Delhi High Court
Suresh Kumar Joon vs Mool Chand Motors & Ors. on 22 August, 2012
Author: V.K. Jain
Bench: V.K.Jain
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on : 14.08.2012
Judgment pronounced on: 22.08.2012
+ IAs No. 8561/2011 and 8562/2011 in CS(OS) 389/2009
SURESH KUMAR JOON ..... Plaintiff
Versus
MOOL CHAND MOTORS & ORS. ..... Defendants
Advocates who appeared in this case:
For the Plaintiff : Mr. Dattatray Vyas
For the Defendants : Mr. Sajan Kumar Singh
CORAM:
HON'BLE MR. JUSTICE V.K.JAIN
V.K. JAIN, J.
1. This is a suit for recovery of Rs.74,88,340/-. The suit was filed under Order 37 of the Code of Civil Procedure and unconditional leave to defendants No. 1 and 3 was granted on 09.02.2011 whereas defendant No.2 who had admitted having received Rs.12 lakhs from the plaintiff was granted leave to defend subject to deposit of the aforesaid amount with Registrar General of this Court.
2. Defendant No.1 is a partnership firm of defendants 2 & 3. It is alleged that the plaintiff advanced a loan of Rs.35 lakhs to defendants and an agreement dated 08.05.1999 was executed by them with the plaintiff. It is alleged that defendants had agreed to pay 50% of the gross profits of defendant No.1 firm to the plaintiff. CS(OS) 389/2009 Page 1 of 13 The defendants are also alleged to have agreed to pay interest at the rate of 24% per annum on the principal amount borrowed from the plaintiff. The monthly instalment of gross profit according to the plaintiff was agreed to be deducted from the principal amount of Rs.35 lakhs. It is further alleged that defendants neither shared the gross profits nor returned the amount taken by them from the plaintiff. They rather offered the plaintiff to operate the petrol pump of defendant No.1 firm. The plaintiff accepted the offer and also agreed to extend, a further loan of Rs.12 lakhs to defendants. A fresh loan agreement was then executed between the plaintiff and defendants on 13.07.2000. It is also the case of the plaintiff that despite the agreement, he was not allowed to take charge of the petrol pump on one pretext or the other.
It is alleged in the plaint that on re-consideration of the accounts, defendant No.2 issued a cheque dated 13.03.2007 for Rs.51,29,000/- to the plaintiff towards re-payment of the debt and requested him to present the same after two weeks so that they could arrange necessary funds in the meanwhile. However, on verification from the bank, the plaintiff came to know that the funds in the account of the defendants were not sufficient to honour the said cheque. The plaintiff has now claimed the aforesaid principal sum of Rs.51,29,000/- along with the interest amounting to Rs. 23,59,340/-.
CS(OS) 389/2009 Page 2 of 13
3. IA 8561/2011 has been filed by defendants 1 & 3 and IA 8562/2011 has been filed by defendant No.2 for rejection of the plaint. Rejection of the plaint has been sought primarily on the ground that the suit is barred by limitation. Defendant No.2 has also taken an additional plea that the purported acknowledgment dated 13.03.2007 has not been executed by him for on behalf of defendant No.1 firm. The first loan agreement between the parties was executed on 08.05.1999 whereas the second agreement was executed on 13.07.2000.
4. The defendants 2 & 3 who are the partners of defendant No.1 are party to the first agreement whereas only defendant No.2 Shri Rajender Kumar Sharma has executed the second loan agreement. The plaintiff has also relied upon an acknowledgment dated 13.07.2007, which reads as under:-
"This amount up to 13/03/2007 47,00,000/-
2.91 Interest
76 Balance
62 Cash
_____________
4.29 lakh
+ Tanker S/d S/d
13/3/2007"
5. The contention of the learned counsel for the plaintiff is that the loan was acknowledged in writing by the defendant no.2 on 13.3.2007 and computed from that date, the suit is within the limitation. This contention, however, is not tenable in CS(OS) 389/2009 Page 3 of 13 law. Section 18 of Limitation Act, to the extent it is relevant, provides that 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. It would be seen that in order to extend limitation, the acknowledgment needs to be before the period prescribed for filing the suit has expired. In case the limitation has already expired before the acknowledgement is made, it would not save limitation. In the case before this Court, the first loan agreement between the parties was executed on 8.5.1999, whereas the second loan agreement was executed on 13.7.2000. Article 19 of the Limitation Act prescribes a limitation of three years from the date of loan, for the suit for recovery of the money payable or money lent. Computed from 13.7.2000, the period of limitation expired on 13.7.2003. The acknowledgment made on 13.3.2007, therefore, does not save the limitation.
6. The next contention of learned counsel for the plaintiff was that Section 25(3) of The Indian Contract Act expressly saves the agreement which is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of CS(OS) 389/2009 Page 4 of 13 which the creditor might have enforced payment but for the law for the limitation of suits. Illustration (e) states that if A owes B Rs. 1, 000, but the debt is barred by the Limitation Act and A signs a written promise to pay B Rs. 500 on account of the debt, this is a contract. Therefore, if defendants have made an agreement in writing, promising to pay either whole or part of the amount which the plaintiff claims to have lent to them, such an agreement would be perfectly legal and enforceable in law.
7. The next question which comes up for consideration is as to whether a dishonoured cheque, which defendant no.2 issued to the plaintiff can be said to be a promise made to pay the amount of the cheque to the plaintiff. The contention of learned counsel for the defendants was that Section 25(3) envisages a contract whereby the debtor expressly promises to pay the whole or part of the debt and a cheque which is only a bill of exchange and does not contain any such promise, it is not a contract saved by the said provision.
8. It is true that the cheque does not contain an express promise in writing, to pay the amount of the cheque to the payee or the cheque. However, Section 9 of the Indian Contract Act makes it very clear that the promise can be express as well as implied. In my view, when a debtor issues a cheque to his creditor, he makes an implied promise to him to pay the amount of the cheque being issued by him. It is CS(OS) 389/2009 Page 5 of 13 only towards fulfillment of that such promise that a cheque is issued by the debtor to the creditor. Once it is alleged that the relationship between the parties was that of debtor and a creditor and it is further alleged that the cheque was issued by the debtor to the creditor, it would be difficult to dispute that a cheque contains an implied promise, in writing, to pay the amount of the cheque. Since, even a time- barred debt is saved by Section 25(3) of the Indian Contract Act, 1872, the issuance of a cheque towards repayment of a time-barred debt constitutes a contract within the meaning of Section 25(3) of the Indian Contract Act, 1872.
9. In taking this view, I find support from the decision of the Kerala High Court in Ramakrishnan v. Parthasaradhy [2003 (2) KLT 613] and the decision of Karnataka High Court in Adivelu (dead by L.Rs) vs. Narayanchari [2005(2) CLT 17(kar]. In the case before the Kerala High Court, the Division Bench of the High Court, inter alia, observed and held as under:
"13......It is, undoubtedly, true that „to draw‟ means to write and sign. However, even if the claim is barred by limitation on the date of the drawing of the cheque, on delivery to the other person, it becomes a valid consideration for another agreement.
Xxxx
15........It may, however, be mentioned that under Section 25(3), a promise can be made even in a case where the limitation for CS(OS) 389/2009 Page 6 of 13 recovery of the amount has already expired. Such a promise has to be in writing. It can be in the form of a cheque...."
In the care before the Karnataka High Court, the High Court while examining the provisions of Section 25(3) of the Indian Contract Act, inter alia, observed and held as under:
"16. But, when the word „promise‟, defined in Section 2(b) besides Section 9 of the Act are kept in mind with the decision of the Supreme Court in the case of Shapoor Freedom Mazda (supra) wherein it is held that an admission could be „express‟ or „implied‟, „promise‟ covered by Section 25(3) of the Act, need not be „express‟. If the legislature had intended that such promise should be an „express promise‟ only, it would have indicated so but the word „express‟ is not found in Section 25(3) of the Act. So, it would not be proper to read so and restrict the scope of Section 25(3) of the Act to "express promise‟ only..."
10. The learned counsel for the plaintiff in support of his contentions has relied upon the decision of Madras High Court in A.R.M. Nizmathuallah vs. Vaduganathan [2008 Crl.L.J. 880], wherein the High Court of Madras, inter alia, observed and held as under:
"8. In view of Section 25(3) of the Act, when a debt has become barred by limitation, a written promise to pay, furnishes a fresh cause of action. Section 25 (3) of the Act in substance does is not a revive a dead right, resuscitate the right is never CS(OS) 389/2009 Page 7 of 13 dead at any time, but to? the remedy to enforce payment by suit, and if the payment could be enforced by a suit, it means that it still has the character of legality enforceable debt, as contemplated by the explanation under Section 138 of the Act. In view of the Illustration (e), the cheque becomes a promise made in writing, to pay under Section 25(3) of the Act"
.
11. Similar view was taken by the Kerala High Court in Gopinathan v Sivadasan [ 2006(4) KLT 779], wherein the Court, inter alia, held as under:
"8. Even assuming it to be time barred, when the cheque is written and signed, there is a promise to pay the amount to the payee, through the drawee of course. Such promise, even if the liability is barred, is valid and enforceable under law in view of Section 25(3) of the Contract Act. Thereafter, when the delivery takes place, the drawal is completed. Such cheque drawn is issued for the discharge of a liability, which is promised under the cheque itself. That being so, I do not find any reason to refer the matter to a Division Bench for further consideration. The argument of the learned Counsel for the petitioner that there must be another agreement - other than the cheque - in order to reckon the promise in the cheque to be a valid agreement for the purpose of Section 25(3) cannot obviously be accepted. The promise made in the cheque is an enforceable agreement as is directed in Section 25(3) of the Contract Act....."CS(OS) 389/2009 Page 8 of 13
12. The learned counsel for the defendants has placed reliance upon a decision of this Court in, Vijay Polymers Pvt. Ltd. & Anr.v. Vinnay Aggarwal [162(2009) DLT 23] and Tulsi Ram v. Same Singh [19(1981) DLT 378]. In the case of Vijay Polymers (supra) the Court examined the effect of a dishonoured cheque in the continuation of Section 18 of the Limitation Act and analyzed the limitation of a civil liability beyond the period of three years and held that the acknowledgement, if any, must be there before the period of limitation is over. The Court did not specifically held that a dishonored cheque does not constitute a contract within the meaning of Section 25(3) of the Indian Contract Act, 1872. In Tulsi Ram (supra), the appellant before this Court had executed a pronote of Rs.1300/- in favour of the respondent and a promise to pay the amount with interest. The amount, however, was not paid. The plaintiff also did not file the suit within three years from the date of the pronote. On 10.7.1996, the defendant made an endorsement on the back of the pronote whereby he accepted the pronote ot be valid for next three years. The contention of the learned counsel for the plaintiff before this Court was that the endorsement was not merely an acknowledgment, but also a promise within the meaning of Clause (3) of Section 25 of Indian Contract Act, 1872 and therefore he was entitled to recover the same on the basis of said endorsement. It was in this context that the court observed that for the purpose of sub section (3) of Section 25 of the Indian Contract Act, a written pronote should be dishonorable in the CS(OS) 389/2009 Page 9 of 13 agreement itself, whereas the appellant before this Court was asking for reading the endorsement in conjunction with the promise contained in the promissory note, which was clearly unjustifiable. The Court, in that case, did not find any express promise to pay in the endorsement made by the respondent on the back of the promote. Thus, in this case also, the Court was not dealing with the question as to whether a cheque when issued by a debtor to his creditor constitutes a contract for the purpose of Section 25(3) of the Indian Contract Act.
13. It is settled preposition of law that while considering an application under Order VII Rule 11 of the CPC the Court has to consider only the averments made in the plaint and the documents filed by the plaintiff. Neither any plea was taken in the written statement nor the documents filed by the defendant can be considered at this stage. The averments made in the plaint have to be taken as true and at their face value, while considering an application for rejection of the plaint. It is true that there is no specific averment in the plaint that the cheque issued by defendant no.2 to the plaintiff amounts to a „contract‟ within the meaning of Section 25(3) of the Indian Contract Act. But, this, to my mind, would not be relevant if such a contract can otherwise be culled out from the averments made in the plaint. It has been specifically alleged in para 11 of the plaint that on 13.3.2007, the principal amount due on the defendants was Rs.47 lac along with Rs.4,29,000/- and the cost of the tanker which the defendants had taken on rent and on reconciliation of amount an CS(OS) 389/2009 Page 10 of 13 acknowledgment of debts took place by intervention of the mediators, whereupon defendant no.2 issued cheque bearing number 352451 drawn on Union Bank of India for a sum of Rs.51,29,000/- towards repayment of debt to the plaintiff and the plaintiff accepted the cheque upon reconciliation of the account of tanker‟s payment. These averments are sufficient, in my view, to constitute a contract under Section 25(3) of the Indian Contract Act, 1872.
14. As regards, the liability of the defendants no.1 and 3 on account of cheque issued by defendant no.2, it is the case of the plaintiff is that defendants no.2 and 2 are partners carrying on business in the name and style of defendant no.1. The loan from the plaintiff is alleged to have been taken by the defendants for the business of the firm. It is specifically alleged in para 3 of the plaint that defendants no.1 to 3 had taken the loan to run their retail outlet smoothly. The first agreement was executed between M/s Mool Chand Motors through its partners Smt. Moorti Devi and Shri Rajesh Kumar Sharma on one hand and the plaintiff Mr. Suresh Kumar Joon on the other hand. The second agreement purports to have been executed by defendant no.2 on behalf M.C. Motors. Even if the second loan agreement is excluded from consideration, the plaint cannot be rejected even qua defendant no.3. Moreover, Section 19 of Indian Partnership Act, 1932 specifically provides that subject to the provisions of Section 22 of the said Act, the act of partner which is done to carry on, in the usual way, the business of the kind carried on by the firm CS(OS) 389/2009 Page 11 of 13 binds the firm. It is further stated that the authority of a partner to bind the firm conferred by the said section is called an „implied authority‟. Section 22 of the said Act provides that in order to bind a firm, an act or instrument done or executed by a partner shall be done or executed in the firm‟s name or in any other manner expressly or impliedly with an intention to bind the firm. The second loan agreement purports to have been executed by defendant no.2 in the name of defendant no.1 firm and since the loan from the plaintiff had been taken for the business of the firm, it was within the implied authority of the defendant no.2, as a partner of the firm, to issue any cheque to the plaintiff towards repayment of the said loan. Section 23 of the Indian Partnership Act, 1932 provides that an admission or representation made by a partner concerning the affairs of the firm is evidence against the firm if it is made in the ordinary course of business of the firm. Section 25 of the said Act provides that every partner is liable jointly, with all other partners and also severally, for all acts of the firm done while he is a partner. Therefore, the cheque issued by defendant no.2 to the plaintiff binds not only defendant no.1 firm but also defendant no.3 who was the other partner in the firm along with defendant no.2. Therefore, the plaint cannot be rejected either qua defendant no.2 or qua defendants no.1 and 3.
CS(OS) 389/2009 Page 12 of 13
15. For the reasons stated hereinabove, both the applications are hereby dismissed. However, the observations made and the view taken in this order would not affect the final decision on merits.
CS(OS) 389/2009
16. List on 24.01.2013 for framing of issues.
V.K.JAIN, J AUGUST 22, 2012/'sn/rd'/// CS(OS) 389/2009 Page 13 of 13