M/s. Gupta Engineering Works vs M/s. Arihant Chini Udyog Pvt. Ltd. and Others

Indermeet Kaur, J.—Petitioner (M/s. Gupta Engineering Works) seeks winding up of the respondent-Company (M/s Arihant Chini Udyog Pvt. Ltd.) u/s 433(e) read with Sections 434 and 439 of the Companies Act. Submission is that the respondent Company had purchased machinery from the petitioner to the tune of Rs. 41,59,555/- in the year 2006. Bills annexed along with the petition are all of the year 2006; the audited balance sheet of the petitioner for the financial year 2006-2007 is Annexure P-3. Further submission of the petitioner is that oral demands were raised upon the respondent-Company and its directors to make the payment; this was followed by a written communication dated 20.12.2007. No reply was received. Reminders were again sent by the petitioner to the respondent on 17.09.2008, 07.04.2009, 04.08.2009 and 12.12.2009 requesting the respondent to pay the legitimate dues of the petitioner but to no avail. On 28.01.2011 another letter was sent by the petitioner to the respondent. Further submission being that the respondent vide its letter dated 09.03.2011 acknowledged the debt of the petitioner but requested for some time to make payment. Relevant would it be to state that there is no letter dated 09.03.2011 on record. What has been placed on record is a letter dated 17.02.2011 which had purportedly been sent by the respondent to the petitioner.

Submission of the petitioner is that although admittedly his debt stands time barred and the letter dated 09.03.2011/17.02.2011 would not constitute an acknowledgement within meaning of Section 18 and 19 of the Indian Limitation Act yet reliance has been placed upon Section 25(3) of the Indian Contract Act. Submission is that the communication sent by the respondent on 09.03.2011/17.02.2011 would extend a fresh of cause of action within the meaning of Section 25(3) of the Indian Contract Act.

The aforenoted communication dated 17.02.2011 has been perused. This is a letter addressed to Sushil Gupta by one Amarkant Rana director of the respondent-Company. Apart from the fact that there is a discrepancy in the date and whether the said reply is dated 09.03.2011 or 17.02.2011 is in doubt, even otherwise it does not contain any details; it only speaks of "outstanding bills"; it also does not refer to any earlier communications of the petitioner. There is no mention of this letter even in the legal notice (dated 13.08.2012) sent by the petitioner to the respondent which is also relevant keeping in view the fact that this letter is the basis of the present petition which is otherwise admittedly barred by limitation and which is also the stand of the respondent in his reply to the legal notice.

Section 25 of the Indian Contact Act speaks of an agreement without consideration to be void unless it is promise to pay a debt barred by the law of limitation. Sub-section 3 has been relied upon by the petitioner.

Section 25(3) reads as under:-

Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law- An agreement made without consideration is void, unless-

(1) ...

(2)...

(3) It is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract.

The essential ingredient of Section 25(3) being that the promise to pay must be in writing signed by the person to be charged therewith or by his agent generally or specially authorized by that person to pay wholly or in part a debt of which the creditor has enforced payment but because of the law of limitation he cannot avail of this remedy. In such a case, such an agreement would amount to a contract.

While an acknowledgement under the Limitation Act to be valid needs to be made before the expiry of the period of limitation; the promise to pay a debt u/s 25(3) may be made after the debt has become barred by limitation. This promise to pay must be in writing signed by the person to be charged with or by his agent generally or specially authorized in that behalf. This is an essential ingredient; it is a condition precedent to the applicability of this section. This is clear and explicit in the language of Section 25(3) itself.

Applying the aforenoted principle to the present case even assuming that the director of the respondent-Company had sent the communication dated 09.03.2011/17.02.2011, there is nothing on record to show that he was authorized either generally or specially to renew this time barred debt on behalf of the Company which is a distinct legal entity of its own. There is no resolution of the Company authorizing Amarkant Rana to renew the debt on behalf of the Company.

In AIR (37) 1950 PC titled as Nagarmel and Ors. Vs. Bajranglal and Anr. a promise to pay a time barred debt by the manager of a Hindu family was held not binding on the junior member of the family; Section 25 (3) was held not applicable.

Section 25(3) of the Indian Contract Act is inapplicable.

Even otherwise the communication dated 09.03.2011/17.02.2011 speaks of "outstanding bills"; no further details have been disclosed.

In AIR 1981 Delhi 354 tiled as Daulat Ram vs. Som Nath and Ors., where the tenant had sent a reply stating that the rent could be collected by the landlord in cash or by a cheque without disclosing the amount of the rent, it was held that such a communication did not amount to an agreement to pay a time barred rent within the meaning of Section 25(3).

So also in AIR 1981 Del. 165 titled as Tulsi Ram vs. Same Singh where an endorsement was made on the back of the promissory note by the promisor stating that it was valid for three years but it did not contain any words expressing any promise to pay, a Bench of this Court had held that this endorsement could not be construed as a contract falling within the scope of Section 25(3) of the Indian Contract Act.

Reliance by the counsel for the petitioner upon the judgments reported in Gharabharan Vs. Sri Radha Kishan and Others, 1975 Madras Law Journal 5 titled as N. Ethirajulu Naidu vs. K.R. Chinnikrishnan Chettiar and AIR 1925 Bom 539 titled as Pestonji Manekji Mody vs. Bai Meherbai and Anr. is misplaced. Facts of the said cases are distinguishable.

The communication relied upon by the petitioner does not fit into the parameters of Section 25(3) of the Indian Contract Act. The present petition is based on a time barred claim. It is liable to be dismissed which is accordingly dismissed with costs of Rs. 25,000/-. All pending applications also stand dismissed.