1. This appeal is from the judgment of Law, J. dated 21st September, 1964 by which the appellant's suit was dismissed.
2. The appellant filed the suit against the defendants and claimed a decree of RS. 8602.00. The defendants are Fatehchand Kanoi and Abirchand Kanoi They are described as residing and/or carrying on business at Sujangarh in the State of Rajputana. The appellant and his eldest brother Manickchand Saraogi in their business of Manickchand Durgaprosad had dealings and transactions with the defendants The transactions are alleged to relate to buying and selling of jute and other goods. The transactions are alleged to be prior to S. Y. 2015 corresponding to 1957-1958 The further allegations of the appellant are that the accounts between the appellant and his brother Manickchand Saraogi on the one hand and the defendants on the other were gone into and finally settled and adjusted. Fatehchand Kanoi for himself and as agent of his son Abirchand Kanoi is alleged by the appellant to have agreed at Calcutta to pay to the plaintiff one half of the amount due together with interest. The appellant alleged in the plaint that the defendant Fatehchand Kanoi for himself and as authorised agent of his son Abirchand Kanoi acknowledged and/or entered the sum due as alleged in the plaint to the plaintiff unconditionally in a writing signed by him for self and as authorised agent of Abirchand Kanoi. In paragraph 4 of the plaint the appellant alleged that the sum of Rs. 8602.00 was due and owing on the basis of the accounts adjusted or settled.
3. The defendants filed separate written statements. The defendants appeared at the trial. Various issues were raised on behalf of the defendants. The defences will appear from the issues raised Broadly stated, the defences were first, that there was no transaction between the appellant and his brother on the one hand and the defendants on the other as alleged in the plaint. Secondly, that there was no settlement or adjustment of account. Thirdly, that Fatehchand did not agree to pay to the appellant the share. Fourthly, that there was no consideration for the writing referred to in the plaint. Fifthly, that Fatehchand did not have any authority. Sixthly, the authority of Fatehchand was questioned and the dissolution of the firm Manickchand Durgaprosad was also questioned in the written statement. Seventhly, it was pleaded that according to the practice or usage of the firm of Manickchand Durgaprosad, accounts used to be sent to the business of defendants for signature for submission to the Income-Tax and Sales Tax Authorities and further, it was the practice and usage of the defendants to sign such papers.
4. Oral evidence was adduced by the plaintiff. The defendants did not adduce any oral evidence.
5. The learned Judge came to the conclusion that there was no transaction between the appellant and the appellant's brother on the one hand and the defendants on the other. Assuming there was transaction, the learned Judge came to the conclusion that there was no adjustment of accounts. The learned Judge came to the conclusion that the evidence did not establish that there was any settlement between the parties and that at best it could be said to be an acknowledgment by Fatehchand Kanoi. The learned Judge further came to the conclusion that Ext. A, namely, the document relied on in the plaint could not be accepted as account stated. If it were not an account stated but a mere acknowledgment, the learned Judge came to the conclusion that it did not amount to promise to pay and it fell within the mischief of the provisions contained in Section 25(3) of the Contract Act
6. The only contention which was advanced on behalf of the respondent in this appeal was whether Ext. A in the present case could form the basis of the plaintiff's suit. Counsel on behalf of the respondent contended that Ext. A was not an account stated within the meaning of the words 'account stated' occurring in Article 64 of the old Limitation Act and therefore, it would not provide cause of action Secondly, it was said that Ext. A was a mere acknowledgment and therefore it would not be the basis of a cause of action Thirdly it was said that if it was an acknowledgment, there was the mischief of limitation and the appellant's suit was liable to be dismissed.
7. The oral evidence of Durga Prosad Saraogi is as follows. Since the year 1954-55 the defendants used to send goods to the appellant and his brother. The goods used to be sent from Thakurgunge and the appellant sold the goods. The business of Fatehchand Kanoi and Abirchand Kanoi was carried on in the name of Fatehchand and Abirchand Kanoi. The business was at Thakurgunge. Durgaprasad Saraogi had personal knowledge of the transactions Durga Prosad's further evidence was that there were accounts in the name of Fatehchand Abirchand Kanoi. Fatehchand was the father and Abirchand was the son and it was their joint family firm and the father and the son used to do business jointly. In 1956 the firm Manickchand Durgaprosad was closed. Manickchand Durgaprosad had transactions with Fatehchand Abirchand Kanoi. Durgaprosad and Manickchand were partners. After the dissolution of the firm Manickchand Durgaprosad, accounts were adjusted at a sitting with Fatehchand Kanoi and Abirchand Kanoi at Calcutta. The date of dissolution of Manickchand Durgaprosad was given by the witness to be the Ratha Jatra Day of the accounting year 1956. It will also appear from the materials on record that the Ratha Yatra festival was on 9th July in the year 1956. Durgaprosad said that accounts were adjusted between him and Manickchand Babu on the one hand and Fatehchand Babu and Abirchand Babu on the other. The accounts were adjusted at 16 Broja Dulal Street, Calcutta.
8. The witness Durgaprosad was shown the plaintiff's document No 1. At the top of the document the words written 'Durgaprosad Saraogi' were said by the witness Durgaprosad to be in the handwriting of Fatehchand. The signature of Fatehchand on the plaintiff's document No. 1 was proved by Durgaprosad The rest of the document was said by Durgaprosad to be in the handwriting of Manickchand Saraogi. When the plaintiff's document No 1 was written by Manickchand Babu. Durgaprosad said that Fatehchand Babu and Abirchand Babu were there. Accounts were gone into and adjusted on a particular day and it was agreed that it would be written out in the document afterwards. The further evidence was that it was decided that the document would be sent to Fatehchand Babu and Abirchand Babu, but it was not sent When Fatehchand Babu and Abirchand Babu came to Calcutta, it was signed. Durgaprosad said that two copies of the plaintiff's document No. 1 were prepared. On one copy the name of Manickchand Babu was written and was given to him and on the other the name of Durgaprosad was written and was given to Durgaprosad Durgaprosad said in question 40 that accounts were looked into by the parties and were adjusted. By the parties, Durgaprosad meant Manickchand Durgaprosad, Fatehchand and Abirchand Kanoi. In question 42 Durgaprosad said that after the accounts were gone into, a sum of Rs. 13,180-1-0 was found due and payable by Fatehchand Abirchand to the firm of Manickchand Durgaprosad. After that some time elapsed and one year's interest was calculated and recorded in the document which was signed by Fatehchand. The rate of interest was said by Durgaprosad to have been agreed upon at the time when the accounts were taken. The rate of interest was nine annas per hundred rupees per month. In question 50 Durgaprosad said that after accounts were gone into the documents were prepared. Durgaprosad was asked as to the time upto which the firm Manickchand Durgaprosad had transactions with Fatehchand Abirchand. Durgaprosad said that the firm started business in the month of Ashar Sudi 2011 and thereafter it took some time for winding up. On this evidence Ext A was tendered. Durgaprosad said that the document Ext. A was signed on Chail Sudi 9. S. Y. 2016 The witness said that the whole amount was due and nothing was paid
9. Counsel on behalf of the respondent contended that, there was no evidence that Fatehchand was not an authorised agent The oral evidence of Durgaprasad was not controverted by any evidence on behalf of the defendants that Fatehchand did not have authority. Another contention was advanced by counsel for the respondent that the plaintiff did not prove that there were dealings and transactions in relation to buying and selling The oral evidence of Durgaprasad that there were dealings and transactions of buying and selling has not been displaced by any other oral evidence
10. The document on which rival contentions were advanced is Ext. A which will appear at page 125 of the Paper Book. That document shows at the top the name of Durgaprosad Saraogi. Thereafter there is description of account of Fatehchand Abirchand Kanoi On the right hand various amounts are shown At the foot the words are 'balance payable' and there is the signature of Fatehchand Kanoi. The document was signed on Chait Sudi 9, S. Y 2016 corresponding to 17th April 1959
11. Counsel for the respondent contended that inasmuch as there were only entries on the right hand and there were no entries on the left hand, the document did not amount to what is described as an account stated but that it was a mere acknowledgment Counsel for the appellant on the other hand contended that evidence in the present case is that there were dealings and transactions, there were amounts due by one party to the other, there were sittings and discussions at which accounts were gone into there was an agreement between the parties as to the amount that was found due and the document tendered in evidence being Ext A in the context of the entire evidence shows that the appellant is entitled to succeed in the suit.
12. The two classic decisions on the meaning and character of the words 'account stated' are the decisions of the Judicial Committee in E.R. Siqueira v. Noronha reported in AIR 1934 PC 144 = 38 Cal WN 813 and Bishun Chand v. Girdhari Lal, reported in 61 Ind App. 273 also reported in 38 Cal WN 961 and in . The earlier decision is 38 Cal WN 813=(AIR 1934 PC 144) and the decision of Bishun Chand's case is later in point of time. In the case of AIR 1934 PC 144 the plaintiff claimed on the allegations that he joined the business of Siqueira and worked under Rodrigues who happened to be the brother-in-law of Noronha and the brother of Mrs Siqueira. Siqueira carried on business at Nairobi. Siqueira died in the year 1911 leaving as his widow Mrs. Siqueira, From about 1913 to 1932 Mrs. Siqueira's business was conducted by her brother Rodrigues under a power of attorney. Noronha was employed in the business from 1913 to 1928. During the whole of the time the plaintiff's salary had not been settled though there was an understanding that he should get something not less than what he had been getting before which was Rs. 150/- per month. In 1922 Rodrigues became a partner. In 1930 the business was wound up. In January 1928 the plaintiff Noronha left his employment by an agreement and went to India. Before the plaintiff went, he asked Rodrigues for a statement of his account During the period the plaintiff worked, he had made drawings of different amounts which he had entered in the books. Noronha had sometimes provided cash for Mrs. Siqueira in respect of her requirements. Eventually in March 1928 Rodrigues sent a document which was headed 'In account with B. C. Siqueira, Nairobi and Mombasa' and was dated 27th March 1928. The document began with an entry, 'By balance due on 31st December 1921.' Thereafter accounts for ensuing six years containing debits and other credits were entered. With regard to the year 1923 there were debits and there was also credit by way of salary The last year contained as a credit item salary and bonus The document ended with these words; 'By balance in your favour on 31-12-27, 42. 458.84' Rodrigues put two stamps of 10 cents On this document the question arose as to whether the claim of the plaintiff could be sustained. It was said that the account went back to the period from 1913 and therefore the acknowledgment that was made was not an acknowledgment during the period of limitation A question also arose as to whether under Section 25 of the Contract Act document should amount to a promise to pay. Lord Atkin said that in that particular case the account stated was in fact an account from which there arose a promise made for good consideration to pay the balance shown in the account.
13. The other aspect in Noronha's case is the discussion of the words 'account stated' by Lord Atkin. I can do no better than quote the observations of Lord Atkin Lord Atkin said:
'Their Lordships think that what has been forgotten is that there are two forms of account stated. An account stated may only take the form of a mere acknowledgment. of a debt, and in those circumstances, though it is quite true it amounts to a promise and the existence of a debt may be inferred, that can be rebutted and it may very well turn out that there is no real debt at all, and in those circumstances there would be no consideration and no binding promise.
But on the other hand, there is another form of account stated which is a very usual form as between merchants in business in which the account stated is an account which contains entries on both sides, and in which the parties who have stated the account between them have agreed that the items on one side should be set against the items upon the other side and the balance only should be paid: the items on the smaller aide are set off and deemed to be paid by the items on the larger side, and there is a promise for good consideration to pay the balance arising from the fact that the items have been so set off and paid in the way described'
14. Lord Atkin referred to the observations of Viscount Cave in the case of Camillo Tank Steamship Company Limited v. Alexandria Engineering Works reported in (1921) 38 TLR 134 which elucidated what Lord Atkin described to be another form of account stated
15. Counsel for the respondents contended that if Ext. A in the present case fell within what Lord Atkin described to be another form of account stated, the appellant's claim would be well founded, but the appellant's document did not contain entries on both sides and therefore, it was not an account stated. The other observations were contended by counsel for the respondents to mean that Lord Atkin described an account stated to be a mere acknowledgment of a debt when the account did not contain entries on both sides and mere acknowledgment of debt unless it was made within the period of limitation would be incapable of providing a cause of action or sustaining a claim. To accede to the contention of counsel for the respondents would be to overlook the inimitable words of Lord Akin which even at the risk of repetition I would quote 'an account stated may take the only form of mere acknowledgment of the debt.' Reference must be made to the words 'only' and 'form' Lord Atkin said that there are two forms of account stated and an account stated might only take the form of a mere acknowledgment The observation that the account stated might take the form of a mere acknowledgment of a debt does not mean, as counsel for the respondents contended, that it was a mert acknowledgment of debt. It only took that form. The verb 'take' should also not be lost sight of. It would be wrong to suggest that when Lord Atkin said that an account stated might only take the form of a mere acknowledgment. Lord Atkin did not mean that such a document was not an account stated.
16. In the case of Lord Wright referred to the observations of Lord Atkin in AIR 1934 PC 144, the observations of Viscount Cave in the case of (1921) 38 TLR 134. and the observations of Blackburn, J. in Laycock v. Pickles reported in (1863) 4 B. & S. 497 and then gave the meaning of account stated as follows:
'Indeed, the essence of an account stated is not the character of the items on one side or the other, but the fact that there are cross items of account and that the parties mutually agree the several amounts of each and, by treating the items so agreed on the one side as discharging the items on the other side pro tanto, go on to agree that the balance only is payable. Such a transaction is in truth bilateral, and creates a new debt and a new cause of action. There are mutual promises, the ont side agreeing to accept the amount of the balance of the debt as true (because there must in such cases be, at least in the end, a creditor to whom the balance is due) and to pay it, the other side agreeing the entire debt as at a certain figure and then agreeing that it has been discharged to such and such an extent, so that there will be complete satisfaction on payment of the agreed balance. Hence there is mutual consideration to support the promises on either side and to constitute the new cause of action.'
17. These observations of Lord Wright indicate first that an account stated is a transaction at which the parties take into account the items on one side or the other, secondly, the parties agree that the amounts are in discharge of the mutual claims and thirdly, the parties agree that the balance only is payable Counsel for the respondents contended that inasmuch as the essence of an account stated was that the items of credit and items of debit were taken into account, the document on which a party would rely as evidence of account stated would contain all such items of credit and such items of debit. That contention is repelled by the observations of Lord Atkin as also by the observations of Lord Wright. If the document relied on by a party as evidence of account stated had to contain both items of credit and items of debit to show as to how the balance was arrived, Lord Atkin would not have made the observation that an account stated may only take the form of mere acknowledgment of a debt. Lord Atkin said that another kind of account stated would contain entries on both sides. Again Lord Wright stated in Bishun Chand's case that the essence of an account stated was not the character of the items on one side or the other but that there were cross items and the parties mutually agree that the items will be discharged and there would be in the end an agreement to pay the balance payable The essence of an account stated is to take an account and then an agreement is made between the parties to constitute the new cause of action spelt out of the mutual consideration to support the promises on either side that mutual debts have been discharged leaving a balance due in favour of the party. Then comes the document. If the document does not support the transaction and the real character of account stated, it will fall outside the true character of account stated.
18. In Bishun Chand's case Lord Wright further clarified the meaning of the words 'account stated' by referring to the observations of Baron Alderson in Ashby v. James, reported in (1843) 11 M&W; 542 and the striking of a balance between the parties is evidence of an agreement that the items of the defendant's account should be set off against the earlier items of the plaintiff's leaving the case unaffected either by the statute of limitations or the set off. Lord Wright further said that in determining whether there was an account stated it would not matter whether payments made on one side were payments in reduction of indebtedness or were payments made in respect of other dealings Lord Wright summed up the essence of account stated to be ascertainment of items and agreement on each side before the balance could be struck and settled.
19. In the light of these principles and in the context of evidence in the present case I am of opinion that the plaintiff is entitled to succeed on the question that there was an account stated and the amount mentioned in Ex. A was payable to the plaintiff on the account stated by and between the parties
20. The signature on stamp is also a feature which should not be lost sight of. Revenue stamps in the case of AIR 1934 PC 144 were said by Lord Atkin to have no real and revenue significance Lord Atkin read the entire transaction in the case of AIR 1934 PC 144 to be that the party who authenticated the document by writing his signature over the two 10 cents stamps entered into an obligation Lord Atkin in Siqueira's case read the entire document to be a plain case to pay the balance for a good consideration Leaving aside that aspect it is apparent that there is the user of stamp in the present case The party making the document is entering into an obligation in token of the agreement. In the present case the overwhelming evidence which has not been displaced or shaken by any other evidence to the contrary is that parties took accounts settled their accounts, adjusted their accounts and entered into an agreement as to how the accounts were discharged and how the balance became payable by one party to other and how in the end the defendants signed the document. The authority of Fatehchand which was questioned in the written statement but which was proved by oral evidence of the appellant and was not disproved by evidence to the contrary is established beyond any measure of doubt by the document Ext. A
21. Some arguments were advanced by counsel for the respondents that if it was not an account stated, the document in the present case would not be a promise to pay within the meaning of Section 25 of tht Contract Act Reliance was placed on the Bench decision in Balkrishna Mansukhram v. Jayshankar Narayan reported in AIR 1938 Bom 460 and the Bench decision in Sashikanta Achariya v. Sonaulla Munshi, reported in : AIR1929Cal444 . In the Bombay Bench decision the balance was struck and the writing in that particular case came up for consideration as to whether a word used in that particular case would amount to an express promise to pay. There is a discussion in the judgment and the conclusion reached by the learned Judge in the present case is that no binding promises could be found in Ext. A within the meaning of Section 25 Sub-section (3) of the Indian Contract Act. There was no special pleading to support such an enquiry or finding. In the absence of pleading, this plea should not be entertained at all. Further, in the present case it is not necessary to So into that question because of the conclusion reached on the character of the document Ext. A that it amounts to an account stated. No other contention was advanced on behalf of the respondents.
22. I am of opinion that the appellant is entitled to succeed, The appellant proved the case pleaded. The document on which the appellant relied upon has been proved. The appellant has a valid cause of action. The appellant is, therefore, entitled to a decree.
23. The judgment and the decree are set aside. The appeal is allowed. The appellant is entitled to a decree for the principal sum of Rs. 7071.93, interest on judgment at 6 per cent per annum from 21st September, 1964. The appellant is also entitled to costs. Certified for two counsel.
S.K. Mukherjea, J.
24. I agree.