Financial documents deemed acknowledgments of liability under Limitation Act, discharge plea challenged.

The court held that the balance sheet and profit and loss account operated as an acknowledgment of liability, satisfying the requirements under Section 18 of the Limitation Act. The suit was found to be within the limitation period, as the acknowledgment was considered effective as of the date of signing the documents. The defendant's plea of discharge was not substantiated due to insufficient evidence and discrepancies in the documentation. The court set aside the previous judgment, remanding the suit solely for consideration of the discharge plea, with directions for expedited proceedings.

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Issues Involved:
1. Whether the balance sheet and profit and loss account operate as an acknowledgment of liability.
2. Whether the suit is barred by the law of limitation.
3. Validity of the plea of discharge of the sum by the defendant.

Issue-wise Detailed Analysis:

1. Acknowledgment of Liability:
The pivotal question in the appeal was whether the balance sheet and profit and loss account could operate as an acknowledgment of liability. The court referenced Section 18 of the Limitation Act, 1963, which addresses the effect of acknowledgment in writing. It was emphasized that the inclusion of a debt in a duly prepared and authenticated balance sheet amounts to an admission of liability, thereby satisfying the requirements for a valid acknowledgment under Section 18. The court cited previous judgments, including Krishnan Assari v. Akilakerala Viswakarma Maha Sabha, to support this interpretation. The court concluded that Ext. A1 balance sheet and profit and loss account, signed on 26.3.1997, reflected the monetary liability due to the plaintiff and thus operated as an acknowledgment of the liability as of 31.3.1995.

2. Law of Limitation:
The defendant contended that the suit filed on 3.1.2000 was barred by the law of limitation, as it was beyond three years from 31.3.1995. The court examined whether the acknowledgment in Ext. A1 balance sheet and profit and loss account was for the period ending 31.3.1995 or the date it was signed, 26.3.1997. The court referred to several judgments, including Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, to conclude that the balance sheet and profit and loss account constitute an acknowledgment of liability as on the date of the signature. Therefore, the suit filed on 3.1.2000 was within the limitation period, counting from 26.3.1997.

3. Plea of Discharge:
The defendant claimed that the sum of Rs. 2,65,000/- was paid back to the plaintiff during 1995-96, as reflected in Ext. B11 balance sheet and profit and loss account. However, the plaintiff disputed Ext. B11 and objected to it during the board meeting, as recorded in Ext. B7 minutes. The court noted that the defendant relied on various documents (Exts. B1 to B6) to support the plea of discharge, but the person who made the entries was not examined, and discrepancies were not explained. The court emphasized that mere entries in books of account are insufficient to prove liability without further evidence, such as receipts or vouchers. Citing Petlad Turkey Red Dye Works Co. Ltd. v. Dyes and Chemical Workers' Union, the court highlighted the burden of proof on the party asserting the correctness of the statements in the balance sheet.

Conclusion:
The court set aside the impugned judgment and decree, remanding the suit to consider only the plea of discharge of liability put forth by the defendant. All other findings by the lower court were confirmed. The parties were directed to appear in the lower court, with the suit to be disposed of within four months from the receipt of records. The appeal suit was allowed with no costs.

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