Lakshmiratan Cotton Mills Co. Ltd. Vs.
Aluminium Corporation of India Ltd.  INSC 222 (16 October 1970)
16/10/1970 SHELAT, J.M.
CITATION: 1971 AIR 1482 1971 SCC (2) 623
Limitation Act. 1908, s. 19(1)-Acknowledgment
of liability--What amounts to-Authority to make acknowledgment on behalf of
corporation, when can be implied.
Prior to January 18, 1944 six companies
Lakshmiratan. Cotton Mills Co. Ltd. (the
appellant-company) and the Aluminium Corporation of India Ltd. (respondent
corporation) were jointly managed by two groups known as the Singhania and
Gupta groups. As a result of disputes between the two groups there was a
reference to arbitration. After January 18, 1944, the date of the award, the
aforesaid six concerns were brought under the management and control of one or
the other of the two groupsThe Corporation came under the control and
management of the Singhania group. In cl. 9 of the award it was said that the
award did not cover the advances which either party or their separate firms may
have made to all or any of them or their moneys which may be in deposit with
them and that they would be payable and paid in their usual course. After the
award the appellantCompany sent a statement of account in respect of advances
made to the respondent corporation, and expenditure incurred on its behalf. The
statement was objected to. on the ground that the appellant company had not
properly maintained its accounts during the period of joint management. Efforts
at reconciliation of accounts having faded the appellants filed two suits
claiming Rs. 3,56,207.9.6 and Rs. 72,595.4.6 from the Corporation, being suits
Nos. 63 and 65 of 1949. In suit No. 63 of 1949 it was claimed that the suit was
within time as after adjustment of several items in 1946 and 1947 a sum of Rs.
2,96,110..11.6 was found due to the appellantcompany and that in any event the
suit was saved from being barred by limitation by a letter (Ex.. 1) dated April
16, 1946 addressed by s the Secretary cum-Chief Accountant of the Corporation,
thereby acknowledging the liability of the Corporation to pay the amount which
would be found due and payable under the said accounts. Similar averments were
made in, Suit No. 65 of 1949. The written statements filed on behalf of the
Corporation inter alia pleaded that the said claim was barred by limitation, that
the said letter did not amount to an acknowledgement within the meaning of s. 19
of the Limitation Act, 1908 which was then applicable to the suits, and lastly,
that even if the said letter did amount to an acknowledgement; it was not
binding on the Corporation. The trial court decreed the suits but the High
Court dismissed them as being time-barred. In appeals to this Court the
questions that fell for consideration were (i) whether the letter in question
amounted to an acknowledgment;(ii) whether it was an acknowledgement by the
corporation, and if not (iii) whether the Secretary-cumChief Accountant had
authority express or implied. to acknowledge liability on behalf of the
Corporation so as, to bind that corporation. Allowing the appeals,
HELD: (1) (a) From the provisions of s. 19(1)
of the Limitation Act, 1908 it is clear that the statement on which the plea of
acknowledgement is founded must relate to a subsisting liability as the section
requires 624 that it must be made before the expiration of the period
prescribed by the Act. It need not, however, amount to a promise to pay, for an
acknowledgement does not create a new right of action but merely extends the
period of limitation.
The statement need not indicate the exact
nature or the specific character of the liability. The words used in the
statement in question, however, must relate to a present subsisting liability
and indicate the existence of jural relationship between the parties such as,
for instance, that of a debtor and a creditor and the intention to admit such a
jural relationship Such an intention need not be in express terms and can be
inferred by implication or the nature of the admission and the surrounding
circumstances. Generally speaking a liberal construction of the statement in
question should be given. That of course does not mean that where a statement
is made without intending to admit the existence of a particular jural
relationship, such an intention should be fastened on the person making the
statement by an involved or a farfetched reasoning. [629 C-E] Khan Bchadur
Shapoor Freedoom Mazda v. Durga Prosad Chamaria,  1 S.C.R. 140, Tilak Ram
v. Nathu, A.I.R.
1967 S.C. 935, 938, 939, Green v. Humphreva,
 26 Ch. D. 474, 481, Tajpal Saraogi v. Lallanjee Jain, C.A. No. 766/62
dt. 8-2-1965 and Abdul Rahim Oosman & Co. v. Ojamshee Prushottamdas &
Co.,  I.L.R. 56 Cal. 6,39, referred to.
(b) From the correspondence between the
parties and the surrounding circumstances it must follow that there was a
subsisting account in the name of the appellannt company in the books of the
Corporation in which interest on the balance shown therein from time to time
was being credited and in which amounts in respect of items passed during the
course of reconciliation were also duly credited. The statement in the letter
Ex. 1 that "after all the above adjustments the position will be as per
statement attached", that is to say, that there 'was a balance of Rs.
107447/13/11 due and payable to the appellant
company must clearly amount to acknowledgement within the meaning of S.
19(1). If the letter be looked at in the
background of the controversy between the parties which controversy was limited
to the question as to the correct-ness of the amount claimed by the appellant
company as also the correspondence which ensued in regard to it, it would be
impossible to say that the letter and the statement of account enclosed therewith
were merely explanatory and did not amount to an admission of the jural reship
of debtor and creditor and of the liability to pay the amount found due at the
foot of the account on finalisation. [635 D-F] The mere fact that letter called
for confirmation of the amount of the balance mentioned therein and the fact
that the appellant company failed to confirm it, could not lead to a conclusion
that the admission of liability was conditional and therefore could not operate
as an acknowledgement. The confirmation sought in the letter was not a
condition to the admission as to the existence of a subsisting account and the
liability to pay when accounts were finalised but to the specific amount which
according to the corporation would be the amount payable by it according to its
calculation. 'There was no condition subject to which the admission was to be
made which remained unperformed. [635 G; 636 F-G; 637 B] Maniram v. Rupchand,
L.R. 33 I.A. 165, Raja Kayali Arunachella Row Bahadur v. Sri Rajah Rangiah Appa
Row Bahadur,  I.L.R. 29 Mad. 519 and Ballapragada Ramamurthy v. Thammana
Gopayya,  I.L.R. 40 Mad. 701, distinguished.
625 LAXMIRATAN COTTON MILLS V. ALUMINIUM
CORP. (Shelat, J.) In re River Steamer Co. v. Mitchell, L.R. 6 Ch. App. 822,
828, referred to., (ii) The plea that the letter Ex. I should be regarded as an
acknowledgement by the corporation itself was not included among the issues
formulated before the courts below. It could not be allowed to be raised for
the first time in this Court. [628 B] (iii) If the correspondence between the
parties together with the statements of accounts enclosed therewith was closely
examined it became clear that S was authorised to scrutinise the claim made by
the appellant company, the various items for which the appellant _company
claimed credit and to reject the same and, what is important, to allow others.
That he had such an authority was clear from the fact that in respect of such
of the items which he allowed, credit was given to the appellant and necessary
entries to the credit of the appellant company were posted in the account
maintained by the Corporation in its books of account. It was impossible to say
that in the course of finalising the accounts, S accorded his assent to various
items claimed by the appellant company without having been authorised so to do.
Nor was it possible to say that on his passing those items necessary entries
were made in the books of accounts of the corporation without his having so
authorised. Further, he could not have sent to the appellant company statements
of account showing the balance due to it "as per the ledger" unless
he was authorised to finalise the accounts and arrive at the amount due and
payable to, the company. [637 E-F; 638 B-C] Uma Shankar v. Govind Narain,
I.L.R. 46 All. 982, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 116, 117 and 119 of 1967.
Appeals from the judgment and decrees dated
May 19, 1966 of the Allahabad High Court in First Appeals Nos. 441 of 1950, 198
of 1952 and 442 of 1950 respectively.
S. V. Gupte, S. T. Desai, J. P. Goyal and G.
N. Wantoo, (or the appellants (in all the appeals).
Sidhartha Ray, A. K. Sen, Rameshwar Nath,
Krishna Sen and Swaranjit Sodhi, for the respondent (in all the appeals).
The Judgment of the Court was delivered by
Shelat, J. Prior to January 18, 1944 M/s. Lakshmiratan Cotton Mills Co. Ltd.
(hereinafter referred to as the appellant company), Aluminium Corporation of
(hereinafter referred to as the corporation,
J.K. Limited, Beharilal Kailashpat India Supplies, Northern India Trading Co.,
and Northern India Brush Manufacturing Co. Ltd. were all jointly managed by
two, groups, who may conveniently be called the Singhania and the Gupta groups.
Disputes having arisen between them, they were referred to arbitration by a
deed of reference, dated December 9, 1943. It is not necessary to go into the
details of the award, dated January 18, 1944, by which these disputes were
adjudicated upon except that from and after the date of the award the aforesaid
concerns were brought under the management and ,control of one or the other of
the said two groups. The corporation came under the control and management of
the Singhania group.
Cl. 9 of the award provided as follows
"The above award or directions in respect of Laxmi Ratan Cotton Mills Co.
Ltd., Aluminium Corporation of India Ltd., J. K. Ltd., Beharilal Kailashpat
India Supplies, Northern India Trading Co. and Northern Brush Manufacturing Co.
do not cover the advances which either party or their separate firms may have
made to all or any of them or their moneys which may be in deposit with them
and they shall be payable and paid in their usual course." According to
the appellants, there existed in their trading books :accounts in respect of
amounts advanced or spent by them for,' the corporation in respect of which cl.
(9) of the award specifically made provision for and also for interest due
thereon. After the award was made the appellant-company sent a statement of
account to the corporation, but this was objected to on the ground that the
appellant-company, during the course, of the previous joint management of the
corporation, had not properly maintained the accounts and that several items
were either not properly accounted for or entered into. Correspondence
thereafter ensued between the parties. The parties also appointed their
respective officers to meet and reconcile their respective accounts the
corporation being represented by its Secretary-cum Chief Accountant, one
Subramanayam, and the appellant-company sometimes by one Arora and at other
times by one Newatia. Since no settlement could be arrived at, the appellants
filed two suits claiming Rs. 3,56,207-9-6 and Rs. 72,595-4-6 from the
corporation, being Suit Nos. 63 and 65 of 1949.
In para 14 of the plaint in Suit No. 63 of
1949, it was claimed that the suit was within time as after adjustment of
several items in 1946 and 1947 a sum of Rs. 2,96,110-11-6 was found due to the
appellant-company and that in any event the suit was saved from being barred by
limitation by a letter ,dated April 16, 1946 addressed by the said
Subramanayam, thereby acknowledging the liability of the corporation to pay the
amount which would be found due and payable under the said accounts. Similar
averments were also made in the plaint in Suit No. 65 of 1949. The written
statements filed by the corporation inter alia pleaded that the said claims
were, barred by limitation, 627 LAKSHMIRATAN COTTON MILLS V. ALUMINIUM CORP.
627 (Shelat, J.) that the said letter did not amount to an acknowledgement
within the meaning of S. 19 of the Limitation Act, 1908 which was then
applicable to the suits, and lastly, that even if the said letter did amount to
an acknowledgment, it was not binding on the corporation as the said
Subramanayam had no authority to make any such acknowledgement for and on
behalf of and binding on the corporation. On the question of limitation, the
Trial Court raised three questions for its determination; (1) whether the
letter (Ex. 1) was binding on the corporation, (2) whether it amounted to an
acknowledgement, and (3) if so, whether it would extend the period of
limitation so as to save the claims made by the appellants, from being barred.
On consideration of the, evidence, both oral and documentary, the Trial Court
held in favour of the appellants on all the three questions and passed decrees
in both the suits.
Three appeals were filed in the High Court
against those decrees, two by the corporation and the third by the appellant
company as the claim allowed in its favour was for a reduced amount. As framed
by the High Court, the question common to all the three appeals was whether the
said letter (Ex. 1) amounted to an acknowledgement extending the period of
limitation. The High Court, on consideration of the correspondence between the
parties and the other evidence, reached the conclusion that the letter (Ex. 1)
was "merely explanatory" and was not, meant to bind the corporation,
that even if it did amount to " some kind of acknowledgement", its author,
the said Subramanayam bad no authority to acknowledge any debt or liability on
behalf of the corporation.. In this view the High Court held the two suits
barred by limitation and allowed the corporations, appeals. It rejected the
appellant-company's appeal and dismissed the two suits. Hence these three
appeals under certificates granted by the High Court.
It was never disputed that, except for the
letter (Ex. 1) relied on by the appellant-company, provided it amounted to an
acknowledgement binding on the corporation, the claims of the, appellants would
be barred by limitation.
Consequently, the questions for determination
in these appeals are the same as the ones before the High Court.
These questions were canvassed before us in
their three aspects; firstly, whether the letter (Ex. 1) amounted to an
acknowledgement, secondly, if it did, whether it was an acknowledgement by the
corporation, and thirdly, if not, whether the said Subramanyam, who addressed
it, had the authority express or implied, to acknowledge liability on behalf of
the I corporation so 'as to bind that corporation.
Counsel for the appellant-company sought to
argue that in as much as the letter, (Ex. 1) was written by the corporation's
628 Secretary, who also combined the position of the Chief Accountant, and
furthermore, addressed that letter for and on behalf of the corporation, the
letter was of and by the corporation. Therefore, if the letter amounts to an
acknowledgement, such acknowledgement would be by the corporation itself and no
enquiry would then be necessary to ascertain whether the said Subramanayam had
the authority to acknowledge the liability so as to bind the corporation. No
such plea, however, is to be found in the plant which merely stated that
"there are several letters constituting acknowledgement of the unsettled
account. The plaintiff files one of such letters which is dated 16th April,
1946." The written statement denied that the corporation, ever made any
acknowledgement or that the letter of April 16, 1946 was any such
acknowledgement. It further denied that Subramanayam, who wrote it, had any
authority to acknowledge any debt. Such a comprehensive denial notwithstanding,
no issue was raised covering the argument now urged that the said letter was
and must be treated as one of or by the corporation, and that therefore, there
was no question of Subramanayam having or not having the authority to make an
acknowledgement on behalf of the corporation. No such argument also appears to
have been made either in the Trial Court or the High Court where the
controversy was centered around the question whether the said letter contained
an acknowledgement and whether its writer, addressing it on behalf of the
corporation, had the authority to make such an acknowledgement binding on the
corporation. In our view Mr. Gupte could not, at such a belated stage, raise
for the first time the plea that it was the corporation which through the said
letter made the acknowledgement and that we should understand that letter to
mean such an acknowledgement by the corporation itself.
The question, therefore, that really arises
for our determination is whether the said letter contains an acknowledgement,
which its writer, Subramanyam, had the authority, express or implied, to make.
Even that question gets reduced in extent and scope as it was never the case of
the appellant-company at any stage that the corporation had clothed its
Secretary with such authority expressly. Such a case Mr" Gupte did not
make out even before us and proceeded in fact to argue that the evidence on
record showed that he had such authority given to him impliedly.
Sec. 19(1) of the Limitation Act, 1908
provides that where, before the expiration of the period prescribed for a suit
in respect of any property or right, an acknowledgement of liability in respect
of such property or right has been made in writing signed by the party against
whom such property or right is claimed, a fresh period of limitation shall be
computed from the time 629 when the acknowledgement was so signed. The
expression 'signed' here means not only signed personally by such a party, but
also by an agent duly authorised in that behalf.
Explanation 1 to the section then provides
that an acknowledgement would be sufficient though it omits to specify the
exact nature of the property or right, or avers that the time for payment has
not yet ,come, or is accompanied by a refusal to pay or is coupled with a claim
to a set-off, or is addressed to a person other than the person entitled to the
property or right. The new Act of 1963 contains in S. 18 substantially similar
It is clear that the statement on which the
plea of acknowledgement is founded must relate to a subsisting liability as the
section requires that it must be made before the expiration of the period
prescribed under the Act. It need not, however, amount to a promise to pay,
for, an acknowledgement does not create a new right to action but merely
extends the period of limitation. The statement need not indicate the exact nature,
or the specific character of the liability. The words used in the statement in
question, however, must relate to a present subsisting liability and indicate
the existence of jural relationship, between the parties, such as, for
instance, that of a debtor and a creditor, and the intention to admit such
jural relationship. Such an intention need not be in express terms and can be
inferred by implication from the nature of the admission and the surrounding
circumstances. Generally speaking, a liberal construction of the statement in
question should be given. That of-course does not mean that where a statement
is made without intending to admit the existence of jural relationship, such
intention should be fastened on the person making the statement by an involved
and far-fetched reasoning. (see Khan Bahadur Shapoor Freedom Mazda v. Durga
Prosad Chamaria(1) And Tilak Ram v. Nathu(2).
As Fry, L.J., in Green v. Humphreys(3) said
"an acknowledgement is an admission by the writer that there is a debt
owing by him either to the receiver of the letter or to some other person on
whose behalf the letter is received but it is not enough that he refers to a
debt as being due from somebody. In order to take the case out of the statute
there must upon the fair construction of the letter, read in the light of the
surrounding circumstances, be an admission that the writer owes the debt."
As already stated, the person making the acknowledgement can be both the debtor
himself as also a person duly authorised by him to make the admission. In Khan
Bahadur (1) (1962) 1 S. C. R. 140.
(2) A. I. R. 1967 S.C. 935, at 938, 939.
(3) (1884) 26 Ch. D. 474 at 481.
13-L436 Sup C 1/71 630 Shapoor Fredoom
Mazda's case(1) the Court accepted a statement in a letter by a bortgagor to a
second mortgagee to save the mortgaged property from being sold away at a cheap
price at the instance of the prior mortgagee by himself purchasing it as one
amounting to an admission of the jural relationship of a mortgagor and
mortgage&, and therefore, to an acknowledgement within s. 19. Also, an
agreement of reference to arbitration containing an unqualified admission that
whoever on account should be proved to 'be the debtor would pay to the other
has been held to amount to an acknowledgement. Such an admission is not subject
to the condition that before the agreement should operate as an
acknowledgement, the liability must be ascertained by the arbitrator. The
acknowledgement operates whether the arbitrator acts or not. (see Tejpal
Lallanjee Jain(2), ,approving Abdul Rahim
Oosman & Co. v. Ojamshee Prushottamdas & Co. (3).
The letter (Ex. 1) relied on as an
acknowledgement was written to the appellant-company by Subramanayam signing it
"for Aluminium Corporation of India Ltd." it consists of Several
paragraphs dealing with diverse items relating to different amounts ,claimed by
the appellant-company in a statement of claim previously sent by it to the
corporation, some of which are refuted by the writer, while the others are
accepted. The penultimate paragraph, which is said to contain the admission,
reads as follows "After all the above adjustments, the position will be as
per statement attached. Interest has been provided on some balances and on
others it has not been provided. We request you, to confirm the balance of Rs. 1,07,477-13-11,
so that we may proceed with the calculation of interest and settle your claim
once and for all immediately.
Kindly acknowledge this letter and favour us
with an immediate reply." The letter speaks in the last sentence of a copy
of it to be sent to Lala Purshottam Dasji Singhania "for
The co of the letter, as is clear from the
other evidence as also the words "for information" was not sent for
approval and was obviously not intended to be subject to such approval by
Purushottam Singhania. The statement enclosed with the letter headed
"Account of M/s. Lakshmiratan Cotton Mills Co. Ltd.' and first sets out
the balance of Rs. 1,00,760-0-7 in favour of (1) (1962) 1. S. C. R. 140.
(2) C.A. No. 766 of 1962, decided. on Feb. 8,
(3) (1928) 1. L. R. 56 Cal. 639.
631 the appellant-com any "as per our
ledger", meaning the ledger of the corporation, and the first foot-note
thereto states that that amount included interest of Rs. 26,490-1110 calculated
upto March 31, 1943. Several amounts due to other concerns payable to or by the
appellant-company are, then adjusted and finally the balance is struck at Rs.
1,07,447-13-11 (which is the one mentioned in
the letter (Ex. 1) which if confirmed by the appellant-company, the corporation
would "settle your claim once and for all immediately." The High,
Court, as aforesaid, held, contrary to the view of the Trial Court, that this
letter was only "explanatory" and was not intended to be an admission
of liability or of the jural relationship between the parties as debtor and
creditor. Counsel for the corporation also argued in support of the High
Court's view that the letter was written in the process of adjustment and
reconciliation of the statement of claim addressed by the appellant-company and
a counter.-statement to it by the corporation and therefore, could not be held
to be one intended as an admission of liability on the part of the corporation,
and that, in any event, Subramanayam, who wrote it, had no authority to
acknowledge any such liability on behalf of the corporation.
Before we proceed to inquire into the
correctness or otherwise of the High Court's view in regard to the letter (Ex.
1), it would be necessary to examine the
correspondence which previously ensued between the parties and the surrounding
circumstances which led to that letter.
As already stated, under cl. (9) of the award
by which the concerns, once, jointly controlled, were separated, moneys
advanced by either of the parties or their firms or standing in deposit with
them were to be payable by one to the other.
The award also directed the Gupta group to
hand over to the Singhanias account books and other papers and files relating
to the corporation. Accordingly, the Guptas handed them over to the corporation
on February 1. 1944. The complaint of the corporation was that these books had
not been properly posted up and contained discrepancies and that the
corporation consequently required-the help of the Guptas to finalise them.
Early in March 1945, the appellant-company had also sent a statement of account
in respect of the amounts due and payable to it by the corporation. On April
20, 1945, one Col. Naidu, a director of the corporation, wrote to the
appellant-company pointing out from the said statement of account certain items
which the corporation disputed. On 11th/12th September,, 1945, the appellantcompany
sent a statement of account claiming Rs. 2,94,000 and odd as payable to it. On
December 17, 1945, 63 2 a reply thereto was given by a letter sent by
Lakshmipat Singhania, the director-in charge, of the corporation, mentioning
various items disputed by the corporation and the efforts made by it to
reconcile those items and enclosed with that reply a reconciliation statement
showing the true position according to the corporation. Among other things, the
reply stated as follows "You will find from the above that we have tried
our level best to see that these accounts are settled as early as possible as
we have been very anxious for finalising but unfortunately, there has been
absolutely no response-from your side.
From the reconciliation statement you will
find that according to our books amount due to the Laxmi Ratan Cotton Mills Co.
Ltd., is Rs. 98,101-3-1 which includes interest calculated and credited to
your account up to 31st March, 1943. The interest from that date till the date
of settlement is further to be calculated when this account is properly
reconciled and confirmed by you." The reply pointed out that as against the
said amount of Rs. 98,101-3-1 the corporation claimed Rs. 38,490-2-2 and Rs. 8,256-13-6
which, according to it, had to be adjusted.
Lastly,, the reply threatened that unless the
accounts were finalised within a month "we will not be paying you any
interest on any of your dues beyond 30th September, 1945-".
The position, as stated in the statement
enclosed with the reply, was as follows "Reconciliation of Accounts of
M/s. Lakshmiratan Cotton Mills Co. Ltd.
Balance as per A.C.I. Ltd. Books Rs.
98,101-3-1 Balance as per statement Rs. 2,94,658-0-9 ----------------Difference
Rs. 1,96,556-13-8" ----------------Then followed detailed items claimed by
the corporation totalling Rs. 1,96,556-13-8. The statement referred to above
was the one under which the appellant-company claimed Rs. 2,94,658-0-9 and
which was sent earlier in March 1945 by Ram Ratan Gupta to Purushottam
Singhania. The corporation took objection to it by claiming various amounts and
against which, according to the corporation, only a sum of Rs.
98,.101-3-1 was payable by it "as per
A.C.I. Ltd. Books that is to say, as shown by the books of account maintained
by the corporation. The reply of the appellant-company, dated December 6, 1945,
to the 633 of the appellant-company, dated December 6, 1945, to the
afore-aforesaid letter of September 17, 1945 and the statement enclosed thereto
shows that the said Arora on behalf of the appellant company and the said
Subramanayam on behalf of the corporation met and tried to reconcile the
accounts. The appellant company by this reply also sent particulars of certain
items apparently called for by Subramanayam at that meeting and in its turn
asked for particulars of certain items debited to it in the said reconciliation
statement. On December 21, 1945, Subramanayam replied to the
appellant-company's letter of December 6, 1945. By that letter he conveyed two
things, (1) that in respect of certain items claimed by the appellant-company
and which were disputed, those items were either passed or disallowed, and (2)
that since the appellant.-company had combined in its statement of claim
accounts of other allied concerns also, he too had combined those accounts
while preparing the statement of accounts he was sending along with his letter.
The letter concluded by stating : "we herewith enclose a consolidated
statement after merging all these accounts." The consolidated statement,
(Ex. 44) enclosed by Subramanayam with his reply, reads as follows :
"Accounts of Messrs Lakshmiratan Cotton
Mills Co. Ltd. 1945 December 1. By balance as per our ledger Rs. 1,00,304-7-7
Then follow accounts of other concerns whose accounts were brought in in what
Subramainayam called the consolidated statement of account. This statement
reflected the position of the appellant--company in the corporation's books of
accounts as on December 1, 1945.
It will be noticed that the amount admitted
in the statement by the corporation as due to the appellant-company rose from
Rs. 98,000 and odd (as per the earlier statement, dated September 17, 1945) to
Rs. 1,00,304-7-7. This increase was due to the fact that, while adjusting the
Subramanayam had allowed and
"passed" some of them between September and December 1945 when the
disputed items were discussed and adjusted, and entries relating to those which
were passed were posted to the credit of the appellant company in the books of
The letter of December 21, 1945 was replied
to by the appellant-company on February 25, 1946 by asking particulars in 63 4
respect of item claimed by Subramanayam in his said letter.
It was in answer to this letter that
Subramanayam wrote the letter (Ex. 1) in controversy and with which he sent the
statement showing Rs. 1,07,447-13-11 as "Balance carried down".
Correspondence continued thereafter between
the parties, the appellant company maintaining that a much larger amount was
due to it than the sum of Rs. 1,07,447-13-11. Except that, the later
correspondence would not throw any light on the question as to acknowledgement,
and therefore, we need now detain ourselves on it.
Leaving aside for the time being the question
as to Subramanayam's authority, the following facts emerge from the
correspondence and the statements of accounts accompanying some of the letters
sent on behalf of the corporation:
(a) In pursuance of cl. (9) of the said
award, the appellant-company sent to the corporation in the beginning of March
1945 a statement of account claiming Rs. 2,94,000 and odd as due to it.
(b) At no time during the lengthy
correspondence which ensued between the parties, the corporation denied its
liability to pay; what it did was. to dispute the correctness of the amount
claimed by the appellant-company by challenging certain items for which the
appellant-company claimed credit and by making certain counter claims of its
own. As against the statement of account sent by the appellant-company, the
corporation sent its own statement which it called the 'reconciliation
(c) During the process of adjustment and
reconciliation of the several items claimed by the appellant-company some were
allowed and some were rejected, and the corporation sought to debit certain
items claimed by it against the appellant-company.
(d) According to the reconciliation statement
sent by the corporation on September 17, 1945 only Rs. 98,000 and odd was due
to the appellant-company as against its claim for Rs. 2,94,000 and odd. Later,
this figure was raised from time to time as some of the items claimed by the
appellant-company were allowed 6 3 5 with the result that in the statement sent
along with the letter (Ex. 1 ) the balance due to the appellant-company was
shown at Rs. 1,07,447.
(e) The statements of accounts, (Exs. 43 and
44) and the one enclosed with the letter, (Ex. 1 ) in clear terms stated that
the balances shown therein were as shown in the ledger maintained by the
corporation. The letters equally clearly stated that interest on such balances
was being credited up to certain dates and for the further period would be
credited when the accounts were finalised.
It must follow from these facts that there
was a subsisting.
account in the name of the appellant-company
in the books of the corporation in which interest on the balance shown therein
from time to time was being credited and in which amounts in respect of items
passed during the course of reconciliation were also being credited. The
statement in the letter (Ex. 1) that "after all the above adjustments the
position will be as per statement attached", that is to say, that there
was a balance of Rs. 1,07,447-13-11 due and payable to the appellant-company,
must clearly amount to an acknowledgement within the meaning of S. 19(1). In
our view if the letter (Ex. 1) were to be looked at in the background of the
controversy between the parties, which controversy was, as aforesaid, limited
to the question as to the correctness of the amount claimed by the appellant
company as also the correspondence which ensued in regard to it, it would be
impossible to say that the letter (Ex. 1) and the statement of account enclosed
therewith were merely explanatory and did not amount to an admission of the
jural relationship of debtor and creditor and of the liability to pay the
amount found due at the foot of the account on finalisation.
But the argument was that since the letter
(Ex. 1) called for confirmation of the amount of Rs. 1,07,447 as being the
balance due to the appellant-company and.-as the appellant company failed to
confirm it, the admission of liability was conditional, and therefore, cannot
operate as an acknowledgement. In this connection the decision in Maniram v.
Rupchand(1) was relied on and in particular the famous dictum of Mellish, L.J.,
in In re River Steamer Co. v. Mitehell(2) approvingly cited therein. The dictum
was that an acknowledgement to take the case out of the statute of limitation
must be either one from which an absolute promise to pay can be inferred, or
secondly, an (1) L. R. 33 1. A. 165.
(2) L. R. 6 Ch. App. 822, at 828.
636 unconditional promise to pay the specific
debt, or thirdly, that there must be a conditional promise to pay the debt and
evidence that the condition has been performed. The statement relied on in
Maniram's case(1) as an acknowledgement was by the respondent in a written
statement filed by him in an earlier bate proceeding in which it was averred
that the applicant chand Nanabhai (the respondent) "had for the last five
ye open and current accounts with the deceased (the testator) that the alleged
indebtedness did not affect his right to apply for probate", as one of the
executors. It was held that the statement was sufficient to constitute an
acknowledgement. "An unconditional acknowledgement", said their
Lordships, "has always been held to imply a promise to pay, because that
is the natural inference if nothing is said to the contrary. It is what every
honest man would mean to do. There can be no reason for giving a different
meaning to an acknowledgement that there is a right to have the accounts
settled, and no qualification of the natural inference that whoever is the
creditor shall be paid when the condition is performed by the ascertainment of
a balance in favour of the claimant.
It is a case of the third proportion of
Mellish, L.J., a conditional promise to pay and the condition performed."
We do not see how this decision can support the corporation since in the
present case also there was an admission of a subsisting account on the
finalisation of which the corporation was prepared to pay the balance found due
at the foot thereof. The only dispute was what would such as balance, Rs.
1,07,447, according to the corporation, a larger sum according to the
appellant.-company. The confirmation sought for in the letter (Ex. 1) was not a
condition to the admission as to the existence of a subsisting account an the
liability to pay when accounts were finalised, but to the specific amount
which, according to the corporation, would the amount payable by it.
according to its calculation. The decision
in, Raja Kavali Arunachella Row Bahadur v. Sri R Rangiah App Row Bahadur(2)
does not apply as the condition subject to which the settlement there was made
was not performed, and therefore, the document was held to be one which could
not be spelt out as an acknowledgement. In Rallapragada Ramamurthy v. Thammana
Gopayva(3) also, the letter relied on as an acknowledgement stated that if
certain arbitrators should decide that the defendant should pay any amount he
would immediately pay, but if the arbitrators failed to decide the plaintiff
might sue and the defendant in that case would not plead limitation. The
arbitrators failed to decide. It was held that the letter being conditional and
the condition not having been (1) L. R. 33 1A. 165. (2)  1. L. R. 29 mad.
(3)  I. L. R 40 Mad. 701.
637 performed did not operate as an
acknowledgement. This decision too has no bearing on the facts of the present
Unlike the cases relied on by Mr. Sen, the
present case is one of an admission of a subsisting, account and the jural
relationship and the liability to pay whatever amount would be found due on
finalisation of accounts. There is no condition subject to which the admission
was made which remained unperformed.
Ordinarily, the functions of Subramanym as
the secretary of the corporation would be ministerial and administrative. As a
secretary only, he would have no authority to bind the corporation by entering
into contracts or other commitments on its behalf. As the chief accountant and
holder of a power of attorney, his functions in regard to the former would be
to supervise over maintenance of proper accounts, and in regard to the latter
to look after and represent the corporation in litigation. None of these three
positions held by him would by itself or cumulatively make him a person duly
authorised to make an acknowledgement binding on the corporation. Also, the
fact that he carried on correspondence for the corporation would not make him
a, person authorised to make an acknowledgement binding on the corporation.
[see Uma Shankar v. Gobind Narain(1)]. But such a description of the functions
and duties perfomed by him would not be complete. If the correspondence
together with the statements of accounts encolsed therewith is closely examined
it becomes clear that he was authorised to scrutinise the claim made by the
appellant-company, the various items for which the appellant-company claimed
credit and to reject some, and what is important, to allow the others. That he
had such an authority is clear from the fact that in respect of such of the
items which he allowed credit was given to the appellant-company and necessary
entries to the credit of the appellant-company were posted in the account
maintained by the corporation in its books of account. Thus, in the
reconciliation statement (Ex. 43) sent along with the corporation's letter of
September 17, 1945. Rs. 98,101 were shown to be the balance due to the
appellant company. The words used in that statement were "balance as per
A.C.I. Ltd. Books". These words clearly indicate that there was a subsisting
account in the name of the appellant-company in the books of the corporation
and that at the foot of that account the sum of Rs. 98,101 was due to it. Ex.
44, another statement of account sent to the appellant-company, stated Rs.
1,00,304-7-7 as being the "Balance as per ledger" as on December 1,
1945. As explained earlier, the increase in the balance from Rs.
98,101 to Rs. 100,304 was due to certain
items aggregating Rs. 2,203-4-6 having been passed by Subramanayam, and entries
(1) 1. L. R. 46 All. 892.
6 38 having thereupon been posted in the
ledger. Thereafter, further items were passed by him totalling Rs. 465-10-0
which when added raised the balance to Rs. 1,60,760-1-7, as at the end of
December 1945. This was the balance "as per our ledger" stated in the
statement sent along with theletter (Ex. 1).
It is impossible to think that in the course
of finalising the accounts Subramanayam accorded his assent to various items
claimed by the appellant-company without having been authorised so to do. Nor
is it possible to say that on his passing those items necessary entries were
made in the books of accounts of the corporation without his having so
authorised. Further, he could not have sent to the appellant-company statements
of accounts showing the balance due to it "as per the ledger" unless
he was authorised to finalise the accounts and arrive at the amount due and
payable to the appellant company.
In his evidence Subramanayam testified that
Lakshmipat Singhania, the director-in-charge of, the corporation, knew that he
was dealing with Arora, the representative of the appellant company, in the
matter of accounts between the parties. He also said that he was to find out
the difference between the two and that as a result many points were resolved
an he confirmed by letters to the appellant company those points which were so
resolved. He then stated that the directors of the corporation were aware of
the settlement of the said points by him but they neither ratified nor
repudiated them. This was because, as conceded by him, be never placed those
settled points before the directors for their ratification. He did not say that
he had no authority to settle the differences or that he settled them subject
to the approval of the directors. It is clear that he could not have settled
the various points of difference between the parties and suitable entries in
the books consequent upon such settlement could not have been posted unless he
was authorised by the directors to finalise the accounts and make final
adjustment with the appellant-company. He tried, of course, to make out that he
had no authority except as a secretary to carry on correspondence for
clarifying the position of the corporation.
He even denied that entries were made in the
books of the corporation after he had settled the said items. The denial is
futile because the statements of account sent by him to the appellant company
from time to time clearly show that such entries were made. The effect of all
this evidence is that besides his functions as the secretary-cum-chief
accountant, he was authorised to finalise the accounts between the parties, to
settle differences between them and to arrive at the final figure payable by
the corporation. It was in pursuance of such authority that he dealt with Arora,
passed some of the items for which the 639 appellant-company claimed credit,
had those entries posted in the books of the corporation, sent statements of
accounts from time to time and finally addressed the letter, (Ex. 1), stating
therein that according to the books of the corporation the sum of Rs. 1,07,447
was the balance payable to the appellant-company. He could not possibly have
asked the appellant-,company to confirm that balance unless he had the
authority on behalf of the corporation to acknowledge on its behalf that that
was the balance payable by it.
Therefore, the conclusion is inescapable that
he had the implied authority to make the acknowledgement and wrote the letter
(Ex. 1) with the intention of doing so.
Accordingly, the suits were not liable to be
dismissed on the ground of their being barred by limitation, and the High Court
was in error in allowing the appeals by the corporation and dismissing the
The result is that the appeals are allowed,
and the judgment and order passed by the High Court are set aside. The case
will have to be remanded to the High Court for deciding the rest of the
questions arising in the suits and ascertaining the amounts due to the
appellants (the original plaintiffs) as the High Court has not gone into those
questions as it dismissed the suits on the point of limitation. In view of the
very long period having elapsed due to prolonged adjournments of the appeals
while they were pending before the High Court, we earnestly hope that the High
Court will dispose of the cases as expeditiously as possible. The corporation
will pay to the appellants costs of these appeals, such costs to be in one set
G.C. Appeals allowed.