Case: Reunion Engineering Company Private Limited Vs. Mrs.Uma Kumar

P.C.By this Appeal the Appellant challenges the order dated 2nd March, 2006 passed by the learned single Judge admitting Company Petition No.570 of 2005. That Company Petition was filed for winding up of the Appellant-company on an allegation that it is not in a position to pay its debts. According to the Respondent, the Appellant by its letter dated 5-11-2001 acknowledged its liability to pay a sum of Rs.6,61,540.27 to the Respondent. This debt was not paid by the Appellant-company though promised. Ultimately, a statutory notice was issued. It was claimed that in the reply to the statutory notice, again the debt was acknowledged but the payment was not made. Therefore, Company Petition was filed.2. There was only one defence raised by the Company namely that the debt is time barred. Before the learned single Judge, it appears, two contentions were raised, (i) that giving of C-Form alongwith letter dated 19-9-2003 amounts to payment of part of the debt under Section 19 of the Limitation Act, and (ii) it was claimed that by reply to the statutory notice a promise to pay admitted amount was made therefore under Section 25(3) of the Contract Act, claim was made within the period of limitation.The learned single Judge, however, rejected the argument based on the provisions of Section 19 of the Limitation Act. The learned single Judge, however, held that by reply to the statutory notice there was implied promise made to pay the debt. The learned Judge, therefore, held that debt for which the statutory notice was issued and the company petition was filed was not the debt barred by the law of limitation. However, surprisingly the learned single Judge made a direction in the Company Petition for payment of Rs.9,00,000/- within twelve weeks to the Petitioner by the Respondent-company. Failure to make the payment was to result in admission of the petition. It is this order which is challenged in the Appeal.3. We have heard the learned Counsel for both sides. In our opinion, even accepting the finding recorded by the learned single Judge that in the reply to the statutory notice there is an implied promise made to pay the debt, which was barred by limitation, still in our opinion, it will not amount to promise to pay the time barred debt as contemplated by provisions of sub-section (3) of Section 25 of the Contract Act. The Division Bench of this court in its judgment in the case of Canara Bank and ors. vs. Vijay Shamrao Ghatole and ors. 1996 (5) Bom.C.R. 338, has clearly held that an implied promise to pay a time barred debt is not covered by Section 25 of the Contract Act. Observations made by the Division Bench in paragraphs 15 & 16 of that judgment are relevant. They read as under:-"15. It is,thus, clear from the perusal of section 25(3) of the Contract Act that when there is a promise to pay the time barred debt made in writing as envisaged therein, it is treated as a contract and therefore such a promise would furnish a fresh cause of action to the creditor. The dispute between the parties upon the construction of Section 25(3) of the Contract Act is that according to the learned Counsel for the plaintiff-Bank, any implied promise is covered by section 25(3) whereas according to the learned Counsel for the respondent No.1 the promise to pay the time barred debt must be express and in writing. In support of his submission, the learned Counsel appearing for the plaintiff Bank has relied upon the judgment of the learned Single Judge of this Court in the case of (M/s R.Sureshchandra & Co. v. M/s.Vadnere Chemicals Works and others), A.I.R. 1991 Bom. 44 ; 1990 Bank.J. 536 (Bom.), and also upon the judgment of another learned single Judge of this Court in the case of (M/s.Manekchand Mohanala v. Shah Bhimji and Co.), 1969 Mah.L.J. 698.""16. The learned Counsel appearing for the defendant No.1 has, however, relied upon the decision of the Division Bench of this Court in the case of (Manganlal Harjibhai & others v. Aminchand Gulabji and others), A.I.R. 1928 Bom. 319, and in the case of (Balkrishna Mansukhram v. Jayshankar Narayan), A.I.R. 1938 Bom. 460 . Besides the judgment of the Division Bench Maganlal v. Amichand, (cited supra), he has also relied upon the judgment of the erstwhile Lahore High Court in the case of (Basheshar Nath Goela v. Baji Nath & others), A.I.R. 1938 Lah. 264, and the judgment of the Full Bench of the Kerala High Court in the case of (Chacko Varkey v. Thommen Thomas), A.I.R 1958 Ker. 31 . The judgments of the Division Bench of this Court cited supra have taken the view that the promise to pay the time barred debt must be express so as to constitute the contract under section 25(3) of the Contract Act. The said view taken by the Division Bench is binding upon us in preference to the view taken by the Single Bench of this Court in the judgments (cited supra) relied upon on behalf of the plaintiff-Bank." (emphasis supplied)4. It is, thus, clear that for enabling a person to institute a suit for recovery of time barred debt on the basis of provision of Section 25(3) of the Contract Act, there has to be express promise to pay and not implied promise, as has been held by the learned single Judge. Therefore, the finding of the learned Single Judge is clearly contrary to the law laid down by the Division Bench in the case of Canara Bank, referred to above. The learned Counsel appearing for the original Petitioner tried to submit that the learned single Judge was not justified in rejecting his submission made under the provisions of Section 19 of the Limitation Act. According to him, submission of C-Form on 19-9-2003 amounts to part payment. In our opinion, that submission cannot be advanced by the original Petitioner in the absence of filing any affidavit putting the Appellant on notice that such a contention is intended to be advanced in the Appeal. In our opinion, in any case the learned single Judge could not have made an order for payment of Rs. 9,00,000/- in the Company Petition. The most that could have been done by the learned single Judge was to issue a direction for deposit of the amount. In our opinion, also considering the fact that till today the original Petitioner has not filed a civil suit for recovery of the amount, which according to the original Petitioner was due to him, the appropriate order would be to set aside the order passed by the learned Single Judge.5. In our opinion, therefore, following order would meet the ends of justice.

Decision reasoning: 1[ds]We have heard the learned Counsel for both sides. In our opinion, even accepting the finding recorded by the learned single Judge that in the reply to the statutory notice there is an implied promise made to pay the debt, which was barred by limitation, still in our opinion, it will not amount to promise to pay the time barred debt as contemplated by provisions of(3) of Section 25 of the Contract Act. The Division Bench of this court in its judgment in the case of Canara Bank and ors. vs. Vijay Shamrao Ghatole and ors. 1996 (5) Bom.C.R. 338, has clearly held that an implied promise to pay a time barred debt is not covered by Section 25 of the Contract Act. Observations made by the Division Bench in paragraphs 1516 of that judgment are relevant. They read asIt is,thus, clear from the perusal of section 25(3) of the Contract Act that when there is a promise to pay the time barred debt made in writing as envisaged therein, it is treated as a contract and therefore such a promise would furnish a fresh cause of action to the creditor. The dispute between the parties upon the construction of Section 25(3) of the Contract Act is that according to the learned Counsel for theany implied promise is covered by section 25(3) whereas according to the learned Counsel for the respondent No.1 the promise to pay the time barred debt must be express and in writing. In support of his submission, the learned Counsel appearing for the plaintiff Bank has relied upon the judgment of the learned Single Judge of this Court in the case of (M/s R.SureshchandraCo. v. M/s.Vadnere Chemicals Works and others), A.I.R. 1991 Bom. 44   ; 1990 Bank.J. 536 (Bom.), and also upon the judgment of another learned single Judge of this Court in the case of (M/s.Manekchand Mohanala v. Shah Bhimji and Co.), 1969 Mah.L.J. 698.""16. The learned Counsel appearing for the defendant No.1 has, however, relied upon the decision of the Division Bench of this Court in the case of (Manganlal Harjibhaiothers v. Aminchand Gulabji and others), A.I.R. 1928 Bom. 319,    and in the case of (Balkrishna Mansukhram v. Jayshankar Narayan), A.I.R. 1938 Bom. 460   . Besides the judgment of the Division Bench Maganlal v. Amichand, (cited supra), he has also relied upon the judgment of the erstwhile Lahore High Court in the case of (Basheshar Nath Goela v. Baji Nathothers), A.I.R. 1938 Lah. 264, and the judgment of the Full Bench of the Kerala High Court in the case of (Chacko Varkey v. Thommen Thomas), A.I.R 1958 Ker. 31   . The judgments of the Division Bench of this Court cited supra have taken the view that the promise to pay the time barred debt must be express so as to constitute the contract under section 25(3) of the Contract Act. The said view taken by the Division Bench is binding upon us in preference to the view taken by the Single Bench of this Court in the judgments (cited supra) relied upon on behalf of theIt is, thus, clear that for enabling a person to institute a suit for recovery of time barred debt on the basis of provision of Section 25(3) of the Contract Act, there has to be express promise to pay and not implied promise, as has been held by the learned single Judge. Therefore, the finding of the learned Single Judge is clearly contrary to the law laid down by the Division Bench in the case of Canara Bank, referred to above. The learned Counsel appearing for the original Petitioner tried to submit that the learned single Judge was not justified in rejecting his submission made under the provisions of Section 19 of the Limitation Act. According to him, submission of03 amounts to part payment. In our opinion, that submission cannot be advanced by the original Petitioner in the absence of filing any affidavit putting the Appellant on notice that such a contention is intended to be advanced in the Appeal. In our opinion, in any case the learned single Judge could not have made an order for payment of Rs. 9,00,000/in the Company Petition. The most that could have been done by the learned single Judge was to issue a direction for deposit of the amount. In our opinion, also considering the fact that till today the original Petitioner has not filed a civil suit for recovery of the amount, which according to the original Petitioner was due to him, the appropriate order would be to set aside the order passed by the learned Single Judge.5.In our opinion, therefore, following order would meet the ends of justice.