V.S. Manickasundaram vs V.S. Ramalinga Gounder and Co. by partner and Others

K. Govindarajan, J.—The plaintiff who failed in his attempt to get a decree to realise the amount on promissory notes under Exs.A1 to A4

and A13 to A16, filed the above Appeal.

The plaintiff filed a suit in O.S.No. 312/1982 on the file of the Sub-Court, Erode against defendants/respondents to recover a sum of Rs.

81,280 with interest on the basis that the defendants have executed Exs.A1 to A4 and A13 to A16, the promissory notes. The plaintiff is the

assignee of the said promissory notes.

The defendants contested the suit contending inter alia that the suit promissory notes were not executed, that the same were discharged, that

they are barred by limitation and that the plaintiff is not the holder in due course of the said promissory notes,

The trial Court found that the said promissory notes were executed and enforceable against the defendants, that they had been discharged, that

the suit is barred by limitation and that the plaintiff as the assignee cannot be treated as a holder in due course. Aggrieved against the said judgment

and decree of the trial Court, the plaintiff preferred an Appeal in A.S.No. 421/1985. The learned Judge, in the judgment dated 7.9.1999 held that

the suit transaction covered under Exs.A1 to A4 and A13 to A16 are not discharged by the defendants and the plaintiff is a holder in due course of

the same. But while considering the question whether the suit is barred by limitation, the learned Judge found that it is barred by limitation and on

that basis the suit was dismissed.

Learned counsel for the appellant/plaintiff submitted that the learned Judge found that the suit is barred by limitation only on the basis that on the

date of making endorsement on 3.8.1979, no amount was paid and the same reflects the earlier payment and so the appellant/plaintiff cannot rely

on Section 19 of the Indian Limitation Act of 1963, hereinafter called ''the Act 1963''. According to the learned counsel, the said finding of the

learned Judge cannot be sustained in view of Section 18 of the Act 1963. According to him, even if the amounts are not paid and if endorsement is

made, the period of limitation will be extended on such endorsement and so the learned Judge is not correct in holding that the suit is barred by

limitation. He also relied on the decisions in Thesiga Aiyangar v. Srinivasa Mudaliar, 10 M.L.J. 25 , Khan Bahadur Shapoor Fredoom Mazda Vs.

Durga Prosad Chamaria and Others, and in L.M.L.L. Lakshmanan Chettiar Vs. V.A.R. Alagappa Chettiar and Others, .

Learned Senior Counsel appearing for the respondents/defendants submitted that since the appellant/plaintiff has come forward with the plea

that the endorsement was made after making payment of interest, the said endorsement cannot be relied on to extend limitation, as the appellant

has not established the payment of interest. Referring to Order 7, Rule 6 of the Code of Civil Procedure, learned Senior Counsel submitted that the

appellant has to specifically plead the grounds upon which the exemption from law of limitation is claimed. In support of his submission, the learned

Senior Counsel also relied on the decisions in Sant Lal Mahton Vs. Kamala Prasad, , Wazir Sultan and Sons Vs. P. Satchithananda Rao and

Others, and in Dastur, B.K. v. R. Rajaram, 1986 (99) L.W. 859.

The point for consideration in this Appeal is whether the suit filed by the plaintiff to recover the monies from the defendants on the basis of the

promissory notes Exs.A1 toA4 and A13 to A16 is barred by limitation ?

In view of the finding of the learned single Judge that endorsement was made on 3.8.1979, though the appellant/plaintiff has not established the

payment on the said date, we have to proceed with the case to decide the issue raised before us on the basis of the said finding.

It is no doubt true that in the promissory notes it is stated that

Though the learned counsel had taken us through the evidence, in support of his submission that P.W.2 in his evidence has stated that on the

morning of 3.8.1979, the said amount was paid and he made the endorsement regarding the same, in the evening and thereafter, the 2nd defendant

had signed. Even in the cross-examination, he reiterated the same. The plaintiff has not stated anything because he is the subsequent assignee. The

third defendant as D.W.1 has stated as follows:

He, though denied the payment of interest on 3.8.1979, admitted the signature made on 3.8.1979 and the reason for putting the said signature.

According to him, such signature was made only to save limitation. Accepting the said evidence, the Courts have found that though the

endorsement was made on 3.8.1979, no payment was effected by the defendants. As the said finding is based on evidence, we are not inclined to

interfere with the said finding and proceed further on the basis of the same.

Section 18 of the Act 1963 deals with the effect of acknowledgment in writing, which reads as follows:-

18, Effect of acknowledgement in writing-- (1) Where, before the expiration of the prescribed period for a suit or application in respect of any

property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom

such property or right is claimed, or by any person through whom he derives his title of liability, a fresh period of limitation shall be computed from

the time when the acknowledgment was so signed.

(2) Where the writing containing the acknowledgement 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 acknowledgement 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.

Section 19 of the Act 1963 deals with the effect of payment on account of the debt for the purpose of calculating the period of limitation or of

interest, which reads as follows:

19.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 duly 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.

Learned counsel for the appellant/plaintiff relied on Section 18 of the Act 1963 in support of his submission that even without payment of any

money, if any endorsement was made, the plaintiff is entitled to rely on the same as an acknowledgment of liability as such endorsement was made

before the expiration of the prescribed period for filing the suit or application in respect of the property or right. Though the learned Senior Counsel

appearing for the respondents submitted that mere endorsement made cannot be construed as an acknowledgment of liability not only on the basis

that no amount was paid on 3.8.1979 but also it cannot be construed as an acknowledgment of the debt but it is only an endorsement

acknowledging the payment of interest.

Section 18 of the Act, 1963 is corresponding to Section 14 of the Act, 1908, but with slight change. The word ''acknowledgment'' is not a

word of Art but an ordinary word. As held in various judgments, the essential ingredients of the Section are as follows:

(a) It must be an acknowledgment or affirming admission of an accepting liability. But the acknowledgment need not directly refer to the liability

sought to be enforced in the suit.

(b) It must be made by the person under the liability. The liability must relate to some debt or other application or to some property or right.

(c) The liability must be subsisting on the date of the acknowledgment; it must not have become barred, or satisfied, or destroyed.

(d) The acknowledgment must be made before the expiry of the period prescribed for a suit or application in respect of such property or right.

(e) The acknowledgment must be in writing.

(f) The acknowledgment must be signed.

(g) The signature must be of the party against whom such property or right is claimed, or of some person through whom he derives title or liability.

(h) The acknowledgment must not be vague or ambiguous.

(i) The surrounding circumstances are also relevant and can be taken into consideration in construing the words in which an acknowledgment said

to have been expressed.

Section 19 of the Act, 1963 is corresponding to Section 20 of the Act 1908 with a change in Clause (b). In order to get the benefit of an

extended limitation the creditor has to prove -

(1) that (a) there has been a payment; (i) on account of a debt, or (ii) on account of interest on a legacy; (b) before the expiration of the prescribed

period; (c) by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf; and

(2) that, except in the case of payment interest made before the 1st day of January, 1928, there is an acknowledgment of the payment in the

handwriting of, or in a writing signed by the person making the payment.

The fundamental difference between the above said two provisions are as follows:

Under Section 18, there must be an acknowledgment of liability unaccompanied by part payment u/s 18. To invoke Section 19 there should be an

endorsement regarding payment and signed by the concerned party. If there is a part payment which does not comply with the terms of Section

19, that cannot prevent the endorsement from operating as an acknowledgment within Section 18.

In the decision in State of Kerala v. Chacko, 2000 (3) M.LJ. 135 (S.C.), the Apex Court had an occasion to deal with the scope of Section

18 of the Limitation Act and held as follows:-

From a perusal of Sub-section (1) of Section 18 it is evident that to invoke this provision:

(1) there must be an acknowledgment of liability in respect of property or right;

(2) the acknowledgment must be in writing signed by the party against whom such right of property is claimed (or by any person) through whom he

derives his title or liability;

(3) the acknowledgment must be made before the expiration of the period prescribed for a suit or application (other than application for the

execution of a decree) in respect of such property or right.

The effect of such an acknowledgment is that a fresh period of limitation has to be computed from the time when the acknowledgment was so

signed.

So, it is now necessary for us to decide the controversy whether the endorsement made for payment of interest can be taken as an

acknowledgment of liability.

We may also refer to the decision in Veeraragavayya v. Seetharamayya, AIR 1944 Mad. 57 in which effect of endorsement made was

considered. The learned Judge held as follows:

Where a promissory note was executed and on the same date an agreement was also come to between the parties that the amount of the note

should be paid in instalments. Held, that the promissory note and agreement should be considered as part of the same transaction and the

endorsement on the note would give the endorsee the advantage which could be derived from the agreement, even though there is no separate

assignment of the agreement. Thus treated, an endorsement of payment on the note made more than three years from its execution would save

limitation in respect of instalments payable within three years of the endorsement under the agreement above mentioned.

The Division Bench of this Court in the decision in L.M.L.L. Lakshmanan Chettiar Vs. V.A.R. Alagappa Chettiar and Others, , while

considering the issue whether independent acknowledgment of liability is necessary when there is an endorsement of payment is available, in the

light of Sections 18 and 19 of the Act 1963, it is held as follows:

Section 18 deals with the making of an acknowledgment of liability before the expiration of the period prescribed for a suit or application in

respect of a property or right. Section 19 deals with payment on account of a debt or of interest on a legacy being made before the expiration of

the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in that behalf, and a fresh period of limitation

being computed from the time when the payment was made.

It is further held as follows:

Thus, it may be seen that while u/s 18, there should be an acknowledgment of liability, u/s 19 an endorsement of payment need not imply an

acknowledgment of liability. The mere fact of payment as evidenced by the endorsement will have the effect of extending the period of limitation.

(emphasis is applied)

In the decision in 10 M.L.J. 25, (supra) while considering the fact where without paying any money, an endorsement was made, it is held that

there was no need for the actual payment of money in order to save the bar by limitation if any endorsement was made to that effect and it will

operate as an acknowledgement, though it did not operate to save limitation on the ground of payment.

Similar view is taken in Sheoji v. Motilal, AIR (37) 1950 Raj 11(2) and held that an endorsement of part-payment upon a bond should

operate to save limitation, it is not necessary that there should be any actual , payment and it is intended to operate as a payment.

So from the above said decisions, it is clear that even endorsement with respect to the payment of interest has to be taken as an

acknowledgment of liability and even if no money is paid but endorsement is made to that effect, the limitation is extended as it is an

acknowledgement. In this case, we are having the evidence of the debtor who said categorically that such endorsement was made to extend

limitation.

Learned Senior Counsel appearing for the respondents relied on the decision in Sant Lal Mahton Vs. Kamala Prasad, in support of his

submission that there should be an acknowledgment in a required form for extension of period of limitation as contemplated u/s 20 of the Act. The

said judgment was delivered construing Sec,20 of the Limitation Act, 1908 which is corresponding to Section 19 of the Act 1963. In the said

decision Section 19, the effect of acknowledgment has not been dealt with, as there was no endorsement on the bond and there was no

acknowledgment in the handwriting signed by the debtor prior to the institution of the suit. Even in the said decision, the Hon''ble Judges have taken

a view that to claim exemption u/s 20 of the Act 1908, the plaintiff must be in a position to allege and prove not only that there was payment of

interest on a debt or part payment of the principal and such payment had been acknowledged in writing in the manner contemplated by that

Section. So the said decision has to be distinguished factually, as in the present case, endorsement made by the debtor is admitted. So it cannot be

applied to the facts of the present case. In view of the principles laid down by the Division Bench in 10 M.L.J. 25 (supra) and L.M.L.L.

Lakshmanan Chettiar Vs. V.A.R. Alagappa Chettiar and Others, , judgment in Shyam Bailor Nandi v. Dolo Gobind Sahu, 1992 Pat. 395, cannot

be relied on to decide the issue.

From the above, it is clear that the learned Judge is not correct in holding that the endorsement made on 9.8.1979 though the plaintiff has not

established the payment of interest on the debt, the period of limitation does not extend. Only on the basis of the said finding, the learned Judge has

dismissed the appeal. The said finding is contrary to the decisions cited above.

In view of the above discussion, the judgment and decree of the learned Judge dated 7.9.1999 and that of the learned Sub-Judge, Erode

dated 28.2.1985 cannot be sustained. Hence, they are set aside and the plaintiff is entitled to a decree as prayed for in O.S.No. 312/1982 and so

the said suit is decreed. Consequently, this Appeal is allowed with costs throughout.