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Gharabharan Vs. Sri Radha Kishan and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAllahabad High Court
Decided On
Case NumberFirst Appeal No. 499 of 1952
Judge
Reported inAIR1958All313
ActsLimitation Act, 1908 - Sections 19 - Schedule - Article 64; Contract Act, 1872 - Sections 25, 25(3), 62 and 182; Partnership Act, 1932 - Sections 18, 19 and 23
AppellantGharabharan
RespondentSri Radha Kishan and ors.
Appellant AdvocateKrishna Shanker, Adv.
Respondent AdvocateBrijlal Gupta, Adv. (for No. 1), ;B.L. Gaur and ;K.L. Misra, Advs.
DispositionAppeals dismissed
Excerpt:
.....article 64 of the limitation act. the words 'baqi dena raha (remains to be paid) in our opinion clearly import a promise to pay. iv is such as to clearly attract the provisions of section 25(3) of the contract act. the suit must, therefore, be held to be within limitation from this point of view, as well......a suit for recovery of money. the suit was filed by one radha krishna. defendant no. 1 in the suit was firm suraj mal ganesh das. defendants nos. 2 and 3 in the suit were gharbharan prasad & seth genesh das, partners of the firm suraj mal ganesh das defendant no. 1.2. the case of the plaintiff was that defendant no. 2 gharbharan prasad was the managing partner of the firm styled as firm suraj mal ganesh das, and in the course of the management of the said firm, he borrowed monies from the plaintiff at various times for the purposes of the firm. he had taken a loan of rs. 10,000/- on the 17th july, 1945, of rs. 3,000/- on the 7th august, 1945, of rs. 2000/- on the 13th august, 1945 and of rs. 5,000/- on the 26th of september, 1945.thus the plaintiff had advanced a total amount of rs......
Judgment:

N.U. Beg, J.

1. These are two connected appeals (F. A. No. 499 of 1952 and F. A. No. 40 of 1953) arising outof a suit for recovery of money. The suit was filed by one Radha Krishna. Defendant No. 1 in the suit was firm Suraj Mal Ganesh Das. Defendants Nos. 2 and 3 in the suit were Gharbharan Prasad & Seth Genesh Das, partners of the Firm Suraj Mal Ganesh Das Defendant No. 1.

2. The case of the plaintiff was that defendant No. 2 Gharbharan Prasad was the Managing partner of the firm styled as Firm Suraj Mal Ganesh Das, and in the course of the management of the said Firm, he borrowed monies from the plaintiff at various times for the purposes of the Firm. He had taken a loan of Rs. 10,000/- on the 17th July, 1945, of Rs. 3,000/- on the 7th August, 1945, of Rs. 2000/- on the 13th August, 1945 and of Rs. 5,000/- on the 26th of September, 1945.

Thus the plaintiff had advanced a total amount of Rs. 20,000/- as loan to the Firm of which defendants Nos. 2 and 3 were the partners. Defendants Nos. 2 and 3 were liable for the payment of the said amount of Rs. 20,000/- being partners of the Firm. It was further alleged that between the 5th of August, 1946, and the 9th September, 1948, defendants had paid Rs. 3,697/2/5 towards interest in various instalments. On the 9th September, 1948, an accounting was done between the parties and after defendant No. 2 had paid the interest due upto that date, a balance was struck and an amount arrived at as 'accountstated.'

An entry to that effect was made in the sarkhat Ext. 4. Below the entry, defendant No. 2 affixed his signature thereby acknowledging the liability and renewing the contract to pay. The defendants having failed to pay the amount, the present suit was filed by the plaintiff on the 1st of May, 1951, praying that a decree for Rs. 20,000/- as principal and Rs. 3,150/- as interest, in all a total sum of Rs. 23,150/- be passed against the defendants. A further prayer was also made for the award of the pendente lite and future interest and costs of the suit.

3. Both defendants Nos. 2 and 3 admitted that they were the partners of the firm Suraj Mal Ganesh Das. It is interesting to note thateach of the two defendants i. e., defendants Nos. 2 and 3, accused the other of colluding with the plaintiff. They contested the suit on variousgrounds.

4. Defendant No. 2 admitted the executionof the sarkhat. He also admitted the receiptof the amount of money, but he took the plea that the amounts evidenced by the sarkhat werenot given by way of loan, but they constituted an investment by way of capital by defendant No. 3 in the firm Suraj Mal Ganesh Das. This wasdone for the purpose of saving income-tax. He also pleaded that the firm Suraj Mal Ganesh Das had been dissolved on the 8th of December, 1948, and after accounting between the partners, the entire liability of the firm was taken over by defendant No. 3. He also pleaded the bar of limitation.

5. Defendant No. 3 pleaded that defendant No. 2 had no authority to contract any loan on behalf of the firm Suraj Mal Ganesh Das, and that, therefore, neither he nor the firm Suraj Mal Ganesh Das could be made liable for the payment of any such amount. He also alleged that the firm Suraj Mal Ganesh Das had been dissolved after the final accounting between the parties, and, after the said accounting, he had paid off his liability in cash. He could not, therefore, be made liable. He also pleaded that the suit was barred by time.

6. The trial court found that the amount in suit was advanced by way of loan by the plaintiff to the firm Suraj Mal Ganesh Das, that defendant No. 2 had authority to contract loans on behalf of the firm and that the suit was not barred by limitation. The trial court, accordingly, decreed the suit in toto.

7. Dissatisfied with the said judgment, the two first appeals have been filed in the High Court. First Appeal No. 499 of 1952 has been filed by defendant No. 2 and First Appeal No. 40 of 1953 has been filed by defendant No. 3. Both these appeals have been connected, and this judgment disposes of both the appeals.

8. Before us the learned counsel for theappellant has advanced two arguments. Firstly, he argued that no money was advanced by the plaintiff to the firm Suraj Mal Ganesh Das at all by way of loan. In fact, the money in respect of which the suit has been brought was an investment by defendant No. 3 in the firm. Secondly, he argued that, in any case, suit waa barred by limitation. The first question is one of fact and the second question is one of law.

9. We shall take up the question of fact first. (His Lordship after discussing the evidence continued).

Under the circumstances, we are of opinion that there are strong grounds for thinking that both the defendants are colluding with each other with a view to deprive the plaintiff of his just dues.

10. The lower court has commented on this part of the conduct of defendants Nos. 2 and 3 and has observed that they 'are both clever and shrewd businessmen. After having taken the loan from the plaintiff, the said defendants went to take undue advantage of the simplicity of the plaintiff and with this end in view they put up a show of difference amongst them. It would have been difficult for them, in the face of the Sarkhat in suit to join hands in a common defence.

They therefore thought of a clever device by putting forward separate defences which prima facedly disclosed an inter defendant's dispute. All this, to my mind, has been done with a view to suppress and conceal the available documentary evidence which, if produced, would have proved the true nature of the transaction in suit. In this attempt, however, the defendants failed.'

11. The question whether the money in suit was a loan by the plaintiff or an investment by defendant No. 3 was a simple question of fact and therefore, unless there are compelling reasons to persuade us to subvert the findings of the trial court on this point, sitting as a court of appeal we would be reluctant to do so. We do not think that sufficient grounds have been made out to incline us to hold that the finding given by the trial court on this question of fact is in any way improbable, unjust or incorrect.

We would, therefore, endorse the finding of the trial court and hold that the amount in dispute was a loan advanced by the plaintiff to the firm Suraj Mal Ganesh Das.

12. The next contention of the learned counsel of the appellant was that the suit was barred by limitation. On this point we are of opinion that Article 64 of the Limitation Act would apply to the present case and the suit cannot, therefore, be thrown out as barred by time. According to the plaintiff, the cause of action accrued in his favour on 9-9-1948, when the Sarkhat (Ext. 4) which is an 'account stated' came into existence, and the present suit, having been filed on the 1-5-1951, i. e., within three years of the accrual of the cause of action, is within time under Article 64 of the Limitation Act.

The only question, therefore, that arises in this connection is whether Sarkhat (Ext. IV) is a genuine 'account stated'. Having examined this document, we are of opinion that it is so. Ext. TV contains a series of entries. One set of these entries is on the left side and the other on the, right. The entries on the left side relate to the advances made to Gharbharan Prasad by way of loan. These entries are signed on behalf of the firm by Gharbharan Prasad. Gharbharan Prasad admitted in his evidence that the said entries from top to bottom were in his hand-writing.

He also admitted that the amounts mentioned therein were actually paid. The entries on the right hand side evidence payments of interest towards the advances of loans entered on the other side. Both the defendants Nos. 2 and 3 admitted that the entries on the right hand side were signed by the Munims of the firm. It appears that on the 9-9-1948, the parties met, and on that day, a balance was struck by setting off entries on the debit side, against the entries on the credit side, and, as a result of this process, Rs. 20,000-/ was found due to the plaintiff from the defendants.

This amount is stated in Ext. IV, as Rs. 20,000/- being the balance payable on Bhadon Sudi 6, Sambat 2005 i.e., 9-9-1948. This entry is signed as correct by Gharbharan Prasad on behalf of the firm. Having examined this document, we are of opinion that the document represents a true picture of 'account stated', and must be treated to be so. An attempt was made by the appellant's counsel to throw certain doubts on its genuineness, but, in view of the strong admissions made by both the defendants in respect of the contracts of this document, we find it difficult to endorse his contentions.

It was also attempted to be argued on behalf of the appellant that all the entries related to the single transaction of loan, and certain entries contained therein were themselves made after the limitation had expired. That, how ever, in our opinion, would not make any difference. Where the accounts contain a series of cross-entries, one evidencing payment of loans advanced at various times by the creditor and the other evidencing payment of amounts paid towards the same loans at various times by the debtor, and the parties agree to set one series of entries against the other, & after doing the same, finally arrive at an agreed balance, the final settlement of account thus made constitutes an 'ac-count stated.'

The fact that both the entries relate to the same transaction of loan does not take the transaction out of the category of 'account stated', nor does it make the transaction a unilateral one. Such a transaction is really a bilateral one as both the parties have met together and after mutual accounting in respect of the advances made by the one and payments made by the other have finally agreed by a joint application of their minds to treat a certain specific figure as the amount due on that date. Both the parties participating in this transaction have combined in finally adjusting their rights.

They have jointly co-operated in wiping off their previous or antecedent rights and liabilities and substituting therefor a new or a fresh right and liability. The procedure of surrender and discharge involved in such a transaction for the purpose of arriving at an agreed settlement is truly a bilateral one. The process of 'give and take,' which such a transaction demands from either side, itself constitutes a sufficient consideration which is enough to sustain the fresh agreement as valid in law.

Reference in this connection might be made to the case of Bishun Chand v. Girdhari Lal , in which their Lordships of the Privy Council have expounded the law in this regard. Then such an 'account stated' is signed by the party sought to be made liable or its duly authorised agent, the 'account stated' as envisaged in Article 64 is created. Such an 'account stated' gives rise to a new cause of action and a suit brought within three years of the date of such a cause of action is not barred by limitation. Such a suit cannot be thrown out on the ground that some of the items antecedent to the date of the 'accounts stated' were barred by limitation.

The previous rights and liabilities having been swept away by the concerted and agreed will and action of parties themselves, the previous items which formed the material for arriving at the agreed figure must, for the purposes of the suit, be eliminated from consideration, and a fresh cause of action be deemed to be born on the date on which such a transaction is entered into. In such a situation, it is not open to the court to re-open the closed transaction and to scrutinize the antecedent entries for the purpose of applying the bar of limitation. Such a procedure would be the very negation of the real purpose of 'account stated' and would constitute a violation of fundamental principles underlying the legal doctrine of 'account stated'.

In the present case, there is also no manner of doubt that this 'account stated' was signed by a partner of the firm. Every partner of a firm has in law an inherent right to do it, and must, therefore, be presumed to act as such. In the present case, it is further admitted that the partner concerned was the managing partner of the firm and is, therefore, found in fact to have actual power to act and sign on behalf of the firm. Under the circumstances, in our opinion, Ext. IV itself constitutes a sufficient answer to the plea of limitation. The plea of limitation must, therefore, fail on the ground of Article 64 of the Limitation Act.

13. This matter can also be approached from the stand-point of Section 25 of the Contract Act, Section 25(3) of the Contract Act lays down thatan agreement made without consideration is void unless 'it is a promise made in writing and signed by the person to be charged therewith or, by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.'

On behalf of the appellant it is argued that Section 25 of the Contract Act is not attracted as Ext. IV merely contains an acknowledgment of liability, and does not contain a promise to pay. A promise to pay, no doubt, is condition precedent to the applicability of Section 25 of the Contract Act. We are, however, unable to accede to the argument that Ext. IV does not contain a promise to pay.

This point involves a construction of the document Ext. IV. A perusal of Ext. IV would indicate that defendant No. 2 acknowledge the liability for payment of the sum of Rs. 20,000/-in the following words:

'Suraj Mal Ganesh Das rupaiya bis hazar paya so sahi baqalam Gharbharan Prasad partner'.

Further, defendant No. 2 stated in Ext. IV as follows:

'Bis hazar rupaiya Bhadon Sudi 6, Sambat 2005 baqi dena raha.'

This entry is signed by Gharbharan Prasad as partner of the firm after affixing four annas revenue stamp. The above statement in our opinion, constituted more than a mere acknowledgment of a liability. The words 'baqi dena raha (remains to be paid) in our opinion clearly import a promise to pay. Where after setting off the cross-entries against each other in this fashion, the parties arrive at an agreed figure, and further agree to be bound by the new contract, a novation of contract takes place.

The old contract is superseded by the new one, and a suit lies on the fresh contract independently of the old one. Even if certain items which were taken into consideration in the process of crystallisation of the rights and liabilities of the parties were barred by, limitation, it would not make any difference. The Indian Law of Contract which has made consideration an essential ingredient of contract has further made an exception in this regard in the case of debts barred by limitation. The equitable principle behind this exception is that it is open to a person to renounce the benefit of a law made for his own protection.

In any case, the situation that has emerged in view of the circumstances presented by Ext. IV is such as to clearly attract the provisions of Section 25(3) of the Contract Act. The suit must, therefore, be held to be within limitation from this point of view, as well.

14. It was further argued on behalf of the respondent that Sections 19 and 20 of the Limitation Act would also be applicable to the facts of the present case. Having already held, that both Article 64 of the Limitation Act and Section 25(3) of the Contract Act protect the plaintiff, a double shield is provided to the plaintiff against the plea of limitation. We do not, therefore, think it necessary to express any opinion on other aspects. The attack on the ground of limitation stands, therefore repelled, and the plea of limitation also falls to the ground.

15. For the above reasons, we are of opinion that there is no substance in these appeals. We, accordingly dismiss them with costs.


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