Acknowledgement of Liability in company balance sheets can revive limitation; contractual interest rate governs recovery and modifies decree.

The note addresses two issues: whether a company's annual balance sheet signed as prescribed constitutes a written acknowledgement of liability under the Limitation Act, and the proper rate of interest payable. It finds that a balance-sheet entry of a creditor's claim, prepared and signed by directors in the prescribed manner, operates as an acknowledgement of subsisting liability and prevents the claim being time-barred. On interest, the plaintiff was contractually entitled to 4% per annum for 1 July 1954 to 1 August 1959; the lower court's 5% award is reduced. The decree is confirmed subject to modified interest and specified repayment and enforcement terms.

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Issues: (i) Whether a company's annual balance sheet can constitute an acknowledgement of liability within the meaning of Section 19 of the Indian Limitation Act; (ii) Whether the plaintiff was entitled to interest at 5% per annum for the period 1 July 1954 to 1 August 1959.

Issue (i): Whether a balance sheet prepared and signed in the prescribed manner by the company amounts to an acknowledgment of subsisting liability under Section 19 of the Indian Limitation Act.

Analysis: Section 19 requires a written acknowledgement of liability signed by the person liable or on his behalf before expiry of limitation. The balance sheets contained the plaintiff's claim in the list of liabilities and were prepared and signed by the requisite number of directors under Section 133 of the Indian Companies Act, 1913. The balance sheet entries, though reflecting the position as at the financial year end, imply continuity of the liability into subsequent accounting periods and therefore operate as an acknowledgement by implication. Prior authorities addressing the precise question were considered and the view that such balance-sheet entries can amount to an acknowledgement was followed.

Conclusion: A balance sheet prepared and signed in the prescribed manner by the company constitutes an acknowledgement of liability within the meaning of Section 19 of the Indian Limitation Act; the plaintiff's claim is not barred by limitation.

Issue (ii): Whether interest at 5% per annum was recoverable by the plaintiff for the period 1 July 1954 to 1 August 1959.

Analysis: The plaintiff's case on the agreed contractual rate of interest was 4% per annum. The lower court awarded interest at 5% per annum for the stated period without supporting basis in the pleaded or agreed rate.

Conclusion: The plaintiff is entitled to interest at 4% per annum for the period 1 July 1954 to 1 August 1959; the lower court's allowance of interest at 5% for that period is modified accordingly.

Final Conclusion: The appeal is partly allowed by confirming the decree in favour of the plaintiff subject to modification of the rate of interest for the specified period, and by directing payment of the decretal amount by equal monthly instalments over two years with continuation of attachment before judgment for that period and an acceleration clause on default.

Ratio Decidendi: A company's annual balance sheet, when prepared and signed in the prescribed manner and containing an entry of the creditor's claim among liabilities, constitutes a written acknowledgement of liability under Section 19 of the Indian Limitation Act and thereby can revive or extend the period of limitation for a suit based on that liability.

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