Swarna Paper Cutting Works and another vs M/s. Indian Express (Madurai) Private Limited, Madras

The defendants and the plaintiff in O.S.No. 2859 of 1982 on the file of the First Additional City Civil Judge at Madras are the appellants and

the respondent respectively in this appeal. In this judgment the parties to the appeal will hereinafter be referred to as the plaintiff and the

defendants. The plaintiff filed the above suit against the defendants for recovering a sum of Rs. 68,993.22 together with interest at the rate of 18%

p.a. on Rs. 65,551.74 from 1.12.1981 till the date of payment and for costs. The defendants contested the suit and the learned trial Judge decreed

the suit for a sum of Rs. 62,133.52 with interest at 18% per annum from 1.12.1981 till date of realisation with proportionate costs. It is the

correctness of that judgment that is being questioned in this appeal before this Court by the defendants.

The brief facts on which the plaintiff went before the lower court seeking the decree are as follows:

One of the incidents of the business of the plaintiff is waste paper, which he has been selling to third parties for price. The defendants have been

purchasing waste papers from the plaintiff. The plaintiff and the defendants had a running account in respect of such dealings. The account

maintained between the parties would contain a debit entry against the defendants and when payments come from the defendants, there will be

credit entry in their favour. The defendants were making payments for the bills of the plaintiff with reasonable regularity. However from 16.10.1981

the defendants stopped their transaction with the plaintiff including purchase of waste papers. As on 1.12.1981 according to the accounts, a sum of

Rs. 65,551.74 in due and payable by the defendants to the plaintiff in respect of the dealings referred to above. In spite of the demands the

defendants did not clear off their outstandings. The plaintiff sent a notice dated 7.12.1981 to the defendants demanding payment of money due

with interest. The defendants did not reply. The cause of action for the suit arose in respect of the dealings between the parties on various dates

prior to 1.12.1981 and subsequently.

The defendants filed a written statement inter-alia contending as follows:

There is no running account between the parties. Every sale under a bill is a separate transaction and payments were made towards each bill

independently. The defendants were purchasing waste papers even after 16.10.1981 and the payments were made in full. The amount claimed in

the plaint as the balance due as on 1.12.1981 as per the accounts is false. The said averment is vague. The plaintiff is called upon to prove the

balance due as on 1.12.1981. The defendant sent a reply notice dated 4.1.1982. Along with the payment of every bill the plaintiff was also

collecting an amount towards deposit to meet the sales tax liability, if demanded. So far the plaintiff had not paid any amount towards sales tax

from and out of the amounts collected from the defendants. The sum so collected to meet the eventual sales tax liability is around rupees one lakh

and therefore the plaintiff is bound to return the same to the defendants. In view of such a large of the defendants in the hands of the plaintiff, the

plaintiff is not entitled to claim the amount stated in the plaint much less any other amount. The defendants are not liable to pay any interest, as there

is no contract for payment of interest. The claim made in the suit is barred by limitation as there is no mutual or running account between the

parties. The plaintiff is put to strict proof of all the transactions and establish that the suit is within time.

This met with a reply statement from the plaintiff, which discloses following:

The plaintiff reiterates that there was a running account. The defendant had not purchased waste papers after 16.10.1981 for a very long period,

but only recently they have started purchasing and the sale so effected from that time onwards is only on cash payment basis. The plaintiff denies

receipt of the reply notice from the defendants. The transaction between the plaintiff and the defendants is exigible to sales tax. The plaintiff had

questioned the sales tax liability in respect of the transaction between the parties upto the higher forum and the liability has been upheld. The

defendants are fully aware about the same. The plaintiff is not in possession of any sum as claimed by the defendants on the sales tax account. The

transactions between the parties are commercial in nature and the plaintiff is entitled to claim the market rate of even 21% interest in respect of the

money due. However they have restricted their claim for interest only to 18%. The relief claimed in the plaint is within the period of limitation.

On the side of the plaintiff two witnesses were examined as P.Ws.1 and 2 and as many as 41 exhibits were marked as Exs. A.1. to A. 41. On

the side of the defendants no oral evidence was let in and one exhibit was marked as Ex.B.1 series. On the materials available on record, the

learned trial Judge framed the following issues:

(a) Whether the suit claim is barred by limitation?

(b) What is the amount due to the plaintiff from the defendants?

(c) Whether the plaintiff is entitled to interest and if so, at what rate and from which date?

(d) To what relief the plaintiff is entitled to?

On issue Nos. 2 and 3 the learned trial Judge found that the defendants are liable to pay the sum as claimed in the plaint and the defendants are

liable to pay interest at the rate of 18% p.a. On issue No. 1 the learned trial Judge found that the suit is not barred by limitation. At the same time

the learned trial Judge also found that as per the acknowledgments of liability placed before the court, the defendants are liable to pay only a sum

of Rs. 62,133.52, since the acknowledgment covers only such amount. For the said sum the decree was passed.

I heard Mr. D. Rajendran, learned counsel appearing for the defendants and Mr. S. Vijayaraghavan, learned counsel appearing for the plaintiff.

The sheet anchor of the argument of the learned counsel for the defendants is that the accounts on which the suit is laid, is not a running account or

a mutual open current account. Under such circumstance the cause of action will commence only from the last of the debit entry found in such

account. In this case a perusal of the accounts would show that it is not a running account or a mutual open current account. The accounts

produced before court would show a number of debit entries against the defendants, each corresponding to the value of the goods sold and

delivered under each bill and all the credit entries shown in the accounts represent various payments made by the defendants, each towards the

particular bill. In other words each of the payments made by the defendants was to discharge a separate distinct liability covered under each bill

followed by a debit entry and the money stated to be due under the accounts as on 1.12.1981. is not the money due on that day and if at all it is

due, it dates back to a period of three years prior to the filing of the suit itself. Therefore the suit filed as such after a period of three years from the

date of the money fell due, is definitely barred by limitation. It is also contended by the Learned counsel for the defendants that since a perusal of

accounts shows that the amount claimed in the plaint is definitely barred by limitation, the plaint should show the ground on which exemption from

such law is claimed. This requirement of Order 7, Rule 6 of the C.P.C. is mandatory in nature and inasmuch as the plaintiff had not shown the

grounds in the plaint itself on the question of limitation, the plaintiff should not have been allowed to produce evidence of the first time before the

lower court during trial to save with suit from the law of limitation. Even an amendment to bring in such materials (the plaintiff had filed application

before this Court seeking an amendment setting out the grounds to save the suit from the law of limitation), cannot be allowed since it will change

the entire cause of action. The learned counsel for the defendants would also contend that the acknowledgments relied upon by the plaintiffs are

not acknowledgments in the eye of law and in any event it not having been given by the defendants to the plaintiff, cannot be acted upon at all as

acknowledgments of liability. Lastly the learned counsel for the defendants would contend that the acknowledgments of liability having been not set

out in the plaint and having not been proved to have been signed by the defendants, they carrot he relied upon at all.

The learned counsel for the plaintiff would contend that the stringent requirement of pleading the saving grounds from the law of limitation as

originally contemplated under Order 7, Rule 6 of the C.P.C. had been mellowed down by adding the proviso to that Section by amending Act 104

of 1976. Therefore according to him the court''s power to permit the plaintiff to claim exemption from the law of limitation on any ground not set

out in the plaint, so long as it is not inconsistent with the grounds set out in the plaint, came to be recognised by the proviso referred to above.

Though an amendment is not necessary to bring in those facts to save the plaint from the law of limitation, yet by way of abundant caution the

plaintiff had filed an application before this Court for amending the plaint setting out the grounds saving the suit from the law of limitation and also to

amend the cause title. According to the learned counsel for the plaintiff no prejudice whatsoever would be caused to the defendants if the

amendment is allowed, as it does not change the cause of action or change the scope of the suit or introduce any new case and the claim of the

plaintiff on account of the transaction between the parties still remains the same. The learned counsel for the plaintiff would contend that

acknowledgments of liability are the return of income of the second defendant along with the balance sheet; the list of creditors submitted to the

Income Tax Department pursuant to the provisions of the Income Tax Act and they being public documents, are admissible in evidence without

any further proof. It is the further contention of the learned counsel for the plaintiff that the documents relied upon as acknowledgments of liability

really constitute acknowledgements of liability in the eye of law and therefore they can be acted upon.

In the light of the arguments advanced by the learned counsel on either side, I perused the entire materials available on record. As already stated

there in no oral evidence on the side of the defendants. Since the entire arguments advanced before this Court revolves around only on the question

of limitation; the documents constituting acknowledgment of liability and inasmuch as the transactions are not disputed, I am addressing myself only

to the two questions referred to above. The first entry in respect of the transaction between the parties commenced with an opening balance of Rs.

3418.22. The relevant entries thereafter are stated hereunder:

Date Particulars Dr. Cr.

1977 To opening Balance 3,418.22 --

31/07 To B.No.134 dated 22.7.77 22,894.08 --

30/1/78 To B.No.238 dated 11. 1.78 50,297.60 --

By Balance C/D 76,609.90

Total 76,609.90 76,609.90

To Balance b/d 76,609.90

Date Particulars Dr. Cr.

1978 To Opening Balance 76,609.90

29/08 By cheque received towards account 10,000.00

31/10 To sale of waste as per B. No. 130 19,783.00

dated 20.10.78

06/11 By Cheque received towards account 19,783.00

The last transaction between the parties is dated 16.10.1981. During the period namely, from 30.12.1978 to 16.10.1981, I find a number of debit

and credit entries, each debit entry representing the value of the goods sold, delivered and claimed under a bill and each credit entry representing

the payments made in respect of each bills raised. In other words the debit and the credit entries commencing from 30.12.1978 and ending with

16.10.1981 cancels each other. Therefore the contention of the learned counsel for the defendants that each bills raised had been separately paid

and there is no running account or mutual current account, is correct. It is no doubt true that from entries extracted above, it is seen that the

payment made on 29.8.1978 and 6.11.1978 were towards account, though the last payment was exactly in cancellation of the earlier debit entry.

As the creditor has a choice, the appropriation in the absence of any instruction, of the payment made on 6.11.1978 towards accounts as shown

above, cannot be said to be erroneous. Going by the debit entries commencing from 31.7.1977 and the credit entries upto 6.11.1978, what is the

balance as on that date namely, 6.11.1978 can be safely struck at Rs. 66,609.90. Though it is not reflected as it is in the accounts. I have to

necessarily state that this should have been the balance as on 6.11.1978, since the credit entries made after that date had the effect of cancelling

the corresponding debit entries. According to the statement of account produced before the court, as on 16.10.1981 a sum of Rs. 65,551.74 is

shown as the amount due and the claim in the plaint includes that amount as well as interest on that amount.

Since I have found that the balance amount due on account has to be necessarily struck as on 6.11.1978 and the later debit and credit entry

may not have the effect of carrying forward the said balance, the suit filed on 29.3.1982 i.e., beyond the period of three years from 6.11.1978

would be barred by limitation save by any acknowledgment. The acknowledgments in this case are marked as Exs. A.12, A. 16, A. 20, A.24, A.

28, A. 32 and A. 36 for the periods ending namely. 31.3.1976, 31.3.1977, 31.3.1978, 31.3.1979, 31.3.1980, 31.3.1981 and 31.3.1982

respectively. These acknowledgments are schedules to balance sheets. The return of income and the balance sheet are also on record. These are

all documents relating to the defendants. The name of the plaintiff is shown as one of the creditors in the list of creditors. In each of these

documents a sum of Rs. 79,807.39, Rs. 732.29, Rs. 73,923.97. Rs. 63,923.97, Rs. 93.924.47, Rs. 93,924.47 and Rs. 63,924.47 are shown as

the respective amounts due and payable to the plaintiff by the defendants. As already stated the acknowledgments are available continuously for

the period from 31.3.1976 to 31.3.1982. The suit admittedly was filed on 29.3.1982.

It is no doubt true that these acknowledgments are not addressed to the plaintiff. But however a reading of section 18 of the Limitation Act

1963 would make it abundantly clear that a statement containing acknowledgments need not be necessarily addressed to the creditor. In this case

admittedly the documents referred to above are part of the return of income submitted by the defendants to the Income Tax Department. The

documents consist of return of income, the balance sheet and the list of sundry creditors. In a case reported in Rajah of Vizianagaram Vs. The

Official Liquidator, Vizianagaram Mining Company Limited, Vizagapatam, it has been held as follows:

Debt due to certain creditor included in the item relating to sundry creditors as contained in the balance-sheet of the company - Balance Sheet

contains an acknowledgment to the particular creditor 1949 (2) KBD 700 Rel. on

The law laid down by the two learned Judges of this court in the above judgment squarely applies to the case on hand as well and therefore I have

no difficulty at all in holding that the documents referred to above and relied upon by the plaintiff as constituting acknowledgments of liability, are

really acknowledgments of liability strictly in accordance with section 18 of the Limitation Act and they constitute acknowledgments of liability on

which the plaintiff can rely upon. To the same effect is the judgment of the Punjab High Court in a judgment reported in Lahore Enamelling and

Stamping Co. Ltd. Vs. A.K. Bhalla and Others, .

In the said judgment it has been held as follows:

Debts due 10 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 so as to extend the period of limitation with effect from the

date of the signing of the acknowledgment.

Section 18 of the Limitation Act, 1963 contemplates:

that before the expiration of the period prescribed for a suit, an acknowledgment of liability in respect of such right should have been made in

writing signed by the party against whom such right is claimed ...... and on such acknowledgments a fresh period of limitation shall be computed

from the time when the acknowledgment was so signed.

Under Explanation (b) to sub-section (2) of section 18 of the Limitation Act, the word ""sign"" is stated to mean ""that signed either personally or by

an agent duly authorised in this behalf."" It is needless to state that the return of income submitted to the Income Tax Department is always signed

by the assessee and all enclosures to the return of income cannot be detached from the return of income to hold that unless the balance sheet and

the list of creditors are also signed either by the debtor or by his authorised agent, it would not constitute an acknowledgment of liability. The

Income tax return, the balance sheet and the list of sundry creditors have been marked in this case through P.W.2, who was working as the

Inspector of Income Tax, Special Investigation Circle- II. His evidence shows that on summons received from the court, he produced the

documents for the accounting years from 1975-1976 till 1982-83. It is no doubt true that in Exs. A. 15, A. 16, A. 19, A. 20, 1st page in A. 23,

A. 27, A. 28. A. 31 and A. 32 the second defendant had not signed. Ex.A. 15 is the balance sheet as on 31.3.1977; Ex.A. 16, is the list of

creditors annexed to Ex.A. 15; Ex. A. 19 is the balance sheet as on 31.3.1978; Ex.A. 20 is the list of creditors annexed to Ex.A. 19; Ex.A. 23 is

the balance sheet as on 31.3.1979; Ex.A.27 is the balance sheet as on 31.3.1980; Ex.A. 28 is the list of creditors annexed to Ex.A. 27; Ex.A. 31

is the balance sheet as on 31.3.1981 and Ex.A. 32 is the list of creditors annexed to Ex.A. 31. In as much as the income tax returns have been

signed and the documents referred to above are enclosures to the income tax returns, I am of the opinion that the fact that the defendants have not

signed in the specified exhibits referred to above, would not by itself lead this court to hold that those documents would not constitute

acknowledgments of liability.

In a case reported in Somanna v. Subba Rao, AIR 1958 A.P. 200 certified copied of income tax returns are held to be public documents. It

has been held in that case as follows:

(b) Evidence Act (1872), Ss. 67, 65, 74 - Income tax documents -Certified copies - Proof of signature. Certified copies of Income Tax returns

relating to a firm and statements filed in support of them, being public documents in the custody of a public officer, may be presumed to be what

they purport to be. It is unnecessary to prove signatures of the particular partners on the originals.

In the case on hand the official witness namely, P.W.2 had spoken to about the income tax returns. The documents evidencing acknowledgment of

liability are from 31.3.1976 and it runs continuously through the subsequent financial year ending with 31.3.1982. Since the suit has the suit is well

within time.

Coming to the question of absence of grounds reflected in the plaint to save the case from the law of limitation, my attention was drawn by the

learned counsel for the plaintiff to the proviso to Order 7, Rules 6 of the C.P.C. It reads as follows:

Provided that the court may permit the plaintiff to claim exemption from the law of limitation on any ground not set out in the plaint, if such ground

is not inconsistent with the grounds set out in the plaint.

It is no doubt true that before the introduction of the said proviso by the amending Act 104 of 1976, unless the plaint discloses the grounds of

exemption, it has been held that in the absence of any plea to that effect, it would not be open to the plaintiff to rely on the exemption. In view of

the proviso referred to above, I am of the opinion that the position is different. The word used in the proviso is that the ""Court may permit"" the

plaintiff to claim exemption from the law of limitation on any ground which is not inconsistent with the grounds set out in the plaint. I perused the

plaint in this context and the plaint proceeds on the basis that it is a running account. The ground of exemption produced by way of documentary

evidence before the lower court in my opinion, do not in any way run inconsistent with anything set out in the plaint. The claim of the plaintiff

remains intact and no new relief is introduced. A Division Bench of this Court in a judgment reported in M. Somasundaram Pillai Vs. M.

Ramaswamy, has considered the effect of the proviso added to Rule 6. In that case it has been held as follows:

The proviso was added to Rule 6 of O.7. of the Code during the pendency of appeal. Since this is no one of those provisions mentioned in S. 97

of the Amendment Act of 1976 as not applicable to pending proceedings and since generally amendment to procedural rules shall to be taken to

be retro-active applicable to all pending proceedings, the appellant is entitled to rely on the proviso. The plain language of the proviso shows that if

there are materials, by way of documentary or other evidence to show that there was an acknowledgment of liability which could save the suit that

could be relied on by the plaintiffs, subject, however, that such ground is not inconsistent with the grounds set out in the plaint. The amendment of

plaint would not be needed only to cover a case permitting the plaintiff to rely on some ground which is not set out in the plaint or by way of

evidence or other material before the court. The words ""may permit"" in the proviso indicate that the court has got a discretion either to permit or

not to permit the appellant-plaintiff to claim exemption having regard to the facts and circumstances of each case and the plaintiff shall not be

treated as having an absolute right to claim exemption on any material which is not pleaded in the plaint. In the instant case, in view of the pleadings

and the materials on record and of the fact that the defendant who was liable to the suit claim was ex parte thereby admitting it High Court allowed

the appellant to rely on acknowledgment on the basis of the proviso and decreed the suit.

It is no doubt true that in this case that plaintiff had not pleaded any ground saving the suit from the law of limitation. But however he had

produced evidence before the lower court. There was no contra evidence before the lower court at all. It is not the case of the defendants while

they cross examined the witnesses on the side of the plaintiff that these documents do not relate to him. Therefore the lower court had exercised

the discretion vested in it under the proviso to Order 7 Rule 6 of the C.P.C. in permitting the plaintiff to claim exemption on the evidence adduced

by him before it. In view of the categorical pronouncement of this court in the judgment referred to above and inasmuch as there is evidence before

the lower court on the basis of which the plaintiff claims exemptions. I am of the opinion that the amendment prayed for to incorporate the ground

claiming exemption is concerned, would be totally unnecessary. But however the amendment application filed by the plaintiff also seeks to amend

the description of the plaintiff in the cause title as ""Express Publications (Madurai) Limited"" in the place of ""Indian Express (Madurai) Private

Limited"". No counter is filed as well as no objection is raised to this amendment. Therefore the amendment, so far it relates to the description of the

plaintiff alone in the cause title is ordered and in all other aspects, it is dismissed, as it is held to be wholly unnecessary.

The learned counsel for the defendants brought to my notice the following judgments namely.

(a) K. Raheja Constructions Ltd. Vs. Alliance Ministries and others, : (b) P.B. Ramjee and Others Vs. P.B. Lakshmanaswamy Naidu and Others,

and (c) Tarlok Singh v. Vijay Kumar Sabharwal, 1996 (I) C.T.C. 739.

and contended that, but for the acknowledgments, the suit would have been barred by limitation even on the date of the plaint; it is definitely barred

even as on date and by allowing the amendment the barred claim should not be allowed to be revived. However, I am of the respectful opinion that

those judgments have no application to the case on hand since I have already held that the amendment sought for disclosing the ground on which

the exemption is claimed, is wholly unnecessary inasmuch as the evidence in regard thereto had already been placed before the lower court.

One other question that has been argued by the learned counsel for the defendants is that the learned trial Judge erred in awarding interest at

18% p.a. on the amount found due. According to the learned counsel for the defendants, inasmuch as the transactions are governed by the Sale of

Goods Act, the plaintiff would not be entitled to interest at any rate higher than 6%. I heard the learned counsel for the plaintiff on that aspect and I

am inclined to agree that the plaintiff is entitled to interest only at 6% p.a. from 1.12.1981 on the amount found due by the learned trial Judge.

Accordingly that portion of the decree relating to interest and as modified alone is set aside. In all other aspects the appeal stands dismissed

without costs. It is on record that the acknowledgments of liability were brought on record only for the first time during trial. Had they been

disclosed in the plaint, it is not possible to decide as to what course of action the defendants would have taken, inasmuch as they have not disputed

the transaction. Under these circumstances I am inclined to order that there shall be no order as to costs in this appeal.