FA/1140/1985 1/9 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEAL No. 1140 of 1985 For Approval and Signature: HONOURABLE MR.JUSTICE KS JHAVERI ========================================= = 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= = STATE BANK OF INDIA Versus CHEMITES CORPORATION & 2 ========================================= = Appearance : MR AC GANDHI for Appellant NOTICE SERVED for Respondents No. 1 – 3,3.1, 3.2 None for Respondent No.3 ========================================= = CORAM : HONOURABLE MR.JUSTICE KS JHAVERI Date : 08/05/2008 ORAL JUDGMENT 1. By way of present appeal, the appellant – original plaintiff FA/1140/1985 2/9 JUDGMENT has challenged the judgment dated 19.12.1984 passed by the City Civil Judge, 5th Court, City Civil Court, Ahmedabad, in Civil Suit No.82 of 1981 whereby the learned City Civil Judge dismissed. 2. The facts in brief, as emerging from the record, are as under. 2.1 The appellant, original plaintiff, had filed a suit being Civil Suit No.82 of 1981 before the City Civil Court, Ahmedabad against the respondents, original defendants, praying for recovery of Rs.10,302.69 paise consisting of Rs.5,407.01 paise as the principal amount due on 02.06.1978 and Rs.4,895.68 paise by way of interest from 18-1-1973 till 31-12-1980. 2.2 The trial Court, after considering the entire evidence on record, dismissed the suit of the appellant – plaintiff vide the impugned judgment. Hence, this appeal. 3. Heard Mr.A.C.Gandhi, learned counsel for the appellant. Though served, nobody appears on behalf of the respondents. 4. Learned counsel for the appellant has submitted that the FA/1140/1985 3/9 JUDGMENT Court below has erred in holding that the letter exh.35 dated 19-9-1975 is not an accounts stated under Article 26 of the Schedule to the Limitation Act. It is also submitted that the Court below has erred in holding that the last installment of the loan given to the respondents No.1 an 2 would fall due by 30-3- 1972. The Court below has also erred in not holding that the last installment would be due on 01.05.1973 as stated in plaint para-6. It is further submitted that the Court below ought to have held that as the last installment was due on 01.05.1973, the letter exh.35 dated 19.09.1975 was an acknowledgment of debt made by the respondents No.1 and2 within a period of limitation. Therefore, the benefit of Section 18 of the Limitation Act should be given to the plaintiff. The Court below has also erred in holding that because it was a loan payable on demand, the period of limitation would start to run from the date when loan was made i.e. 30.10.1969. It is submitted that said letter exh.35 constitutes a fresh promise under Section 25(3) of the Contract. It is further submitted that the Court below has overlooked the fact that there is a credit entry of Rs.100/- dated 31.05.1976. Learned advocate for the appellant has lastly submitted that in view of the aforesaid facts and circumstances of the case, the present appeal deserves to be allowed and the impugned judgment requires to be quashed FA/1140/1985 4/9 JUDGMENT and set aside in the interest of justice. 5. The Court below has discussed every aspects and given reasons in detail, in paras-8 and 9 which are reproduced hereunder. “8. The controversy has mainly centered around this issue, the plaintiff has one hand contending that the period of limitation was extended by acknowledgments and the defendants 1 and 2 on the other alleging that the suit is barred by limitation because the earliest acknowledgment was beyond the period of limitation. 9. At the time of the arguments, it was contended by Mr.A.M.Bhatt the learned advocate appearing for the plaintiff that in the instant case the provisions of Article 26 of the Schedule to the Limitation Act should be applied and the letter dated 19-9-1975 which is at exh.35 which was written by the defendant No.2 as the sole proprietor of the defendant no.1 to the plaintiff should be taken as accounts stated in writing signed by the defendant. Mr.Bhatt argued that because the accounts were stated on 19-9-1975 as stated above the period of limitation FA/1140/1985 5/9 JUDGMENT should be computed from that date and not from any earlier date. There is no dispute about the fact that the last transaction prior to 19-9-1975 was of 31st August, 1970 as can be seen from the certified accounts which are at exh.45. The certified copy of account exh.45 reflects an entry dated 31st August, 1970 of Rs.128/- which is a debit entry showing withdrawal of that amount. All the entries which follow are debit entries for the interest amount due from time to time in this account. The last credit entry is of 23rd July, 1970. Therefore, after 23rd July, 1970 till 19-9-1975 when the letter exh.35 was written by the defendant no.2 to the plaintiff, the defendant no.2 did not make any part payment in this account and the last transaction in this account and the last transaction in this account which is of a withdrawal took place in August, 1970. Under Article 26 of the Schedule to the Limitation Act, a suit for money payable to the plaintiff for money found to be due from the defendant to the plaintiff on accounts stated between them can be filed within three years from the date when the accounts are stated in writing signed by the defendant or his authorised agent. On perusal of the letter exh.35 dated 19-5-1975 it is at once clear that by FA/1140/1985 6/9 JUDGMENT no stretch of imagination can this letter be considered as account stated. As account stated has its own consequence in the context of the provisions of Article 26. AS held by the Privy Council in BISHANCHAND v. GIRDHARILAL AND ANOTHER, reported in AIR 1934 PC 147, the essence of an account stated is the fact that there are cross items of account and that the parties mutually agree the several amounts of each and by treating the items so agreed on the one side as discharging the items on the other side protestant, go on to agree that the balance only is payable. Such a transaction is in truth bilateral, and creates a new debt and a new cause of action. Letter exh.35 only states that some financial help was given to the defendant no.2 and that the defendant no.2 shall endeavour to return the amount to the plaintiff from his income. This would at best constitute as acknowledgment of debt. It is not at all contended before me that this letter constituted a fresh promise under section 25(3) of the Indian Contract Act. Neither side has at all addressed the Court on that aspect nor is there any such contention of a new promise under sec.25(3) of the Contract Act taken up in the pleadings. The only contention which was raised as stated above FA/1140/1985 7/9 JUDGMENT was that this letter amounts to accounts stated. By no stretch of imagination this letter can be treated as account stated between the parties. The contention of Mr.Bhatt on this count is, therefore, rejected. The acknowledgment of debt contained in this letter exh.35 dated 19-9-1975 is clearly made beyond the prescribed period of three years limitation and, therefore, the plaintiff cannot get benefit of the provisions of sec.18 of the Indian Limitation Act, which requires that the acknowledgment of liability should be made before the expiration of the prescribed period of limitation. According to the plaintiff even though there was facility of payment by quarterly installments granted on 30-10- 1069 as stated in the letter exh.31 the quarterly installments were to commence from 30-1-1970 being of Rs.500/-, the character of the promissory note as payable on demand was not changed. This contention is incorporated in para 6 of the plaint. Earlier in para 4 of the plaint, the contention of the plaintiff was that it was a clean demand loan granted to the defendant no.1. A suit for money lent under an agreement which shall be payable on demand has to be filed within three years from the date when the loan is paid under Article 21 and FA/1140/1985 8/9 JUDGMENT when it is the case of the plaintiff that the loan was payable on demand, the period of limitation would start to run from the date when the loan was made i.e. from 30th October, 1969. If the facility of payment by installments is taken into account, then keeping in view the quarterly rests and the fact that the installments were to commence from 30-1-1970 of Rs.500/- each, the amount of Rs.5,000/- which is described as clean demand loan in the letter of sanction which is at exh.31, would be paid in 10 such installments which would mean by 30th March, 1972. Even from that date, the acknowledgment dated 19-9-1975 falls beyond three years. Even if the account is to be treated for the sake of arguments as a mutual, open and current account, the period of three years would start from the close of the year in which the last item admitted or proved is entered in the account under Article 1 of the Schedule to the Limitation Act and as earlier noticed, the last item admittedly was entered in the account in August, 1970. However, Article 1 cannot apply in this case because there is no mutuality envisaged therein. Thus, the plaintiff's case is hopelessly barred by limitation and issue no.2 is answered in the affirmative.” FA/1140/1985 9/9 JUDGMENT 6. In view of the aforesaid facts and circumstances of the case, it is noticed that the Court below has rightly come to the conclusion and discussed every aspects in detail in the aforesaid paragraphs of the impugned Judgment. The suit is barred by limitation. Considering the facts of the case, I am of the considered opinion that the Court below was completely justified in passing the impugned judgment. I am, therefore, in complete agreement with the reasonings given by the Court below and the findings arrived at by the Court below in the impugned judgment and hence, no interference is warranted in this appeal. This appeal is, therefore, required to be dismissed. 7. For the foregoing reasons, the present appeal stands dismissed. No order as to costs. [K. S. JHAVERI,J.] vijay