Shri S.C. Gupta vs Allied Beverages Co. Pvt. Ltd.

Gita Mittal, J.—By this order, I propose to dispose of this application which has been filed by the sole defendant under Order 37 Rule 3(5) of the Code of Civil Procedure, 1908 praying for leave to defend the present suit which has been filed under the summary procedure provided under Order 37 of the Code of Civil Procedure, 1908.

The suit has been filed by the plaintiff on the averments that the plaintiff, Shri S.C. Gupta, was carrying on a business of interior contractors as a sole proprietor under the name and style of M/s S.C. Gupta & Bros. The plaintiff had good relations with Shri Surender Sadhu, a Director in the defendant, a company incorporated under the provisions of the Companies Act, 1956. On account of such good relations, the plaintiff also remained as a Director in the defendant company with effect from 31st May, 2000 till 31st January, 2002.

The plaintiff advanced to the defendant several amounts as loan account payee cheques or demand drafts between the period 16th December, 1998 to 13th September, 2000 totalling an amount of Rs. 41 lakhs. The amount which was advanced by the plaintiff was reflected and acknowledged by the defendant as such loan in their books of account, balance sheets and profit and loss accounts, which were prepared and filed before the Registrar of Companies as well as the income tax authorities.

In partial discharge of its liability, the defendant paid an amount of Rs. 4 lakh by way of cheque in September, 2000 which was credited to the plaintiff''s account on 16th September, 2000. Further loan was requested and between 21st September, 2000 and 25th April, 2001, the plaintiff advanced a further amount of Rs. 37,30,000/-. Details of payments made to the defendant by the plaintiff have been detailed in para 5 of the plaint. Thereafter, the defendant repaid a sum of Rs. 1.50 lakhs by two cheques dated 2nd March and 15th March, 2001. At the time of filing of the suit, the defendant was owing a sum of Rs. 72,80,000/- to the plaintiff for which the plaintiff filed the suit on 26th March, 2004.

After the suit was filed on 29th March, 2004, the plaintiff filed an application being I.A. No. 4876/2004 seeking amendment of the plaint to incorporate certain subsequent events/developments which have taken place after the filing of the suit. This application was allowed on 5th August, 2004. By way of the amendment, the plaintiff has brought on record the fact that on 31st March, 2004 and 1st of April, 2004, Shri Surender Sadhu, Managing Director of the defendant approached the plaintiff to settle the outstanding loans. He requested that the defendant was not in a position to repay the entire amount of Rs. 72,80,000/-and expressed the desire to make payment in a full and final settlement of its dues by payment of Rs. 47,00,000/-

With a view to maintaining good relations, the plaintiff agreed to this proposal and the parties signed a Memorandum of Understanding dated 1st April, 2004. Pursuant to this Memorandum of Understanding, the defendant issued cheques to the plaintiff, however, the cheque dated 5th April, 2004 issued by the defendant in terms of the Memorandum was dishonoured on account of insufficiency of funds in the defendant''s account. The plaintiff consequently has pleaded that this Memorandum of Understanding is not binding on the plaintiff. The plaintiff in the amended plaint has restricted the liability of the defendant to Rs. 43,80,000/-.

The plaintiff has placed strong reliance on the letter dated 2nd September, 2001 whereby the defendant acknowledged an amount of Rs. 64,30,000/- as outstanding and payable to the plaintiff on 31st March, 2001. After 31st March, 2001, the plaintiff advanced a further loan of Rs. 8,50,000/- to the defendant. The defendant issued three cheques to the plaintiff; one dated 17th February, 2004 and two cheques, each dated 8th March, 2004, for the total sum of Rs. 17,00,000/- to the plaintiff in partial discharge of its liability. When presented for encashment in February and March, 2004, these three cheques were dishonoured by the bank with the remarks that the account stood closed. These cheques were dishonoured on 19th February, 2004 and 9th March, 2004 respectively giving rising to the cause of action for the plaintiff to file the present suit.

Basing its claim also on the acknowledgement in the balance sheet and profit and loss account for the financial year ending 31st March, 1999, 31st March, 2000, 31st March, 2001 and 31st March, 2002, the plaintiff originally filed the suit on 26th March, 2004 for a principal sum of Rs. 72,80,000/-.

The defendant entered appearance on receipt of summons in the suit. The plaintiff thereafter sought summons for judgment to be issued in the prescribed form. The present application has been filed on 13th of October, 2004 seeking leave to defend.

A preliminary objection has been taken by the plaintiff to maintainability of this application on the ground of limitation. Before dealing with the pleas of the defendant in the application, it would be appropriate to consider this objection. The advance copy of the I.A. No. 6307/2004, whereby the plaintiff had sought issuance of summons for judgment, was served upon counsel for the defendant against receipt on 20th September, 2004. Based on this service, it is urged that the leave to defend ought to have been filed within ten days thereof on or before 30th September, 2004. The same having been filed on 13th October, 2004, according to the plaintiff the present application seeking leave to defend is barred by limitation. Reliance is placed on the pronouncement of this Court reported in Projects and Equipment Corporation of India Ltd. Vs. H.C. Suri and others,

I find that I.A. No. 6307/2004 was listed before this Court on 2nd September, 2004. The plaintiff accepted that service of advance copy was not adequate service upon the defendant inasmuch as it has permitted the Joint Registrar to pass an order for issuance of summons for judgment against the defendant in the prescribed proforma, returnable on 12th October, 2004. The plaintiff also filed the requisite process fee for issuance of summons for judgment which was thus issued to the defendant. In this view of the matter, the judgment in Projects and Equipment Corporation of India Ltd. (supra) would have no application inasmuch in that case, the defendant No. 1 had accepted service of the copy of the application for the same and annexures thereto as service of summons for judgment and consequently, the court had issued summons for judgment only to the remaining defendants. In this view of the matter, the objection of the plaintiff based on this service of advance copy of the application for the summons is hereby rejected.

The plaintiff has taken yet another objection for urging that the present application is barred by limitation. Placing reliance on the affidavit of service dated 8th October, 2004 filed by it, the plaintiff has asserted that the defendant was served with the summons for judgment on 25th September, 2004. The plaintiff along with this affidavit has placed the receipt given by the courier company purporting to be duly receipted by the defendant. Perusal of the receipt which has been enclosed with the affidavit shows that there are no signatures where the particulars of the consignee/addressee are to appear. This cannot be accepted as valid proof of service for summons of judgment on 25th September, 2004. Furthermore, on 22nd September, 2004, the court had directed service by registered cover A.D. as well as by courier. The plaintiff did not file a properly and duly stamped registered cover and for this reason, the summons could not be issued by registered post. In this view of the matter, I am not inclined to accept the contention of the plaintiff that the defendant was served with the summons for judgment on the 25th of October, 2004 and for this reason, the application for leave to defend filed on 13th October, 2004 is barred by time.

The defendant has contended that he received the summons for judgment on 4th October, 2004 and has filed the application on 13th October, 2004. There is no material on record to the contrary. I am therefore inclined to accept the contention of the defendant on this ground and reject the objection of the plaintiff to the effect that this application deserved to be rejected on the ground that the same is barred by limitation.

So far as the grounds on which leave to defend has been sought by the defendant, by way of the present application, the defendant raises the following pleas:

(i) the suit of the plaintiff is barred under the provisions of Punjab Registration of Money Lenders'' Act, 1938.

(ii) The money claimed by the plaintiff is not a debt or a liquidated demand under contract and consequently, the present suit filed under Order 37 of the Code of Civil Procedure, 1908 is not maintainable.

(iii) The suit claim is barred by limitation inasmuch as each cheque allegedly paid by the plaintiff was an independent transaction and consequently gave rise to independent causes of action. The suit having been filed more than three years beyond the date of the cheques is barred by limitation.

I heard learned Counsels for the parties at great length and have given my considered thought to the rival contentions. I first take up the objection of the defendant that the suit is barred by the provisions of Punjab Registration of Money Lenders'' Act, 1938 for consideration. The first question which arises is as to whether this enactment applies to the transactions between the plaintiff and the defendant. The Act has been enacted to regulate the business of money lenders and was effectuated in order to register money lenders for this purpose. The expression ''money-lender'' is statutorily defined u/s 2 Sub-section 9 thus:

Section 2(9): "Money-lender" means a person, or a firm carrying on the business of advancing loans as defined in this Act, and shall include the legal representatives and the successors-in-interest whether by inheritance; assignment or otherwise, of such person or firm; provided that nothing in this definition shall apply to

(a) a person who is the legal representative or is by inheritance the successor-in-interest of the estate of a deceased moneylender together with all his rights and liabilities; provided that such person only

(i) winds up the estate of such money-lender;

(ii) realises outstanding loans;

(iii) does not renew any existing loan, nor advance any fresh loan;

(b) a bona fide assignment by a money-lender of a single loan to any one other than the wife or husband of such assignor, as the case may be, or any person, who is descended from a common grandfather of the assignor.

It is therefore apparent that this statute would have applicability only in respect of and against persons of firms who are engaged in the business of advancing loans as defined under the Act. The expression ''loan'' is defined under Sub-section 8 of Section 2. ''Loan'' has been defined to mean an advance, whether secured or unsecured, of money or in kind at interest and shall include any transaction which the court finds to be in substance a loan. Certain exceptions to this definition has been carved out and under Sub-clause (vi) of Sub-section 8 of Section 2 it is specifically stipulated that a loan advanced by a trader to a trader in the regular course of business, in accordance with trade usage shall not be covered under the definition of the loan.

I find that in this application, apart from a bald allegation that the suit is barred under the Punjab Registration of Money Lenders'' Act, 1938, there is nothing further. I find that the plaintiff has contested the claim of the defendant that the amount given to it was advanced by the plaintiff as a Director of the company. Even assuming that the investment was made by the plaintiff in the capacity of a director of the defendant-company in the form of a loan to the company. I find that there is no plea in the application that the plaintiff is a money lender by profession within the meaning of expression u/s 2(9) of the statute.

In Amar Singh Vs. Kuldip Singh and Others, , it was held by the court that a man does not become a ''money lender'' merely by reason of casual loans to relations, friends or acquaintances, whether interest be charged or not nor does a man become a money lender merely because he may, upon one or several occasions, lend money to a stranger. There must be a business of money lending and the ''business'' imports the notion of system, repetition and continuity to be covered under the definition of money lender under this statute.

This very issue has arisen for consideration before this Court and in the pronouncement reported at S. L. Luthra Vs. Narender Kumar Puri, , the court held thus:

The petitioner through his affidavit raised such pleas which can easily be raised in respect of any suit brought on the basis of a promissory note. In his affidavit no instances of money lending by the plaintiff-respondent were cited. It is open to a defendant in every suit brought on a promissory note to plead that the plaintiff is a money lender and has not been submitting six monthly statements of account which a registered money lender is to submit.

In suits covered by Order 37, Rule 2 of the Code every possible care should be taken by the trial Courts in coming to the conclusion whether the issues raised are triable or not. There should be a further finding whether the defence raised is bona fide or not. The Court is not to be impressed by mere assertions, whether of facts or of law. The Court must examine the merits of all the contentions raised in order to obtain leave to defend that suit. Unless the trial Courts act strictly in accordance with the requirements of Order 37 of the Code the provisions contained therein may be rendered ineffective.

It is noteworthy that the defendant has failed to place even a single instance of money lending transaction by the defendant on the record of the present case and has made merely a bald allegation unsupported by any material. In this view of the matter, the pleas raised by the defendant are certainly insufficient to hold that the plaintiff was in the business of money lending and that the suit was not maintainable for the reason that the plaintiff was not registered under the Punjab Registration of Money Lenders'' Act, 1938.

It now becomes necessary to consider the second and third objection raised by the defendant to the maintainability of the suit on the ground that the same is not based on a debt or a liquidated demand or on a written contract and could not be filed under Order 37 of Code of Civil Procedure, 1908 and that the claim is barred by limitation. Inasmuch as these objections are based on the same documents and legal submissions they are required to be considered together.

From the plaint and the documents placed on record, it is apparent that the plaintiff advanced amounts to the defendant between the period 16th December, 1998 to 13th September, 2000. The plaintiff became a director of the defendant-company and remained its director with effect from 31st May, 2000 till 31st January, 2002. From the statements of accounts placed before this Court, it is evident that the plaintiff has made payments to the defendant before the date he became the director of the defendant and even thereafter.

Before this Court the plaintiff has placed certified copies of the balance sheet duly certified by a chartered accountant. Perusal of the balance sheet of the defendant-company as on 31st March, 1999 shows that it was owing an amount of Rs. 17,00,000/- to Shri S.C. Gupta who has given unsecured loan in the category of ''unsecured loans from others'' as on 31st March, 1999. The amount due to the plaintiff has been so reflected even in the balance sheet of 31st March, 2000 and the same amount has been shown. As on 31st March, 2001, Shri S.C. Gupta is shown to have advanced an unsecured loan of Rs. 62,30,000/- while in the balance sheet as on 31st March, 2002, Shri S.C. Gupta is shown to have advanced unsecured loan to the tune of Rs. 72,80,000/-.

Thus, the amounts payable to the plaintiff are not reflected by the defendant under the column of loans from directors but under the category of "unsecured loans from others" The submission that the plaintiff had advanced money as a director of the company is therefore wholly without merit and fallacious.

These acknowledgements in the balance sheets of the owings to the plaintiff have been relied upon by it for two purposes. Mr. Rajesh Mahajan, learned Counsel for the plaintiff has urged that such acknowledgements would be covered within the meaning of expression ''debt'' so as to enable the plaintiff to base the suit on the same. It has been secondly urged that such debt shown in a balance sheet of a company is an acknowledgement within the meaning of Section 19 of the Limitation Act.

Section 18 and 19 of the Limitation Act which have bearing on the respective contentions of the parties read thus:

Effect of acknowledgment in writing

(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment 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 acknowledgment was so signed.

(2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act, 1872(1 of 1872), oral evidence of its contents shall not be received.

Explanation:- For the purposes of this section

(a) an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or right;

(b) the word "signed" means signed either personally or by an agent duly authorised in this behalf; and

(c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.

Effect of payment on account of debt or of interest on legacy - Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duty authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made:

Provided that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgement of the payment appears in the handwriting of, or in a writing signed by, the person making the payment. Explanation - For the purposes of this section

(a) where mortgaged land is in the possession of the mortgagee, the receipt of the rent or produce of such land shall be deemed to be a payment;

(b) "debt" does not include money payable under a decree or order of a court."

My attention has been drawn to the judgment of the Gujarat High Court reported at Ambica Mills Ltd., Ahmedabad Vs. Commissioner of Income Tax Gujarat, Ahmedabad, , wherein the court has held that a debt shown in a balance-sheet is an acknowledgment within the meaning of Section 19 of the Limitation Act, and in order to be so, a balance-sheet in which such acknowledgment is made need not be addressed to the creditor.

This Court has an occasion to consider the effect of an acknowledgement made by a company in its balance sheets in several binding precedents. In the judicial pronouncement reported at Rishi Pal Gupta Vs. S.J. Knitting and Finishing Mills Pvt. Ltd., , this Court has held thus:

The respondent in its balance sheet for the year ending 31.3.1990 has admitted that the petitioner is one of the sundry creditors of the respondent Company and its name is shown in the list of sundry creditors in the said balance sheet. The respondent has also admitted its liability in its reply dated 22.11.1991 whereunder it has transmitted the said balance sheet to the Registrar of Companies. The Division Bench of this Court has also in its order dated 29.11.1995 recorded that there is an admission of liability by the respondent to the extent of Rs. 6,89,870.76 and that the said liability was acknowledged by the respondent in its reply dated 22.11.1991. In view of the aforesaid acknowledgment of debt in the balance sheet as also in the reply sent by the respondent through one of its Directors Constituting acknowledgment in writing within the meaning of Section 18 of the Limitation Act, the petition presented by the petitioner on 14.5.1992 to enforce a liability of the Company acknowledged in the balance sheet for the year ending 31.3.1990 is indisputably within time. Reference may also be made to a decision of this Court in Larsen and Tubro Ltd. Vs. Commercial Electric Works and Others, wherein this Court referred to the decision reported in ILR 33 Cal 1033 wherein it was held that a statement of accounts like balance sheet would constitute acknowledgment of liability. The decisions relied upon by the Counsel for the respondent also have taken the same view with which I respectfully agree.

In R.K. Chemicals Vs. Kohinoor Paints Faridabad Pvt. Ltd. (P) Ltd. and Another, , the court held thus:

.It is the balance sheet only, which can be relied for this purpose and that is of 31st March, 1996. The claim is, therefore, time barred.

In Larsen and Tubro Ltd. Vs. Commercial Electric Works and Others, , the court also had an occasion to consider the legal impact of an acknowledgement in a balance sheet and had held thus:

Mr. Jain learned Sr. Counsel for the defendants apart from arguing on merits submitted that the suit was barred by time. Mr. Kohli the learned Counsel for the plaintiff relied upon the letter written by the Income Tax Officer in January 1981 to the defendants wherein the Income Tax Officer had said that the defendants had shown in the balance sheet for the year ended 31.3.78 a sum of Rs. 1,74,000/- as due from the defendants to the plaintiff and the plaintiff, therefore, filed an application for a direction to the defendants to file the balance sheet. Mr. Kohli learned Counsel for the plaintiff contends that the balance sheet wherein the defendants itself had shown that particular amount is due to the plaintiff would constitute an acknowledgment within the meaning of Section 18 of the Limitation Act, 1963. As I had already noticed that the last payment by cheque by the defendants was on 1.8.80, the plaint was presented on 14.12.81, therefore, the suit is in time. I need not go into the question of acknowledgment but it is well settled in ILR 33 Cal 1033 that such a statement in accounts would constitute acknowledgment of liability. In any view of the matter the suit is in time.

Section 18 of the Limitation Act requires a suit to be filed within three years of an acknowledgement of the owing. In the pronouncement reported at Rajah of Vizianagaram Vs. The Official Liquidator, Vizianagaram Mining Company Limited, Vizagapatam, , so far as limitation based on such acknowledgement in a balance sheet was concerned, the court had held thus:

(33) C.M.A. No. 252 of 1949: In this appeal, Arthur Stanley Lindley, the petitioner in the Lower Court claimed a sum of � 746-1-2 as being due to him and the question here is one of limitation. The lower Court has held that it is included in the item of � 4897-7-7 relating to sundry creditors as contained in the balance sheet Ex.P-1. In ''Jones v. Bellgrove Properties Ltd.'' (1949) 2 K B D 700 the Court of Appeal held that where a balance sheet presented to the shareholders at annual general meeting of a limited liability company signed by the chartered accountants etc., contained the statement "to sundry creditors � 76381, 6s.10d" and it was proved by a witness from the firm of chartered accountants which had signed the balance sheet that the debt of � 1,807 owed by the company to the plaintiff was included in the sum of � 7638, 8s.10d. stated in the balance sheet to be due to sundry creditors, the balance sheet contained an acknowledgment to the plaintiff in writing signed by the agents of the company that the debt of � 1807 at the date of the annual general meeting remained unpaid and due to the plaintiff. Therefore by virtue of Sections 23 and 24 of the Limitation Act, 1939, the debt was held to be recoverable. Mr. Tiruvenkatachari contends that this decision should not be applied and is erroneous. On the other hand Mr. Rajah Ayyar contends that the observations of the Privy Council in ''Maniram Seth v. Seth Rupchand'' 33 Cal 1047 at p.1060 are to the effect that the provisions of the Limitation Act in England regarding acknowledgment are more stringent than what they are in India. We have not been shown any reason why the judgment of the Court of Appeal should not be followed by us. From the affidavit submitted by John Hawkins, it is clear that � 746-1-2 is included in the debts due to sundry creditors. In these circumstances we feel that the decision of the District Judge is right and this appeal is dismissed with costs.

The High Court of Punjab & Haryana also had an occasion to consider this issue. In its pronouncement reported at Lahore Enamelling and Stamping Co. Ltd. Vs. A.K. Bhalla and Others, , the court laid down the principles thus:

All the claims mentioned above are acknowledged in the balance sheet for the year ending 31-12-1950. In two cases the specific amounts are shown to be due to the Managing Director (Shri Bhagwan Das) and to technical expert (Shri A.K. Bhalla). Loans due to unsecured creditors are stated to be Rs. 1,22,099/10/9.

There is evidence on the record to show that the above amount includes sums due to Shrimati Yash Kumari Bhalla and Dr. Tara Chand, vide Exhibit P.1. All these entries constitute an acknowledgment of the debts due to the claimants within the meaning of Section 19 of the Indian Limitation Act.

Debts due to creditors not mentioned by name but included in the item relating to "Loans (unsecured)" or as due to "Sundry Creditors" mentioned in the balance sheet amount to an acknowledgment within the provisions of Section 19 of the Indian Limitation Act, so as to extend the period of Limitation Act with effect from the date of the signing of the acknowledgment. For this proposition, reference may be made to Rajah of Vizianagaram Vs. The Official Liquidator, Vizianagaram Mining Company Limited, Vizagapatam, ; and Jones v. Bellegrove Properties Ltd. (1949) 1 All ER 498 (W). The facts of the last case were that in 1936 the plaintiff had lent a sum of � 1,807 to the defendant company in which he was a shareholder. At the annual general meeting of the company in December, 1946, the plaintiff was handed by a director the accounts of the company, signed by the accountants and two directors, which included the balance sheets for the years 1939 to 1945, in each of which was the entry Sundry creditors � 7,638 8s.lod.

It was held by the King''s Bench Division that parol evidence was admissible to show that the sum mentioned in the entry included the debt due to the plaintiff; and further that the entry, thus explained, constituted an acknowledgment within the meaning of the Limitation Act, 1939, Sections 28(4) and 24(1).

Apart from the admissions contained in the balance sheets, perusal of the record shows that the first payment by the plaintiff was made to the defendant on 16th December, 1998. The plaintiff has urged that it has maintained running account of the amounts advanced and the amounts received from the defendant. The first repayment by the defendant was by a cheque dated 16th September, 2000 for Rs. 4.00 lakhs. Clearly this partial payment on account of the debt was made before expiry of the prescribed period of limitation computed from the date of the plaintiff''s payment on the 16th of December, 1998. Consequently, in terms of Section 19 a fresh period of limitation would require to be computed from 16th September, 2000 when this cheque was paid. Likewise, the second and third payment of Rs. 50,000/- and Rs. 1,00,000/- were made by way of cheque dated 2nd March, 2001 and 15th March, 2001. Three further cheques were given by the defendant in February and March, 2004. The last payments from the defendant in this case have been made by cheque No. 690246 dated 12th April, 2004 for the sum of Rs. 18,00,000/- and vide cheque dated 15th April, 2004 bearing No. 690248 for the amount of Rs. 11,00,000/-. The debt in the present case, therefore, is by no means time barred. The initial suit is within time from the date of payments made by the defendant by the cheque Nos. 513249, 513248 and 513247, the first was dishonoured on 19th January, 2004 and the other two on 9th March, 2004. The amended suit is within three years from the last payments which were made by the defendant vide cheque Nos. 690246 and 690248 dated 12th April and 15th April, 2004 respectively as also dishonouring of the cheque No. 690427 which was dishonoured on 22nd July, 2004.

It is noteworthy that each of these payments was within three years of the last payment and on each date limitation would require to be computed afresh from the date when the payments were rendered. On these facts alone, the present suit having been filed on 29th March, 2004 would have to be held within limitation.

The defendant can claim no benefit from the act of dishonouring of the cheque. It is well settled that dishonouring of the cheque would not wipe out an advantage of extension of limitation which is earned by the creditor on the issuance of such cheque. (Ref: Rajesh Kumari Vs. Prem Chand Jain, ; decision dated 5th September, 2005 rendered in CS (OS) No. 2342/1998 Hindustan Petroleum Corporation v. Tajiskstan International Airlines).

There is yet another aspect to the objection relating to the suit being barred by limitation. The defendant has admittedly issued a letter dated 2nd September, 2001 wherein it has stated thus:

Dated: 2nd September, 2001

To,

S.C. Gupta & Bros.

240, Top Floor,

Satya Niketan,

New Delhi-100021

Kind attn: Mr. S.C. Gupta

Dear Sir,

This is to certify that the loan amount of Rs. 64.30 lakhs (Rs. Sixty Four Lacs Thirty Thousand only) outstanding, payable to you in our records as on 31st March, 2001.

For: Allied Beverages Co. Pvt. Ltd.

Sd/-

Asst. Manager Accounts

(Uma Shanker Gupta)

Herein contained is an acknowledgement that the loan amount of Rs. 64.30 lakhs is outstanding and payable by the defendant and the same has been advanced after the 31st of March, 2001. The present suit has been filed within three years of acknowledgement made by the defendant.

I further find that in the Memorandum of Understanding dated 1st April, 2004, the defendant has yet again acknowledged and admitted that it owes a sum of Rs. 72,80,000/- to the plaintiff which it has taken as a loan by way of cheques and drafts. There is a clear and unequivocal acknowledgement that this loan is duly reflected in the books of account i.e. the balance sheet. The relevant extract of this MOU reads thus:

Whereas the first party owes to the second party a sum of Rs. 72.80 lacs (Rs. Seventy Two Lacs Eighty Thousand only) which the first party has taken as loan from the second party by way of cheque/draft/. The said loan is also reflected in books of accounts i.e. Balance Sheets of the first party.

Whereas the first party has not been able to pay the second party the loan amount mentioned above and therefore the first party has approached the second party for amicable settlement of its dues. Now this MOU witnessed as under:

That the first party hereby confirms and acknowledges that a sum of Rs. 72.80 lacs (Rs. Seventy Two Lacs Eighty Thousand only) is payable by the first party to second party towards the loan advance by the second party to first party.

Certainly, this statement is also an acknowledgement of the debt of the defendant within the meaning of Section 18 of the Limitation Act.

The defendant has urged at great length that issuance of every cheque was an independent transaction and that so far as the owings of the defendant are concerned, the same would lapse so far as the amount of a particular cheque was concerned, on expiry of period of three years from the date of its issuance.

I find that the plaintiff has maintained a running account so far the transactions with the defendant are concerned. The loan transactions have been made through cheques and demand drafts and repayments have come through the same mode. The plaintiff has extended amounts to the defendant-company from time to time and the defendant has made partial payments from time to time. Thus, in the instant case, in my view, the limitation would not commence on expiry of the prescribed period from date of issuance of each cheque.

There is yet another angle to this case. It is well settled that in order to maintain a suit against the defendant, there must accrue cause of action for filing the same. In the instant case, there was no occasion for the plaintiff to believe that the loan taken by the defendant would not be repaid. The defendant did tender some cheques which were honoured. The defendant had also acknowledged the amounts due in its letter dated 2nd September, 2001. Therefore, inasmuch as the defendant kept acknowledging the loan, the same would amount to a promise to pay the plaintiff towards the loan. The first time that the cheques were dishonoured were on 19th February, 2004, and 9th March, 2004.

The question which needs to be answered is as to when the cause of action could be said to have accrued to enable the filing of the suit. In this behalf, it would be appropriate to advert to the observations of the Apex Court in its judgment reported at Steel Authority of India Limited Vs. J.C. Budharaja, Government and Mining Contractor, , wherein the court held thus:

Learned Counsel for the respondent relied upon the decision of this Court in Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority for contending that cause of action for referring the claim arises only when the appellant disputed the right of the respondent to recover the damages claimed by him. In the said case, the Court has observed that on completion of the work, the right to get payment would clearly arise, but wherein the final bills have not been prepared and when the assertion of the claim was made on 28-2-1983 and there was non-payment, the cause of action arose from that date. In that case, application u/s 20 was filed in January 1986. The Court also observed that: (SCC p.340, para 4)

It is also true that the party cannot postpone the accrual of cause of action by writing reminders or sending reminders but where the bill had not been finally prepared, the claim made by a claimant is the accrual of the cause of action. A dispute arises where there is a claim and a denial and repudiation of the claim. The existence of dispute is essential for appointment of an arbitrator u/s 8 or a reference u/s 20 of the Act. See Law of Arbitration by R.S. Bachawat, 1st Edn., p.354. There should be dispute and there can only be a dispute when a claim is asserted by one party and denied by the other on whatever grounds. Mere failure or inaction to pay does not lead to the inference of the existence of dispute. Dispute entails a positive element and assertion of denying, not merely inaction to accede to a claim or a request. Whether in a particular case a dispute has arisen or not has to be found out from the facts and circumstances of the case.

Therefore, a dispute arises when the plaintiff made a claim which was denied by the defendant. In the instant case, the disputes having arising when the cheques were first dishonured on 19th February, 2004, then on 9th March, 2004 and again when the cheque dated 15th April, 2004 has got dishonoured on 22nd July, 2004. it is only by such dishonouring of the cheques that the plaintiff would have got an indication that the defendant did not intend to honour its commitment. As such, the plaint as initially filed and the amended plaint within three years of the accrual of the cause of action is clearly within limitation.

It is equally well settled that bouncing of cheque would not have any effect on the impact of the tender of cheque so far as limitation is concerned. In this behalf, the pronouncement of this Court reported at Rajesh Kumari Vs. Prem Chand Jain, ; and decision dated 5th September, 2005 rendered in CS (OS) No. 2342/1998 Hindustan Petroleum Corporation v. Tajiskstan International Airlines (para 13) deserve to be adverted to.

The defendant has urged at great length that so far as the amount actually due and payable by the defendant is concerned, it cannot be determined from the pleadings or the documents as filed and that evidence requires to be led in this behalf before ascertainment of the liability. It is contended that the defendant is entitled to challenge such evidence and cross examine the plaintiff and his witnesses. Mr. T. Nath, learned Counsel for the defendant has urged that the defendant is consequently entitled to leave to defend.

I find that the plaintiff has placed complete details of the cheques which have been issued towards the loan advanced to the defendant. The amounts received from the defendant have also been detailed and statements of account have also been filed as Annexure ''A'' to the amended suit. The amount which was advanced by the plaintiff is acknowledged in the balance sheet of the defendant. The plaintiff has asserted that it has paid an amount of Rs. 64.30 lakhs and additionally, Rs. 3.50 lakhs on 21st April, 2001. The plaintiff has further advanced an amount of Rs. 5 lakhs on 24th April, 2001. Against this, the defendant has repaid an amount of Rs. 18.00 lakhs on 12th April, 2004 and Rs. 11.00 lakhs on 15th April, 2004 leaving a balance amount due and payable by the defendant of Rs. 43,80,000/-. The payments made by the defendant stand duly stated before this Court. The cheques which were issued and dishonoured have been placed on record.

The defendant has not urged that it has made any other payment to the plaintiff. In these circumstances, even the amount which the defendant is liable to pay to the plaintiff is clearly established on record.

The defendant has objected that the suit claim is not covered under the definition of debt and liquidated demand under Order 37 of the Code of Civil Procedure. This objection is taken up last for consideration as it entails consideration of the various documents noticed hereinabove. In this factual background, it now becomes necessary to consider the meaning assigned to the expression ''debt'' and ''liquidated demand'' in judicial pronouncements. The expression ''debt'' has arisen for consideration in several cases prior hitherto. In S.V. Electricals Ltd. Vs. M/s. Sylvania and Lakshman Ltd., , the court held thus:

The plaintiff''s reliance on Food Corporation of India Vs. Balkrishna Garg, which is a Division Bench judgment of this Court, is also misplaced. A reading of this decision discloses that 500 Rolls of black polythene film had been supplied pursuant to a tender. The defence against payment was, inter alia, that Order XXXVII did not apply since the goods supplied, upon subsequent examination, were found deficient and inferior in quality, and that interest had not been agreed upon in writing. These objections were negatives and the relevant paragraphs read as follows:

Regarding the objection as to the maintainability of the suit raised by the appellant appellants, we are of the view that where the suit is for recovery of the price of the goods, it should be construed as a suit for enforcing payment of a debt, within the amended Clause (b) of Sub-rule (2) of Rule 1 of Order 37, C.P.C. which covers a few more categorises of suits and not being inconsistent with Rule 1 of Chapter XV of the Original Side Rules will govern the present suit, vide Rule 12 of the said Rules, as explained in Print Pak Machinery Ltd. Vs. Jay Kay Papers Conveters, , Avadh Behari J. in Sushila Mehta v. Shri Bansi Lal Arora and Anr. I.A. 3032/81 : Suit No. 93/81, decided on 26.10.1981, has held that the amendment of Order 37, CP.C. is neither repugnant nor inconsistent with Chapter XV of the Original Side Rules, and a suit on a debt arising out of a written contract can be brought under the summary procedure. We are in respectful agreement with that view. What then, is a debt? Relying in Webb v. Stention (1883) 11 OBD 518 it was held in The Commissioner of Wealth Tax Vs. Pierce Leslie and Co. Ltd., , that the essential requisites of a debt are (1) an ascertained or readily calculable amount; (2) an absolute unqualified and present liability in regard to that amount with the obligation to pay forthwith or in future within a time certain; (3) the obligation must have accrued and be subsisting and should not be that which is merely accruing. A contingent liability or a contingency debt is, therefore, neither a liability nor a debt. A debt is a ''debitum in praesenti, solvendum in future.'' We, therefore, hold that the amount payable under an unqualified present liability. the obligation has accrued and subsists. It is a debt accruing under a written contract. The learned Counsel for the defendant wanted to urge that the words "arising on a written contract" must be read along with the word "interest" and since no interest was payable under the contract the suit is not covered by clause (b) of Rule 2 of Order 37, C.P.C. This is an argument totally unsupportable. The words "arising on a written contract" apply to the word "debt" which may be "with or without interest". We therefore, without any hesitation reject this contention of the appellant.

It would be useful to consider the observations of this Court in the pronouncement reported at Food Corporation of India Vs. Balkrishna Garg, , wherein the court had held thus:

What then, is a debt? Relying in Webb v. Stenton (1883) 11 QBD 518 it was held in The Commissioner of Wealth Tax Vs. Pierce Leslie and Co. Ltd., , that the essential requisites of a debt are (1) an ascertained or readily calculable amount; (2) an absolute unqualified and present liability in regard to that amount with the obligation to pay forthwith or in future within a time certain; (3) the obligation must have accured and be subsisting and should not be that which is merely accuring. A contingent liability or a contingency debt is, therefore, neither a liability nor a debt. A debt is a ''debitum in praesenti, solvendum in futuro.'' We, therefore, hold that the amount covered by the suit is an ascertained amount payable under an unqualified present liability. The obligation has accrued and subsists. It is a debt accruing under a written contract. The learned Counsel for the defendant wanted to urge that the words ''arising on a written contract'' must be read along with the word ''interest'' and since no interest was payable under the contract the suit is not covered by Clause (b) of Rule 2 of Order 37 Code of Civil Procedure, 1908. This is an argument totally unsupportable. The words ''arising on a written contact'' apply to the word ''debt'' which may be ''with or without interest''. We therefore, without any hesitation reject this contention of the appellant.

It would also be appropriate to advert to the observations of the High Court of Judicature at Madras in its pronouncement reported at The Commissioner of Wealth Tax Vs. Pierce Leslie and Co. Ltd., which reads thus:

Debt is a common expression and it is difficult to believe that it can give rise to any controversy in interpreting it. Broadly stated it is a liquidated money obligation for the recovery of which an action will lie. It is an ascertained liquidated quantified obligation enforceable ''in praesenti'' or ''in futuro''. A debt must be a "debitum" that is due. The fact that the time for payment will arise in future does not make it any the less a debt. ''Debitum in praesenti, solvendum in futuro'' - this is not repugnant to the conception of a debt, because the obligation is crystallised and it is only the payablity that is in abeyance, but a debt has to be distinguished from what can only be described as something which will probably or partly ripen into a debt. A future contingent liability is not a debt due and owing. It is not only not due but being contingent never may become due. An inchoate liability with a fair prospect of maturity into a debt in future and still in its embryo stage would not answer the description of a debt. Till it is born it is not a debt. Every kind of liability, immature, formative and in the course of evolution to become a debt, cannot be called a debt in anticipation of the ultimate.

In a later part of the judgment, in para 10, the court held that a contingent debt is not a debt until the contingency happens. In para 11 of the pronouncement, essential requisites of the debt were laid down thus:

...The essential requisites of a debt are therefore (1) an ascertained or readily calculable amount; (2) an absolute unqualified and present liability in regard to that amount with the obligation to pay forthwith or in future within a time certain; (3) the obligation must have accrued and subsisting and should not be that which is merely accruing.

So far as the expression ''liquidated demand'' is concerned, the same has been interpreted in Rajinder Kumar Khanna Vs. The Oriental Insurance Co. and another, , wherein the court held thus:

The industry of counsel had not been able to produce a single precedent of courts in India, which explained what is ''liquidated demand''. However, reference has been made to Words & Phrases Permanent Edition, in which reference is made to Rifkin v. Safenovitz 40 A 2d 188. It is stated that "amount claimed to be due is a ''liquidated demand'' within statute authorizing summary judgments if it is susceptible of being made certain in amount by mathematical calculations from factors which are or ought to be in possession or knowledge of party to be charged.

xxxx xxxx xxxx 6. As a result of the claim, made by the petitioner, a surveyor was appointed by the Insurance Company, who gave a report of damage in terms of percentage, to the cargo of dry dates. It is the plaintiff''s case that this damage in percentage is capable, by arithmetical calculation of being quantified into the amount of damage actually sustained to the cargo, vis-a-vis the amount for which they were insured, and, therefore, the damage in percentage is a ''liquidated demand'' within the meaning of Order XXXVII of the Code of Civil Procedure.

xxxx xxxx xxxx 12. In view of the provisions of the insurance policy, the provisions of item 14 of the Schedule to the Insurance Act, the provisions of Section 64-UM of the Insurance Act, the percentage loss suffered to the dry dates as evidenced by the report of the surveyor, in my view, is capable, by an arithmetical calculation, of arriving at a determinable sum, which sum would constitute a ''liquidated demand'' within the meaning dicta in Rifkin v. Safenovitz (supra), and the provisions of Order XXXVII of the Code of Civil Procedure.

In the preceding paragraphs, I have noticed the computation of the amounts claimed is based on additions and subtractions of the amounts of the cheques which is enabled by simple arithmetical calculation ascertainment of the amount payable by the defendant.

My attention has been drawn to the pronouncement of this Court reported in Daya Chand Uttam Prakash Jain and Another Vs. Santosh Devi Sharma, . The court has extensively considered the law on what would constitute a ''debt'' which is with instructive and apposite and deserves to be considered in extenso. It was discussed and held thus:

In Food Corporation of India Vs. Balkrishna Garg, , a Division Bench of this Court considered the requisites of debt in connection with the suit for recovery of the price of goods. It was held to be maintainable under Order 37, Code of Civil Procedure, 1908 by treating the unpaid price as debt. In regard to ''Debt'' following observations of the Division Bench of this Court in para 7 are relevant here.

What there is a debt? Relying in Webb v. Stenton (1883) 11 QBD 518 it was held in The Commissioner of Wealth Tax Vs. Pierce Leslie and Co. Ltd., , that the essential requisites of a debt are (1) an ascertained or readily calculable amount; (2) an absolute unqualified and present liability in regard to that amount with the obligation to pay forthwith or in future within a time certain; (3) the obligation must have accured and be subsisting and should not be that which is merely accuring. A contingent liability or a contingency debt is, therefore, neither a liability nor a debt. A debt is a ''debitum in praesenti, solvendum in futuro.'' We, therefore, hold that the amount covered by the suit is an ascertained amount payable under an unqualified present liability. The obligation has accrued and subsists. It is a debt accruing under a written contract.

The term "written contract" in the words of Black''s Law Dictionary (6th Ed.) means as under:

To "acknowledge" is to admit, affirm, declare, testify, avow, confess or own as genuine, Favello v. Bank of America Nat. Trus & Savings Ass''n 24 Cal App. 2d 342 74 P.2d 1057m 1058. Admission or affirmation of obligation or responsibility. Weyerhaeuser Timber Co. v. Marshall, C.C.A. Wash. 102 F.2d 78, 81. (sic) states have adopted the Uniform Acknowledgment Act. The debtor''s acknowledgement of the creditor''s debt and or right of action that will revive the enforceability of a debt barred by the statute of limitations. Part payment of obligation which tolls statute of limitation is a form of acknowledgement of debt. In re: Badger''s Estate 156 Kan. 734. 137 P. 2nd 198 205.

11.2 According to Stroud''s Judicial Dictionary acknowledgement means as under:

(1). an acknowledgement, in writing of a debt...so as to take such debt out of the Limitation Act.... (1) must admit that debt is due, and (2) promise, or justify the inference of promise, of payment unconditionally, or (if conditionally) it must be shown that the condition has been accomplished.... A statement in a balance sheet presented to a creditor-shareholder of a Company and signed by the Directors or their agents is sufficient acknowledgement (Jones v. Bellgrove Properties (1949) 2 K.B. 700), and an acknowledgement is within the section if it indicates that a debt is due, even if it does not state the amount (Dungate v. Dungate (1965) 1 W.L.R. 1577). But a signature on a balance sheet, notwithstanding that the debt appeared therein, was held not to be a sufficient acknowledgement (Consolidated Agencies v. Bertram (1965) to be a sufficient acknowledgement by one of the several executors suffices (ReMacdonald [1897] 2 Ch. 181, distinguishing Tullick v. Dunn, Ry. & Moo. 416, and Scholey v. Walton 13 L.J. Ex. 122; see Astbury v. Astbury, infra). "Acknowledges the claim" (Section 23(4) means "acknowledgement the debt or other liquidated pecuniary amounts" (Good v. Parry [1963] 2 W.L.R. 846). "Acknowledgement" (Section 24(1) means acknowledgement of liability....

(2) "An acknowledgement of a DEED, or SPECIALITY, by writing or part payment or part satisfaction (Civil Procedure Act, 1833 (c.42), Section 5 will suffice if it contains a clear admission of the speciality debt (see Moodie v. Bannister 28 L.J.Ch. 881; Howcutt v. Bonser 3 Ex. 499; Forsyth v. Bristowe 8 Ex. 721, [See also Read v. Price (1909) 1 K.B. 7; affirmed (1909) 2 K.B. 724, cited PARTY LIABLE, where it was held that parole evidence is admissible to prove the contents of a written acknowledgement which has been lost; see now Limitation Act, 1939, Sections 23, 24. As to acknowledgement is writing within Civil Procedure Code, 1908, Section 5 see Viscount Burnham v. Atlantic & Pacific Fibre Importing & Manufacturing Co. Ltd. 44 T.L.R. 702.

11.3 In AIR 1934 144 (Privy Council) , it was observed as under:

Their Lordships think that what has been forgotton is that there are two forms of account stated. An account stated may only take the form of a mere acknowledgement 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 in no real debt at all, and in those circumstances there would be no consideration and no binding promise. But on the other hand, there is another form of account stated which is a very (sic.)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 a larger side, and there is a promise for good consideration to pay the balance arising from the fact that the items have been so set off and paid in the way described.

Their Lordships were further of the view that:

That was done.

The man writes on account which was demanded by the servant for the express purpose of knowing what sum he would be entitled to get and which, it seems to their Lordships, was stated by the Managing Partner of the business, for the sole purpose of enabling the servant to know what his final remuneration was to be. To make quite clear that it was intended to express something in the nature of an obligation he authenticated the document and that can be the only effect of that particular part of the transaction-by writing his signature over two 10 cent stamps.

In their Lordships'' view, that was a plain case of a promise made to pay the balance for a good consideration. One cannot help thinking that if an account stated in those circumstances did not give rise in Kenya to the promise to pay, and for a good consideration, Kenya would be certainly without one of the most ordinary business facilities which has been common to everybody who carries on business under any system which incorporates any of the ordinary principles of English contract law.

(Emphasis supplied)

11.4 In Gharabharan Vs. Sri Radha Kishan and Others, , a Division Bench of the Allahabad High Court about ''account'' stated as under:

(12)...Where the accounts contain a series of cross-entries, one evidencing payment of loans advanced at various times by the creditor and the other evidencing payment of amounts paid towards the same loans at various times by the debtor, and the parties agree to set one series of entries against the other and after doing the same, finally arrive at an agreed balance, the final settlement of accounts thus made constitutes an "account stated.

That fact that both the entries relate to the same transaction of loan does not take the transaction out of the category of "account stated", nor does it make the transaction a unilateral one. Such a transaction is really a bilateral one as both the parties have met together and after mutual accounting in respect of the advances made by the one and payments made by the other have finally agreed by a joint application of their minds to treat a certain specific figure as the amount due on that date. Both the parties participating in this transaction have combined in finally adjusting their rights.

They have jointly co-operated in wiping off their previous or antecedent rights and liabilities and substituting therefore a new or a fresh right and liability. The procedure of surrender and discharge involved in such a transaction for the purpose of arriving at an agreed settlement is truly a bilateral one. The process of "give and take" which such a transaction demands from either side, itself constitute a sufficient consideration which is enough to sustain the fresh agreement as valid in law.

Reference in this connection might be made to the case of AIR 1934 147 (Privy Council) in which their Lordships of the Privy Council have expounded the law in this regard. Then such an "account stated" is signed by the party sought to be made liable or its duly authorised agent, the "account stated" as envisaged in Article 64 is created. Such an "account stated" gives rise to a new cause of action and a suit brought within three years of the date of such a cause of action is not barred by limitation. Such a suit cannot be thrown out on the ground that some of the items intecedent to the date of the "account stated" were barred by limitation. Previous rights and liabilities having been swept away by the concerted and agreed Will and action of parties themselves, the previous items which formed the material for arriving at the agreed figure must, for the purposes of the suit, be eliminated from consideration, and a fresh cause of action be deemed to be born on the date on which such a transaction is entered into. In such a situation, it is not open to the Court to reopen the closed transaction and to scrutinise the antecedent entries for the purpose of applying the bar of limitation. Such a procedure would be the very negation of the real purpose of "account stated" and would constitute a violation of fundamental principles underlying the legal doctrine of "account stated". In the present case, there is also no manner of doubt that this "account stated" was signed by a partner of the firm. Every partner of a firm has in law an inherent right to do it, and must, therefore, be presumed to act as such.

It was said that it has not been pleaded that the suit is based on a written contract. This is not required by any provision of law. The Court has to find out whether the suit has been brought upon a negotiable instrument or a written contract or an enactment should guarantee to which Order 37, C.P.C. applies. The acknowledgement of Rs. 1,00,000/- by the defendants for the purposes allotment of shares as application money therefore clearly amounts to a contract. Because it is their own case that the plaintiff paid allotment of shares and they accepted it. There was "consensus of mind". And "consensus of mind" leads to a contract, as Lord Caizns siad. (Cundy v. Lindsay (1878) 3 AC 459 (2) at p. 465). There was promise. There was consideration. There was acceptance. All the elements essential for the formation of the contract are present. What more is needed to make a contract. It was not a nudum pactum.

(Emphasis supplied)

From the foregoing, it is evident that the balance sheets of the defendant company clearly amounted to acknowledgement of debt in the light of the principles laid down in the foregoing judgments. In Daya Chand Uttam Prakash Jain v. Santosh Devi Sharma (supra), this Court has held that ''an acknowledgement'' would amount to ''written contract'' and that acknowledgement implies present liability with an obligation to pay. Such written acknowledgement satisfies all essential elements of a written contract.

I therefore, find force in the submission on behalf of the plaintiff that the suit based on the balance sheets of the defendant-company would by itself be maintainable and covered under clause 2(b)(i) of Rule 1 of Order 37 of the Code of Civil Procedure, 1908.

There can be no dispute that the reliance by the plaintiff on the Memorandum of Understanding dated 1st April, 2004 would also be covered under the same clause of Order 37 in as much as such Memorandum of Understanding would constitute a written contract. Undoubtedly, in the instant case, the defendant has failed to abide by the Memorandum of Understanding resulting in the plaintiff being entitled to submit that the same was not binding on its very terms.

Learned Counsel for the defendant has placed reliance on the pronouncement of the Apex Court reported in 1970 (21) FLR 387 Management of Consolidated Coffee Estate Ltd. v. The Workmen to support the defendant''s submission that it was entitled to the leave to defend the suit. I find that in this case the issue raised before this Court was whether the workmen were entitled to bonus. The workmen had placed reliance on the amount so reflected in the profit and loss account and balance sheet of the company. In the facts of the case, the court arrived at a conclusion that the company could not have known the amount of bonus it ultimately would have to pay while preparing its balance sheet for the year in question and that the amount shown as bonus in its balance sheet and profit and loss account for the year in question could therefore, be at best an estimated amount. For this reason, the amount reflected as bonus was held not to be an admission of liability to pay.

In the instant case, there is no estimate involved in the amount reflected by the company as its owings to other persons and the admission of the amount is clear and unequivocal.

In (1983) 3 SCC 410 Central Bureau of Investigation v. V.C. Shukla and Ors., the court was considering the probative value of entries in the books of accounts. Furthermore, the court considered the entries made by certain persons in notebooks. The court had held that such entries were in the nature of statements which could be treated as an admission against the accused persons provided that they related to any fact in issue or to a relevant fact.

So far as the books of accounts were concerned, the court had stated that the rationale behind the law of admissibility of books of accounts is that the regularity of habit, the difficulty of falsification and the fair certainty of ultimate detection give them in a sufficient degree a probability of trustworthiness. Since there is an element of self-interest and partisanship of the entrant to make a person liable, behind whose back and without whose knowledge, the entry is made, an additional safeguard of insistence upon other independent evidence to fasten him with such liability has been provided in Section 34 of the Evidence Act.

These observations were made in a criminal prosecution wherein the prosecution was relying on diaries and records made by accused persons against other co-accused.

In the instant case, the entries in the books of account are duly corroborated in the balance sheets as well as in the admissions of the defendant in its correspondence with the plaintiff as also the afore-noticed Memorandum of Understanding dated 1st April, 2004. Therefore, such corroboration as is envisaged u/s 34 of the Indian Evidence Act is also available.

So far as the pronouncement of this Court reported in Krishna Finhold Pvt. Ltd. Vs. Gupta and Co. and Another, is concerned, this case is distinguishable on facts from the present case. Before this Court, there is no ambiguity in the amount payable by the defendant in the light of the statements made in the several documents noticed hereinabove. In Krishna Finhold Pvt. Ltd. v. Gupta & Co. and Anr., the terms of the loan as to the period for which the loan was granted and other material terms of the agreement were not clear and for this reason, the court was of the view that leave to defend is granted to the defendant. There is no such issue in the present case.

So far as the grant of leave to defend to a defendant in a suit under Order 37 is concerned, the principles which would guide the court are well settled. In this behalf, reliance can be placed on the pronouncement of the Apex Court in Santosh Kumar Vs. Bhai Mool Singh, , wherein the court summed up the principles thus:

(a) If the defendant satisfied the Court that he has a good defence to the claim on merits, the defendant is entitled to unconditional leave to defend.

(b) If the defendant raises a triable issue indicating that he has a fair or bonafide or reasonable defence, although not a possibly good defence, the defendant is entitled to unconditional leave to defend.

(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is, if the affidavit discloses that at the trial he may be able to establish a defence to the plaintiff''s claim, the court may impose conditions at the time of granting leave to defend the conditions being as to time of trial or mode of trial but not as to payment into court or furnishing security.

(d) If the defendant has no defence, or if the defence is sham or illusory or practically moonshine, the defendant is not entitled to leave to defend.

(e) If the defendant has no defence or the defence is illusory or sham or practically moonshine, the court may show mercy to the defendant by enabling him to try to prove a defence but at the same time protect the plaintiff imposing the condition that the amount claimed should be paid into court or otherwise secured.

These principles were reiterated by the Apex Court in M/s. Sunil Enterprises and Another Vs. SBI Commercial and International Bank Ltd., .

The defendants have admitted liability in the balance sheets, correspondence and the Memorandum of Understanding. The plaintiff has filed a detailed affidavit clearly setting out the owings of the defendants. No other payment is claimed by the defendants. There is also no material dispute nor any issue to the payments made by the plaintiff to the defendants.

So far as interest is concerned, there is no claim of pre-suit interest. The plaintiff has prayed for pendente lite and future interest at the rate of 18% per annum. It is well settled that the power to grant pendente lite and future interest vests in the court u/s 34 of the CPC and certainly there can be no prohibition to the maintainability of the present suit on the ground that the plaintiff has incorporated a prayer for pendente lite and future interest.

In the instant case, I have no manner of doubt that the defendant has failed to raise the triable issue or that he has a fair or bonafide or reasonable defence to the case of the plaintiff. The defendant has not disclosed any such fact which could be considered sufficient to entitle him to leave to defend the present suit. In fact, the case of the plaintiff is established from the documents executed by the defendant itself. There is therefore no merit in the present application.

In the light of the above, it has to be held that the objections of the defendant are wholly without merit and the defence disclosed in support of the leave to defend do not require adjudication.

These principles clearly apply to the defence raised by the defendant which consequently deserves to be rejected.

I therefore, find no merit in the case by the defendant in this application and consequently, the present application is hereby dismissed.