balance of the debts as true and to pay it, the other side agreeing the entire debt as at a certain figure and then agreeing that it has been discharged to such and such an extent, so that there will be complete satisfaction on payment of the agreed balance.
15. In Hiralal v. Baduklal, AIR 1953 SC 225 it has been held that the unqualified acknowledgment made below the entry in the plaintiffs khata and the statement of account under which the entry is made, is sufficient to furnish a cause of action to the plaintiff for maintaining the suit for recovery of the principal and interest due on foot of mutual dealings.
16. Applying the above criteria to instant Annexure I with Ext. 6, we find herein all the ingredients of an account stated. Here the totals of different items have been stated and the balance struck and the same is acknowledged by one of the defendants putting his signature which has not been denied by the defendants, nor have they given any explanation as to why the signature should have been put at the foot of the account stated otherwise. There is no averment that the acknowledgement was by mistake or without consideration. Mr. Sen submits that Annexure I does not indicate a formal account and is based on slips and cannot, therefore, be binding. We are unable to accept this contention. In Panmal Lodha v. Omraomal Lodha, AIR 1953 Cal 244, it was rightly held that the word 'account' has no definite legal meaning. The primary idea of "account computatio" is some matter of debit and credit and it implies that one is-responsibie to another on the score either of contract or some fiduciary relations of a public or private nature, created by law or otherwise. It is not necessarily restricted to several items, nor is it less an account because all are by one person against another and not of mutual demands. The method of accounting is a choice of the parties. Annexure I cannot, therefore, be rejected.
17. In Tarachand v. Dhapu, AIR 1957 Raj 110, it has rightly been held that striking of a balance is essential for a real "account stated" because unless that is done, it cannot be said that the defendant agreed to set off his payments towards the earlier items of the plaintiff or that he had admitted that a certain sum was due from him and to pay the same. Accounts are settled or stated, as was held in Gordon Woodroffe & Co v. Sk M.A. Mazid & Co., AIR 1967 SC 181, if they are submitted and accepted as correct by the other side to whom the accounts have been rendered. Such a statement of account need not be in writing, nor is it necessary that before the accounts are settled, they should be gone into by the parties and scrutinised and supported by vouchers. It is sufficient if the accounts are accepted and such acceptance may be inferred by conduct. In the instant case there is clear acknowledgment of the liability by putting signature at the foot of the account stated which has not been shown to have been given by mistake or nude.
18. Mr. Sen submits that Annexure I cannot be regarded even as an account, relying on Chandi Ram Deka v. Jamini Kanta Deka, AIR 1952 Assam 92; Santi Ranjan Dasgupta v. Dasuram Mirzamal, AIR 1957 Assam 49; and Sohanlal v. Gulab Chand, AIR 1966 Raj 229. In Chandi Ram (supra) while discussing the relevancy of entries in the books of account under Section 34 of the Evidence Act, it was held that in order to be relevant under Section 34 the books of account must be kept regularly in the course of business. They must be in conformity with some known system of accounting. On facts of that case it was held that the books produced were merely ledgers not supported by any day book or roznamcha, containing no entries of transactions as they took place and there was no daily opening or closing balance in the ledger accounts but what was shown from those books was that there was plaintiff's account and in that account entries were made, and those entries could all have been made on any one day, those books did not fulfil the requirements of Section 34 of the Evidence Act and therefore could not be regarded as relevant under that Section. This decision is distinguishable on facts inasmuch as in the instant case it is not the books of account which are produced but an account stated which contained a balance struck from accounts and which contained the acknowledgment of the defendants, one of them having put his signature at its foot. In Sohanlal (supra) it was held that 'a khata bahi' was certainly a book of account and if it was maintained in regular course of business it was admissible in evidence under Section 34 of the Evidence Act; but what weight could be attached to the entries in the khata when the original entries on which they were based was not produced was quite a different matter. This decision is also distinguishable as there was no question of the debt having been acknowledged by the defendants. In Santi Ranjan (supra) it was held that in a money suit founded on accounts the defendant's statement that he executed a 'Mabalakbandi' on plaintiffs khata even though the same was due to him was not acceptable. The facts of that case were different from the instant one's and that decision is clearly distinguishable. There the plaintiff filed the khata showing the defendant's liability as also the 'mabalakbandi' with the plaint. The mabalakbandi said that the amount was due to the defendant and not to the plaintiff and hence it was not believed as it remained with the debtor and not with the creditor which was unusual. In Zenna Sorabji v. Mirabelle Hotel, AIR 1981 Bom 446, it was held that a bundle of sheets detachable and replaceable at a moment's pleasure can hardly be characterised as a book of account. Moreover, what Section 34 demands is a book of account regularly maintained in the course of business. A ledger by itself could not be a book of account of the character contemplated by Section 34. It was further held that even when a duly bound ledger book, incapable of being tampered with, that is to say, of a fool-proof character was produced, all by itself, without production of the corresponding journal or Rojmel or day-book, the ledger would not by itself be admissible in evidence as a relevant document. It would become relevant only in conjunction with the cash book, Rojmel or day book. This decision is similarly distinguishable. It is common knowledge that in a double entry system of accounting transactions are first entered in a book of original entry and posted in the corresponding ledger accounts. From the ledger balances the trial balance is prepared on the basis of which the Profit & Loss account is prepared. From all these the balance sheet is prepared to show the state of affairs of the concern as at the year ending date. There is no question of acknowledgment of liability in the books of accounts. This was followed in Chitta Ranjan v. Shyam Sunder, (1984) 1 Gauh LR (NOC) 27 and in Mohan Lal v. Dwarka Nath, AIR 1985 J & K 85, which decisions are also similarly distinguishable on the ground that while in those cases there was no evidence of acknowledgment, in the instant case there is clear evidence of acknowledgment of the balance to have been due by the defendants. An account stated is admissible in evidence.
19. On the basis of the foregoing rulings it can be observed that it is one thing to impute a liability on the basis of one's own books of account and it is entirely a different thing to impute liability on the basis of an account stated. An account stated is foundation of liability and itself provides a cause of action. Thus in the instant case apart from the books of account, Annexure 1 has itself provided a cause of action. The defendants could have escaped if they denied the acknowledgment, or showed it to have been given in mistake or without consideration; but they have not done so. P.W. 1 deposed that he asked the defendants to keep an account and to make the payment to him and the defendants paid him money now and then. Defendant Sachin Chakravorty furnished him account in writing in his house in presence of Deo Chand Tewari, Pacharu Sekh and himself. All the three defendants were present. Defendant Bagish Prasad Chakravarty wrote the account and gave him (P.W. 1) the paper. P.W. 1 submitted that paper (Annexure I) along with the plaint. These statements were not shaken in cross-examination. Both P.W. 1 and P.W. 3 gave details of the transactions. P.W. 4, Deo Narayan Tewari, was a witness to the preparation of the account stated. Defendant Pranab put his signature in presence of other witnesses. The paper was made over to Ahmed Ali by Pranab. He clearly stated that defendant Sachin Chakravorty brought a list and the accounts in Annexure I was written therefrom. Pranab Chakravorty examining himself as D.W. 1 admitted his signature on Annexure I but said that the writing were not his. He said "The slip written by Abdul Aziz and Rogai Marak on 7-6-76 at Rongshoi Camp, was given to me and asked to put my signature there. I then put my signature. The slip was taken away by Abdul Aziz". He of course said that the amount of Rs. 30,632.25 or any other amount, was not admitted to be payable by him. In cross-examination he said : "The statements read over to-day at Annexure-I, were written at the time when I put my signature there. I know English. I put my signature after going through all the contents". He also said that he himself entered into an agreement with Aziz regarding truck fare and that he took the truck on hire for carrying stones and that stones were carried mainly with Aziz's truck. D.W. 2, Sachindra Prasad Chakravorty, also said : "I suppose that Ext. 6 is the signature of my son Pranab. I do not know who had written Annexure-I". There is evidence to show that the defendants carried on the business.
20. On correct appreciation of the evidence on record and applying the law as to account stated we do not find any infirmity in the findings recorded by the trial court.
21. The rate of interest is reduced from 10% to 6% as the plaintiffs have not proved anything as regards rate of interest payable by the-defendants.
22. In the result, subject to the reduction of the rate of interest, this appeal is found to be without merit and hence it is dismissed but without cost in this Court. Stay order dated 28-1-77 stands vacated.
S.N. Phukan, J.
23. I agree.