M/s. Sudershan Trading Company Limited, Hyderabad vs Madanlal Gujrati and others

Lakshmaiah

This revision by the plaintiff u/s 25 of the Small Causes Act is directed against the decree and judgment of the learned Additional Chief Judge, City Small Causes Court, Hyderabad, in S.C.S. No. 897 of 1974 dated August, 12, 1975. The suit was instituted by the petitioner M/s. Sudershan Trading Company against the respondents-defendants for recovery of a sum of Rs. 1,105-07 with costs and future interest.

The case of the petitioner is that the 1st respondent was a subscriber of the plaintiff-firm in a chit for Rs. 5,000/-. On 6th of September, 1968 the 1st respondent bid the chit for Rs, 3,750/- and he received the said amount on 26th of February, 1969 under a receipt of the same date. Respondents 2 and 3 stood as sureties and all of them executed a pronote, Ex. A2 dt. 26-2 1969 for a sum of Rs. 4,250/-. The 1st defendant made some remittances, but he committed default thereafter. The respondents, under these circumstances, according to the petitioner, are due in a sum of Rs. 1,095-05. The 2nd and 3rd defendants are set ex-parte in the suit.

The 1st defendant alone contested the suit. In the written statement filed by him it is stated that he was the subscriber in the plaintiff-company and was paying monthly subscription of Rs. 125/- On the date of the bid, he stated that he paid a total amount of Rs. 750/- and therefore a pronote was taken for Rs. 4,250/- on 26-2-69. Defendants 2 and 3 stood as guarantors for the suit pro-note. The plaintiff paid only a sum of Rs. 3,750/- against the pro-note for Rs. 4,250/-. The plaintiff did not give the entire amount of Rs. 5,000/- but he paid only a sum of Rs. 3,750/- According to him he paid the entire amount and nothing was due from him to the plaintiff. After he paid the entire amount, the pass book was also taken from him on the pretext that the entries made therein should be checked up with the plaintiffs ledger entries.

It was further contended by the defendant that the suit is barred by limitation and is beyond three years. The respondent did not pay or remit a sum of Rs. 450/- on 18th June, 1974. Therefore net amount is due from him and the suit is liable to be dismissed with costs. The trial court dismissed the suit with costs. Hence this revision by the plaintiff.

The only point that arises for consideration in this case is whether the suit is barred by limitation. The date of execution of the pro-note (Ex. A-2) in 26th of Feb. 1969. The suit was instituted on 5th October, 1974. The suit is, therefore, clearly barred by time, but as against that, the plaintiff contends that the 2nd defendant made a payment of Rs. 450/- on 18th of June, 1974 and that constitutes acknowledgement of the liability on the part of the defendants. Thus the debt is kept alive and the suit is, therefore, not barred by time. EX. A3 is the receipt dt. 18th June, 1974 passed by the plaintiff, company and it shows that an amount of Rs. 450/- was received from the 2nd defendant. According to the plaintiff, it was the 1st defendant that made the payment of Rs. 450/- on 18th June, 1974. The court below disbelieved the statement of the plaintiff and found that under Ex.A-3 dt 18-6-74 amount of Rs. 450/- was paid by the 2nd defendant. The question therefore that arises for consideration is whether the payment of Rs 450/- made under Ex.A-3 dated 18th of June 1974 would keep the pro-note alive, even though it was barred by time. The Court below held that the suit was barred by time. The point, therefore that arises for consideration is whether a payment made by one of the sureties towards the debt incurred by the principal debtor would keep the debt alive. Defendants 2 and 3 shall have to be proceeded on the footing that they occupy the position of the sureties. Liability of sureties is co-extensive with that of the principal debtor. This is evident from section 128 of the Indian Contract Act which reads thus:

The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.

There is nothing hear on record to show that there is any provision made to bring it under the category or otherwise provided by the Contract within the meaning of that expression as occurring in section 128 of the Contract Act- Therefore the legalistic position is that the liability of the surety is co-extensive with that of the principal debtor. But the question is whether the surety by making a part payment can keep the debt of the debtor alive. This question can be determined only by referring to sections 12 and 20 of the Limitation Act of 1973. Sri V. Narasimha Rao, the learned counsel appearing for the petitioner-firm, submits that the payment under Ex. A-3 constitutes acknowledgment within the meaning of that expression as occurring in section 18 of the Limitation Act and as such the debt was kept alive and the suit cannot be said to have been barred by limitation. Section 18 so far as it is material, reads thus:--

(1) Fact of Acknowledgement in Writing:--Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing, signed by the party against whom such property or right is claimed or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed.

Explanation (b) reads thus: "The word ''signed'' means signed either personally or by an agent duly authorised in this behalf.

What is manifest from the foregoing position of law is that acknowledgement of liability in respect of a right shall have to be made in writing and it shall have to be signed by that party against whom such right is claimed or by the person from whom he derives his title or liability. The 2nd defendant, in the instant case, cannot be said to be one deriving his title or liability from the 1st defendant. It is the 1st defendant against whom the right has been claimed and it is he that has got to make the acknowledgement in writing. It shall have to be signed by him alone. But there may be cases where a person may be legally disabled from so signing in which case it can be signed by an agent duly authorised in that behalf. It is not the case of the 2nd defendant who made the payment under Ex. A-3 that he is acting as an agent duly authorised in that behalf. We shall read in this context section 20 of the Limitation Act also which deals with the subject matter of effect of acknowledgement or payment by another person, in so far as it is material.

20 (1) The expression "agent duly authorised in this behalf" in sections 18 and 19 shall, in the case of a person under disability include his lawful guardian, committee or manager or an agent duly authorised by such guardian, committee or manager to sign the acknowledgement or make the payment.

Sub- section (2) is important and reads thus:

Nothing in the said section 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 by the agent of, any other or others of them.

We have already noted that as per the provisions contained in section 128 of the Indian Contract Act the liability of a surety is co-extensive with that of a contractor and therefore from that point of view in the context of sub-section (2) of section 20 of the Limitation Act, it can safely be said that the surety and the principal debtor answer the description of the joint contractors. If the sureties and the principal debtor are, thus to be regarded as joint contractors, within the meaning of that expression as occurring in section 20 (2), then nothing contained in section 18 in so far as we are concerned, renders one of the several joint debtors in our case the 1st defendant, the principal debtor, chargeable by reason only of a written acknowledgement signed by a surety, here the 2nd defendant. Therefore the payment by a surety cannot keep alive the debt against the principal debtor, unless it appears otherwise from the surety''s conduct. An acknowledgement of payment by a debtor does not extend limitation against another debtor. I am fortified in this view of mine by a decision rendered by a Division Bench of this court in Ratan Lal and Another Vs. Commercial and Industrial Bank Ltd. and Others, . The Head Note brings cut pithily the rational of the decision rendered by Justice Chanderasekhar Sastry on behalf of the Bench It is stated that;

It is clear from section 21 (2) of the Limitation Act (corresponding to sec. 20 of the present Act) that one of several joint contractors as the 1st defendant in the present case, cannot keep the debt alive and subsisting against the other joint debtors by reason only of a written acknowledgement signed or a payment made by himself. What is further necessary for the plaintiff to prove is that the 1st defendant was the agent of the other defendants duly authorised by them to acknowledge the liability or to make the payment on account of the debt and to acknowledge the payment in writing signed by him.

It is not the case of the plaintiff that the 2nd defendant made payment under Ex. A-3 in the capacity of himself being the agent of the 1st defendant. Unless that is established, the suit cannot be said to be well within time.

Sri Narasimha Rao, the learned counsel appearing for the petitioner, relied upon the decision in the case or Liquidator, Bagha Co-operative Society Vs. Debi Mangal Prasad Sinha and Others, The following passage occurs at page 411:--

But one matter is perfectly clear and that is that the letter of 8th September 1927 does not put defendant No. 1 who wrote the, letter in the position of surety he became by that letter on its proper construction the principal debtor whatever the position may have been prior to the date upon which the letter was written.

The contents of that the letter dt. 8th September 1927 which is extracted at page 411, reads thus:

In obedience to your letter Dt. 8th September, 1927 I beg to state that I hold responsible myself regarding the payment of the dues against Munsih Munnalal, the member of the Bhaga Co-operative Society by 15th of January, 1928.

The Division Bench in that case, on a construction of the terms of that letter, was of the view that the surety was to occupy the position of the principal debtor. In the present case, it is nobody''s case that the 2nd defendant, when he made the payment under Ex. A-3, assumed the role of principal debtor. Therefore, that decision may not lend any support to the petitioner''s contention. For the aforesaid reasons I am satisfied that the payment by a surety cannot keep the debt alive and the suit is barred by limitation. The Revision, therefore, fails and is dismissed, but under the circumstances without costs.