Full Judgment Text
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PETITIONER:
LAKSHMIRATAN COTTON MILLS CO. LTD.
Vs.
RESPONDENT:
ALUMINIUM CORPORATION OF INDIA LTD.
DATE OF JUDGMENT:
16/10/1970
BENCH:
SHELAT, J.M.
BENCH:
SHELAT, J.M.
VAIDYIALINGAM, C.A.
CITATION:
1971 AIR 1482 1971 SCC (2) 623
ACT:
Limitation Act. 1908, s. 19(1)-Acknowledgment of
liability--What amounts to-Authority to make acknowledgment
on behalf of corporation, when can be implied.
HEADNOTE:
Prior to January 18, 1944 six companies including M/s.
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 groups- The 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 appellant-
Company 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 appellant-
company 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 Secretarycum-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
didnot amount to an acknowledgement within the meaning of s.
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19 of theLimitation Act, 1908 which was then applicable to
the suits, and lastly,that even if the said letter did
amount to an acknowledgement, it wasnot binding on the
Corporation. The trial court decreed the suits but theHigh
Court dismissed them as being time-barred. In appeals to
this Courtthe 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) whethe’r the Secretary-cum-
Chief 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 partes 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 far fetched reasoning. [629 C-E]
Khan Bchadur Shapoor Freedoom Mazda v. Durga Prosad
Chamaria, [1962] 1 S.C.R. 140, Tilak Ram v. Nathu, A.I.R.
1967 S.C. 935, 938, 939, Green v. Humphreva, [1884] 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., [1928] 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]
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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 acknow-
ledgement. 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, [1906] I.L.R. 29 Mad. 519 and Ballapragada
Ramamurthy v. Thammana Gopayya, [1917] 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.
JUDGMENT:
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
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Cotton Mills Co. Ltd. (hereinafter referred to as the
appellant company), Aluminium Corporation of India Ltd.
(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 adjudi-
626
cated 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
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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 Subra-
manayam, who wrote it, had any authority to acknowledge any
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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 provisions.
It is clear that the statement on which the plea of acknow-
ledgement 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
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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 Saraogi v.
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 information".
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.
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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, 1965.
(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. 26,490-11-
10 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 these 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 other-
wise 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 appellant-
company 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-incharge, 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
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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, Subra-
manayam 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 state-
ment, (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
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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 disputed items.
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 corporation.
The letter of December 21, 1945 was replied to by the appel-
lant-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 Subra-
manayam’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 account’.
(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
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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
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for giving a different meaning to an acknowledgement that
there is a right to have the accounts settled, and no quali-
fication 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 con-
firmation 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) [1906] 1. L. R. 29 mad. 519:
(3) [1917] I. L. R 40 Mad. 701.
637
performed did not operate as an acknowledgement. This deci-
sion too has no bearing on the facts of the present case.
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
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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 the-
letter (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 cor-
respondence 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
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is futile because the statements of account sent by him to
the appellancompany 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 suits.
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 of costs.
G.C. Appeals allowed.
640