Bangalore District Court
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1
Com.O.S.No.9039/2005
IN THE COURT OF LXXXII ADDL.CITY CIVIL & SESSIONS
JUDGE, AT BENGALURU (CCH.83)
THIS THE 22ND DAY OF JANUARY 2021
PRESENT:
SRI.DEVARAJA BHAT.M., B.COM, LL.B.,
LXXXII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.O.S.No.9039/2005
BETWEEN:
1. The Tata Steel
Limited, (formerly
known as The Tata Iron
and Steel Company
Limited) a Company
incorporated under the
Indian Companies Act,
1882, and having its
Registered Office at
Bombay House, No.24,
Homi Modi Street,
Mumbai 400 001, and its
Branch Office at No.45,
2nd floor, Jubilee
Building, Museum Road,
Bangalore - 560 025,
represented herein by
its Manager (Legal) and
Constituted Attorney Mr.
Pradeep Kumr Saha S/o
Dr. S.N. Saha, aged
about 51 years,
2
Com.O.S.No.9039/2005
2. The Tinplate Company
of India Limited, a
Company incorporated
under the Indian
Companies Act, 1913,
and having its
registered office at No.4,
Bankshall Street,
Kolakata 700 001 and its
branch office at Shree
Shakti Buiding, 14, Park
Road, Tasker Town,
Bangalore - 560 051,
represented herein by
its Company Sercretary
and constituted Atorney
Mr. Suddhabrata Kar, S/o
Mr. S.S. Kar, aged 49
years.
: PLAINTIFFS
(Represented by M/s.
King & Patridge-
Advocates)
AND
Metal Closures Private
Limited, a Compay
incorporated under the
Companies Act, 1956,
having its Registered
Office at 12th KM,
Kanakapura Road,
3
Com.O.S.No.9039/2005
Bangalore -560 062,
represented herein by
its Chairman and
Managing Director Mr. B.
Prashanth Hegde.
: DEFENDANT
(Defendant is
represented by Sri.
Suraj R. Manjeswar-
Advocate)
Date of Institution of 18.11.2005
the suit
Nature of the suit (suit
on pronote, suit for
declaration & Suit for Recovery of Money
Possession, Suit for
injunction etc.)
Date of commencement 09.01.2009
of recording of evidence
Date on which judgment 22.01.2021
was pronounced
Duration Years Months Days
15 02 04
(DEVARAJA BHAT.M),
LXXXII Addl.City Civil & Sessions Judge,
Bengaluru.
4
Com.O.S.No.9039/2005
JUDGMENT
This is a suit for the relief of recovery of outstanding sum of Rs.2,85,59,713.49 and Rs.38,44,998.14 being the interest at the rate of 18% p.a., from 01.02.2005 till 31.10.2005 with future interest at the rate of 18% p.a., from the date of suit till realization.
2. The Brief facts as narrated in the Plaint are as follows:-
The Plaintiff No.1 is a Company incorporated under the Indian Companies Act, 1882 and engaged in the business of manufacture and supply of hot rolled coils, that the Plaintiff No.1 appointed the Plaintiff No.2 as its conversion agent vide Agreement dated 30.03.1998 w.e.f. 01.04.1998, that the Plaintiff No.2 was also appointed as the Consignment and Marketing agent of the Plaintiff No.1 for the purpose of receipt, handling, dispatch, sales and marketing of ETP on behalf of Plaintiff No.1, vide two separate Agreements both dated 30.03.1998, that the Plaintiff No.2 has its factory at Jamshedpur and stockyard at Hyderabad from which all the supplies are made, that the Defendant is a Company engaged in the business of manufacture and supply of battery jackets, crown corks, lug caps, shoe polish containers etc., for the manufacture 5 Com.O.S.No.9039/2005 of which items the Defendant uses ETP as raw material, that in the ordinary course of business, the Defendant placed Purchase Orders both oral and in writing on the Plaintiff No.2 for supply of ETP and based on the said Orders, Plaintiff No.2 on behalf of Plaintiff No.1 was supplying the material from its factory at Jamshedpur and stockyard at Hyderabad and the Plaintiff No.1 was raising Invoices for the same, giving 60 days credit period for payment of the outstanding amount due, that any delayed payment subsequent to 60 days credit period was agreed to be subject to interest at the rate of 18% per annum, that the Plaintiff No.1 has all along been maintaining a mutual, open, current and running account with respect to the transactions with the Defendant, that the Defendant on some occasions raised issues regarding quality of a part of the material supplied by the Plaintiffs, that in order to maintain the relationship the Plaintiffs accepted the rejection of said portion of the material although it was not due to any fault on the part of the Plaintiffs, that the Plaintiff No.1 issued credit notes for the said portion of the materials returned by the Defendant and credited the amount due by the Defendant against the Invoices of the said material to the Defendant's running account, that other than the material thus returned, the Defendant consumed rest of the material supplied by the Plaintiffs without any complaint, that 6 Com.O.S.No.9039/2005 the Defendant has been irregular in making payments against supplies made by the Plaintiffs and the Cheques issued by the Defendant were often returned dishonoured and hence, the outstanding amount rose to several lakhs of rupees during the year 1999, that the Plaintiff No.2 protested against the dishonour of Cheques being issued by the Defendant vide its letters dated 27.05.1999 and 01.06.2000, but though the Defendant assured to honour the Cheques, the Cheques issued by the Defendant continued to get dishonoured, that the Plaintiffs requested the Defendant to clear the outstanding amounts due in a meeting held in the month of July 1999 and the Defendant agreed to clear the same by November 1999, however failed to make payment of the same, that the Defendant in response to the several requests made by the Plaintiff No2 acknowledged the amount due and payable by it and promised to clear its liability vide letters dated 14.10.1999, 23.10.1999, 14.01.2000 and 13.05.2000, that as the payment from the Defendant towards the outstanding amount due was not forthcoming, it was agreed between the parties that supplies made from October 2000 would be against Letter of Credit issued by the Defendant in favour of the Plaintiff No.1 and it was also agreed that a portion of the amount covered by such Letter of Credit would be adjusted towards the old outstanding amount due, however in spite of it, the running 7 Com.O.S.No.9039/2005 account of the Defendant maintained by the Plaintiffs continued to be outstanding, that as per the request of the Plaintiffs, the Defendant agreed to clear the amount due to the Plaintiff No.1 in installments and issued Cheques towards partial discharge of its liability as detailed in Para No.11 of the Plaint and the Plaintiff No.1 adjusted the amounts received through the said Cheques towards total outstanding amount due by the Defendant, that since the payments received from the Defendant were very small when compared to the huge outstanding dues, Plaintiff No.1 sent a letter dated 06.02.2003 requesting the Defendant to give a plan or schedule of payment for clearing the outstanding dues, but the Defendant instead continued to pay paltry sums which not even covered the interest accruing on the total outstanding amounts due by the Defendant, that in spite of Plaintiff's requests the Defendant failed to clear the total outstanding dues, that as on 30.11.2004 the Defendant was due to pay to the Plaintiff No.1 an amount of Rs.2,90,59,713.49 together with interest at the rate of 18% per annum against the delayed payment or non-payment of the total outstanding amount, that the Defendant has failed and neglected to clear the said dues, that the Plaintiff No.1 got issued a Legal Notice dated 27.12.2004 demanding the Defendant to pay the outstanding amount due, that after 8 Com.O.S.No.9039/2005 receipt of the said notice, the Defendant made payment of Rs.5 Lakhs vide two cheques dated 30.12.2004 and 31.01.2005 for Rs.2,50,000/- each and further acknowledged its liability to the Plaintiff No.1, that thereafter, as an afterthought the Defendant issued a reply dated 16.02.2005 through its Counsel baldly denying any liability to the Plaintiff No.1, that the Plaintiff No.1 filed a Petition under Section 433(e) of the Companies Act, 1956 before the Hon'ble High Court of Karnataka in Company Petition No.62/2005, however later withdrew the said Petition, that the Defendant is still due and liable to pay to the Plaintiffs a sum of Rs.2,85,59,713.49 towards total outstanding amount and Rs.38,44,998.14 towards interest at the rate of 18% per annum and also liable to pay future interest at the rate of 18% per annum and therefore, the Plaintiffs have filed the present suit for the above-mentioned reliefs.
3. The contentions of the Defendant in its Written Statement are as follows:-
That the suit is not maintainable either in law or on facts, that the Plaintiffs have not approached the court with clean hands and are guilty of suppression of material facts, that there are no bonafide and truth in the allegations made in the plaint and are invented for the purpose of the case, that the suit filed 9 Com.O.S.No.9039/2005 by the Plaintiffs is highly belated and hence, barred by limitation, that the Defendant is a regular purchaser of materials from the Plaintiff No.2 since 1991 and the materials are always sent against written purchase orders, that ever since from the year 1998 the Plaintiff No.2 was supplying the materials on monthly basis against letter of credit and at no point of time any credit facility was extended to the Defendant, that the Plaintiffs were operating a stock point, which had no proper infrastructural facility for storage of materials and hence, they were looking for a proper stock storage facility, that since the Defendant had adequate storage facility and was also identified as a down stream converter, it was decided to provide space for shifting and storage of material moved from White- field stock point, that all the materials including the defective material were moved to the Defendant's premises and it was agreed that the Defendant could use as much material under their customer development scheme and give credit to the account of Plaintiff No.2 in respect of the materials so used and accordingly Defendant used some material and faced huge rejections of the end products from their customers as the raw material was not suitable for the end product manufactured by the Defendant and hence, the Plaintiffs lifted the same from the stock point, that the material whatever utilized by the Defendant has been duly accounted and has been fully paid 10 Com.O.S.No.9039/2005 and there is no amount due payable to the Plaintiffs much less the amount claimed in the Plaint, that the Plaintiff No.2 eager to sell the materials dumped the materials at the Defendant's place voluntarily without the Defendant asking for the same and further Plaintiff No.2 assured the Defendant that payment need to be made only on the materials consumed and accordingly the Defendant has made the entire payment for the materials consumed even though they were defective and not suitable to the products manufactured by the Defendant, causing huge loss to the Defendant and hence, prayed to dismiss the suit.
4. On the above pleadings of the parties, the following issues are framed :-
1. Whether the plaintiff proves that the defendant is due to pay an amount of Rs.2,85,59,713.49 being the total outstanding as per the running account maintained by the Plaintiffs for the supply of material to the Defendant ?
2. Whether plaintiffs are entitled to an amount of Rs.38,44,998.14 being the interest at the rate of 18% p.a., from 01.12.2005 up to 31.10.2005 ?
3. Whether the suit is barred by limitation ?11
Com.O.S.No.9039/2005
4. To what decree or order?
5. In order to prove the contentions of the Plaintiffs, the Plaintiffs have got examined 2 witnesses as P.Ws.1 & 2 and got marked Exs.P.1 to P.55.
6. In order to prove the contentions of the Defendants, the Defendants have got examined 2 witnesses as DWs. 1 & 2 and got marked Exs.D.1 to D.124.
7. The Advocate for the Plaintiff has filed her written arguments on 05.04.2012. The Advocate for the Defendant has filed his written arguments on 23.05.2012. On 23.03.2019, this case was transferred from the Court of II Addl.City Civil & Sessions Judge to this Court. Thereafter, I have heard the oral arguments of the learned Advocate for the Plaintiffs and the learned Advocate for the Defendant.
8. My findings on the above issues are as follows:-
Issue No.1 : Does not survive for consideration Issue No.2 : Does not survive for consideration Issue No.3 : In the Affirmative Issue No.4 : As per the final Order for the following 12 Com.O.S.No.9039/2005 reasons.
REASONS
9. Issue No. 3: - Since this issue relating to the limitation in filing the suit, I propose to discuss about the same first of all. Further, the issue relating to limitation is a mixed question of law and facts, I discuss the facts of the case also while discussing this Issue.
10. In order to prove the Defendant's liability to pay the Plaintiffs the amount claimed in the suit, the Plaintiffs rely on Ex.P.2/Statement of Account, which is a print-out of the customer's ledger maintained by the Plaintiffs in an electronic form, in respect of supplies made to the Defendant. Further he has also filed the Invoices raised by the Plaintiffs at Ex.P.28, which is a file containing 776 Invoices.
11. The Defendant has produced Ex.D.28 to D.65/Sales Return Invoices for the period from 29.03.1999 to 31.03.1999. Among the same, Ex.D.28, D.32, D.36 to D.40, D.47 to D.50, D.54, D.59 to D.62 are pertaining to independent transactions which the Defendant had with Plaintiff No.2 and are not pertaining to the suit transaction. The DW.1 during his cross-examination has admitted 13 Com.O.S.No.9039/2005 the said aspect and he has also deposed that they could not be included in Ex.D.11 to D.17/Ledger Extract.
12. As per Ex.P.2, the Plaintiffs have raised totally 830 Invoices for the Supplies made to the Defendant. However, as per Ex.P.28, only 776 Invoices are produced. The PW.1 has deposed at Para No.23 of his Affidavit filed in-lieu of his oral Examination-in-Chief that 23 Invoices relating to supplies made by the Plaintiffs Hyderabad Stockyard and 14 Invoices relating to supplies made by the Factory of 2nd Plaintiff at Jamshedpur could not be located as the Invoices being quite old seem to have been misplaced in the Office of the Plaintiffs. However, the Plaintiffs have produced Exs.P.29 to P.39/'C' Forms issued by the Defendant. In the said 'C' Forms, the Defendant has acknowledged the sale of goods under the said missing Invoices also. The DW.1 during his cross- examination has admitted that the Invoices shown as missing in Ex.P.40 and P41 have been duly accounted in Ex.D.11 to D.17/Ledger extract maintained by the Defendant for the period from 01.04.1998 to 31.03.2005. The DW.2 at Para No.4 of his Affidavit filed in-lieu of his oral Examination-in-Chief has deposed that the Defendant has issued 'C' Forms in respect of entire supplies made by the Plaintiffs to the extent of Rs.19,52,84,584/- .
14Com.O.S.No.9039/2005
13. The learned Advocate for the Defendant has much argued about the authority of Sri. Pradeep Kumar Saha to file the suit and the authority of PWs.1 & 2 to depose on behalf of the Plaintiff's Company, by relying on Order XXIX Rule 1 of Civil Procedure Code, Rule 16 of the Karnataka Civil Rules of Practice and Section 291 of the Companies Act. He has also relied on several decisions in support of the said contentions.
14. Order XXIX Rule 1 of the Civil Procedure Code uses the term "Corporation" which will naturally include companies within its definition.
15. The Hon'ble Supreme Court in the decision reported in 1996 (6) - S.C.C. - 660 = A.I.R. - 1997 - S.C. - 3 (United Bank of India vs. Naresh Kumar) has held at Para No.10 as follows :-
"It cannot be disputed that a company like the bank can sue and be sued in its own name. Under Order VI Rule 14 of the Civil Procedure Code a pleading is required to be signed by the party and its pleader, if any. As a company is juristic entity it is obvious that some person has to sign the pleadings on behalf of the company. Order XXIX Rule 1 of the Civil Procedure Code, therefore, provides that in a suit by or against a corporation the Secretary or any Director or other Principal Officer of the corporation who is able to depose to the facts of the case might sign and verify on behalf of the company. Reading Order VI Rule 14 together with 15 Com.O.S.No.9039/2005 Order XXIX Rule 1 of Code of Civil Procedure it would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order XXIX can, by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation. In addition thereto and dehors, Order XXIX Rule 1 as a company is a juristic entity, it can duly authorise any person to sign the plaint or the written statement on its behalf and this would be regarded as sufficient compliance with the provisions of Order VI Rule 14. A person may be expressly authorized to sign the pleadings on behalf of the company, for example by the Board of Directors, passing a resolution to that effect or by a power of attorney being executed in favour of any individual. In absence thereof and in cases where pleadings have been signed by one of its officers a Corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be expressed or implied. The Court can on the basis of the evidence on record, and after taking all the circumstances of the case, specially with regard to the conduct of the trial, come to the conclusion that the corporation had ratified the act of signing of the pleading by its officer."
16. Even the Hon'ble Supreme Court in the aforesaid judgment has used the terms "Company" and "Corporation" interchangeably. Hence, the said arguments of the advocate for the Defendant cannot be accepted at all.
16Com.O.S.No.9039/2005
17. According to the Plaintiffs, this suit is filed for balance due on a mutual, open, current and running account falling under Article-1 of Schedule to Limitation Act and the last entry admitted and proved being on 21.02.2005, the suit is within the period of limitation. The Defendant has contended that the said account is not a mutual account giving rise to independent obligations and hence, the suit is barred by limitation. In support of his contention, he has relied on a decision reported in A.I.R. - 1959 - S.C. - 1349 (Hindustan Forest Co. vs. Lal Chand & Others) and 2005 (128) - Company Cases - 376 - (Karnataka) (Mysore Tools Limited (in liquidation) vs. Domination Hardware Store). In the present case, the supplies were made by the Plaintiffs to the Defendant were both on credit and against Letter of Credit. The Plaintiffs at Para No.10 of the Plaint has contended that it was agreed between the Plaintiffs and the Defendant that supplies made from October 2000 would be against Letter of Credit issued by the Defendant in favour of the Plaintiff No.1 and that a portion of the amount covered by such Letters of Credit issued by the Defendant would be adjusted towards the old outstanding amount due. The PW.1 has deposed the same facts at Para No.15 of his Affidavit filed in-lieu of oral Examination-in-Chief. During his cross-examination, he has deposed that all the credit notes issued by him are reflected in Ex.P.1. Further, he has 17 Com.O.S.No.9039/2005 deposed that as per Ex.P.14, he had promised the Defendant to issue credit note for Rs.30Lakhs, that the said credit note is not mentioned in Ex.P.1 and that Ex.P.1 contains only the credit notes given to the Defendant. The PW.1 has also admitted during his cross-examination that there was a Meeting between the Plaintiff and Defendant to reconcile the accounts and that it was found that the amounts were not tallying and there was difference of amount claimed by the Defendant. He has denied the suggestion that the difference of amount was mainly on account of non-issue of credit notes. He has also deposed that from 2002 to 2004 the goods were sent on Letter of Credit and also on credit basis. He has admitted that there was an understanding between the parties after the year 2002 all the supplies were to be made against Letter of Credit and on the basis of post-dated cheques. He has deposed that in spite of that, the Plaintiffs continued to supply the goods on credit basis and that the balance due from the Defendant is reflected in the accounts and that he has not produced the Balance Sheet in this suit.
18. When the supplies are made on credit, the obligation is on the Defendant to make payment for such supplies. According to the Defendant the said supplies were made during the period from 14.10.1999 to 13.05.2000 with a credit period 18 Com.O.S.No.9039/2005 of 60 days. When such being the case this suit is filed on 18.11.2005 is about 5 years after the said date.
19. However, the Plaintiff has contended that the suit is filed for balance due on a mutual open current and running account and the last item admitted and proved being on 21.02.2005, the suit is filed within the period of limitation. The learned Advocate for the Plaintiff has argued that it is a settled legal proposition that a 'C' Form issued by the Purchaser of the goods is an acknowledgment of debt in writing within the meaning of Section 18 of the Limitation Act. In support of the said argument, he has relied upon a decision of the Hon'ble Supreme Court reported in A.I.R. - 1961 - S.C. - 1236 (S.F.Mazda vs. Durga Prasad). It is to be noted that this decision of the Hon'ble Supreme Court is relied and referred in a subsequent Division Bench judgment of the Andhra Pradesh High Court reported in A.I.R. - 1988 - Andhra Pradesh - 203 (M/s. Electro Flame Ltd., Hyderabad vs. M/s Mittal Iron Foundry Pvt.Ltd.). In the said case the Division Bench of the Hon'ble Andhra Pradesh High Court has held that furnishing of the Sales Tax Declaration Form regarding the sale transaction between the parties implies the admission of the existence of the jural relationship that of a debtor and creditor as follows:-
19Com.O.S.No.9039/2005 "3. As noted above, the appellant-company did furnish sales tax declaration form regarding the self-
same sale transaction between the parties. Does it not mean and imply that there has been an intention on the part of the appellant-company to admit the existence of a jural relationship between the parties such as that of debtor and creditor in regard to the debt in question. In our view, the answer cannot but be in the affirmative. As such, the plea of limitation in the contextual facts, on the basis of the law laid down by the Supreme Court, as noted above, cannot be sustained."
20. The Division Bench has relied upon the above-mentioned decision reported in A.I.R. - 1961 - S.C. - 1236 ( S.F.Mazda vs. Durga Prasad) wherein it is held that the plea of acknowledgment must relate to a present subsisting liability and there must be a sufficient indication of the existence of a jural relationship that of a debtor and creditor. The Hon'ble Apex Court did not have any occasion to deal an issue as to whether the submission of Sales Tax Declaration Form would imply the acknowledgment of the liability and establishment of the jural relationship as of debtor and creditor.
21. The learned Advocate appearing for the Defendant refutes the aforesaid contention of the Plaintiff in submitting that the submission of 'C' Form can never be treated as an acknowledgment of the liability to pay but at best be taken 20 Com.O.S.No.9039/2005 as the acknowledgment of the transaction. It is further submitted that the 'C' Form are issued in discharge of the statutory obligation to enable the seller to avail the reduced rate of Central Sales Tax which is not relatable to liability to pay the price indicated in the tax invoices for which the 'C' Form was issued.
22. The Hon'ble Delhi High Court in a decision reported in 168 (2010) - D.L.T. - 591 (Alliance Paints & Varnish Works Pvt. Ltd. vs. Harikishan Gupta) has held in unequivocal terms that Sales Tax Declaration Form can never be construed as acknowledgment of the liability for extending the period of limitation for institution of the suit as follows:-
"15. In my considered opinion, the learned trial court clearly erred in construing the "C"
Forms as acknowledgments of liability and in relying upon them for extending the period of limitation, inter alia, for the reason that when exemption from limitation is prayed for, it is essential for the plaintiff to very specifically plead such an exemption in the plaint. As a matter of fact, under Order VII Rule 6 CPC, it is obligatory, as a matter of pleading, to show the ground on which the exemption from limitation is claimed. It was so held in ShaManmal Misrimall vs. K.Radhakrishnan AIR 1972 Mad 108 by the Madras High Court and by a Division Bench of the Himachal Pradesh High Court in the case of Roshan Lal Kuthiala (supra). In the instant case, 21 Com.O.S.No.9039/2005 this has not been done by the respondent- plaintiff at all, in that the respondent in the plaint does not seek to rely upon any acknowledgment for extending the period of limitation for institution of the suit. Thus, clearly, in my view, it would not be open to the respondent to rely on an exemption not specifically pleaded in the plaint."
24. In Taipack Limited & Ors. vs. Ram Kishore Nagar Mal 2007 (3) ARB. LR 402 (Delhi), a similar question arose as in the instant case as to whether "C" Form supplied by the petitioner therein constituted acknowledgment of debt owed to the respondent so as to give a fresh lease to the commencement of limitation. A learned Single Judge of this Court answered the question in the negative giving the following reasons:
32. Firstly, there is no acknowledgment of a present and subsisting liability. The said form can at the most be treated as an acknowledgment of the goods received under the contract of supply of goods and the price fixed to be paid for them. Whether or not payments were effected thereafter, or any amount remains due or outstanding cannot be inferred from the said "C" Form in the facts and circumstances of this case. Secondly, no intention to acknowledge a liability can be inferred from the contents of the said "C" form. Thirdly, one cannot establish a jural relation of debtor and creditor from the contents of the said "C" form. Thus, the essential requirements for a writing to constitute 22 Com.O.S.No.9039/2005 acknowledgment are missing from the document."
23. The plea of limitation is one of the defence available to the other side which is well-recognized in law. Section 18 can be pressed when there is a valid acknowledgment of the subsisting liability and not the past liability. The words used in the acknowledgment must sufficiently indicate the circumstances of the jural relationship as that of the debtor and creditor and there must be a manifest intention to admit such jural relationship. The object behind the issuance of the Sales Tax Declaration Form is to avail of the reduce rate of sales tax. The Declaration Form does not require to contain the statements relating to the payments already made or to be made but can at best be a best piece of evidence relating to the contract of sale and the goods being sold and delivered at a price agreed upon. The letter which contains the Declaration Form does not indicate the acknowledgment of the liability as well as the admission of the existence of a jural relationship. There is no express intention of the Defendant to acknowledge the liability in a letter containing the Declaration Form. Therefore, the issuance of the Sales Tax Declaration Form does not constitute the acknowledgment of the subsisting liability and/or establishes the jural relationship of a debtor and a creditor.23
Com.O.S.No.9039/2005
24. In the decision reported in A.I.R. - 1979 - S.C. - 1937 (Valliamma Champaka Pillai vs. Sivathanu Pillai and Ors.), it was held as under: -
"Under Section 18 of the Limitation Act, 1908, one of the essential requirements for a valid 'acknowledgment' is that the writing concerned must contain an admission of a 'subsisting liability'. A mere admission of the past liability is not sufficient to constitute such an 'acknowledgment'. Hence a mere recital in a document as to the existence of a past liability, coupled with a statement of its discharge, does not constitute an 'acknowledgment' within this Section."
25. In respect of the contention of the Advocate for the Plaintiff about the existence of a mutual open and current account, it would be apposite to reproduce Article 1 and Article 14 of the Schedule to the Limitation Act,1963 for the sake of ready reference, which read as under:-
Description of suits Period of Time from which limitation period begins to run For the balance Three years The close of the due on a mutual, year in open and current which the last item account, where admitted or proved there is entered in have been the account;
24
Com.O.S.No.9039/2005
reciprocal such year to
demands between be computed as in
the parties the account.
For the price of Three years The date of the
goods sold and delivery of the
delivered where no goods.
fixed period of
credit is agreed
upon.
26. A bare reading of the aforesaid Articles set out in the Schedule to the Limitation Act shows that Article 1 relates to suits in respect of balance due on a mutual, open and current account where there have been reciprocal demands between the parties. The period of limitation prescribed by this Article is three years from the close of the year in which the last item admitted or proved is entered in the account and such year is to be computed as in the account. In other words, if the statement of account between the parties is to be regarded as a mutual, open and current account, then the period of limitation of three years would begin from the close of the year in which the last item admitted or proved is entered in the account.
27. It is settled law that merely because there is a running, open or current account in respect of the transactions between 25 Com.O.S.No.9039/2005 the parties does not mean that Article 1 of the Limitation Act, 1963 would apply. It has been so held by the Hon'ble Supreme Court in the decision reported in A.I.R. - 1965 - S.C. - 1711 (Kesharichand Jaisukhlal vs. Shilong Banking Corporation Ltd.) , after referring to the leading case on mutual accounts reported in (1871) VI - Madras High Court Reports - 142 (Hirada Basappa vs. Gadigi Muddappa), wherein it is observed as follows:-
"To be mutual there must be transactions on each side creating independent obligations on the other, and not merely transactions which create obligations on the one side, those on the other being merely complete or partial discharges of such obligations."
28. A Division Bench of Hon'ble Delhi High Court in the decision reported in 2001 III - A.D. (Delhi) - 493 (Manish Garg vs. East India Udyog Ltd.) , after referring to the above-mentioned judgment reported in A.I.R. - 1965 - S.C. - 1711 (Kesharichand Jaisukhlal vs. Shilong Banking Corporation Ltd.) and in the decision reported in A.I.R. - 1959 - S.C. - 1349 (Hindustan Forest Co. vs. Lal Chand and Ors). (It is to be noted here that the Advocate for the Defendant has relied on this decision in his written arguments 26 Com.O.S.No.9039/2005 at Page No.12) has held as follows:-
"8. Thus for an account properly to be called Mutual Account there must be mutual dealing in the sense that both the parties come under liability under each other. In this case, this ingredient is not satisfied. It was simply a case of debtor and creditor only and not a case of mutual obligations which will in the ordinary way result in enforceable liabilities on each side. Mutual Account is when each has a demand or right of action against the other."
29. There were no reciprocal dealings between the parties and thus there was no mutual, open and current account within the meaning of Article 1 of the Schedule 1 to the Limitation Act which could keep the debt alive even after 13.05.2000 with a credit period of 60 days. As discussed by me earlier, the Sales Tax Declaration forms submitted to the Plaintiff at best could be said to have acknowledged the receipt of the goods delivered to the Defendant and cannot be stretch to mean acknowledgment of liability.
30. In construing the 'C' Forms as acknowledgments of liability and in relying upon them for extending the period of limitation, inter alia, for the reason that when exemption from limitation is prayed for, it is essential for the plaintiff to very specifically plead such an exemption in the plaint. As a matter 27 Com.O.S.No.9039/2005 of fact, under Order VII Rule 6 of Civil Procedure Code, it is obligatory, as a matter of pleading, to show the ground on which the exemption from limitation is claimed. Thus, clearly, in my view, it would not be open to the respondent to rely on an exemption not specifically pleaded in the plaint.
31. Apart from the above, in my view, the Central Sales Tax declarations cannot be relied upon as acknowledgments in the instant case for claiming extension of the period of limitation. Section 18 of the New Act (corresponding to Section 19 of the Old Act) deals with the effect of acknowledgment in writing, the relevant portion whereof reads as under:-
"18. Effect of acknowledgment in writing:-
(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.
(2) ----------
Explanation :- For the purposes of this Section, 28 Com.O.S.No.9039/2005
(a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or right;
(b) the word "signed" means signed either personally or by an agent duly authorized in this behalf; and (c ) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right."
32. In the decision reported in A.I.R. - 1961 - S.C. - 1236 (Khan Bahadur Shapoor Freedom Mazda vs. Durga Prosad Chamaria And Others), the Hon'ble Supreme Court, while laying down the basic requirements that need to be fulfilled for a document to constitute a valid acknowledgment within the meaning of Section 19 of the 1908 Act, has held as follows:-
"(6). It is thus clear that acknowledgment as prescribed by Section 19 merely renews debt;
it does not create a new right of action. It is a mere acknowledgment of the liability in respect of the right in question. It need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledge is based must 29 Com.O.S.No.9039/2005 relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgment must, however, indicate the existence of jural relationship between the parties such as that of debtor or creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or far-fetched process of reasoning. Broadly stated that is the effect of the relevant provisions contained in S.19, and there is really no substantial difference between the parties as to the true legal position in this 30 Com.O.S.No.9039/2005 matter."
33. The question was again examined with reference to the right of redemption in the decision reported in A.I.R. - 1967 - S.C. - 935 (Tilak Ram vs. Nathu), wherein it is held as follows:-
"The right of redemption no doubt is of the essence of and inherent in a transaction of mortgage. But the statement in question must relate to the subsisting liability or the right claimed. Where the statement is relied on as expressing jural relationship it must show that it was made with the intention of admitting such jural relationship subsisting at the time when it was made. It follows that where a statement setting out jural relationship is made clearly without intending to admit its existence, an intention to admit cannot be imposed on its maker by an involved or a far-fetched process of reasoning."
34. Again in the decision reported in A.I.R. - 1989 - S.C. - 1775 (Reet Mohinder Singh Sekhon vs. Mohinder Parkash) where the suit was resisted on the ground that the recitals in the sale deed served as an acknowledgment, the Hon'ble Supreme Court relying upon the above-mentioned decision reported in A.I.R. - 1967 - S.C. - 935 (Tilak Ram 31 Com.O.S.No.9039/2005 vs. Nathu) and has held as follows:-
".......................................the period of limitation cannot be extended by a mere passing recital regarding the factum of the mortgage but that the statement on which the plea of an acknowledgment is based must relate to a subsisting liability. The words used must indicate the jural relationship between the parties and it must appear that such a statement is made with the intention of admitting such jural relationship. But, in our opinion, the recitals in the sale deed on November 1, 1913 fulfil the above requirements...................................................... .......The words spell out a clear intention the moneys due under the mortgage still remained unpaid and also that the mortgagor had a subsisting right of redemption which he could enforce against the mortgagee. In this view of the matter the contention on behalf of the appellant that the recitals in the document of November 1, 1913 constituted an acknowledgment of liability for redemption within the meaning of Section 19 of the Limitation Act deserves to be accepted."
35. The aforesaid principles relating to Section 19 of the Old Act, the provisions of which are similar to Section 18 of the New Act, were reiterated by the Hon'ble Supreme Court in the decision reported in A.I.R. - 2006 - S.C. - 1567 (Prabhakaran and Ors. vs. M. Azhagiri Pillai (Dead) by 32 Com.O.S.No.9039/2005 LRs. and Ors.).
36. Further, the Hon'ble Delhi High Court in the decision reported in 2007(3) - ARB.L.R. - 402 (Delhi) (Taipack Limited and Ors. vs. Ram Kishore Nagar Mal), a similar question arose as in the instant case as to whether 'C' Form supplied by the Petitioner therein constituted acknowledgment of debt owed to the respondent so as to give a fresh lease to the commencement of limitation. The Hon'ble High Court of Delhi has held as follows: -
"32. Firstly, there is no acknowledgment of a present and subsisting liability. The said form can at the most be treated as an acknowledgment of the goods received under the contract of supply of goods and the price fixed to be paid for them. Whether or not payments were effected thereafter, or any amount remains due or outstanding cannot be inferred from the said 'C' form in the facts and circumstances of this case. Secondly, no intention to acknowledge a liability can be inferred from the contents of the said 'C' form. Thirdly, one cannot establish a jural relation of debtor and creditor from the contents of the said 'C' form. Thus, the essential requirements for a writing to constitute acknowledgment are missing from the document."33
Com.O.S.No.9039/2005
37. In view of the aforesaid settled legal position, the Central Sales Tax 'C' Forms marked as Exs.P.29 to P.39 dated 01.01.2000, 10.06.2000, 14.09.2001, 12.06.2002, 30.01.2004, 09.07.2004, 06.04.2005, 22.08.2000, 04.04.2003, 30.01.2004 and 09.07.2004 respectively, in my view, cannot be treated as an acknowledgment of the debt owed by the Defendant to the Plaintiff as it fails to fulfill the essential requirements for a valid acknowledgment. It is not in dispute that the suit was instituted on 18.11.2005. Whether any payments were made after 13.05.2000 and whether any amount remained due or outstanding, cannot be inferred from the aforesaid 'C' Forms. Most importantly, however, the 'C' Forms cannot be construed as an acknowledgment for the reason that no intention to acknowledge a liability can be inferred therefrom. The Courts though lean in favour of a liberal construction of all documents which are sought to be relied upon as acknowledgments, it would be too far fetched to hold that the 'C' Forms handed over by the Defendant to the Plaintiff can be construed as an acknowledgment of subsisting liability owed by the Defendant to the Plaintiff. The liability could well have been liquidated and wiped off even before the issuance of the 'C' Forms.
38. The Plaintiffs have claimed to have issued a notice dated 34 Com.O.S.No.9039/2005 27.12.2004 to the Defendant as per Ex.P.19, wherein he has contended that an amount of Rs.2,41,10,966.34 was due under various invoices as on 30.11.2004 and called upon the Defendant to pay the same. However, at Para No.13 of the Plaint, the Plaintiff has contended that as on 30.11.2004, the Defendant was still due to pay to the Plaintiff No.1 an amount of Rs.2,90,59,713.49. There is a difference between the said amount in Ex.P.19 when compared to the amount mentioned in Para No.13 of the plaint. According to the Plaintiff, after receipt of Ex.P.19 Notice, the Defendant made payment of Rs.5 Lakhs through two Cheques dated 30.12.2004 and 31.01.2005 towards discharge of the said liability and the same amounts to the acknowledgement of its liability by the Defendant as per the contentions at Para No.15 of the Plaint. The Defendant has not specifically denied the said aspect in the written statement and thereby there is a deemed admission of said payment. However, it is to be noted here that the said Ex.P.19 Notice was issued as required under Section 434 of the Companies Act. In the said Notice, the Plaintiff has contended that if the dues were not paid within 21 days of receipt of the said Notice, he would initiate legal proceedings for winding up under Section 433(e) of the Companies Act. The Defendant has issued a Reply to the said Notice as per Ex.P.21. In Ex.P.21, the Defendant has contended that there is no such acknowledgement of liability by 35 Com.O.S.No.9039/2005 the Defendant and that there is no amount due and outstanding after the last payment of Rs.2.5 Lakhs through Cheque No.258069 dated 31.01.2005. The said Cheque referred to in Ex.P.21 is the same Cheque referred to at Para No.15 of the Plaint. From the said aspect, the payment through the said Cheque is admitted by the Defendant. However, the Defendant has contended that after the said payment, there was no due to the Plaintiff. It is to be noted that at Para No.16 of the Plaint, the Plaintiff has contended that the 1 st Plaintiff filed a Petition under Section 433(e) of the Companies Act before the Hon'ble High Court of Karnataka in Company Petition No.62/2005 and later he withdrew the said Petition. The Defendant in his written statement at Para No.15 has contended that the said Company Petition was withdrawn by the Plaintiff when the Plaintiffs failed to establish any debt due to the Plaintiffs. This is the categorical statement of the Defendant in his defence. The PW.1 was aware about the said contention of the Defendant. However, in the Affidavit filed in- lieu of his oral Examination-in-Chief, he has not whispered about filing of said Company Petition or subsequent withdrawal. The DW.1 at Para No.10 of his Affidavit filed in-lieu of oral Examination-in-Chief has reiterated same contentions as contended at Para No.15 of the written statement and he has deposed that the Plaintiff had withdrawn the said Company 36 Com.O.S.No.9039/2005 Petition when the Plaintiff failed to establish any dues to the Plaintiffs. Though the PW.1 has thoroughly cross-examined by the learned Advocate for the Plaintiffs, during his cross- examination, the said aspect as deposed at Para No.10 of the Affidavit has not been denied or challenged. No documents are produced in respect of the said Company Petition. On a combined reading of all these aspects, it shows that just because two payments said to have been made after receipt of the Ex.P.19 Notice, it cannot be construed as acknowledgement of debt by the Defendant. The issue in respect of defective materials supplied by the Plaintiffs and some meetings held in respect of the same is also not in dispute. Therefore, in view of above-mentioned discussions, I am of the opinion that the Plaintiffs have failed to prove the alleged acknowledgement of debt by the Defendant and also that the suit based on mutual open running account is within the Law of Limitation. Therefore, I answer Issue No.3 in the "Affirmative".
39. Issue Nos. 1 & 2 :- I have already discussed about the facts involved in these two issues while answering Issue No.3. However, in view of my above discussions, observations and affirmative findings on Issue No.3, these two issues do not survive for my consideration.
37Com.O.S.No.9039/2005
40. Issue No. 4:- Therefore, I proceed to pass the following Order.
ORDER The Suit of the Plaintiffs is dismissed.
The Plaintiffs are directed to pay the cost of the suit to the Defendant in accordance with Section 35 of the Civil Procedure Code as amended under Section 16 of the Commercial Court Act. The Advocate for the Defendant is directed to file Memorandum of Cost before the Office within 5 days from today as required under Rule 99 and 100 of Karnataka Civil Rules of Practice.
Draw decree accordingly.
The Office is directed to send copy of this judgment to Plaintiffs and Defendant to their email ID as required under Order XX Rule 1 of the Civil Procedure Code read with Section 16 of the Commercial Courts Act.
(Dictated to the Judgment Writer, typed by her directly on the computer, transcribed by her, verified and pronounced in the open court on 22nd day of January 2021).
(DEVARAJA BHAT.M.), LXXXII Addl. City Civil & Sessions Judge, BENGALURU.
38Com.O.S.No.9039/2005 ANNEXURE LIST OF WITNESSES EXAMINED ON BEHALF OF THE PLAINTIFF:
PW.1 Sri. Ashwini Sharma PW.2 Sri. M.K. Jha
LIST OF DOCUMENTS MARKED ON BEHALF OF THE PLAINTIFF Exs.P-1 List dated 18.11.2005 Ex.P-2 Statement of Account Ex.P-3 Letter dated 13.05.2000 written by Defendant to 2 Plaintiff nd Ex.P-4 Letter dated 27.05.1999 written by Plaintiff No.2 to the Defendant Ex.P-5 Letter dated 01.06.2000 written by the Plaintiff No.2 to the Defendant Ex.P-6 Minutes of the Meeting dated 03.02.1999 Ex.P-7 Letter dated 21.10.1999 issued by Plaintiff No.2 to the Defendant Ex.P.8 Letter dated 27.05.2000 written by the Plaintiff No.2 to the Defendant Ex. P-9 Letter dated 17.07.2000 written by the Plaintiff No.2 to the Defendant Ex.P-10 Letter dated 10.02.2001 sent by the Plaintiff No.2 to the Defendant Ex.P-11 Letter dated 14.10.1999 written by the Defendant to the Plaintiff NO.2 Ex.P-12 Letter dated 23.10.1999 written by the Defendant to the Plaintiff No.2 Ex.P-13 Letter dated 14.01.2000 written by the Defendant to the Plaintiff No.2 39 Com.O.S.No.9039/2005 Ex.P-14 Letter dated 13.05.2000 written by the Defendant to the Plaintiff No.2 Ex.P-15 Letter dated 06.02.2003 written by the Plaintiff No.1 to the Defendant Ex.P-16 Letter dated 07.05.2004 written by the Plaintiff No.2 to the Defendant Ex.P-17 Letter dated 23.08.2004 written by the Plaintiff No.1 to the Defendant Ex.P-18 Letter dated 19.11.2004 written by the Plaintiff No.1 to the Defendant Ex.P-19 Legal Notice dated 27.12.2004 issued by the Plaintiffs to the Defendant Ex.P-20 Postal Acknowledgement Ex.P-21 Reply Notice dated 16.02.2005 issued by the Defendant Ex. P-22 List of documents dated 09.01.2008 Ex. P-23 Authorization Letter dated 11.10.2007 issued by Plaintiff No.1 Ex.P.24 Authorization Letter dated 11.10.2007 issued by Plaintiff No.2 Ex.P.25 Conversion Contract dated 30.03.1998 Ex.P.26 Consignment Agency Contract dated 30.03.1998 Ex.P.27 Marketing Agency Agreement dated 30.03.1998 Ex.P-28 File containing 776 Invoices Ex.P-29 to 39 'C' Forms issued by the Defendant Ex.P-40 Statement of all the Invoices raised by the Plaintiffs from Hyderabad Stockyard Ex.P-41 Statement of all the Invoices raised by the Plaintiffs from Jamshedpur Factory Ex.P-42 Consolidated month-wise & year-wise summary of the Ledger pertaining to supplies made from Plaintiff's Hyderabad Stockyard. Ex.P-43 Consolidated month-wise & year-wise summary of the Ledger pertaining to supplies made from Plaintiff's Jamshedpur Factory.
40Com.O.S.No.9039/2005 Ex.P-44 Consolidated year-wise summary of the Ledger maintained in respect of Defendant's running account Ex.P-45 Minutes of Meeting dated 03.02.1999 between the Defendant and Plaintiff No.2.
Ex.P.45(a) Signature of DW.1
Ex.P.45(b) Signature of DW.2
Ex. P-46 File containing proof of Bank Payment voucher
Ex.P-46(a) to 46(e) File containing five bills
Ex.P-47 Letter dated 15.07.1999
Ex.P-48 to 54 File containing Bank Payment vouchers
Ex.P-55 Certificate under Sec.65B of Indian Evidence
Act
LIST OF WITNESSES EXAMINED ON BEHALF OF THE DEFENDANTS DW.1 Sri. Mahesh N. Hegde DW.2 Sri. Ignatius LIST OF DOCUMENTS MARKED ON BEHALF OF THE DEFENDANTS Exs.D-1 Letter sent by the Plaintiff Ex. D-2 to 4 File containing Joint Inspection Reports Ex. D-5 to 7 File containing Minutes of the Meeting Ex. D-8 Letter written by Plaintiff Ex. D-9 Minutes of the Meeting Ex. D-10 Authorization letter issued by Plaintiff Company Ex. D-11 to 17 File containing ledger extract from 1.4.1998 to 31.3.2005 Exs.D.11(a) & (b) Relevant entries Exs.D.12(a) to (f) Relevant entries Exs.D.13(a) to (f) Relevant entries 41 Com.O.S.No.9039/2005 Exs.D.14(a) to (g) Relevant entries Ex.D.15(a) to (d) Relevant entries Exs.D.16(a) to (h) Relevant entries Exs.D.17(a) &(b) Relevant entries Ex.D-18 to 27 File containing Annual Statement from 31.03.1998 to 31.03.2007 Ex. D-28 to 65 File containing Sales Return Invoices from 29.03.1999 to 31.03.1999 Ex. D-66 Quality Report Ex.D-67 to 85 File containing fax messages from 06.01.2000 to 20.06.2000 Ex. D-86 to 99 File containing fax messages from 19.07.2000 to 29.12.2000 Ex.D-100 to 112 File containing fax messages from 17.01.2001 to 23.11.2002 Ex. D-113 to 117 File containing fax messages from 08.03.2000 to 26.05.2003 Ex. D-118 to 122 File containing Minutes of Meeting dated 26.06.2000, 15.07.2000, 13.02.2003, 08.03.2003 and 31.03.2003.
Ex. D-123 PFS Rejected statement
Ex. D-124 File containing samples of Selected Banks
(DEVARAJA BHAT.M.),
LXXXII Addl. City Civil & Sessions Judge, Bengaluru.
42 Com.O.S.No.9039/2005 The Judgment is pronounced in Open Court today. The operative portion of the said judgment is as follows:-
ORDER The Suit of the Plaintiffs is dismissed.
The Plaintiffs are directed to pay the cost of the suit to the Defendant in accordance with Section 35 of the Civil Procedure Code as amended under Section 16 of the Commercial Court Act.
The Advocate for the Defendant is directed to file Memorandum of Cost before the Office within 5 days from today as required under Rule 43 Com.O.S.No.9039/2005 99 and 100 of Karnataka Civil Rules of Practice.
Draw decree accordingly.
The Office is directed to send copy of this judgment to Plaintiffs and Defendant to their email ID as required under Order XX Rule 1 of the Civil Procedure Code read with Section 16 of the Commercial Courts Act.
(Vide my separate detailed Judgment dated 22.01.2021) (Typed as per my dictation).
(DEVARAJA BHAT.M.), LXXXII Addl. City Civil & Sessions Judge, Bengaluru.
44 Com.O.S.No.9039/2005