G.S. Panicker vs K. Prabhakaran

Defendant in a suit for money, is the Appellant.

The Defendant is the Director and Producer of cinemas. He produced the cinema "Prakrithi Manohari" and for taking additional prints paying the technical experts and meeting the advertisement charges, he wanted a sum of Rs. 70,000. The Plaintiff offered to pay that on certain conditions. They on 25th April. 1980 entered into Ext. A-3 Agreement, by which the sum of Rs. 70,000 was to be paid on or before 15th August 1980. The amount so advanced was to carry interest at 12 per cent per annum. It is also provided that the Plaintiff will be entitled to 15 per cent commission on the profits dexived from exhibiting the cinema. Another condition in the agreement is that Rs. 50,000 will be paid back as and when the Defendant gets Government subsidy. Clause (13) of the agreement says that the sum is repayable with interest within one year and in case of default, the Plaintiff will be entitled to recover that with interest.

According to the Plaintiff, the entire sum was paid as promised by him before 15th August 1980, but there was default in repayment excepting the sum of Rs. 50,000 received by way of subsidy from the Government. On a calculation of the interest and assessing the profits that might have been derived by exhibiting the film at Rs. 1 lakh, the Plaintiff was claiming Rs. 52,461.60 in the plaint.

Defendant contended that the Plaintiff failed to pay the money within the stipulated time, that the payment was only to the tune of Rs. 60,000, that out of that Rs. 50,000 was repaid when Government subsidy was received, that in addition to that, certain payments were made and the claim is excessive, and that in any event, the suit is barred by limitation.

The trial Court raised the necessary issues arising out of the pleadings and on a consideration of the evidence, found that the Plaintiff has paid the sum of Rs. 70,000 within the time provided in Ext. A-3, that the repayment of that was only to the tune of Rs. 50,000 received by way of subsidy, that the balance due is Rs. 20,000, and that by way of commission from the profits the Plaintiff is entitled to recover Rs. 15,000. The trial Court further held that the limitation is saved by the subsequent agreements, evidenced by Exts. A-10 and A-9 falling u/s 25(3) of the Contract Act and so, there is no bar of limitation. A decree for recovery of Rs. 44,276 with interest was awarded. Aggrieved by the decree, the Defendant has come up in Appeal.

Regarding the actual amount advanced, no argument was advanced, Exts. A-4, A-5 and A-6 dated 26th April 1980, 5th May 1980 and 2nd July 1980 respectively, together with the admissions in Exts. A-9 and A-10 notices issued by the Defendant through his Lawyer, establish that within the time specified in Ext. A-3 the entire sum of Rs. 70,000 was advanced by the Plaintiff. So, that question does not survive.

Learned Counsel argued that Exts. A-10 and A-9 do not contain any specific agreement to pay as contemplated by, Section 25(3) of the Contract Act and so, the claim is hopelessly barred by limitation. According to him, in these notices there is no specific promise at all and even if there are promises in these notices, since the Advocate was not specifically or generally authorised to make an agreement or promise to pay, they are of no effect.

In support of the latter part of the contention, the decision reported in Bansidhar and Others Vs. Babu Lal and Others, , was relied upon. That was a case where while the suit was pending, the pleader for the Defendant stated that if the Plaintiff presented probate of letters of administration or succession certificate, the Defendant would have no objection to pay him the amounts in dispute with interest thereon. This statement made by the pleader was not accepted as a promise falling u/s 25(3) of the Contract Act for the reason that there was nothing in writing and that the pleader had no authority for making the promise. Those facts have no bearing with the facts of the present case. Here, it is proved that Ext. A-10 notice was issued in reply to a notice given by the Plaintiff through his Lawyer. The very caption of Ext. A-10 is '' ''. It is in evidence that in the notice for which Ext. A-10 was given as a reply, the Plaintiff was claiming the amounts due under Ext. A-3 agreement. It is also brought out in evidence that Ext. A-10 was issued on specific instructions given by the Defendant to his advocate. Ext.. A-9 was issued in reply to Ext. A-8. In Ext. A-9 it is specifically stated thait the Defendant had given specific instructions to the advocate to send a reply in terms of Ext. A-9 in answer to Ext. A-8 notice. u/s 25(3) of the Contract Act, it is not necessary that the person under liability himself should make the promise. The promise could be made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf. Here, the advocate was authorised to send the reply notices and .it was on the basis of that authorisation, Exts. A-10 and A-9 were issued. Therefore, the contention that Exts. A-9 and A-10, even if they contain promises, will not bind the Defendant or they do not constitute ''promise'' as contemplated by Section 25(3) of the Contract Act, cannot be accepted.

The next argument advanced was that these reply notices do not contain any promise at all, but only certain statements regarding the liability which arose out of Ext. A-3.

To constitute a promise or a contract u/s 25(3) of the Contract Act, the requirements are that the promise is to be in writing and it shall be signed by the person to be charged therewith, or by its agent generally or specially authorised in that behalf. In Ext. A-10, after referring to the claim made in the notice sent by the Plaintiff, it is stated that Rs. 50,000 was paid on 21st October 1980, that on subsequent three occasions payments were made of different sums, and that what was due after such payments was only Rs. 9,423. Then, after dealing with the actual amount of commission, it says:

The Company referred to in that passage, is the distributor of the film. So, what is mentioned in Ext. A-10 is that on receipt of money from the distributor, all the accounts with the Plaintiff will be settled. This in my view is certainly a promise to settle the accounts by payment of the dues to the Plaintiff. This view gets ample support from a decision of the Division Bench of this Court in Noor Mohammed Rawther v. Cheru and Anr. 1959 K.L.J. 168. There, the claim was to the tune of Rs. 5,500 and a promise dated 12th February 1949 in Ext. C in that case was relied on. The Plaintiff in that case ,was having arecanut business, and the Defendant was having . The Plaintiff therein made a demand for the payment of dues. It was in reply to that, Ext. C therein was sent on 12th February 1949. In thait letter, the Defendant offered to go and meet the Plaintiff as soon as possible and said in Tamil: . That expression was considered as a promise falling u/s 25(3) of the Contract Act. The case at hand is also similar. In Ext. A-10, Defendant offers:

That certainly is a ''promise'' to settle the dues under Ext. A-3 agreement. So, Ext. A-10 contains an agreement as contemplated by Section 25(3) of the Contract Act.

The agreement Ext. A-3, was on 25th April 1980. Clause 13 of the agreement provides that the repayment shall be within one year of the date of the agreement. So, the period of limitation starts to run from 24th May 1981. That will expire on 25th April 1984. So, when Ext. A-10 was issued on 29th October 1984, the claim was already barred. But since there was Ext, A-10 agreement to pay the barred liability, that gives a fresh cause of action for the Plaintiff to realise the dues under Ext. A-3- The suit was instituted on 10th December 1987 even after the expiry of three years from the date of Ext. A-10. So, the claim cannot be sustained on the basis of Ext. A-10 alone. It is for that purpose that the Plaintiff relies on Ext. A-9, which was already adverted to.

According to learned Counsel for the Plaintiff/Respondent, Ext. A-9 could be construed either as an agreement u/s 25(3) of the Contract Act, or an acknowledgment of liability falling u/s 18 of the Limitation Act, because Ext. A-9 was issued before the expiry of three year period from the date of Ext. A-10. So, even if Ext. A-9 does not constitute an agreement u/s 25(3) of the Contract Act, if it is an acknowledgment of the liability, the Plaintiff will certainly be within time in his claim.

After referring to the notice Ext. A-8, Ext. A-9 gives a statement of accounts saying that a total sum of Rs. 65,576.99 was paid, and what was due to the Plaintiff after that payment, was only a sum of Rs. 4,423.01. Then the notice deals with the commission received by the Defendant from the distributors. That amount is stated.to be Rs. 10,576.99. Then the notice asserts that the Plaintiff will be entitled to fifteen per cent of that by way of commission, and that amount is given as Rs. 1,586. Then the Defendant offers to pay both the amounts and settle the matter. Further down, it says:

This certainly is a promise to pay the amounts mentioned in the notice, namely Rs. 4,423.01 with interest and Rs. 1586 towards commission. It can be an acknowledgment of liability u/s 18 of the Limitation Act of those sums of money. There is no acknowledgment of the entire liability arising out of Ext. A-3. But the liability to the tune of the amounts stated above alone was acknowledged or promised to be paid.

Learned Counsel for the Respondent would urge that when Exts. A-10 and A-9 are taken together and Ext. A-9 treated as an extension or continuation of Ext. A-10. then Ext. A-9 should be construed as an acknowledgment of the entire liability arising out of Ext. A-3. This argument cannot be accepted. Whether Ext. A-9 is an acknowledgment u/s 18 of the Limitation Act or a promise or contract u/s 25 of the Contract Act, that is only with respect to the amounts stated in those notices, and not with respect to the entire sum arising out of Ext. A-3.

A promise to pay a part of the barred debt cannot be taken to be a promise to pay the whole of the debt If a person promises to pay a portion of a barred debt, he can only be sued for that portion alone and not for the whole debt.

(Puliyath Govinda Nair v. Parekalathil Achutan Nair AIR 1940 Mad 678).

A series of other decisions were also cited by the learned Counsel at the Bar, which lay down the proposition that agreement to pay a part of the barred debt will not entitle the Plaintiff to sue for the entire debt, but only to realise that part of the debt promised to be paid. So, it could be taken as a settled principle of law that when a part of a barred debt is promised to be paid as falling u/s 25(3) of the Contract Act, that will entitle the promisee only to realise that much of the debt, and not the entire liability which existed.

Similar will be the result even if Ext. A-9 is taken as an acknowledgment u/s 18 of the Limitation Act. The authority for the proposition is Moidu v. Kerala State Electricity Board 1980 KLT 817. There, a Division Bench of this Court has held:

Evidently since in such a case the person who makes the admission does not specify the quantum of liability which subsists, it will not be possible to say that it operates as an acknowledgment in respect of any specific sum. In other words, it may be an acknowledgment of a part of the claim which part is not specified and so long as that is not specified, it cannot operate in respect of any particular sum. In such a case without anything more, it would not be available as an acknowledgment to save limitation. When a debtor denies the claim made against him by the creditor, such denial, notwithstanding the implied admission of liability for a lesser specified sum, would not operate as an acknowledgment of the entire claim to save the suit on the entire claim. The debtor in such a case does not evidently intend to keep alive the whole debt and does not indicate intention on his part to acknowledge the subsisting liability for the whole sum. Such intention stands negatived by the very denial by the debtor of the claim for the whole sum, If, as we have pointed out, the admission is not of any specific sum but of ''some amount'', that again cannot operate as an acknowledgment even in respect of a lesser sum, for, no Court will be able to grant a decree in regard to ''some amount'' on the basis of such an acknowledgment.

(emphasis supplied)

In Ext. A-9, the Defendant intends only to keep alive the amounts mentioned therein, and not the entire liability, which arose out of Ext. A-3 contract.

By virtue of Exts. A-10 and A-9; the first was a promise to pay the liability arising out of Ext. A-3, and then under Ext. A-9 the promise was only to pay the sums specified therein. To that extent, there is acknowledgment of the liability. With respect to the rest of the claim made in the plaint, the remedy of the Plaintiff is lost by limitation. In the circumstances, the judgment of the trial Court decreeing the'' entire claim made by the Plaintiff, cannot be sustained. Plaintiff is entitled to get a decree for a sum of Rs. 4,423 (Four Thousand, Four Hundred and Twentythree) with interest at the rate of twelve per cent per annum from the date of Ext. A-3 plus Rs. 1,586 (One thousand, Five Hundred and Eightysix) by way of commission with interest at six per cent from the date of suit. Interest on the amounts pending suit as well as after decree, will be six per cent per annum. The decree of the trial Court is modified to that extent, and the Appeal is allowed in part as above.

In the circumstances of the case, the parties will suffer their respective costs.