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A.S. Krishnappa Chettiar and ors. Vs. Nachiappa Chettiar and ors. - Court Judgment

LegalCrystal Citation
CourtSupreme Court of India
Decided On
Reported inAIR1964SC227; [1964]2SCR241
ActsIndian Limitation Act, 1908 - Sections 15(1) and 19; Code of Civil Procedure (CPC),1908; Procedural Law; Substantive Law
AppellantA.S. Krishnappa Chettiar and ors.
RespondentNachiappa Chettiar and ors.
Cases ReferredIndora v. Sundar Singh Malha Singh Sanatan Dharma Rajput HighSchool Trust I.L.R.
.....the original decree cannot be saidto have been satisfied. since the decrees herein involved could not be regardedas having been satisfied they are still alive. 15(1) areapplicable to a case like the present one, mr. 6though it was clearly of opinion that s. the question is whether there is any well-recognized principlewhereunder the period of limitation can be regarded as being suspended becausea party is prevented under certain circumstances from taking action inpursuance of his rights. you arehereby informed that as you have not paid to the creditors the dividend amountsmy client is put to a heavy loss and that you are bound to bear all the lossesthat may be caused thereby and make good the losses;.....or that dividends paid to the appellants by the trustees in august,1949 operated to extend the time of limitation. 11. mr. viswanatha sastri, who appears for the appellants in these appeals,has raised only two contentions. the first is that the principle underlying s.15(1) of the limitation act is applicable to a case of this kind and that,therefore, the execution applications are within time. the second is that atany rate the letter dated april 19, 1949, written by the second defendant tothe trustees operates as an acknowledgment of liability under s. 19 of thelimitation act and, therefore, saves the limitation in respect of all theexecution applications except the one out of which c.a. no. 104 of 1961 arises.according to mr. sastri the composition of a decretal debt does not amount.....

Mudholkar, J.

1. This appeal and civil appeals Nos. 104, 106 and 107 of 1961 arise out ofexecution proceedings in four different suits but as they involve a commonquestion they were heard together by the High Court and by us. That question iswhether the execution applications out of which these appeals arise are withintime.

2. We propose to treat C.A. No. 105 of 1961 as a typical case. The relevantfacts thereof are briefly these :

In O.S. 46 of 1943 one RamanathanChettiar instituted a suit against one Venkatachalam Chettiar in the court ofthe Subordinate Judge of Devakottai, for the recovery of a sum of Rs. 10,285/-due on promisory note dated November 20, 1942 with interest thereon. Heeventually obtained a decree for the full claim. In so far as the seconddefendant is concerned, he was made liable for the decretal amount to theextent of this interest in the joint family property of himself and his father.The plaintiff assigned the decree in favour of Chidambaram Chettiar, who is theappellant in C.A. 105 of 1961. He filed an execution application but theexecution proceedings commenced by him proved infructuous because the firstdefendant was adjudicated an insolvent on February 27, 1945. On September 9,1946 a composition of the debts due from the insolvent and his son, the seconddefendant was arrived at. To the deed of composition the second defendant wasalso a party though he was not adjudicated an insolvent. Under that deed thecreditors, including the four appellants before us, agreed to take 40% of thedues, except one creditor who was to be paid a little more. The defendants, itmay be mentioned, had extensive money-lending business in Burma and the bulk oftheir property was situate in that country. Under the composition arrangement,the entire property of the defendants, both in India and in Burma was to vestin four trustees, one of whom was the insolvent, that is, the first defendantto the suit. Two of the trustees were the present appellants, ChidambaramChettiar and Krishnappa Chettiar, appellant in C.A. 104 of 1961. The fourthtrustee was an outsider. The total indebtedness of the defendants, asascertained on the date on which the composition was effected, was Rs.2,16,077/4/8/- but it was reduced under the arrangement to Rs. 86,430-13-3.There are four schedules to the composition deed. Schedule A sets out the namesof the creditors and the amounts due to them, Schedule B sets out theproperties of the defendants and Schedules C and D set out the properties atLeiwo and Meola respectively in Burma. The deed provides for the payment of thereduced amount by the trustees to different creditors from the income of theproperties or by sale or mortgage of those properties within four years fromApril 14, 1947. The deed further provides for the extension of this time limit'according to exigencies and necessity at the discretion of the first twotrustees' i.e., the first defendant and the appellant ChidambaramChettiar. The arrangement also provides for payment of interest at 5 annas permensem in respect of the amounts due on the decrees and 4 annas per mensem inrespect of other outstandings as from April 14, 1947. The compositioncontemplated the realisation of the dues of the creditors from the income orsale or mortgage of the Burma property, in the first instance. Clause 10 whichdeals with this matter runs as follow :

'In case the properties ofBurma firm are not sufficient to pay the amounts set apart as payable to thecreditors at 40 per cent the individuals Nos. 1 and 2 Trustees shall sell theproperties in British India and set out in the B schedule herein and from outof the sale proceeds distribute the amount to the creditors. Similarly, afterthe 40 per cent amounts have been paid and if there should be any amount ofdeficiency for the payment of the 60 per cent amount payable to KrishnappaChettiar as described in para 6 supra, even for that also, the individual Nos.1 and 2 Trustees shall sell the aforesaid British India properties and pay theaforesaid Krishnappa Chettiar the entire balance amount.'

3. The composition deed contains various other terms out of which it wouldbe relevant to set out only the following two :

'Clause 8 : Until 40 percent of the amount is paid to the creditors as aforesaid, the said Trustees,shall at the time of disbursement of the dividend, pay from the 1st Chitirai ofthe year Sarvajith for the annual expenses of the family, a sum of Rs. 600 perannum to individual No. 4 Trustees Venkatachalam Chettiar and a sum of Rs. 300per annum to his son Nachiappa Chettiar for the aforesaid expenses.

Clause 16 : After the annulmentof the order of adjudication herein, the aforesaid Venkatachalam Chettiarshall, in respect of transfer etc., of management of the properties mentionedin C and D schedules, execute a general power of attorney in the favour ofindividual Nos. 1 and 2 trustees and have the same registered.'

4. The composition scheme was accepted by the insolvency Court and theadjudication of the first defendant as insolvent was annulled by the court onDecember 19, 1946.

5. Due to political changes in Burma only very little was realised out ofthe Burma assets within the period of four years prescribed in the compositiondeed. The trustees who were empowered to extend the time did not extend it. Theappellants, therefore, turned to the Indian assets and sought execution oftheir decrees against them. Two contentions were raised on behalf of thedefendants. One was that the Indian assets could not be sold until the assetsin Burma were completely exhausted and the other was that the executionapplications were barred by time.

6. In O.S. No. 46 of 1943 the last execution application was dismissed onSeptember 19, 1946 (E.P. No 109 of 1946). No execution petition was filedthereafter till the present petition (E.P. No. 117 of 1952). This was filed onJune 13, 1952. Similarly in the remaining three appeals also executionapplications with which we are concerned were filed more than three years afterthe dismissal of the previous execution applications. It may be mentioned thatoriginally the appellant as well as appellants in the other appeals had soughtthe execution of their respective decrees for the full amount. But they amendedtheir petitions later on pursuant to the orders of the court and restricted theirclaims to 40 per cent of the amounts due under their decrees. The appellantChidambaram filed an affidavit along with the execution petition and set outthe following grounds in support of his contention that the executionapplication was within time.

'The trustees were able torealise some of the assets of the defendants, in Burma and to pay a dividend of10 per cent to the creditors. I was paid a sum of Rs. 562-4-0 by way ofdividend for this decree on August 10, 1949. As the rest of the Burma assets ofthe defendant could not be realised by the trustees on account of the civil warin Burma and the land legislations passed there and as there was no prospect oftheir being realised in the near future myself and A. S. K. Krishnappa Chettiaraforesaid as managing trustees under the said composition offered to extend theperiod of management by one year provided the defendants would consent to theirIndian assets being realised and distributed among the creditors. But thedefendants were not willing thereto and hence we thought fit to extend theperiod of our management. We have filed a petition in I.A. No. 87 of 1951 inthe suit I.P. No. 1 of 1945 to have the said composition scheme set aside andthe 1st defendant re-adjudged as insolvent. The said petition is pending.

7. I am advised that as the saidcomposition arrangement has failed on account of the assets of the defendantsnot being realised and the debts discharged within the four year periodmentioned therein I am in law and in equity entitled to recover the entireamount due to me under this decree by executing it.

8. The said composition providesfor a maintenance allowance of Rs. 600 and Rs. 300 annually being given to the1st and 2nd defendant respectively at the time of distribution of the dividends.In respect thereof a notice was issued by the 2nd defendant on April 19, 1949to myself and A. S. K. Krishnappa Chettiar aforesaid wherein there is anacknowledgment of liability in respect of the several debts mentioned in thesaid composition. Further the trustees have, acting under the authority givento them by the defendants under the said composition, paid me Rs. 562-4-0 onAugust 10, 1949 by way of dividend for this decree and have duly entered thesame in the accounts maintained by them. Moreover I could not execute thedecree during the four years from April 14, 1947 or any extended period duringwhich the trustees had to manage, realise and distribute the assets of thedefendants. There is therefore no question of limitation.'

7. Similar grounds were set out in the affidavits filed by the otherappellants also.

8. It may be mentioned that in each of the execution applications relief wasclaimed only against the second defendant because in insolvency petition No. 87of 1951 filed by some of the creditors the first defendant, was readjudicatedan insolvent by the court on August 3, 1954. The execution application was, asalready stated, opposed by the second defendant firstly on the ground that thecomposition arrived at between him and his father on the one hand and thecreditors on the other was still in force, that the arrangement was irrevocableand operated as a complete discharge of the liability of the defendants for alltime. The second ground was that the execution application was barred by time.The precise pleas of the second defendant regarding limitation were as follows:

(a) that the adjudication of hisfather as an insolvent and the pendency of insolvency proceedings against himwould not affect limitation in so far as he was concerned;

(b) that the receipt by theappellant and other creditors of certain amounts as dividends in August, 1949would not extend the period of limitation for execution proceedings;

(c) that the acknowledgmentrelied upon is 'wholly wrong, misconceived and untenable.'

9. According to him there was no acknowledgement of liability of any kind inthe notice referred to in the affidavit much less the liability of the seconddefendant to discharge the decree which had in fact become extinguished andeffaced by reason of the composition arrived at on September 9, 1946.

10. In the course of the arguments before the executing court it was urgedon behalf of the appellants in those appeals that the four years within whichthe trustees were required to realise the Burma properties and pay off thedebts of the creditors must be regarded as a period during which the executionof the decrees was stayed and that consequently on the principles underlying s.15 of the Indian Limitation Act, 1908, that period should be deducted fromcomputing the period of limitation for preferring execution applications. The SubordinateJudge, before whom the execution applications were filed, upheld thiscontention and held that the execution applications were within time. He alsoheld that the execution applications arrived at between the parties operated asan adjustment of the decree on the date on which that composition was effectedor from the date on which the adjudication was arrived at and that though thecomposition could not be certified to the executing court under O. XXI, r. 2,C.P.C. within the time permitted by law, it could be certified even now at theinstance of the decree-holder because it was open to the decree-holder tocertify an adjustment at any time he liked. According to the learnedSubordinate Judge, the adjustment precluded each of the appellants from executinghis decree for a period of four years from April 14, 1947 and, therefore, theexecution applications were within time. The High Court, however, disagreedwith the Subordinate Judge on both the grounds and holding that the executionpetitions were barred by time allowed the appeals. It may be mentioned thatneither of the two courts below has considered the contention of the appellantsin these appeals that the letter dated April 19, 1949 sent by the seconddefendant to two of the trustees operated as an acknowledgment of theirliability or that dividends paid to the appellants by the trustees in August,1949 operated to extend the time of limitation.

11. Mr. Viswanatha Sastri, who appears for the appellants in these appeals,has raised only two contentions. The first is that the principle underlying s.15(1) of the Limitation Act is applicable to a case of this kind and that,therefore, the execution applications are within time. The second is that atany rate the letter dated April 19, 1949, written by the second defendant tothe trustees operates as an acknowledgment of liability under s. 19 of theLimitation Act and, therefore, saves the limitation in respect of all theexecution applications except the one out of which C.A. No. 104 of 1961 arises.According to Mr. Sastri the composition of a decretal debt does not amount toan adjustment or satisfaction of a decree until the acts required to be donethereunder have been performed. Here the composition scheme required payment of40 per cent of the decretal debts by the trustees to the craditors. Accordingto him, until that condition was fulfilled the original decree cannot be saidto have been satisfied. Since the decrees herein involved could not be regardedas having been satisfied they are still alive. Then, according to Mr. Sastri,where a composition scheme prescribes the period during which a condition hasto be performed, till the expiry of the period or performance of the conditionthe operation of the decrees must be deemed to have been stayed. For, duringthis period it would be incompetent to the decree-holders to execute theirdecrees. Such period could therefore be deducted by applying the principlesunderlying s. 15(1) of the Limitation Act from computing the period oflimitation for filing a fresh execution application. He concedes that here thecomposition scheme not having been certified to the execution court, thedefendants would not have been able to resist an execution application if madewithin the period of four years specified in the deed of composition. But thecomposition being binding on the appellants, that would have laid themselvesopen to suits for damages at the instance of the defendants if they hadproceeded to execute their decrees within this period. Section 15(1) of theLimitation Act runs thus :

'15 (1) : In computing the period of limitationprescribed for any suit or application for the execution of a decree, theinstitution or execution of which has been stayed by injunction or order, thetime of the continuance of the injunction or order, the day on which it wasissued or made, and the day on which it was withdrawn, shall be excluded.'

12. It is clear from its terms that it is restricted in its application to acase where the execution of a decree has been stayed by an injunction or anorder. By no stretch of imagination can it be said that the acceptance by theinsolvency court of the composition operated as a stay of execution of thedecrees for the period of four years referred to in the deed or as an injunction.Further, the second defendant was not a party to the insolvency proceedings andcould, therefore, not have been entitled to the benefit of the order of thecourt accepting the scheme of composition.

13. In support of his contention that the principles underlying s. 15(1) areapplicable to a case like the present one, Mr. Sastri has strongly relied onthe decision in Govindnaik Gurunathnaik v. Basawannawa Parutappa I.L.R. 1941 Bom. 435.. There, Beaumont C.J., has observed at p. 437 :

'Section 15 of the Act recognizes the principlethat in computing the period of limitation prescribed for an application forthe execution of a decree, any period during which the execution of the decreehas been stayed must be excluded; and it would certainly seem right to apply asimilar principle to applications in a suit which has been stayed; in terms,however, the section does not apply. The only authority on the point, to whichwe have been referred, and which was referred to in the lower Courts, is PulinChandra Sen v. Amin Mia Muzffar Ahmad : AIR1933Cal508 .'

14. Saying that this decision had stood for some years and had not beendissented from the learned Chief Justice observed :

'I would rather base the appellant's case on theground that the right to apply for a final decree was suspended during theperiod in which the suit was stayed. Such a principle was applied by theCalcutta High Court in Lakhan Chunder Sen v. Manhusudan Sen I.L.R. (1907) Cal. 209. affirmed by the Privy Council in Nrityamoni Dassi v. Lakhan ChandraSen. I.L.R. (1916) Cal. 660.'

15. It would thus appear that the learned Chief Justice based his decisionreally on s. 14 of the Limitation Act. In both the cases referred to by thelearned Chief Justice the provisions of s. 14 of the Limitation Act wereapplied.

16. In Pulin Chandra Sen's case : AIR1933Cal508 , the facts werethese. The next friend of a minor instituted a suit upon a mortgage but diedafter the preliminary decree was passed. No new next friend was, however,appointed in his place. The minor made an application for passing a finaldecree within 3 years after attaining majority, but three years after theperiod of grace fixed by the preliminary decree. The High Court, while holdingthat though the erstwhile minor was not entitled to claim the benefit of s. 6of the Limitation Act, held that the execution application must be regarded aswithin time since it had been made within three years from the date when theright to apply accrued to him on his attaining majority. No doubt, this is acase where in effect the court has applied the principles underlying s. 6though it was clearly of opinion that s. 6 in terms did not apply. There is nodiscussion of the point at all and, therefore, we do not think that this is adecision which needs to be considered.

17. The next two decisions relied on are Badruddin Khan v. Mahvar KhanI.L.R. 1939 All 103 and Managing Committee Sundar Singh Malha Singh RajputHigh School, Indora v. Sundar Singh Malha Singh Sanatan Dharma Rajput HighSchool Trust I.L.R. 1945 Lah. 8.. In both these cases the court applied whataccording to it were the general principles underlying s. 15 of the LimitationAct, though the facts of these cases do not strictly fall within the purview ofthat section. The question is whether there is any well-recognized principlewhereunder the period of limitation can be regarded as being suspended becausea party is prevented under certain circumstances from taking action inpursuance of his rights. The Limitation Act is a consolidating and amendingstatute relating to the limitation of suits, appeals and certain types ofapplications to courts and must, therefore, be regarded as an exhaustive Code.It is a piece of adjective or procedural law and not of substantive law. Rulesof procedure, whatever they may be, are to be applied only to matters to whichthey are made applicable by the legislature expressly or by necessaryimplication. They cannot be extended by analogy or reference to proceedings towhich they do not expressly apply or could be said to apply by necessaryimplication. It would, therefore, not be correct to apply any of the provisionsof the Limitation Act to matters which do not strictly fall within the purviewof those provisions. Thus, for instance, period of limitation for various kindsof suits, appeals and applications are prescribed in the First Schedule. Aproceeding which does not fall under any of the articles in that schedule couldnot be said to be barred by time on the analogy of a matter which is governedby a particular article. For the same reasons the provisions of Sections 3 to 28 ofLimitation Act cannot be applied to situations which fall outside theirpurview. These provisions do not adumbrate any general principles ofsubstantive law nor do they confer any substantive rights on litigants and,therefore, cannot be permitted to have greater application than what isexplicit or implicit in them. Suspension of limitation in circumstances of thekind obtaining in these appeals is neither explicit nor implicit in s. 15 uponwhich reliance is placed on behalf of the appellants. We are, therefore, unableto accept the first argument of Mr. Sastri.

18. Coming to the second argument of Mr. Sastri it would be useful toreproduce the relevant portion of the letter dated April 19, 1949, on whichreliance is placed :

'The properties of our client's family and hisfather, Venkatachalam Chettiar's share of properties have vested in you in thecapacity of Trustees as per the composition scheme of arrangement effected onSeptember 9, 1946 and you are managing the same, and you have to pay Rs. 300per annum to our client from 1st Chitrai of Sarvajit year (April 14, 1947) forhis family expenses as provided in the scheme of composition and you have paidRs. 300 and for the year Sarvajit and have obtained a receipt therefore from myclient. You have not paid the sum of Rs. 300 due for the year Sarwadhari to ourclient though he demanded you many times. As it is learnt that individual No. 2out of you, are raising non-maintainable objections and the sum of Rs. 300 duefor the year Virodhi, still remains to be paid, I have been given instructionsto demand the total amount of Rs. 600 payable for the aforesaid years. So youshould pay the amount to my client and obtain a receipt therefore within oneweek after the receipt of this notice. Further you have till now collected Rs.17,500 as per the scheme of arrangement and though you have received the amountlong time ago, you have not paid to the creditors their dividend amounts, youare bound by law and equity to pay interest to the aforesaid amounts. You arehereby informed that as you have not paid to the creditors the dividend amountsmy client is put to a heavy loss and that you are bound to bear all the lossesthat may be caused thereby and make good the losses; you should immediately payoff the creditors the dividends and in default my client will have to launchproceedings against you and seek reliefs through Court.'

19. This letter was written by the vakil of the second defendant to theTrustees demanding payment of the maintenance allowance due to the seconddefendant. The second object of this letter was to require the trustees to payout of the funds in their hands dividends due to the various creditors underthe composition scheme. Mr. Sastri contends that this letter contains adefinite admission of the jural relationship between the defendant on the onehand and the creditors on the other - i.e., the relationship of creditor anddebtor and, therefore, this is an admission of liability under the decrees.Relying upon the decision of this Court in Khan Bahadur Shapoor Freedom Mazdav. Durga Prosad Chamaria : [1962]1SCR140 , he says that the essentialrequirement for sustaining a plea of acknowledgment under s. 19 of theLimitation Act is that the statement on which it is sought to be founded mustrelate to a subsisting liability, indicate the existence of jural relationshipand must be intended, either expressly or impliedly, to admit that jural relationship.Where such jural relationship is admitted expressly or impliedly, he contends,that the mere fact that the precise nature of the liability is not mentionedwould not prevent the acknowledgment from falling within s. 19. That was a casein which the mortgagor had written to his creditor a letter to the followingeffect :

'My dear Durgaprosad,

Chandni Bazar is again advertisedfor sale on Friday the 11th inst. I am afraid it will go very cheap. I had aprivate offer of Rs. 2,75,000 a few days ago but as soon as they heard it wasadvertised by the Registrar they withdrew. As you are interested why do you nottake up the whole. There is only about 70,000 due to the mortgagee - a paymentof 10,000 will stop the sale.

Yours sincerely,

Sd/ J. C. Galstaun.'

20. The question to be considered was whether this amounted to anacknowledgment of the mortgagee's right. This Court held that it did amount toan acknowledgment and observed thus :

'It is thus clear that acknowledgment as prescribedby s. 19 merely renews debt; it does not create a new right of action. It is amere acknowledgment of the liability in respect of the right in question; itneed not be accompanied by a promise to pay either expressly or even byimplication. The statement on which a plea of acknowledgment is based mustrelate to a present subsisting liability though the exact nature or thespecific character of the said liability may not be indicated in words. Wordsused in the acknowledgment must, however, indicate the existence of jural relationshipbetween the parties such as that of debtor and creditor, and it must appearthat the statement is made with the intention to admit such jural relationship.Such intention can be inferred by implication from the nature of the admissionand need not be expressed in words. If the statement is fairly clear then theintention to admit jural relationship may be implied from it. The admission inquestion need not be express but must be made in circumstances and in wordsfrom which the court can reasonably infer that the person making the admissionintended to refer to a subsisting liability as at the date of the statement. Inconstruing words used in the statements made in writing on which a plea ofacknowledgment rests oral evidence has been expressly excluded but surroundingcircumstances can always be considered. Stated generally courts lean in favourof a liberal construction of such statements though it does not mean that whereno admission is made one should be inferred, or where a statement was madeclearly without intending to admit the existence of jural relationship suchintention could be fastened on the maker of the statement by an involved orfar-fetched process of reasoning. Broadly stated that is the effect of therelevant provisions contained in s. 19, and there is really no substantialdifference between the parties as to the true legal position in thismatter.'

21. In our opinion, this case is not of assistance to the appellants. In theappeals before us though there was a personal liability on the defendants underthe various decrees, their liability which was created by the composition deedwas only on properties in which they had, consequent on the creation of a trustunder the composition deed, only a beneficial interest. This new liability hadto be discharged by the trustees in whom the legal title to the propertyvested. Thus there were two different sets of persons who were liable, thedefendants and the Trustees and their respective liabilities were distinct.What the defendant No. 2 has referred to is the liability of the Trusteesarising under the terms of the deed of composition and could be enforced onlyagainst them. To refer to a liability resting on someone else is not toacknowledge one's own liability within the meaning of the word in s. 19. Thedefendant No. 2 has not even indirectly referred to the decree much less to theliability arising under any of them. In the circumstances we must hold thatthis letter does not extend the period of limitation. For these reasons we upholdthe decision of the High Court and dismiss each of these appeals with costs.There will, however, be only one hearing fee.

22. Appeals dismissed.

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