Ram Kumar Gupta and another vs State of Madhya Pradesh

(1) This First Appeal under Section 96 of Civil Procedure Code has been filed against the judgment and decree dated 9-8-2002 passed by XI Additional District Judge (Fast Track Court), Gwalior in Civil Suit No.7-B/2001.

(2) The necessary facts for the disposal of the present appeal in short are that the respondent no.1/plaintiff had filed a civil suit against the appellant and respondents No. 2 to 5 for recovery of Rs.2,14,472.37/- on the averments that initially the respondent no.2- Narmada Pharma was a Proprietorship firm, and the respondent no. 3 was its sole proprietor. The respondent no. 2 obtained a loan of Rs.1,17,909.74/- from the plaintiff/bank on 6-1-1975. Necessary documents were executed by the respondent no.2 and No. 3 for obtaining loan. Ramnath Choubey and the appellant had stood as a guarantor by executing documents in favor of the Bank. Later on, the respondent no.2 was converted into a registered partnership firm on 9- 4-1975. Bindeshwari Prasad Mishra (Defendant No.2), Smt. Malti Mishra (Defendant No.3), Umashanker Dubey and Shailendra Kumar

Shukla (Defendant No. 7) were made the partners. Thereafter, the partnership was reconstituted on 15-7-1975, the firm was reconstituted. Arvind Kumar Chaturvedi (Appellant) was inducted as a partner and Umashanker Dubey ceased to be the partner of the firm. Necessary declarations and documents were executed by newly added partners. As per the declaration, the defendants no. 2,3,4,and 7 were liable to repay the outstanding amount either severally or jointly. An agreement of hypothecation was also executed. The defendants no.5 and 6 who stood as guarantors, died during the pendency of the civil suit and their names were deleted. A bank account was opened in the Bank and all the transactions which took place in the said bank account were maintained regularly. The respondent no.1/plaintiff issued a registered notice dated 30-8-1977 raising a total demand of Rs. 1,43,439.65. The defendants were also directed to handover the physical possession of the machinery as well as raw and finished goods to the bank, so that the respondent no.1/Bank can recover the outstanding amount. The said notice was served personally on defendants no.5, 7, 4 and 6 whereas the defendants no.3 and 2 refused to receive the said notice. The defendants no.3 and 2 thereafter by letter 20-9-1977, sought time till January 1978 for repayment of the loan amount and also proposed that the instalments shall be paid regularly from the month of October 1977 at the rate of Rs. 2000/- per month as the respondent no.2/defendant no. 1 has started production from 25-8-1977. Thus, it is clear that defendants No.2 and 3 were aware of the notice dated 30-8-1977. The defendant no. 7 also sent his reply dated 26-9-1977 and admitted himself to be a partner of the firm and informed that a resolution has been passed in the meetings dated 25-4-1976 and 13-5-1976 removing him from the partnership and thus, it was stated by the defendant no. 7 that now he is no more responsible for the repayment. However, it was pleaded that the plaintiff/bank do not accept that the defendant no. 7 has no liability to repay the loan amount. It was also pleaded that the respondent

no.2/defendant no. 1 had submitted the list of machines and raw material to the bank on 15-10-1977, from which it was clear that the value of the assets is less then the outstanding amount. Similarly, the defendants no. 5 and 6 also sent a reply to the bank on 24-10-1977, informing that the defendants no. 5 and 6 are not the partners of the firm and it was alleged that the partnership deed dated 15-7-1975 was merely a sham document. It was also alleged that the Bank management has deliberately did not take possession of the assets for which the bank management is responsible. It was also alleged that the Cash Credit and Overdraft advance has been given without the consent of the defendants no. 5 and 6. A copy of the resolution dated 12-5-1976 was also sent. However, it was pleaded that if any internal resolution was passed by the Firm, then the plaintiff/bank is not bound by it. By letter dated 19-10-1977, all allegations made against the Branch Manager were withdrawn. The plaintiff/bank sent its reply dated 17-10-1977 and informed that any internal arrangement in the firm is not accepted to the bank. Thus, it was pleaded that a total amount of Rs. 1,77,643.60/- is outstanding towards Term Loan whereas Rs.36,828.77/- is outstanding against Cash Credit account and thus, a claim of Rs. 2,14,472.37/- was raised by the plaintiff/bank.

(3) The appellant/defendant no. 4 filed his written statement and claimed that he was never a partner of the firm and although the partnership firm deed was prepared but was never acted upon. The pleadings of execution of declaration and documents were also denied. The appellant denied his liability to repay any amount. It was also pleaded that the suit is barred by time and it was denied that any amount was deposited on 20-1-1978 in any of the accounts.

(4) The defendants no. 5 and 6 also filed their separate written statement and denied the plaint pleadings. The defendants no. 5 and 6 have expired and their names have already been deleted. It was pleaded that the defendants no. 5 and 6 are the father and brother of the appellant Arvind and they were merely asked to sign the papers

and they had never read the contents. They also refused to have stood as a guarantor to the loan transaction. It was further pleaded that they had instructed the plaintiff/bank to take the machinery in its possession, however, the same was not done by the plaintiff. They also disputed that any amount was deposited in any of the account.

(5) The defendant no. 7 also filed his separate written statement, however, did not appear subsequently.

(6) The defendants no. 1 to 3 did not file any written statement and they were proceeded ex parte from the very beginning.

(7) The Trial Court framed issues and after recording evidence, decreed the suit and held that the plaintiff is entitled to recover Rs.2,14,472.37/- from all the defendants either severally or jointly, with interest at the rate of 6% from the date of institution of suit i.e., 8-8-1980.

(8) Being aggrieved by the judgment and decree passed by the Trial Court, the defendant no.4/appellant has filed the present appeal.

(9) Challenging the judgment and decree, a solitary ground of limitation was raised by the appellant. It was submitted by the Counsel for the appellant that the bank has failed to prove that an amount of Rs. 300 was deposited in any of the bank account on 20-1- 1978, Ex. P.25, and thus, it cannot be said that the period of limitation was extended by the defendants by acknowledging the loan transaction. It is further submitted that the plaintiff/bank should have examined that bank official who had actually done the transaction to prove that any amount was deposited by the defendant no.3, Smt. Malti Mishra. It is further submitted that as the plaintiff/bank has failed to prove that any amount was deposited in the Cash Credit or Term Loan account of the respondent no.2/defendant no.1, therefore, the suit filed on 8-8-1980 was barred by time.

(10) Per contra, it is submitted by the Counsel for the respondent no.1/plaintiff, that as the books of accounts are maintained in the day to day business of the bank, therefore, the bank statements are

admissible and relevant and thus, it was not necessary for the plaintiff/bank to examine that bank official who had actually accepted the deposit of Rs. 300/- from Malti Mishra on 20-1-1978. It is submitted that as the amount of Rs. 300/- was deposited in each of the account, therefore, the period of limitation would start running afresh from 20-1-1978, and therefore, the suit was within the period of limitation.

(11) Thus, the only question for determination in the present appeal is that whether the suit filed by the respondent no.1/plaintiff was within the period of limitation or not? The only question of fact which has been disputed by the appellant/defendant no. 4 is that the respondent no.4/defendant no.3, Smt. Malti Mishra, had never deposited the amount of Rs. 300/- in each of the bank account on 20- 1-1978.

(12) To consider the submissions made by the Counsel for the appellant, it would be apposite to consider Section 34 of Evidence Act which reads as under :-

''''34. Entries in books of account, including those maintained in an electronic form] when relevant-- Entries in the books of account, including those maintained in an electronic form], regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability.''''

(13) The Supreme Court in the case of Chandradhar Goswami Vs. Gauhati Bank Ltd, reported in (1967) 1 SCR 898 has held as under :-

''''6. The main question urged before us is that there is no evidence besides the certified copy of the account to prove that a sum of Rs 10,000 was advanced to the appellants and therefore in view of Section 34 of the Evidence Act the appellants cannot be saddled with liability for that amount. Section 34 is in these terms:

"Entries in books of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability."

It is clear from a bare perusal of the section that no person can be charged with liability merely on the basis of entries in books of account, even where such books of account are kept in the regular course of business. There has to be further evidence to prove payment of the money which may appear in the books of account in order that a person may be charged with liability thereunder, except where the person to be charged accepts the correctness of the books of account and does not challenge them. In the present case, however, the appellants did not accept the correctness of the books of account. We have already indicated that they went to the length of saying that the accounts were not correctly kept, and were fraudulent. They also said that no money had been taken by them after March, 1, 1947. This being their pleading, the trial court rightly framed the third issue relating to the total amount due from the appellants to the bank. But unfortunately it overlooked to go into that issue specifically and we have already indicated how it made a mistake in arriving at the amount due when considering the issue relating to relief. In any case as the appellants had not admitted the correctness of the accounts filed by the bank, particularly after March 1, 1947, the bank had to prove payment of Rs 10,000 on March 19,1947 if it wanted to charge the appellants with liability for that amount, But all that the bank did was to produce a certified copy of account under Section 4 of the Bankers'' Books Evidence Act, 18 of 1891.

Section 4 of that Act reads thus--

"Subject to the provisions of this Act, a certified copy of any entry in a banker''s book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every case where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise."

It will be clear that Section 4 gives a special privilege to banks and allows certified copies of their accounts to be produced by them and those certified copies become prima facie evidence of the existence of the original entries in the accounts and are admitted as evidence of matters, transactions and accounts therein, but such admission is only where, and to the same extent as, the original entry itself would be admissible by law and not further or otherwise. Original entries alone under Section 34 of the Evidence Act would not be sufficient to charge any person with liability and as such copies produced under Section 4 of the Bankers'' Books Evidence Act obviously cannot charge any person with liability. Therefore, where the entries are not admitted it is the duty of the bank if it relies on such entries to charge any person with liability, to produce evidence in support of the entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence. But no person can be charged with liability on the basis of mere entries whether the entries produced are the original entries or copies under Section 4 of the Banker''s Books Evidence Act. We cannot agree with the High Court that the mere fact that the appellants did not specifically mention the sum of Rs 10,000 as not having been advanced to them in their written statement would make any difference on the facts of the present case. We have already pointed out that the appellants did not admit the correctness of the accounts produced specially after March 1, 1947. We have also pointed out that it was stated on their behalf that nothing was borrowed after March 1, 1947. The main appellant in whose name the account was, appeared as a witness and stated that so far as he remembered he only borrowed Rs 8000 from the bank and nothing thereafter. He also stated that he did not remember to have borrowed any sum from the bank after the execution of the mortgage deed. In the face of this pleading of the appellants and the statement of one of them, the bank had to prove that the sum of Rs 10,000 was in fact advanced on March, 19,1947 and could not rely on mere entries in the books of account for that purpose. This is clear from the provision in Section 34 of the Evidence Act. No attempt was made on behalf of the bank to prove

by any evidence whatsoever that a sum of Rs 10,000 was advanced on March 19, 1947. The entry in the account books in that connection is to the effect: "To amount paid to Gauhati branch as per D/advice, dated 6th March, 1947". If this amount of Rs 10,000 was paid by the bank on the order of the appellants or any one of them that order should have been produced in support of the entry, and then the entry would have been helpful to the bank as a corroborative piece of evidence. But the bank did nothing of the kind. The only witness produced on behalf of the bank was an officer who had nothing to do with the Tezpur branch where the transactions were entered into. We are therefore of opinion that in view of Section 34 of the Evidence Act the appellants cannot be saddled with liability for the sum of Rs 10,000 said to have been advanced on March, 19,1947 on the basis of a mere entry in the amount. Section 34 says that such entry alone shall not be sufficient evidence, and so some independent evidence had to be given by the bank to show that this sum was advanced. What would be the nature of such independent evidence would certainly depend upon the facts of each case; but there can be no doubt that some independent evidence to show that advance had been made has to be given. Further, as in this case the dispute was with respect to one entry of Rs 10,000 it should not have been difficult for the bank to produce evidence with respect thereto. We cannot therefore agree with the High Court that the advance of Rs 10,000 on March 19, 1947 has been proved in this case.''''

(14) Thus, it is clear that the books of accounts, regularly kept in the course of business are relevant and admissible in evidence. However, at the same time, it is also clear that an entry by itself would not be sufficient to prove the liability and there has to be an evidence to that effect. In the present case, the plaintiff/Bank has examined Arjun Meghani (P.W.3) who has proved the Voucher Ex. P.25. According to the respondent no.1/Plaintiff, an amount of Rs. 300/- each was deposited in the Cash Credit Account, Ex. D.1 and Term Loan account Ex.D.2, by Smt. Malti Mishra (Defendant no.3). However, this fact

has not been denied by Smt. Malti Mishra by filing a written statement. In fact Smt. Malti Mishra remained ex parte. Even otherwise, the appellant could have examined Smt. Malti Mishra as his defence witness to deny her signatures on the reverse side of Voucher Ex. P.25. When the deposit of amount of Rs. 300/- in each of the bank account was not disputed by the defendant no.3, then in the light of provisions of Section 34 of Evidence, the entry in the bank accounts Ex. D.1 (marked twice) and D.2 would be relevant. Further, the bank had also filed letter dated 20-9-1977, Ex. P.2, Letter dated 26-9-1977, Ex. P.5, Letter dated 19-10-1977, Ex. P.7, Partnership Declaration Ex. P.11, Agreement dated 21-7-1975 Ex. P.12 and P.15, Pronote Ex.P.17, Pronote Ex.P.18, Irrevocable authority letter Ex. P.19, which bears the signatures of Smt. Malti Mishra. The appellant could have filed an application for sending the Voucher Ex. P.25, to the handwriting expert for comparison with the above mentioned documents, to show that Voucher Ex. P.25 didnot bear the signatures of Smt. Malti Mishra and Voucher Ex. P.25 was a forged document. However, no such attempt was made. Thus, in absence of any challenge to the authenticity of Voucher Ex. P.25 executed by Smt. Malti Mishra, and in the light of the evidence of Arjun Meghani (P.W.3), this Court is of the considered opinion that the respondent no.1/Plaintiff has succeeded in proving that Smt. Malti Mishra (Defendant no.3) had deposited an amount of Rs. 300/- in Cash Credit Account as well as Term Loan Account on 20-1-1978.

(16) The Supreme Court in the case of J.C. Budhraja Vs. Chairman, Orissa Mining Corporation Ltd., reported in (2008) 2 SCC 444 has held as under :

''''20. Section 18 of the Limitation Act, 1963 deals with effect of acknowledgment in writing. Sub- section (1) thereof provides that where, before the expiration of the prescribed period for a suit or application in respect of any right, an acknowledgment of liability in respect of such right has been made in writing signed by the party against whom such right is claimed, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. The explanation to the section provides that an acknowledgment may be sufficient though it omits to specify the exact nature of the right or avers that the time for payment has not yet come or is accompanied by a refusal to pay, or is coupled with a claim to set off, or is addressed to a person other than a person entitled to the right. Interpreting Section 19 of the Limitation Act, 1908 (corresponding to Section 18 of the Limitation Act, 1963) this Court in Shapoor Freedom Mazda v. Durga Prosad Chamaria AIR 1961 SC 1236 held: (AIR p. 1238, paras 6-7)

"6. ... acknowledgment as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgment of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledgment is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. ... Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of

jural relationship such intention could be fastened on the maker of the statement by an involved or far-fetched process of reasoning. ... In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly excluded but surrounding circumstances can always be considered.

7.... The effect of the words used in a particular document must inevitably depend upon the context in which the words are used and would always be conditioned by the tenor of the said document...."

It is now well settled that a writing to be an acknowledgment of liability must involve an admission of a subsisting jural relationship between the parties and a conscious affirmation of an intention of continuing such relationship in regard to an existing liability. The admission need not be in regard to any precise amount nor by expressed words. If a defendant writes to the plaintiff requesting him to send his claim for verification and payment, it amounts to an acknowledgment. But if the defendant merely says, without admitting liability, it would like to examine the claim or the accounts, it may not amount to acknowledgment. In other words, a writing, to be treated as an acknowledgment of liability should consciously admit his liability to pay or admit his intention to pay the debt. Let us illustrate. If a creditor sends a demand notice demanding payment of Rs 1 lakh due under a promissory note executed by the debtor and the debtor sends a reply stating that he would pay the amount due, without mentioning the amount, it will still be an acknowledgment of liability. If a writing is relied on as an acknowledgment for extending the period of limitation in respect of the amount or right claimed in the suit, the acknowledgment should necessarily be in respect of the subject-matter of the suit. If a person executes a work and issues a demand letter making a claim for the amount due as per the final bill and the defendant agrees to verify the bill and pay the amount, the acknowledgment will save limitation for a suit for recovery of only such bill amount, but will not extend the limitation in regard to any fresh or additional claim for damages made in the suit, which was not a part of the bill or the

demand letter. Again we may illustrate. If a house is constructed under the item rate contract and the amount due in regard to work executed is Rs two lakhs and certain part-payments say aggregating to Rs 1,25,000 have been made and the contractor demands payment of the balance of Rs 75,000 due towards the bill and the employer acknowledges liability, that acknowledgment will be only in regard to the sum of Rs 75,000, which is due. If the contractor files a suit for recovery of the said Rs 75,000 due in regard to work done and also for recovery of Rs 50,000 as damages for breach by the employer and the said suit is filed beyond three years from completion of work and submission of the bill but within three years from the date of acknowledgment, the suit will be saved from bar of limitation only in regard to the liability that was acknowledged, namely, Rs 75,000 and not in regard to the fresh or additional claim of Rs 50,000 which was not the subject-matter of acknowledgment. What can be acknowledged is a present subsisting liability. An acknowledgment made with reference to a liability, cannot extend limitation for a time- barred liability or a claim that was not made at the time of acknowledgment or some other liability relating to other transactions. Any admission of jural relationship in regard to the ascertained sum due or a pending claim, cannot be an acknowledgment for a new additional claim for damages.''''

(17) If the facts of this case are considered, then it would be clear that Smt. Malti Mishra was one of the partners of respondent no.2/defendant no.1 and had deposited an amount of Rs. 300/- in each of the bank account vide voucher Ex. P.25 on 20-1-1978 and the suit was filed on 8-8-1980. It is not the case of the appellant that the loan had already become barred by time on 20-1-1978. Thus, by making payment on behalf of the respondent no.2/defendant no. 1, on 20-1- 1978 by one of the partners of respondent no.2/defendant no.1, the liability was acknowledged by the respondent no.2/defendant no.1 and its partners. It is also not disputed by the appellant that the jural relationship between the parties was still existing [the amount was

deposited] on 20-1-1978 when in respect of existing loan amount. Thus, the payment made on 20-1-1978 would further extend the period of limitation and this Court is of the view that the suit filed on 8-8-1980 was within limitation and the Trial Court didnot commit any mistake in deciding the question of limitation in favor of the respondent no.1/plaintiff and against the appellant and respondents no. 2 to 5/defendants.

(18) No other argument was advanced by the Counsel for the appellant.

(19) Accordingly, it is held that the suit as framed and filed on 8-8- 1980 was within the period of limitation.

(20) Consequently, the judgment and decree dated 9-8-2002 passed by the Court of XI Additional District Judge (Fast Track Court), Gwalior in Civil Suit No.7B/2001 is hereby affirmed.

(21) The appeal fails and is hereby dismissed.