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Bengal Credit Corporation Vs. Central Bank of India - Court Judgment

LegalCrystal Citation
CourtKolkata High Court
Decided On
Case NumberA.F.O.D. No. 121 of 1970
Reported inAIR1978Cal567
ActsLimitation Act, 1963 - Schedule - Article 26
AppellantBengal Credit Corporation
RespondentCentral Bank of India
DispositionAppeal dismissed
Cases ReferredDurga Prasad v. Fateh Chand
- withdrawn would be debited in the firm's account book as also by the bank in the said cash credit account but when the money would be deposited by the firm the same would be entered in the current account and not in the loan account. as and when the same would be transferred to the loan account the same would be credited to the firm's cash credit account. after adjustment of the debit entries against such cash credit entries, the balance position of the loan account could be ascertained. in answer to question 287 the witness said that he had never doubted the account prepared by the bank and so he never wrote any letter expressing any doubt as to the correctness of the sum of money mentioned in the documents being exts. e, f, g and h series.8. in examination-in-chief he said in.....

Ramendra Mohan Datta, J.

1. This appeal has been preferred from the judgment and decree dated Dec. 16, 1968 passed by K.L. Roy, J.

2. The plaintiff respondent the then Central Bank of India Limited, now Central Bank of India, filed the suit against the appellant Bengal Credit Corporation for a sum of Rs. 33,311.14 p. due on account of the dealings and transaction between the parties up to Dec. 31, 1964, inter alia, on the ground that the said accounts were adjusted and/or stated in writing on or about Jan. 11, 1965 and upon such adjustment and/or account stated a sum of Rs. 32,708.05 was found due and owing from the defendant to the plaintiff. The learned trial Judge held that the plaintiff's claim is based on an account stated in writing (exhibit 'E'), and as such, no part of the claim of the plaintiff is barred by the law of limitation. In the premises, the learned trial Judge passed a decree for Rs. 32,708/- with interest.

3. The point for consideration in this appeal is whether the document, exhibit 'E' being the letter dated Jan. 11, 1965 could be held to be an account stated under Article 26 of the Limitation Act, 1963.

4. The said Ext. 'E' is set out as follows :--

'Under Certificate of Posting




Registered Office : Mahatma Gandhi Road,


33, Netaji Subhas Road,

Place - Calcutta

Date - 11-1-1965.

M/s. Bengal Credit Corporation

9, India Exchange Place,



We beg to inform you that the interest on your Hire Purchase Account with us up to 31st Dec. 1964 amounts to Rupees 567,69. You are requested to pay in this amount at your earliest convenience.

The Balance in your account on that day was Rupees 32,708.05 P. including interest and we held the following securities against this account on that day.

We shall be obliged if you will kindly confirm the correctness of the securities and the balance in the account returning us of the duplicate advice attached hereto duly stamped and signed in the space provided in it for the same,

Yours faithfully,

Sd/- Illegible



Demand Pronote dated 26-6-58.

Letter of Continuity dated.

Letter lien Dated.

Govt. Securities, shares scrips etc, as under:

Hire purchase agreement.

We hereby confirm the correctness of the securities mentioned above and that the balance now due by me/us in the above account against the said securities inter alia is Rs. 32,708.05 as at 31-12-64.

For Bengal Credit Corporation.

Sd/- Bhagawati Prasad Ganariwala.



(India Revenue 10 np.)

5. It would appear from the above that the said document was sent to the constituent and the same was signed by the partner Bhagwati Prasad Ganariwala on Jan. 18, 1965 confirming the balance due as on Dec, 31, 1964 on a revenue stamp of 10 np.

6. It is in evidence before us that similar letters used to be seat by thebank to the constituent periodically and the same would be returned to the bank by the constituent after putting their signature on revenue stamps but it is significant to note that in every such letter the language of the last paragraph of the letters was different from the language used in Ext. E in so far as the confirmation portion thereof was concerned. The other identical letters which are Exts. F, G and H series contained in the following printed writing immediately after such securities were mentioned in such letters :--

'P. S. If we do not hear from you anything to the contrary within a week from the receipt of this letter we shall conclude that you admit the statement of above securities held by us on your account as correct.'

Underneath the said writings the constituent's said partner Bhagwati Prasad Ganariwalla for the Bengal Credit Corporation put his signature on a revenue stamp of 10 naya paise.

7. Ganeriwalla gave evidence before the trial Court, In answer to questions put in cross-examination the witness said that there was a loan account with the Central Bank of India wherefrom certain amounts were withdrawn from time to time and certain amounts also used to be deposited from time to time. There were in fact two accounts, one cash credit and the other current account. The amounts which would be withdrawn would be debited in the firm's account book as also by the bank in the said cash credit account but when the money would be deposited by the firm the same would be entered in the current account and not in the loan account. As and when the same would be transferred to the loan account the same would be credited to the firm's cash credit account. After adjustment of the debit entries against such cash credit entries, the balance position of the loan account could be ascertained. In answer to question 287 the witness said that he had never doubted the account prepared by the bank and so he never wrote any letter expressing any doubt as to the correctness of the sum of money mentioned in the documents being Exts. E, F, G and H series.

8. In examination-in-chief he said in answer to questions 109 to 112 as follows :--

'109. Q. Did you ask the agent what was the amount due?

A. I did not. I came to know when I signed in 1965 that some money was due about Rs. 30,000/-.

110. Q. You came to know that atthe time of signature ?

A. Yes.

111. Q. You found the figure andthen you signed it?

A. Yes.

112. Q. You had then no reason to doubt as to the correctness of it ?

A. The bank did not representany false statement.'

From the nature of evidence given by the witness it can safely be inferred therefrom the witness himself enquired into the accounts found the amount mentioned as balance due to be correct and then only he put his signature on the said Ext. 'E'. His definite case is that the bank did not represent any false statement. That he used to go to the bank would be evident from the answer to question 107 which read as follows:--

'107, Q. On what basis did you ask your partners to pay some amount of money Were you talking on air ?

A. Whenever I went to the bank the Agent told me that some amount was due, and why did not you square up this account.'

From that answer it appears that the question of finally adjusting the account was discussed from time to time. In other words, the bank intended not to enter into any further transactions with Bengal Credit Corporation. That it wanted to finally close the account would also be evident from Exhibit 'E' where the bank wanted confirmation of the balance due and the constituent also confirmed the same after checking the account.

9. Apart from the above oral evience of Ganeriwalla, in my opinion, Ext. E itself contains the intrinsic evidence that parties went into their respective accounts and after they found the same to be correct they both arrived at the amount being the balance due as on 31st Dec., 1964. It is only if the parties go through the account then only they can arrive at the figure which they call to be the balance due. Furthermore, Ext. E also shows that Ganeriwalla put his signature as the partner of the appellant firm on a revenue stamp. The questionarises why did he do so The point that arises from these facts and the evidence before this Court is, can an implied promise to pay be found from all these materials placed before this Court ?

10. In the case of Hiralal v. Badkulal reported in : [1953]4SCR758 the Supreme Court considered the meaning of the expression 'balance due', 'act count adjusted' and 'balance struck'. The Supreme Court approved the Lahore case in the case of Kahanchand Dularam v. Dayaram Amritlal, AIR 1929 Lah 263 where it was observed:

'that the three expressions 'balance due', 'account adjusted' and 'balance struck' must mean that that the parties had been through the account.'

The appellant's partner Ganeriwalla further stated in cross-examination in answer to questions 142 to 154 that the appellant firm had a pass book in its current account. Whatever amount would be debited to the account of Bengal Credit Corporation the same would be mentioned in the pass book. According to the witness the bank could do it. The witness admitted that in the firm there were accountants who told him what was the position of the account and how much was due to the bank. He would also know how much amount was being withdrawn from that account. If any amount would be transferred from the current account to the loan account that would also be mentioned in the pass book. Thereafter in answer to questions 160 to 162 the witness said as follows :--

'160. Q. You have told my Lord that you had stated to the agent of Central Bank that after squaring up the accounts of the other two concerns you would square up the accounts of Bengal Credit Corporation ?

A. I did not promise that. I assured that I would try to meet the partners.

161. Q. Did you make any attempt to fulfil your assurances?

A. I failed.

162. Q. What attempt did you make?

A. I visited Bombay and met my partner and he told me that there were still outstandings from parties of Bengal Credit Corporation and he asked me to try for the recovery of that money and pay to the bank; he also said that after that they would see.'

In question 166 the witness admitted that he met the agent who asked him why he was not adjusting the account.That answer would show that the question of adjustment was discussed by the bank and the bank intended to finalise the account so far as this constituent was concerned.

11. As to what is an account stated in connection with the transactions between the banker and the customer had been very lucidly discussed in the judgment of the Judicial Committee in the case of Bishun Chand v. Girdharilal reported in AIR 1934 PC 147 also reported in 61 Ind App 273. At page 282 of the Indian Appeals Lord Wright observed:

'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 accounts of each and, by treating the items so agreed on the one side as discharging the items on the other side protanto, 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 one 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. The account stated is accordingly binding, save that it may be reopened on any ground for Instance, fraud or mistake--which would justify setting aside any other agreement. In Ashby v. James, (1843) 11 M & W 542 (the leading authority for the rule that though some of the items are barred by limitation, a settlement of accounts including these items is none the less binding. Alderson B. thus summed up the position. 'Here, 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 plaintiffs, leaving the case unaffected either by the Statute of Limitations or the set off.'

12. The Judicial Committee found that there could be settled or stated account between the banker and the customer. At page 284 it is observed:

'The closest parallel, however, to the case presented in this appeal is that of accounts between banker and customer; that relationship is one of debtor and creditor, the banker being the debtor when the account is in credit, and the customer being debtor when the account is overdrawn. It has not been doubted that in law there can be a settled or stated account between banker and customer; what has been questioned is whether the acceptance by the customer without protest of a balance struck in the pass book constitutes a settled account, but the question has had reference merely to the issue whether such a settlement can be inferred as a matter of fact from, the passing backward and forward of the pass-book. The legal competence of such a settlement, if made, is not questioned. In Blackburn Building Society v. Cunliffe, Brooks & Co. (1883) 22 Ch D 61, 71 Lord Selborne said: Nor can they (bankers) have the benefit of the doctrine that a passbook passing to and from is evidence of a stated and settled account.' On the other hand, in Vagliano v. Bank of England (1889) 23 QBD 243 Bowen L. J. rejected the idea that there had been a settlement of account between the customer and the bank, but he did so purely on the ground, as he stated, that 'there was no evidence what as between a customer and his banker is the implied contract as to the settlement of account by such dealing with the pass-book.' It is clearly involved in these observations that there can in law be a settlement of account as between banker and customer, and that this is the law, is constantly assumed and acted upon in practice; but in such cases the dealings are purely financial on each side and consist of money credits and debits, in the course of which one side may never be able to to sue the other for a demand or claim because he is always in debt to the other, though, if sued for the whole debt, he could avail himself of payments he has made in partial reduction of the debt on running account, though merely by way of set off or counter-claim. The customer in such cases may have had a continuous overdraft, and be in this respect in the same position as the respondents on the account in question. But it would be an unfortunate restraint on legitimate and ordinary business relations if the law were to say that an account could not be mutually stated and agreed between parties in such relationship. Their Lordships do not think that such is the law for the reasons and on the authorities they have set out; they think after a careful examination of all the relevant provisions of the Act, that the same conclusion governs the meaning of the term 'account stated' in Article 64 of the Limitation Act: there is no definition of the term in the Act.'

13. The nature and essence of an account stated came to be considered by the Judicial Committee also in the case of Siqueira v. Noronha, reported in AIR 1934 PC 144 : 38 Cal WN 813. It was considered that the trial Court wrongly proceeded on the footing that an account stated amounted to an implied promise to pay without consideration. The account in that case went back to the whole period of 1913 and related to items of transactions which happened long before the period of 3 years. It could not be an acknowledgment because the same was to be within the period of 3 years. Section 25(3) of the Indian Contract Act could not have any application because the promise with which we are concerned with in an account stated although in writing is an implied promise and such a promise would not be covered by the said Sub-section (3) of Section 24. Lord Atkin observed:--

'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 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 side 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, arisingfrom the fact that the items have been so set off and paid in the way described, Probably the best authority for that definition on an account stated is that which was selected by Viscount Cave in the case of Camillo Tank Steamship Co. Ltd, v. Alexandria Engineering Works, (1921) 38 TLR 134 which was in the year 1921, although the account in that case was not an account of the nature described, because it was merely a repairer's account, with the items probably only on one side. Viscount Cave, in dealing with the various descriptions in law of account stated goes on to cite this passage at page 143 : --

'There is a second kind of account stated where the account contains items both of credit and debit, and the figures on both sides are adjusted between the parties and a balance struck. This is called by Mr. Justice Blackburn, in Laycock v. Pickles, (1863) 4 B & S 497 'a real account stated', and he describes it as follows : 'There is a real account stated, called in old laws incimal xompulascent -- that is to say, when several items of claim are brought into account on either side, and, being set against one another, a balance is struck, and the consideration for the payment of the balance is the discharge of the items on each side. It is then the same as if each item was paid and a discharge given for each, and in consideration of that discharge the balance was agreed to be due. It is not necessary in order to make out a real account stated, that the debts should be debts in praesenti or that they should be legal debts. I think equitable claims might be brought into account, and I am not certain that a moral obligation is not sufficient. It is to be taken as if the same had been really paid down on each side, and the balance is recoverable as if money had been really taken in satisfaction, subject to this, that where some of the items are such that if they had been actually paid, the party paying them would have been able to recover item back as on a failure of consideration, the account stated would be invalidated.'

14. Applying the above principle to the facts of the case before the Judicial Committee the Board found that it was a plain case of a promise made to pay the balance for a good consideration.

15. The only other case which had dealt with this point was the case of Durga Prasad v. Fateh Chand, reported in : AIR1968Cal292 .

This was another Beinch decision of this Court which dealt with the aforesaid Privy Council decisions. We respectfully agree with the said decision. There also the question arose whether the document which was used as evidence of account stated must contain such items of credit and such items of debit. The said Bench observed at page 422 (of Cal WN) : (at pp. 295-96 of AIR):

'That contention is repealed 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 (also) 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 Bishnu 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 the 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.'

Before the said Bench the facts relating to the account stated were that the plaintiff alleged that the defendant Fateh Chand Kanoi for himself and as authorised by his son Amin Chand Kanoi acknowledged and/or entered the sum due to the plaintiff unconditionally in a writing signed by him for self and as authorised agent of Amin Chand Kanoi. The appellant further alleged that a sum of Rs. 8,602/- was due and owing on the basis of the account adjusted and/or stated. It would clearly appear from the facts of that case that there also the entire account was not embodied in the document which is relied on as evidence of account stated. The plaintiff appellant succeeded in the appeal as such a document was held to have amounted to an account stated.

16. Mr. Panja appearing on behalf of the appellant contends that an account stated differs from a mere acknowledgment in that the signature of the defendant has to be put either in the plaintiff's books of account, or in some document in which the entire transaction had been set out. In my opinion, that contention cannot succeed. The essence of an account stated is that the parties must apply their respective mind in the account itself. They must so apply their mind that they would be in a position to strike a balance which both parties must agree as the balance amount due. As observed by the Supreme Court that when the document states that the party admitted the balance due the same would surely signify that the said party went through the account. Otherwise, it could not be possible for a party to arrive at the balance amount due. I do not see any reason why the respective parties while sitting in their respective business places could not apply their mind on the respective accounts in which items of credit and items of debit would be written and the party from whom the balance amount would be due could not confirm in writing that such and such amount was confirmed to be due. If that would be done, why couldn't it be said to be an account stated It is the application of the mind by both the parties and adjustment of account which would be done by the respective parties in order that they may arrive at the particular figure which would be the amount representing the balance amount due. After the balance is correctly struck then the question of liability is determined and the question of agreement would come up. When the parties signed such an account or confirmed the same then such a document implied a promise to pay and that constituted a new cause of action. That would arise out of the mutual promise on either side that mutual debts had been discharged leaving a balance due in favour of the party. The entire such transaction would be evidenced by the document which would be signed by the party.

17. In the case of a banker and a customer I do not see any reason why a transaction like the one which was done in the facts of this case could not constitute an account stated even though the constituent did not sign either the bank's books where the transaction hadbeen entered or on a document containing the entire statement of account. There is sufficient evidence on record to arrive at the finding that both the parties applied their mind and finally arrived at the balance amount due as on December 31, 1964 as would be evidenced by Ext. 'E' in this case. The evidence suggests that Ganeriwalla came to the bank, talked about the question of final adjustment of the account, went through the account himself and after receiving Ext. E satisfied himself with reference to their own books of account and after consulting the accountants of the firm that, the balance was correctly arrived at after mutual adjustment, of credits and debits after having thus satisfied himself, signed Ex1. E and confirmed that the balance amount due was Rs. 32,708.05 including interest as on Dec. 31, 1964,. Upon signing the said confirmation letter on Jan. 18, 1965 on a revenue stamp of 10 paise he sent the same to the bank. The document, Ext. E as observed here-inabove, signified that the constituent being the appellant firm made an implied promise to pay the said balance amount due as on Dec. 31, 1964. He meant business and did not execute the said Ext. E as a mere formality. He thereby re-established the relationship of a debtor and a creditor in respect of the said sum. This is not a case where the appellant firm would contend that the account stated was made under mistake or fraud. That would have been a different matter. But that is not the case before us.

18. In my opinion, there is clear evidence in this case that the parties intended to close their account but the same could not actually be closed because the payment had not been made, In fact, no further transaction took place thereafter except that the interest amounts were debited and entered since Dec. 31, 1964.

19. It is recorded that Mr. Panja did not challenge the finding of facts arrived at by the learned trial Judge. He only proceeded on the basis that Ext E did not constitute an account stated and his contention was that on a true construction it would not be held to be an account stated under Article 26 of the Limitation Act, 1963.

20. That being so, it must be held that the learned Judge rightly decided that the document dated Jan. 11, 1965 which was confirmed on Jan. 18, 1965 (Ext. E) could be relied on as accountstated in writing and in decreeing the suit. The result, therefore, is that the appeal must be and is hereby dismissed with costs.

Hazra, J.

I agree.

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