1997 (3) TMI 623 - HC - Indian Laws

Written acknowledgement of pre-existing debt constitutes valid contract with promise, consideration and acceptance

Delhi HC held that a written acknowledgement of pre-existing debt constituted a valid written contract containing all essential elements - promise, ... Suit of recovery for a sum - basis of an 'acknowledgement' - interest on account of loan advanced and written acknowledgement of liability - defines 'Debt' and 'acknowledgement' - HELD THAT:- In view of the observations in Food Corporation of India v. BalKishan Garg - 1981 (12) TMI 185 - DELHI HIGH COURT, the amount of the debt had been ascertained between the parties and the interest is also readily calculable amount in view of the past conduct of the parties. The acknowledgement was of a pre-existing debt. The purpose of giving this written acknowledgement implies in it an absolute unqualified present liability with an obligation to repay it in future on the understanding that the creditor need not file a suit immediately. Consequently, the written acknowledgement surely falls under the term 'written contract' and the parties had consensus of mind when this written acknowledgement was signed by one of the partners of the petitioner firm. There was a promise. There was consideration. There was acceptance. All the elements essential for the formation of a written contract were present. Nothing more is required in this acknowledgement to make it a written contract. Accordingly, I am of the definite opinion that the present suit has been filed on the basis of a 'written contract' for the recovery of the existing debt on the basis of this 'account stated' and case on the basis of said written contract in the shape of written acknowledgement is certainly maintainable under Order 37, CPC. As regards the granting of leave to defend, the defendant though specifically not denied the written acknowledgement but alleged that the case of the plaintiff was based on false document and the claim was barred by time. The plaintiff gave an undertaking to the applicant that the plaintiff would pay the balance amount of ₹ 35,000.00 to M/s. Paras Nath Textiles herself and in case of any failure on her part, the applicant/ defendants would pay the said amount of ₹ 35,000.00 to M/s. Paras Nath Textiles on behalf of the plaintiff. Thus, the outstanding amount stand exhausted on failure of the plaintiff to pay the said amount of ₹ 35,000.00 since the said Cheque No. 196311 could not be encased by M/s. Paras Nath Textiles. They also raised the demand of ₹ 35,000.00 and the petitioner/defendant had paid the amount of ₹ 35,000.00 to M/s. Paras Nath Textiles as per undertaking. The application is supported by affidavit of Sh. Naveen Kumar, partner of the defendant-firm'. It is further notable that before filing this suit a legal notice was given. The payments up to 29th July, 1989 have not been disputed. Simply it has been stated that they are matters of record. Moreover, there is virtual admission of the liability, it is sought to be adjusted by alleging an oral agreement of standing surety for cloth sold to the husband of the plaintiff and payment of ₹ 35,000.00 to M/s. Paras Nath Textiles without alleging date and mode of payment either in para 5(e) in which payment is alleged or in any other paras of the application for leave to defend. It is disputed by the other side on affidavit and certain contradictions have also been pointed out in the stand in this case and the plea in suit filed subsequently and numbered as 169/90. If the nature and source of the knowledge is not disclosed the affidavit would not be as per law. In such circumstances it appears that the defense taken by the petitioner is as good as illusory a sham and practically a moonshine and Therefore, unconditional leave could not be granted. This case is covered by the principles laid down for 5th category of cases in M/s. Mechalec Engineer & Manufacturers v. Basic Equipment Corporation,[1976 (11) TMI 194 - SUPREME COURT]. For the foregoing reasons the impugned order dated 22nd April, 1991 rejecting the application of the petitioner for leave to defend and decreeing the suit is hereby set aside subject to the condition that the petitioner furnishes Bank guarantee for the decretal amount calculated till today within a period of four weeks from the date of this order. In case of failure to do so, the revision petition shall stand dismissed. Issues Involved:1. Whether a suit under Order 37, Civil Procedure Code (CPC) can be filed on the basis of an 'acknowledgement'.2. The validity of the written acknowledgement as a 'written contract'.3. The granting of leave to defend based on the defendant's claims.Comprehensive Summary:Issue 1: Suit under Order 37, CPC based on 'acknowledgement'The primary question addressed was whether a suit under Order 37, CPC could be filed on the basis of an 'acknowledgement'. The plaintiff filed a suit for recovery of Rs. 49,956.00 along with interest, based on a written acknowledgement of liability by the defendant. The defendant challenged the maintainability of the suit under Order 37, CPC, arguing that a suit on the basis of an acknowledgement is not maintainable.Issue 2: Validity of Written Acknowledgement as a 'Written Contract'The court examined whether the present suit relates to the recovery of 'Debt' arising out of a 'written contract'. The court referred to various legal definitions and precedents, including Black's Law Dictionary and previous judgments like Food Corporation of India v. BalKishan Garg, which defined 'Debt' as a sum of money due by certain and express agreement. The court also considered the definition of 'written contract' and 'acknowledgement' from Black's Law Dictionary and Stroud's Judicial Dictionary. It was concluded that the written acknowledgement of a pre-existing debt, signed by one of the partners, constituted a written contract. The court held that the present suit was maintainable under Order 37, CPC, as it was based on a written contract for the recovery of an existing debt.Issue 3: Granting of Leave to DefendThe defendant's application for leave to defend was dismissed by the Additional District Judge. The defendant had not specifically denied the written acknowledgement but alleged that the plaintiff's case was based on false documents and was barred by time. The court noted that the defendant's affidavit was not reliable as it lacked specific details and verification. The defense was deemed illusory, sham, and practically a moonshine. Consequently, unconditional leave to defend could not be granted.Conclusion and Orders:The court set aside the impugned order dated 22nd April 1991, rejecting the application for leave to defend and decreeing the suit. The petitioner was directed to furnish a bank guarantee for the decretal amount within four weeks. Failure to do so would result in the dismissal of the revision petition. A copy of the order was to be sent to the concerned Additional District Judge for further proceedings in accordance with the law. If the bank guarantee was not furnished, the plaintiff would be entitled to pursue the execution application.