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Allied Trading Co. Etc. Vs. S.L. Verma - Court Judgment

LegalCrystal Citation
SubjectLimitation
CourtDelhi High Court
Decided On
Case NumberRegular First Appeal No. 30 of 1976
Judge
Reported in1984RLR102
ActsLimitation Act - Sections 19
AppellantAllied Trading Co. Etc.
RespondentS.L. Verma
Advocates: Bharat Inder Singh and; J.P. Gupta, Advs
Cases ReferredMurugiah v. Pakkiria
Excerpt:
.....before the learned trial judge. the present case, in our opinion, is clearly a case of 'money deposited' and not 'money lent'.the distinction between a 'loan' and a 'deposit' is subtle but real. the position will be different if the agreement specifies the point of time when, within which or after which the loan is to be repaid ;vide article 28 or 55. on the other hand, a deposit is when a person leaves funds available with him in deposit with another for safe custody or for some other specific purpose for a particular period of time or indefinitely. where it is deposited for an indefinite period of time, the depositee's only liability is to keep the money safe and return it with or without interest when called upon to do. on the other hand, the plaintiff had recently returned..........article 22 of the schedule. this provides the period of limitation in respect of a suit for money deposited under an agreement that it shall be payable on demand (including money of a customer in the hands of his banker so payable) and the period prescribed is three years from the date on which the demand is made. the present case, in our opinion, is clearly a case of 'money deposited' and not 'money lent'. the distinction between a 'loan' and a 'deposit' is subtle but real. a loan, broadly speaking, arises when a person, for his necessity generally, borrows moneys from another, promising to repay the loan with or without interest. the liability to repay arises from the moment the borrowing is effected and, conceptually, the debtor is expected to seek out the creditor and.....
Judgment:

D.K. Kapur, J.

(1) [APPELLANTS 3 & 4 are brothers. Wife of appellant 3 is sister of Respondent. Appellants 3, 4 & 5 are partners of App. 1 & 2. Respondent repatriated from Burma on 12.1.67. He sued appellants for recovery of Rs. 1 lac alleged to have been deposited on 1.4.67 evidenced by a written receipt. He further pleaded that Defts. paid him interest on 10.10.68 & 12.11.69 after deducting Rs. 1,200.00 as tax deducted at source and deposited in State Bank and as after that nothing was paid, he made a demand by letter of 6.9.71 and then sued Defts. on 14.7.72. The Defts. contended that alleged deposit receipt was without consideration ; that plaintiff came from Burma without any funds & could not bring any and had no money to deposit, that the documents had been obtained by the plaintiff by mis-representation and that the suit was barred by time. Trial Court held that there was consideration and the suit was within limitation. Defts. appealed against it to D.B. D.B. dismissed the appeal, holding :-

(2) The second issue regarding limitation was also decided by the learned trial Judge is favor of the plaintiff. It was not denied before him that the period of limitation was three years and the suit was brought within this period by having resort to Ext. P. 7, the payment of interest on 12.11.1969, acknowledged under Ext. Public Witness . 3/4 on 19.1.1970. Ext. P.W. 3/4 recorded the payment of interest & the question to be considered was on account of the debt incurred under Ex. P. 3/A. Trial Judge referred to the provisions of S. 19 of the Limitation Act, 1908 (reproduced in S. 18 of the Act of 1963) and judicial decisions there under cited on behalf of the defendants and agreed that, to save limitation under that section, a mere endorsement of payment would not be sufficient but that there must in addition be an acknowledgement of a subsisting liability. Such, however, was not the position u/s 19 of the 1963 Act. The learned Judge-pointed out that, u/s 19 of the 1963 Act, a payment on account of a debt had the effect of extending the period of limitation. The proviso to that section only required that an acknowledgement of the payment had to appear in the handwriting of, or in a writing signed by, the person making the payment. The acknowledgement need not show, on the face of it, that the payment was made on account of a particular debt, that could be proved by evidence aliunde. In the present case, the plaintiff had stated that he had been paid Rs. 12,000.00 towards interest in Oct., 1968 and again in Nov., 1969. The certificate Ext. P. 3 clearly states that the plaintiff was paid the interest of Rs. 12,000.00 in respect of the period 1.4.67 to 31.3.68. Again, in respect of the subsequent period the certificate Ext. P.W. 3/4 which was ultimately furnished by defendant 5 under the date 19.1.1970 shows the payment of Rs. 12,000.00 on 12.11.69 as interest to the plaintiff, after deduction of Rs. 1,200.00 by way of tax. Plaintiff has deposed that this was in respect of his debt. It is not the case of the defendants that there was any other debt due from the defendants to the plaintiff or any one else to which it could pertain. The payment of Rs. 12,000.00 could, thereforee, be reasonably inferred as payment on account of the debt under Ext. P.W. 3/1. If this payment of Rs. 12,000.00 was of interest on account of the debt under Ext. Public Witness . 3/1 and was made on 12.11.69, it would extend the period of limitation, since there was an acknowledgement of the payment (Ext. Public Witness . 3/4) in the handwriting of defendant 5 who has signed as partner of the defendant firm. A fresh period of limitation had, thereforee, to be computed from the time when payment was made. Suit having been filed on 14.10.72 within 3 years from 12.11.69 was thereforee very much within time......

(3) The learned trial Judge has held that in this case there has been a payment on account of the debt before the expiration of the prescribed period by the person liable to pay the debt or by his agent duly authorised in this behalf on 12.11.69 that this payment has been acknowledged in writing by Ext. P.W. 3/4 and that, thereforee, the suit filed within three years of that date has been filed within time. There can be no doubt, for the reasons already stated, that the payment by the defendants of a sum or Rs. 12,000.00 to the plaintiff on account of the debt on 12.11.69 has been established. We agree with the learned trial Judge that though the income tax deduction declaration (Ext. Public Witness . 3/4) does not show that the tax deduction at source is in respect of this particular debt, it is open to the plaintiff to show that the payment made to him on 12.11.69 was on account of this debt by leading other evidence. As we have already pointed out the declaration of tax deduction at source is inextricably linked up with the payment of Rs. 12,000.00 by way of interest on a debt owed by the defendants to the plaintiff whatever the sum may be. It is not the case of the defendants that they owed the plaintiff any other sum of money or paid any other amount to him by way of interest. On the other hand, the plaintiff has specifically deposed that this payment was towards this debt and, for reasons already discussed, this version deserves to be accepted. thereforee, there is clear evidence to show that the payment on 12.11.69 evidenced by the declaration dated 19.1.70 is a payment on account of this debt that is claimed by the plaintiff in suit.

(4) Learned counsel for the appellants, however, submits that the learned Judge has erred in arriving at the conclusion that this payment and its acknowledgement by Ext. P.W. 3/4 will save limitation as be has overlooked the provisions of S. 20 of Limitation Act, 1963. Counsel points out that while on the terms of S. 19, any 'payment made on account of a debt by the person liable to pay the debt or by his agent duly authorised in this behalf' would extend limitation provided' an acknowledgement of the payment appears......in a writing signed by the person making the payment,' this provision has to be read subject to the provisions of S. 20. S. 20(1) defines 'agent duly authorized in this behalf' in S. 19 in its application to certain types of cases with which we are not concerned here. S. 20(2) is, however, relevant to the present case. This sub section enacts : 'nothing in the said sections (i.e.. Section 18 & 19) renders one of several joint contractors, partners. executors or mortgagees chargeable by reason only of a written acknowledgement signed by, or of a payment made by, or the agent of, any other or others of them.' The argument of the learned counsel for the appellants is that by reason of this specific provision, the declaration dated 19.1.1970 cannot be treated as sufficient to extend the period of limitation for the simple reason that it is signed, not by all the partners of the firm, as has been the receipt but only by one of them. The consequence, runs the argument, is that the said declaration can, if at all, save limitation in respect only of the claim against defendant 5 who has signed the same but cannot operate to save limitation against the firms (defendant 1 & 2) or the third and fourth defendants who are co-partners of the person who has signed it. This point does not appear to have been raised before the learned trial Judge. We shall, however, proceed to consider this argument.

(5) For the purposes of the argument under consideration, we shall proceed on the assumption that the normal period of limitation for the claim in question is a period of three years from the date of the deposit, i.e. till 31.3.1970. This period, however, gets extended if one of two events take place before that date-(i) An acknowledgement of the liability in respect of the debt, made in writing signed by the debtor or an agent duly authorised in this behalf [Section 18(1) read with clause (b) of the Explanationn) ; or (ii) a payment on account of the debt made by the person liable to pay the debt or by his agent duly authorised in this behalf (Section 19). In the present case, event (i) has not taken place but event (ii) has, in view of our finding that the defendants have made payment of the interest due on the debt on 10.10.1968 and, again on 12.11.1969. But this alone is not sufficient to extend the period of limitation for the statute imposes two important restrictions on this provision for extension, one enacted in the proviso to S. 19 concerning event (ii) and the other common to both events enacted in S. 20(2) and both these restrictions have to be got over in the present case. The restriction u/s 19 is that part payment, to extend limitation, should not be dependant only on oral assertion; there should be some writing signed by the person making the payment acknowledging that payment. As pointed out by the learned trial Judge, this acknowledgement need not be contemporaneous with the payment; it need not, on its face, specify the debt or the nature of the part payment or the correlation between the two. All these can be proved by circumstantial or oral evidence. That being so, there are in the present case payments on account of debt made on 10.10.1968 and 12.11.1969, supported by the acknowledgements in writing, Ext. P. W. 3-and Ext. P.W. 3/4 dated 19.1.1970. The payment of 12.11.1969 will, thereforee, extend limitation by another three years from that date.

(6) What has been strenuously argued on behalf of the appellants, however, is that though the plaintiff can get over the restriction imposed in S. 19, he cannot get over the restriction placed by S. 20(2) on the ambit of S. 19. It is submitted that since that payment, as well as acknowledgement cannot bind the other co-partners, viz., defendants 3 & 4 or the firm. This argument proceeds on a misconception as to the exact scope of S. 20(2) of the Act. In our view and this is indeed settled by a number of judicial decisions-this sub-section does not enact an absolute rule that no partner can at all be bound for purposes of limitation by a payment or acknowledgement made by another partner. It only enacts that the mere fact that persons are partners is not sufficient to make one partner liable under an acknowledgement or payment by the other. The somewhat unusual phraseology of S. 20(2) which begins : 'nothing in the said sections renders...' and used the words 'chargeable by reason only' make it quite clear that the object of the sub-section is only to ensure that no such liability is to be imposed merely by reason of the relationship as partners between the person sought to be made liable and the person who makes the acknowledgement/ payment. It only means that the partner making the acknowledgement/payment should have express or implied authority to do so and that, in appropriate cases, it will be open to the co-partner to show that the acknowledgement/payment was without authority and should be held not to bind him. S. 20(2) says that sections 18 and 19 should not be so interpreted as to take away this right and to cast an automatic liability on the co-partner. The sub-section cannot be read as standing in the way of liability being imposed on the co-partner where acknowledgement or payment is made in the course of partnership business or in such circumstances as show, expressly or impliedly, that he was authorised to make the acknowledgement or payment on behalf of the other partner. Reference in this context may be made to Veeranna v. Veerabhadraswami Air 1919 Mad. 1140, F.B. Ratan Lal vs. Commercial and Industrial Bank Ltd. : AIR1965AP349 , S Vellaya Gounder V.R. Venkatatesa Chettiar (1968) 2 ML. 101, and Baidyanath Mandal vs. The Coal P.I. Agency {P) Ltd. in Liquidation : AIR1971Pat229 . To give a contrary interpretation and to hold that only the partner making an acknowledgement/payment will be affected by it in all circumstances will be to rob S. 18 and 19 of their essence viz. that a written acknowledgement/payment by a duly authorised agent will serve to extend the period of limitation. If such will be the effect in the case of acknowledgements/payments by agents of other principals, there is no logical reason why the same effect should not follow in the case of the agents described in S. 20(2) The truth, thereforee, is that the scope of S. 20(2) is really much more limited, as explained above, and it should not be interpreted on the lines suggested by the appellant's counsel. In the present case, the partnership was a running concern & Ext. Public Witness . 3/4 was supplied not to the plaintiff but to the Income-tax Officer, after he contacted the firm at the instance of the plaintiff, and in discharge of the firm's statutory obligations. There is, thereforee, no difficulty in holding that the acknowledgement of payment on 12.11.1969 evidenced by Ext. Public Witness . 3/4, though signed only by defendant 5 is sufficient to save limitation not only against him, but against the other defendants as well.

(7) We would like to say, however, that, in our opinion, the present case is not one governed by Article 19 of the Schedule to Limitation Act, 1963, as contended for the appellants and as assumed in the proceedings before the learned trial Judge. That article applies only to a case where money is lent and there is a suit for money payable in respect of the moneys so lent and the period of three years will be from the date on which the loan is made. A similar period of three years will also apply where money is lent under an agreement where it shall be payable on demand, vide Art. 21. But, in the present case, we think the transaction attracts Article 22 of the Schedule. This provides the period of limitation in respect of a suit for money deposited under an agreement that it shall be payable on demand (including money of a customer in the hands of his banker so payable) and the period prescribed is three years from the date on which the demand is made. The present case, in our opinion, is clearly a case of 'money deposited' and not 'money lent'. The distinction between a 'loan' and a 'deposit' is subtle but real. A loan, broadly speaking, arises when a person, for his necessity generally, borrows moneys from another, promising to repay the loan with or without interest. The liability to repay arises from the moment the borrowing is effected and, conceptually, the debtor is expected to seek out the creditor and discharge his liability. It makes no difference, in principle, if in such a case the loan agreement also says that the money shall, if not repaid otherwise, be repayable on demand. This situation is covered by Articles 19 & 21 in the schedule to the Limitation Act. The position will be different if the agreement specifies the point of time when, within which or after which the loan is to be repaid ; vide Article 28 or 55. On the other hand, a deposit is when a person leaves funds available with him in deposit with another for safe custody or for some other specific purpose for a particular period of time or indefinitely. Where it is deposited for an indefinite period of time, the depositee's only liability is to keep the money safe and return it with or without interest when called upon to do. His liability to repay arises, as in the case of relationship between banker and customer, only when called upon to repay the same. This is covered by Art. 22 in the Schedule. In both cases, a relationship of debtor and creditor springs up between the parties but this alone is not conclusive ; the real difference lies in the nature and circumstances of the transaction. In Suleman Haji Ahmed Umer v. Haji Abdulla , the Privy Council quoted with approval a passage from Lord Atkin in Mohammad Akbar Khan v. Attar Singh AIR 1936 Pc 171 where he had said :

'WAS this then a loan, or was it a deposit payable on demand It should be remembered that the two terms are not mutually exclusive. A deposit of money is not confined to a bailment of specific currency to be returned in specie. As in the case of a deposit with a banker it does not necessarily involve the creation of a trust, but may involve only the creation of the relation of debtor and creditor, a loan under conditions. The distinction which is perhaps the most obvious is that the deposit not for a fixed term does not seem to impose an immediate obligation on the depositee to seek out the depositor and repay him. He is to keep the money till asked for it. A demand by the depositor would thereforee seem to be a normal condition of the obligation of the depositee to repay.'

(8) In Ram Janki Devi v. M/s Juggilal Kamlapat : [1971]3SCR573 , the Supreme Court has pointed out that a case of deposit is something more than a mere lending of money and that it will depend on the facts of each case whether the transaction is a loan or one clothed with the character of a deposit (see also Annamalai v. Veerappa : AIR1956SC12 ). The surrounding circumstances, the relationship between the parties, the character of the transaction on and the manner in which the parties treated the transaction will throw light on the true legal character of the transaction. In the present case there is no evidence to show that the defts. were in need of money and that they needed to borrow a sum of Rs. 1 lakh from the plaintiff. Indeed the claim of the defendants is that they had ample funds and were not in need of any money for the purposes of their business. On the other hand, the plaintiff had recently returned from Burma with a large sum of money and before he could settle down in India and start looking out for proper investments for that sum of money it was only natural that he should look out for a place where he could invest it or leave it for purposes of safe custody. He could have deposited it in a bank. But, being on good relations with the defts. and having regard to their close mutual relationship, he decided to deposit the money with the defendant firm. There was no prescribed period by which the amount was repayable to him. It was not a deposit for any prescribed period. It was a case of deposit for safe custody any by way of investment. The idea of the parties was that the money should remain with the defendants and should be repayable to the plaintiff on demand. It has been held in Murugiah v. Pakkiria : AIR1928Mad499 that in cases of doubt a transaction can be presumed to be one of deposit rather than one of loan. But it is not necessary for the purposes of this case to rely on such general presumptions. The circumstances in which the deposit was made, the state of the plaintiff at the relevant time, the mutual relationship between the parties, the absence of any need on the part of the defendants to borrow money are all circumstances which show that the amount was by way of deposit. The defendants received the money not merely as debtors but as custodians of the money that they had received from the plaintiff. It is not necessary to refer to the numerous decided cases on the subject, as each case turns on its own facts. It is sufficient to say that, in our opinion, in the circumstances of the present case, the transaction by which the plaintiff gave a sum of Rs. 1 lakh to the defts. was a transaction by way of deposit of a certain sum which was repayable as and when demanded by the plaintiff. The case is, thereforee, clearly governed by Article 22....... The action was, thereforee, well within the period of limitation prescribed by Article 22.


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