AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2007 (4) TMI 698
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....company with effect from 31st May, 2000 till 31st January, 2002. 3. The plaintiff advanced to the defendant several amounts as loan account payee cheques or demand drafts between the period 16th December, 1998 to 13th September, 2000 totalling an amount of Rs. 41 lakhs. The amount which was advanced by the plaintiff wasreflected and acknowledged by the defendant as such loan in their books of account, balance sheets and profit and loss accounts, which were prepared and filed before the Registrar of Companies as well as the income tax authorities. 4. In partial discharge of its liability, the defendant paid an amount of Rs. 4 lakh by way of cheque in September, 2000 which was credited to the plaintiff's account on 16th September, 2000. Further loan was requested and between 21st September, 2000 and 25th April, 2001, the plaintiff advanced a further amount of Rs. 37,30,000/-. Details of payments made to the defendant by the plaintiff have been detailed in para 5 of the plaint. Thereafter, the defendant repaid a sum of Rs. 1.50 lakhs by two cheques dated 2nd March and 15th March, 2001. At the time of filing of the suit, the defendant was owing a sum of Rs. 72,80,000/- to the....
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....d profit and loss account for the financial year ending 31st March, 1999, 31st March, 2000, 31st March, 2001 and 31st March, 2002, the plaintiff originally filed the suit on 26th March, 2004 for a principal sum of Rs. 72,80,000/-. 9. The defendant entered appearance on receipt of summons in the suit. The plaintiff thereafter sought summons for judgment to be issued in the prescribed form. The present application has been filed on 13th of October, 2004 seeking leave to defend. 10. A preliminary objection has been taken by the plaintiff to maintainability of this application on the ground of limitation. Before dealing with the pleas of the defendant in the application, it would be appropriate to consider this objection. The advance copy of the I.A. No. 6307/2004, whereby the plaintiff had sought issuance of summons for judgment, was served upon counsel for the defendant against receipt on 20th September, 2004. Based on this service, it is urged that the leave to defend ought to have been filed within ten days thereof on or before 30th September, 2004. The same having been filed on 13th October, 2004, according to the plaintiff the present application seeking leave to defend is ....
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....pplication for leave to defend filed on 13th October, 2004 is barred by time. 13. The defendant has contended that he received the summons for judgment on 4th October, 2004 and has filed the application on 13th October, 2004. There is no material on record to the contrary. I am therefore inclined to accept the contention of the defendant on this ground and reject the objection of the plaintiff to the effect that this application deserved to be rejected on the ground that the same is barred by limitation. 14. So far as the grounds on which leave to defend has been sought by the defendant, by way of the present application, the defendant raises the following pleas:- (i) the suit of the plaintiff is barred under the provisions of Punjab Registration of Money Lenders' Act, 1938. (ii) The money claimed by the plaintiff is not a debt or a liquidated demand under contract and consequently, the present suit filed under Order 37 of the Code of Civil Procedure, 1908 is not maintainable. (iii) The suit claim is barred by limitation inasmuch as each cheque allegedly paid by the plaintiff was an independent transaction and consequently gave rise to independent causes of action. The su....
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....ith trade usage shall not be covered under the definition of the loan. 16. I find that in this application, apart from a bald allegation that the suit is barred under the Punjab Registration of Money Lenders' Act, 1938, there is nothing further. I find that the plaintiff has contested the claim of the defendant that the amount given to it was advanced by the plaintiff as a Director of the company. Even assuming that the investment was made by the plaintiff in the capacity of a director of the defendant-company in the form of a loan to the company. I find that there is no plea in the application that the plaintiff is a money lender by profession within the meaning of expression under Section 2 (9) of the statute. 17. In AIR 1952 Punjab 207 Amar Singh Vs. Kuldeep Singh, it was held by the court that a man does not become a 'money lender' merely by reason of casual loans to relations, friends or acquaintances, whether interest be charged or not nor does a man become a money lender merely because he may, upon one or several occasions, lend money to a stranger. There must be a business of money lending and the 'business' imports the notion of system, repetition....
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....uments placed on record, it is apparent that the plaintiff advanced amounts to the defendant between the period 16th December, 1998 to 13th September, 2000. The plaintiff became a director of the defendant-company and remained its director with effect from 31st May, 2000 till 31st January, 2002. From the statements of accounts placed before this court, it is evident that the plaintiff has made payments to the defendant before the date he became the director of the defendant and even thereafter. 21. Before this court the plaintiff has placed certified copies of the balance sheet duly certified by a chartered accountant. Perusal of the balance sheet of the defendant-company as on 31st March, 1999 shows that it was owing an amount of Rs. 17,00,000/- to Shri S.C. Gupta who has given unsecured loan in the category of 'unsecured loans from others' as on 31st March, 1999. The amount due to the plaintiff has been so reflected even in the balance sheet of 31st March, 2000 and the same amount has been shown. As on 31st March, 2001, Shri S.C. Gupta is shown to have advanced an unsecured loan of Rs. 62,30,000/- while in the balance sheet as on 31st March, 2002, Shri S.C. Gupta is sh....
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....er shall not be deemed to be an application in respect of any property or right. 19. Effect of payment on account of debt or of interest on legacy - Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duty authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made: Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgement of the payment appears in the handwriting of, or in a writing signed by, the person making the payment. Explanation - For the purposes of this section (a) where mortgaged land is in the possession of the mortgagee, the receipt of the rent or produce of such land shall be deemed to be a payment; (b) "debt" does not include money payable under a decree or order of a court." 24. My attention has been drawn to the judgment of the Gujarat High Court reported at AIR 1964 Gujarat 208 Ambika Mills Ltd., Ahmedabad Vs. Commissioner of Income Tax, Gujarat, wherein the court has held that a debt shown....
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....en & Tubro Ltd. Vs. Commercial Electric Works & Ors., the court also had an occasion to consider the legal impact of an acknowledgement in a balance sheet and had held thus: "16. Mr. Jain learned Sr. Counsel for the defendants apart from arguing on merits submitted that the suit was barred by time. Mr. Kohli the learned Counsel for the plaintiff relied upon the letter written by the Income Tax Officer in January 1981 to the defendants wherein the Income Tax Officer had said that the defendants had shown in the balance sheet for the year ended 31.3.78 a sum of Rs. 1,74,000/- as due from the defendants to the plaintiff and the plaintiff, therefore, filed an application for a direction to the defendants to file the balance sheet. Mr. Kohli learned Counsel for the plaintiff contends that the balance sheet wherein the defendants itself had shown that particular amount is due to the plaintiff would constitute an acknowledgment within the meaning of Section 18 of the Limitation Act, 1963. As I had already noticed that the last payment by cheque by the defendants was on 1.8.80, the plaint was presented on 14.12.81, therefore, the suit is in time. I need not go into the question of....
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....ese circumstances we feel that the decision of the District Judge is right and this appeal is dismissed with costs." 29. The High Court of Punjab & Haryana also had an occasion to consider this issue. In its pronouncement reported at AIR 1958 Punjab 341 Lahore Enamelling and Stamping Co. Ltd. Vs. A.K. Bhalla & Ors., the court laid down the principles thus: "37. All the claims mentioned above are acknowledged in the balance sheet for the year ending 31-12-1950. In two cases the specific amounts are shown to be due to the Managing Director (Shri Bhagwan Das) and to technical expert (Shri A.K. Bhalla). Loans due to unsecured creditors are stated to be Rs. 1,22,099/10/9. There is evidence on the record to show that the above amount includes sums due to Shrimati Yash Kumari Bhalla and Dr. Tara Chand, vide Exhibit P.1. All these entries constitute an acknowledgment of the debts due to the claimants within the meaning of S.19 of the Indian Limitation Act. Debts due to creditors not mentioned by name but included in the item relating to "Loans (unsecured)" or as due to "Sundry Creditors" mentioned in the balance sheet amount to an acknowledgment within the provisions of S.19 of....
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..... The initial suit is within time from the date of payments made by the defendant by the cheque nos. 513249, 513248 and 513247, the first was dishonoured on 19th January, 2004 and the other two on 9th March, 2004. The amended suit is within three years from the last payments which were made by the defendant vide cheque nos. 690246 and 690248 dated 12th April and 15th April, 2004 respectively as also dishonouring of the cheque no. 690427 which was dishonoured on 22nd July, 2004. 31. It is noteworthy that each of these payments was within three years of the last payment and on each date limitation would require to be computed afresh from the date when the payments were rendered. On these facts alone, the present suit having been filed on 29th March, 2004 would have to be held within limitation. 32. The defendant can claim no benefit from the act of dishonouring of the cheque. It is well settled that dishonouring of the cheque would not wipe out an advantage of extension of limitation which is earned by the creditor on the issuance of such cheque. (Ref: AIR 1998 Delhi 80 para 6-15 Rajesh Kumari Vs. Prem Chand Jain; decision dated 5th September, 2005 rendered in CS(OS) No. 2342/1....
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....on 18 of the Limitation Act. 35. The defendant has urged at great length that issuance of every cheque was an independent transaction and that so far as the owings of the defendant are concerned, the same would lapse so far as the amount of a particular cheque was concerned, on expiry of period of three years from the date of its issuance. 36. I find that the plaintiff has maintained a running account so far the transactions with the defendant are concerned. The loan transactions have been made through cheques and demand drafts and repayments have come through the same mode. The plaintiff has extended amounts to the defendant-company from time to time and the defendant has made partial payments from time to time. Thus, in the instant case, in my view, the limitation would not commence on expiry of the prescribed period from date of issuance of each cheque. 37. There is yet another angle to this case. It is well settled that in order to maintain a suit against the defendant, there must accrue cause of action for filing the same. In the instant case, there was no occasion for the plaintiff to believe that the loan taken by the defendant would not be repaid. The defendant did....
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....rcumstances of the case". Therefore, a dispute arises when the plaintiff made a claim which was denied by the defendant. In the instant case, the disputes having arising when the cheques were first dishonured on 19th February, 2004, then on 9th March, 2004 and again when the cheque dated 15th April, 2004 has got dishonoured on 22nd July, 2004. it is only by such dishonouring of the cheques that the plaintiff would have got an indication that the defendant did not intend to honour its commitment. As such, the plaint as initially filed and the amended plaint within three years of the accrual of the cause of action is clearly within limitation. 39. It is equally well settled that bouncing of cheque would not have any effect on the impact of the tender of cheque so far as limitation is concerned. In this behalf, the pronouncement of this court reported at AIR 1998 Delhi 80 para 6-15 Rajesh Kumari Vs. Prem Chand Jain; and decision dated 5th September, 2005 rendered in CS(OS) No. 2342/1998 Hindustan Petroleum Corporation Vs. Tajiskstan International Airlines (para 13) deserve to be adverted to. 40. The defendant has urged at great length that so far as the amount actually due an....
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....ivision Bench judgment of this Court, is also misplaced. A reading of this decision discloses that 500 Rolls of black polythene film had been supplied pursuant to a tender. The defence against payment was, inter alia, that Order XXXVBII did not apply since the goods supplied, upon subsequent examination, were found deficient and inferior in quality, and that interest had not been agreed upon in writing. These objections were negatives and the relevant paragraphs read as follows:"Regarding the objection as to the maintainability of the suit raised by the appellant appellants, we are of the view that where the suit is for recovery of the price of the goods, it should be construed as a suit for enforcing payment of a debt, within the amended clause (b) of sub-rule (2) of Rule 1 of Order 37, C.P.C. which covers a few more categorises of suits and not being inconsistent with Rule 1 of Chapter XV of the Original Side Rules will govern the present suit, vide Rule 12 of the said Rules, as explained in M/s.Printpack Machinery Ltd. v. M/s.Jay Kay Paper Congeters, AIR 1979 Delhi 217, Avadh Behari J. in Sushila Mehta v. Shri Bansi Lal Arora and another, I.A. 3032/81 in suit No.93/81, decided o....
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....r a debt. A debt is a 'debitum in praesenti, solvendum in futuro.' We, therefore, hold that the amount covered by the suit is an ascertained amount payable under an unqualified present liability. The obligation has accrued and subsists. It is a debt accruing under a written contract. The learned counsel for the defendant wanted to urge that the words 'arising on a written contract' must be read along with the word 'interest' and since no interest was payable under the contract the suit is not covered by clause (b) of Rule 2 of Order 37 Code of Civil Procedure, 1908. This is an argument totally unsupportable. The words 'arising on a written contact' apply to the word 'debt' which may be 'with or without interest'. We therefore, without any hesitation reject this contention of the appellant." 45. It would also be appropriate to advert to the observations of the High Court of Judicature at Madras in its pronouncement reported at AIR 1963 Madras 356 which reads thus: "7. Debt is a common expression and it is difficult to believe that it can give rise to any controversy in interpreting it. Broadly stated it is a liquidated mone....
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.... in possession or knowledge of party to be charged". xxxx xxxx xxxx 6. As a result of the claim, made by the petitioner, a surveyor was appointed by the Insurance Company, who gave a report of damage in terms of percentage, to the cargo of dry dates. It is the plaintiff's case that this damage in percentage is capable, by arithmetical calculation of being quantified into the amount of damage actually sustained to the cargo, vis-a-vis the amount for which they were insured, and, therefore, the damage in percentage is a 'liquidated demand' within the meaning of Order XXXVII of the Code of Civil Procedure. xxxx xxxx xxxx 12. In view of the provisions of the insurance policy, the provisions of item 14 of the Schedule to the Insurance Act, the provisions of Section 64-UM of the Insurance Act, the percentage loss suffered to the dry dates as evidenced by the report of the surveyor, in my view, is capable, by an arithmetical calculation, of arriving at a determinable sum, which sum would constitute a 'liquidated demand' within the meaning dicta in Rifkin Vs. Safenovitz (supra), and the provisions of Order XXXVII of the Code of Civil ....
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.....(sic.) states have adopted the Uniform Acknowledgment Act. The debtor's acknowledgement of the creditor's debt and or right of action that will revive the enforceability of a debt barred by the statute of limitations. Part payment of obligation which tolls statute of limitation is a form of "acknowledgement of debt". In re: Badger's Estate, 156 Kan. 734. 137 P. 2nd 198, 205." 11.2 According to Stroud's Judicial Dictionary acknowledgement means as under : (1). "an acknowledgement, in writing of a debt...so as to take such debt out of the Limitation Act....(1) must admit that debt is due, and (2) promise, or justify the inference of promise, of payment unconditionally, or (if conditionally) it must be shown that the condition has been accomplished....A statement in a balance sheet presented to a creditorshareholder of a Company and signed by the Directors or their agents is sufficient acknowledgement (Jones v. Bellgrove Properties, (1949) 2 K.B.700), and an acknowledgement is within the section if it indicates that a debt is due, even if it does not state the amount (Dungate v. Dungate, (1965) 1 W.L.R. 1577). But a signature on a balance sh....
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.... off and deemed to be paid by the items on a larger side, and there is a promise for good consideration to pay the balance arising from the fact that the items have been so set off and paid in the way described." Their Lordships were further of the view that : "That was done. The man writes on account which was demanded by the servant for the express purpose of knowing what sum he would be entitled to get and which, it seems to their Lordships, was stated by the Managing Partner of the business, for the sole purpose of enabling the servant to know what his final remuneration was to be. To make quite clear that it was intended to express something in the nature of an obligation he authenticated the document and that can be the only effect of that particular part of the transaction-by writing his signature over two 10 cent stamps. In their Lordships' view, that was a plain case of a promise made to pay the balance for a good consideration. One cannot help thinking that if an account stated in those circumstances did not give rise in Kenya to the promise to pay, and for a good consideration, Kenya would be certainly without one of the most ordin....
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....tion and a suit brought within three years of the date of such a cause of action is not barred by limitation. Such a suit cannot be thrown out on the ground that some of the items intecedent to the date of the "account stated" were barred by limitation. Previous rights and liabilities having been swept away by the concerted and agreed Will and action of parties themselves, the previous items which formed the material for arriving at the agreed figure must, for the purposes of the suit, be eliminated from consideration, and a fresh cause of action be deemed to be born on the date on which such a transaction is entered into. In such a situation, it is not open to the Court to reopen the closed transaction and to scrutinise the antecedent entries for the purpose of applying the bar of limitation. Such a procedure would be the very negation of the real purpose of "account stated" and would constitute a violation of fundamental principles underlying the legal doctrine of "account stated". In the present case, there is also no manner of doubt that this "account stated" was signed by a partner of the firm. Every partner of a firm has in law an inherent right to do it, an....
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....ex Court reported in 1970 (21) FLR 387 Management of Consolidated Coffee Estate Ltd. Vs. The Workmen to support the defendant's submission that it was entitled to the leave to defend the suit. I find that in this case the issue raised before this court was whether the workmen were entitled to bonus. The workmen had placed reliance on the amount so reflected in the profit and loss account and balance sheet of the company. In the facts of the case, the court arrived at a conclusion that the company could not have known the amount of bonus it ultimately would have to pay while preparing its balance sheet for the year in question and that the amount shown as bonus in its balance sheet and profit and loss account for the year in question could therefore, be at best an estimated amount. For this reason, the amount reflected as bonus was held not to be an admission of liability to pay. In the instant case, there is no estimate involved in the amount reflected by the company as its owings to other persons and the admission of the amount is clear and unequivocal. 51. In (1983) 3 SCC 410 Central Bureau of Investigation Vs. V.C. Shukla & Ors., the court was considering the probative....
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....laced on the pronouncement of the Apex Court in (1958) SCR 1211 Santosh Kumar Vs. Mool Singh, wherein the court summed up the principles thus: "(a) If the defendant satisfied the Court that he has a good defence to the claim on merits, the defendant is entitled to unconditional leave to defend. (b) If the defendant raises a triable issue indicating that he has a fair or bonafide or reasonable defence, although not a possibly good defence, the defendant is entitled to unconditional leave to defend. (c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is, if the affidavit discloses that at the trial he may be able to establish a defence to the plaintiff's claim, the court may impose conditions at the time of granting leave to defend the conditions being as to time of trial or mode of trial but not as to payment into court or furnishing security. (d) If the defendant has no defence, or if the defence is sham or illusory or practically moonshine, the defendant is not entitled to leave to defend. (e) If the defendant has no defence or the defence is illusory or sham or practically moonshine,....