TaxTMI 
TaxTMI 
2007 (4) TMI 748
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....C.R. Naidui/b.,& Co. in S.J. Nos. 656, 657 and 658 of Preeti Shah, Adv. in Summons for Judgment No. 762 of 2004 in Summary Suit No. 1138 of 2004, L.H. Rambhai, Adv. in S.J. Nos. 778, 779 and 780 of 2004, Preeti Shah, Adv. in Summons For Judgment No. 275 of 2005 in Summary Suit No. 3486 of 2002, Y.R. John and Ajay K.J. Panicker, Advs. in S.J. Nos. 355 to 373 of 2004, L.H. Rambhia, Adv. in Summons for Judgment No. 402 of 2005 in Summary Suit No. 1270 of 2005, Virag Tulzapurkar, Sr. Counsel, Somya Srikrishna, Adv., Little & Co. in Summons For Judgment No. 524 of 2005 in Summary Suit No. 1126 of 2005, i/b., Naushad Engineer, Adv., Desai and Diwanji,i/b., in Summons For Judgment No. 549 of 2005 in Summary Suit No. 1691 of 2005 For the Respondents : P.K. Vora., Pramodkumar, i/b., & Co. for Defendant No. 1 in Summons For Judgment No. 968 of 2003 in Summary Suit No. 1482 of 2003, Birendra Saraf, Adv., Nankani,i/b., and Associaes in Summons for Judgment No. 1021 of 2003 in Summary Suit No. 3040 of 2003, R.J. Majra, Adv.,i/b. , M.g. Gawde, Adv. in Summons For Judgment No. 140 of 2004 in Summary Suit No. 2387 of 2003, B. Dalal, Adv., i/b., Dalal T.N. Tripathi, Adv. in S.J. Nos. 656, 657 an....
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....s upon bills of exchange, hundies or promissory notes and all suits in which the plaintiff seeks only to recover a debt or liquidated demand in money payable by the defendant with or without interest, arising on a contract express or implied, or on an enactment where the sum sought to be recovered is a fixed sum of money or in the nature of debt other than a penalty, or on a guarantee, where the claim against the principal is in respect of a debt or a liquidated demand only, or in suits in which the landlord seeks to recover possession of immovable property, with or without a claim for the rent or mesne profits against a tenant whose term has expired or has been duly determined by notice to quite, or as become liable to forfeiture for non-payment of rent or against persons claiming under such tenant may in case the plaintiff desires to proceed hereunder, be instituted by presenting a plaint in the form prescribed, but the summons shall be in Form No. 4 in Appendix B or in such other form as may be from time to time prescribed. 4. By a further amendment dated 1st November, 1966 by this Court, the provisions of Order XXXVII Rule 2 of the Code of Civil Procedure was substituted as ....
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....ted that there is no standard format for the four documents in respect of which the present reference has been made. They are not well-defined legal terms. Whether a particular document is a receipt of acknowledgment of liability on which a Summary Suit would lie, would depend on the contents and language of the document and not on the nomenclature thereof. It is next submitted that no useful purpose will be served to lay down, as a matter of law, whether a Summary Suit will or will not lie on a document solely based on a particular type of document. This kind of compartmentalization will not solve future controversy on the issue, on the contrary it is likely to create further controversy on the question whether a particular document falls within the category of 'receipt' or 'accounts stated' or 'acknowledgment of liability', etc. In all these matters, it is submitted, what is required to be seen is the substance of the document and not the nomenclature. A document may be titled as a receipt but, in fact, may not be a receipt. Similarly, a document may not be titled 'receipt' or may be titled with some other word, but may actually be a receipt. He....
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....nterest, must arise on a written contract. The rule before the 1966 Bombay amendment and the 1976 Central amendment to the Civil Procedure Code used the expression "arising on a contract express or implied" and this was substituted by the words "arising on a written contract". There can be therefore no dispute that after the 1966 Bombay amendment and the 1976 amendment to the Civil Procedure Code, the summary suit can only be filed if there be on a written contract. In other words, no Summary Suit can lie on an implied contract. There seems however some confusion as to the expression an implied contract and "implied terms in a written contract". The expression "implied term in a written contract" in law is distinct and different from an implied contract. We will consider this aspect of the matter whilst construing the legislative changes. 10. In this interpretive process, this Court must consider the effect of deletion of words. Gainful reference may be made to paragraphs 89 to 93, In Bombay Dyeing & Manufacturing Company Ltd. v. Bombay Environmental Action Group and Ors. AIR2006SC1489 : 89. In Venkata Subamma v. Ramayya, it is stated that an Act should be interprete....
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....ract Act. Section 25 requires a written promise to pay a debt. Thus, the legislature was conscious of the difference and has not used the same language that is found in Section 25. Dealing with Sections 18 of the Limitation Act and 25 of the Contract Act and reliance placed on the judgments, it is argued that the ratio that emerges from all those cases is that Section 25 of the Contract Act requires a promise in writing to pay, and hence, a mere acknowledgement under Section 18 of the Limitation Act, does not comply with the requirements of Section 25 of the Contract Act, as it does not contain a promise in writing to pay. The Plaintiffs', do not dispute the proposition. It is next submitted that a Summary Suit is maintainable on written contract with implied promise to pay. Reference is made to judgments which have also been referred to earlier. Relying on Chitty on the Law of Contracts, it is pointed out that an implied term is a matter of law for the court to decide and that in most cases it has nothing to do with the intention of the parties. In many cases, the terms to be implied are well settled. In these circumstances, as far as acknowledgment, receipt or accounts stated....
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....agreed that the amount mentioned at the foot thereof is the only amount that is due and payable by the debtor to the creditor. A summary suit is maintainable. On the aspect of the document being properly stamped, it is submitted that considering Sections 33 and 37 of the Bombay Stamp Act, in respect of the documents not sufficiently stamped, on paying the penalty, the documents can be admitted in evidence. However, considering Section 35 of the Indian Stamp Act, if a promissory note or a bill of exchange is not stamped or not sufficiently stamped, then, it is not possible to pay the stamp duty and penalty in the court to make them admissible in evidence. 12. On behalf of the Defendants their Counsel contend, that the primary question the Court must answer is whether the different documents which are the subject matter of reference constitute written contracts. The submissions are as under : The documents in question do not constitute contracts at all, at best they are admissions of liability. Once it established that the documents in question do not constitute contracts at all it follows that they also do not constitute written contracts. As a result summary suit cannot be....
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....n fact by definition "every promise and every set of promises, forming the consideration for each other, is an Agreement"; See Section 2(e) of the Contract Act. The reasoning, therefore, in respect of an implied promise to pay/implied contract applies equally and squarely to an implied term in a contract as if it were an implied contract. If a summary suit is filed on the basis of an implied promise in a written contract, it presupposes that there is no express promise to pay in the written contract. In other words, there is no promise to pay in writing. Accordingly a summary suit, purely based on an implied promise to pay in a written contract is really no different and is in fact the same as a summary suit based on an implied promise to pay arising from a document which does not amount to a written contract. If in the later kind summary suit is not maintainable then even the former is not. Referring to the arguments advanced on behalf of the petitioners on the words "arising on a written contract" it is submitted that the words used are "arising on" and not "arising out of" or "arising in respect of" or "arising in connection with" which are words of wide import. It becomes clear....
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....ge, placing reliance on this judgment, was pleased to observe that the judgment would indicate that a suit on a receipt for a loan or an acknowledgment of a loan would not fall within the purview and scope of Order 37 Rule 2. In our opinion, it is not possible to draw the ratio decidendi of the judgment in that context. On the facts, there the Court had come to the conclusion that the documents produced would make not amount to an agreement in writing. 14. Let us now consider the other judgments of the Appellate Benches which were considered by the learned Single Judge. Reliance was placed on an unreported judgment in Appeal No. 186 of 1994 in Summons for Judgment No. 718 of 1991 in Summary Suit No. 2372 of 1991, decided on 3.13.1994. This judgment was a judgment on confirmation of accounts. On the facts the Court found that the only document in connection with the claims, is form "C", being a form of declaration under Central Sales Tax Act. On facts, the Court held that it would not constitute a contract between the parties. The next judgment which was considered by the learned Judge was in Appeal No. 178 of 2000 dated 1.3.2000 in respect of an honoured cheque. Considerin....
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....to whether a suit on a writing or a receipt or a settled account would be maintainable as a Summary Suit. The learned Judge thereafter recorded his findings as under: (1) Neither of the aforesaid judgments were arising under Order 37 Rule 2 of the Civil Procedure Code nor an issue came up before the Apex Court pertaining to the scope and meaning of Order 37 Rule (2) The judgment of the Apex Court was considering whether a suit on account can be filed without going back to the original transaction as contained in the said set of accounts. (3) The Supreme Court has merely held in the aforesaid two judgments that a category exists under the regular law in which a suit on account can be filed because it contains an implied promise to pay. (4) The judgment of the Apex Court in the case of Gordon Woodroffe and Co. v. Shaik M.A. Majid and Co. (supra) in fact holds that suit on account can be filed even if it is not confirmed by the opposite party or even if it is not in writing. Thus if the aforesaid judgements of the Supreme Court are held to be applicable to the provisions of Order 37 Rule 2 of Civil Procedure Code then a further issue will arise whet....
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....he words necessarily have that meaning. A document purporting to be an agreement may be an agreement in writing sufficient to satisfy the requirements of an Act of Parliament though it is only verified by the signature of one of the parties: In Re Jones (1895) 2 Ch. 719. Here the question is one of a bargain for the sale of goods. I doubt whether the objection which is here set up to avoid a business transaction would have been sufficient to support a special demurrer before the passing of the Common Law Procedure Acts, Relying on these observations, the Madras High Court in Lucky Electrical Stores, by Partner Mahendra Kumar Shah and Anr. v. Ramesh Steel House, by Partner Babulal 1988 M L R 187 in a case where the invoice of the bill was not signed by the other party to the contract, however, as a result of the acceptance of the goods delivered in pursuance of the invoice, on the demand for the price of goods admittedly received by the purchaser on the basis of the invoice, observed that it must be held, to arise on a "written contract". A written contract therefore need not be evidenced in a single document written by the parties since the written document can be by exchange....
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....ought not to be implied unless it is, in all the circumstances equitable and reasonable. But this does not mean that a term will be implied merely because in all the circumstances it would be reasonable to do so or because it would improve the contract or make its carrying out more convenient. "The touchstone is always necessity and not merely unreasonableness. (See Liverpool City Council v. Irwin) 1977 A.C.239. Similarly, a term will not be implied if it would be inconsistent with the express wording of the contract. 18. Lord Wright in Luxor (Eastbourne) Ltd. v. Cooper 1941 A.C 108 said: The expression 'implied term' is used in different senses. Sometimes it denotes some term which does not depend on the actual intention of the parties but on a rule of law such as the terms, warranties or conditions which, if not expressly excluded, the law imports, as for instance under the Sale of Goods Act and the Marine Insurance Act. But a case like the present is different because what it is sought to imply is based on an intention imputed to the parties from their actual circumstances. Professor Glanville Williams in "Language and the Law" (1945) 61 L.Q.R., 71 o....
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..... In Mosvolds Rederi A/S v. Ford Corporation of India [1986] 2 L R 68, Steyn, J. spoke of three categories of implied term. He said: Sometimes it is said that a term is implied into the contract when in truth a positive rule of law of contract is applied because of the category in which a particular contract falls. Another type of implied term is a term in order to give business efficacy to the contract. The basis of such an implication is that the contract is unworkable without it. There is, however, another form of implication. It is not permissible to imply a term simply because the court considers it to be reasonable. On the other hand, it is possible to imply a term, if the court or arbitrator, as the case may be, is satisfied that reasonable men faced with the suggested term which ex hypothesis was not expressed in the contract, would without hesitation say: 'yes, of course that is so obvious that it goes without saying.' 19. In "The Interpretation of Contracts" by Kim Lewison, Q.C., there is extensive discussion on "implied terms". At paragraph 6.03 it is set out that in order for a term to be implied, the following conditions must be fulfilled: ....
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....ements with express stipulations, it is manifestly not desirable to extend them by any implication; the presumption is that having expressed some, they have expressed all the conditions by which they intend to be bound under that instrument. In Churchward v. R., Cockburn (1865) L.R. 1 Q.B. 173, Cockburn C.J. said: ...where a contract is silent, the court or jury who are called upon to imply an obligation on the other side which does not appear in the terms of the contract, must take great care that they do not make the contract speak where it was intentionally silent; and above all that they do not make it speak entirely contrary to what, as may be gathered from the whole terms and tenor of the contract was the intention of the parties. Lord Wright in Luxor (Eastbourne) Ltd. v. Cooper [1941] A.C. 108, said: It is agreed on all sides that the presumption is against the adding to contracts of terms which the parties have not expressed. The general presumption is that the parties have expressed every material term which they intended should govern their agreement, whether oral or in writing. From the discussion there are sufficient guidelines to hold as to w....
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....y 1; (ii) debt which has; become due but is payable at a future date (debitum in praesenti solvendum in futuro) in the above example if under an agreement of tenancy rent is payable on the 15th of the following month, the rent for January becomes due on February 1, but is payable on February 15; and (iii) contingent debt which becomes payable on the happening of a certain event which may or may not occur; in the above instance the rent for the month of January will not be a debt in the preceding month of December for the tenant may or may not reside in the next month. 22. The expression, "acknowledgment" may now be considered. In Black's Law Dictionary, Eighth Edition, "acknowledgment" has been described as under: acknowledgment. 1. A recognition of something as being factual. 2. An acceptance of responsibility. 3. The act of making it known that one has received...something...acknowledgment of debt. Recognition by a debtor of the existence of a debt. In P. Ramanatha Aiyar's, The Law Lexicon, Reprint, 2001, "acknowledgment" has been stated thus: Acknowledgment, is a proceeding whereby a person who has executed an instrument may, by ....
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....knowledgment involving an implied promise to pay. There seems to be practically a consensus of judicial opinion on the point that a mere implied promise to pay, which may be conveyed by an unconditional acknowledgment, would not be sufficient for the purposes of Section 25(3), In Hiralal and Ors. v. Badkulal and Ors. [1953]4SCR758 , the suit, was filed as a regular suit. One of the issues however was whether an unqualified acknowledgment contained in the entry and the statement of accounts under which the entry was made were sufficient to furnish a cause of action to the plaintiff for maintaining the suit. Considering Section 19 and Article 64 of the Limitation Act, 1908, while considering the judgment of the Judicial Commissioner, which was appealed before it, the Supreme Court observed as under: The Judicial Commissioner took the view that an unqualified acknowledgment like the one in the suit, and the statement of the account under which the entry had been made, were sufficient to furnish a cause of action to the plaintiffs for maintaining the present suit. We are satisfied that no exception can be taken to this conclusion. It was held by the Privy Council in Maniram....
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.... and tersely gives the substance of the provisions contained in Section 19 of the Limitation Act. 24. A learned Single Judge of this Court -K.K. Deasi in Manekchand Mohanlal Poonawala v. Shah Bhimji Kundanmal & Co. and Ors. 1968 Vol.LXX1, 370 was considering whether "Khata Pete Receipt" constitutes not only an acknowledgment for receipt of money but to contain an implied promise that money has been received. The Court was considering the provisions of Order XXXVII Rule 2 as amended by the Bombay Amendment Act, 1966. (The learned referring Judge erroneously proceeded on the footing that this judgment was delivered before the amendment to Order XXXVII Rule 2). After considering the various contentions consequent upon the Summary Suit having to be filed on a written contract, the learned Judge after referring to several judgments held: The ratio of the decisions in those cases was that mere accounts stated or mere writings of acknowledgments which did not contain express promise for making payments were insufficient to complete a cause of action for a suit on the basis of the provisions of Sub-section (3) of Section 25. Apparently, the ratio of these decisions is that a pr....
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....der what constitutes a "settled account" or "account stated". Before further discussing the issue, it would be relevant to refer to some judgments which, in our opinion, shed light on the issue and can be said to have conclusively decided that aspect of the matter. In Tulsiram Shrikisan Marwadi v. Zaboo Bhima Shankar, learned Division Bench was considering as to what would be an account stated. After relying on various judgments, the Court observed as under: that a real account stated is a very different thing from an acknowledgment. In a real account stated there is consideration in the shape of an agreement that items on one side of the account be taken as paid by items on the other side. In an account stated it does not matter if some of the items are time-barred. It would be different thing if all the items are time-barred, and we see no reason to depart from the view expressed on this point in Ganesh prasad v. Rambati Bai I.L.R. (1942) Nag.369. The Privy Council had an occasion to deal with the issue in the case of (Elvira Rodrigues) Siqueira v. (Godnicalo Hypolito Construction) Noronha A.I.R. 1934 P C 144. The Privy Council was considering Section 25(3) of the Con....
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.... it necessary that before the accounts are settled, they should be gone into by the parties and scrutinised and supported by vouchers. It is sufficient if the accounts are accepted and such acceptance may be inferred by conduct of the parties. As observed in Daniell's Chancery Practice, eighth edition, Vol. I, p. 419: The mere delivery of an account will not constitute a stated account without some evidence of acquiescence which may afford sufficient legal presumption of a settlement. There is also the following passage in Bullenn and Leake's Precedents of Pleadings ninth edition, p. 584: It is not enough for the accounting party merely to deliver his account; there must be some evidence that the other party has accepted it as correct. But such acceptance need not be express, contemporaneous or subsequent conduct may amount to a sufficient acquiescence. After so observing, considering the contention of the Defendants that there has been a stated or settled account, the Court in paragraph 15 held as under: In this connection it is necessary to state that the expression "account stated" has more than one meaning. It sometimes means a claim to ....
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....f Baroda AIR1996Bom386 . In that case, the Plaintiff had issued crossed cheques for Rs. 1,75,000/- for short term deposit by the bank. The bank encashed the cheque but the amount of cheque was siphoned by the bank officials. A learned Single Judge whilst holding that a Summary Suit was maintainable, held that the Plaintiff society seeks to recover a debt payable by the Defendants bank with interest, arising on a written contract. The Court held that to hold otherwise, would be to cause loss of faith and confidence of the business community and the ordinary citizens in the banking system. This however was not a case of honoured cheque. 27. From the above discussion it is clear that a summary suit would not lie on a settled account which is not confirmed by the Defendant and "on honoured cheque". Items (II) and (IV) of para 2 are answered accordingly. 28. The issues which remain to be answered would be (a) on settled accounts which are confirmed by the Defendants (b) on acknowledgement of liability, on a mere writing or receipt. We have classified these under two heads as acknowledgement of liabilities or mere writing or a receipt, many a time have to be read together. Befor....
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....tered and the accounts settled between them. Such settling of accounts gives rise to a written contract on a fresh cause of action, with an implied promise to pay the amount settled. A summary suit would therefore lie on 'Settled accounts duly confirmed by the defendants. Issue (1) is answered accordingly. 30. In so far as acknowledgements writing or receipt are concerned, considering the various judgments adverted to earlier on behalf of the plaintiffs and Defendants and the discussion, it is not possible to lay down any precise test as to when a Summary Suit would lie on an acknowledgement writing or receipt. That would depend firstly on the document itself, the practice, usage and customs of the trade as also the facts of each case. 31. By so holding it is not as if the Defendant is denuded of his defences when he applies for leave to defend. The Supreme Court in Machalec Engineering and Manufacturers v. Basic Equipment Corporation [1977]1SCR1060 has laid down the tests, which thereafter have been reiterated by the Supreme Court in Sunil Enterprises v. S.B.I. Commercial and International Bank Ltd. AIR1998SC2317 . The tests laid down are as under: (a) If the de....