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Judgment
Vipin Sanghi, J.—The respondent has raised an objection to the maintainability of this petition on the ground that the alleged debt, which is claimed to be outstanding and unpaid to the petitioner, was barred by limitation on the date of filing of the petition. The submission is that the transaction dates back to the lease agreement dated 19.2.1996 and the term of the Lease expiring as early as 18.2.1991, the term being 60 months. The present petition having been filed in April 2006 clearly makes the petition barred by limitation. Even if for the sake of arguments only, it is assumed that the earlier notice of the petitioner dated 22.1.2003 and the reply from the respondent to the said notice dated 10th February 2003 is deemed to be giving the cause of action to the petitioner, then too the present petition is time barred as the petition is filed beyond 9th February 2006. This petition has been filed only on 24th April 2006 vide filing No. 5557. By this date, the period of three years had run out from the last payment made by the respondent, as aforesaid, in the month of March 2002. In answer to this submission, the petitioner relies on two communications to claim the extension of the period of limitation. The first is dated 10th February 2003, issued by the respondent to the petitioner. In this communication, the respondent, inter-alia, states as follows:
In the above circumstances, NHI was expecting to close the Lease agreement after execution of the necessary documents. Surprisingly, however, DCMFSL sent the letter under reply raising absolutely illegal and illogical demand on NHI and further threatened to drag NHI into litigation. NHI is not in arrear of any of the lease rental and has paid the same punctually and in conformity with understanding with DCMFSL. As such there is no question of payment of any of the alleged over due amount much less interest thereon. The demand raised by DCMFSL is false on its face as DCMFSL never raised any contention till date regarding any amount being due or interest payable thereon. At no point of time NHI was apprised of its liability to pay interest @ 2.5% compounded monthly on the amount allegedly over due. We feel that the threat contained in your letter under reply has no factual and/or legal basis and is a means to pressurize NHI to succumb to illegal demand of DCMFSL. NHI is not liable to pay any amount to DCMFSL under the Lease agreement and denies and disputes the demand raised and allegations made by DCMFSL in its letter under reply. Further, NHI is a commercially solvent Company, able to meet all its present and future liabilities. Presently it employs more than 400 employees with a regular monthly disbursement on account of salary and wages exceeding Rs. 100 lacs. NHI is a market leader catering the needs of larger number of agriculturist across the country for cost effective tractors designed and manufactured by technology of international excellence. Besides being a Company providing direct assistance to agriculture, a prime occupation of the country, NHI is a cash rich Company having strong financial base and as such there is no legal ground for winding up of NHI.
Under above circumstances, we request to you withdraw your letter under reply and prepare necessary documents for foreclosure of the Lease agreement. NHI is ready and willing to pay Rs. 1,59,004 towards residual value of the leased assets on execution of the documents in that regard. However, if DCMFSL takes any action against NHI, NHI shall defend the same at the costs and consequences of DCMFSL.
This was followed by another communication dated 24th April 2003, which reads as follows:
Dear Sir,
Re.: Our letter dated 10th February 2003.
In reference to above mentioned letter, we are still to receive reply from your side regarding the foreclosure of lease.
We request you to kindly expedite the matter and take necessary steps for foreclosure of lease.
Thanking you,
Yours sincerely,
for New Holland Tractors (India) Pvt. Ltd.
The submission of the petitioner is that the aforesaid two communications tantamount to an acknowledgement of the existence of the jural relationship between the parties, wherein the petitioner was the Lessor and the respondent the lessee, in respect of the leased equipment. In that capacity the lessee was obliged to make payment of the tease rentals as well as the residual value to the petitioner/lessee. These communications also contain an acknowledgment of debt under the contract of lease. The second communication dated 24th April 2003 reiterates the jural relationship by making reference to the first communication dated 10th February 2003. He submits that for the purposes of extending the period of limitation u/s 18 of the Limitation Act it is not necessary that the respondent should have acknowledged any particular amount or that he should have promised to pay the same. In this case, even according to the respondent, he was liable to pay the residual value of Rs. 1,59,004/-. Learned Counsel for the Petitioner has relied on the two decisions, viz., In Re: Reunion Electrical Mfrs. (P.) Ltd., In re., and Food Corporation of India Vs. Assam State Cooperative Marketing and Consumer Federation Limited and Others,
In Reunion Electrical Mfrs. (P) Ltd. In re. (supra), the petitioner had invoked the provision of section 18 of the Limitation Act on the basis of the communication issued by the respondent on 9th June 2005 wherein the respondent made the following assertions:
Our clients state that the claim made in the notice under reply is absolutely false and frivolous and without any justification and the same is required to be reconciled. Our clients state that there is nothing due and payable by our clients to your clients as alleged.
[Emphasis supplied]
Our clients state that without admitting the genuineness and correctness of the claim made in the letter under reply, our clients say and submit that the accounts in respect of the transaction between the period 1-4-2001 and 31-3-2002 between our clients and your clients is required to he reconciled and thus we hereby call upon your clients to convene a joint meeting -for reconciliation of the said accounts by independent expert and thus reserve their right to give detailed and suitable reply to the said notice after reconciliation of the said accounts
[Emphasis supplied]
The Bombay High court considered the various decisions cited before it, including those of the Supreme Court and gave its finding in para 23 & 24 which reads as follows:
However, to my mind, the letter dated 9-6-2005 and in particular, paragraphs 3 and 5 thereof, constituted a promise albeit an implied promise by the company to pay the petitioner the amounts, if any, that may be found due upon the account being reconciled. It is crucial to note that the company did not really deny its liability totally. It denied that it was liable in the sum of Rs. 7,67,646.21 demanded by the petitioner. The company however did not stop there. The Company then expressly stated that the account in respect of the transactions during the relevant period "is required to be reconciled". The letter goes a step further and calls upon the petitioner "to convene a meeting for reconciliation of the said accounts by independent expert." And further still did it go stating that the company reserved "their right to give detailed and suitable reply to the said notice after reconciliation of the said accounts.
The question that first conies to mind is -Why did the Company call upon the petitioner to reconcile the accounts ? The obvious answer is,- to arrive at the amount that the petitioner was actually entitled to. The question that than comes to mind is - Why did the company want the correct amount to be arrived at ? The logical answer is that the company impliedly thereby agreed to pay only that amount which was found to be due and payable on a reconciliation of the account.
In Food Corporation of India (supra), the Supreme Court while dealing with section 18 of the Limitation Act observed as follows:
According to Section 18 of the Limitation Act, an acknowledgement of liability made in writing in respect of any right claimed by the opposite party and signed by the party against whom such right is claimed made before the expiration of the prescribed period for a suit in respect of such right has the effect of commencing a fresh period of limitation from the date on which the acknowledgement was so signed. It is well settled that to amount to an acknowledgement of liability within the meaning of Section 18 of the Limitation Act, it need not be accompanied by a promise to pay either expressly or even by implication.
The statement providing foundation for a plea of acknowledgement must relate to a present subsisting liability, though the exact nature or the specific character of the said liability may not be indicated in words. The words used in the acknowledgement must indicate the existence of jural relationship between the parties such as that of debtor and creditor. The intention to attempt such jural relationship must be apparent. However, such intention can be inferred by implication from the nature of the admission and need not be expressed in words. A clear statement containing acknowledgement of liability can imply the intention to admit jural relationship of debtor and creditor. Though oral evidence in lieu of or making a departure from the statement sought to be relied on as acknowledgement is excluded but surrounding circumstances can always be considered. Courts generally lean in favour of a liberal construction of such statements though an acknowledgement shall not be inferred where there is no admission so as to fasten liability on the maker of the statement by an involved or far-fetched process of reasoning. (See : Khan Bahadur Shapoor Fredoom Mazda Vs. Durga Prosad Chamaria and Others, and Lakshmirattan Cotton Mills Co.Ltd. and Behari Lal Ram Charan Vs. The Aluminium Corporation of India Ltd., So long as the statement amounts to an admission, acknowledging the jural relationship and existence of liability, it is immaterial that the admission is accompanied by an assertion that nothing would be found due from the person making the admission or that on an account being taken something may be found due and payable to the person making the acknowledgement by the person to whom the statement is made.
The two letters dated 29/03/1977 and 30/07/1977 (Exhibits 8 and 9) clearly acknowledge the amount of Rs. 2 crores having been received by the Federation from the Food corporation of India whether by way of advance or by way of deposit. The letters also indicate that the amount of two crores was by way of advance or deposit against paddy procurement. This is admission of jural relationship of buyer and seller which stood converted into relationship of creditor and debtor on the failure of the principal transaction. However, the acknowledged liability is sought to be disowned by submitting that on an account being taken nothing would be found due and payable by the plaintiff to the Federation. Disputing the liability to repay the amount acknowledged to have been received does not dilute the fact of acknowledgement in so far as Section 18 of the Limitation Act is concerned. The two letters have the effect of extending the period of limitation prescribed for filing the suit and calculated from the date of the latter of the two letters i.e. 30/07/1977, the suit filed on 30/05/1980 was well within the period of limitation.
I had occasion to deal with a similar issued in Yogesh Kumar Gupta Vs. Miss Anuradha Rangarajan, wherein I had to consider the provision of section 18 of the Limitation Act. In that case, there was a dispute between the two partners. The petitioner, who had filed an application u/s 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator sought to rely on the correspondence exchanged between the parties to claim the extension of limitation u/s 18 of the Limitation Act. The relevant extract of the decision reads as follows:
Section 18 of the Limitation Act, inter alia, states that before the expiration of the prescribed period for a suit in respect of any right, upon acknowledgment of liability in respect of such right made in writing and signed by the party against whom such right is claimed, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. An acknowledgment may be sufficient though it omits to specify the exact nature of the right or is accompanied by refusal to perform the obligation corresponding to the right claimed by the other party.
Every partner of a dissolved firm, is vested with the right as against all other partners of the firm, to have the property of the firm applied in the payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners according to their rights. (Section 46 of the Indian Partner ship Act). The Mode of settlement of the accounts is prescribed u/s 48 of the Partnership Act. It is these rights that a partner of a dissolved firm exercises, when he asks for rendition of accounts of the partnership business from the other partners.
To determine whether Section 18 of the Limitation Act applies to the present case, one has to determine, whether the respondent has acknowledged this particular right of the petitioner, i.e to seek the rendition of accounts. The acknowledgment of this right to my mind would stand established if the respondent has also asserted the same right and has in fact acted in a manner which shows his acceptance of the said right of the petitioner.
The correspondence exchanged between the parties between 24.10.2002 and 8.12.2002 assumes importance in the light of Section 18 of the Limitation Act. In para 12 of the communication dated 24.10.2002, the respondent stated as follows:
Summarising, you are called upon to furnish the originals/photocopies of the following Documents and the information asked for to me immediately, as all these Documents are already available with you and there is no justification for delay.
(1) Bills mentioned in para 3
(2) Documents mentioned in para 4
(3) Original cheque book mentioned in para 5
(4) Bills mentioned in para 8
(5) Bills mentioned in para 9
(6) Bills mentioned in para 10 and the information asked for
(7) Dishonoured cheque or the information asked for in-lieu
You are called upon to furnish all the above items within a week of issue of this letter and your failure to do so will be treated as a deliberate attempt on your part to withhold information from me in total violation of the letter and spirit of the Partnership Deed, with the conclusion that you are trying to hide these from me as otherwise your misdeeds will be exposed.
Enclosures - photocopies of 25 pages of Accounts
Register, as mentioned above
New Delhi Anuradha. R.
24-10-2002.
On a complete reading of the said communication, and particularly the above extracted position, it is clear:
A. that the respondent was seeking disclosure of information and accounts of the partnership business from the petitioner. The respondent had even sent its agent to the petitioner on 7.10.2002 for this purpose.
B. the petitioner had made disclosures and furnished some accounts.
C. the respondent itself rendered some accounts, inter alia, by giving details of cheques received by the partnership, and enclosing copies of 25 pages of the accounts. The respondent admits the existence of accounts of partnership business.
D. the respondent demanded further disclosure of information and furnishing of accounts.
To the same effect is the communication issued by the respondent on 23.11.2002 and the two communications issued by the petitioner on 7.11.2002 and 8.12.2002. It would therefore be seen that both the parties acknowledged their respective liability in respect of the other to render accounts, in relation to the partnership business, by rendering accounts and offering to render further accounts. Both the parties also asserted their respective rights to demand the rendition of accounts from the other.
To my mind these communications on both sides constitute acknowledgment of liability to render accounts to the other within the meaning of Section 18 of the Partnership Act. I may refer to the decision rendered in Hukumat Sing Kundanmal vs. Nenumal Rejhumal wherein it was held that where the plaintiff in a suit for the making of accounts of a dissolved partnership relies on an acknowledgment, all that the plaintiff is required to prove is that the defendant has admitted, from time to time, the existence of the partnership accounts between the parties and his obligation to settle such accounts. It is not necessary for the acknowledgment to be operative, that he should go further and state that he was bound to pay any particular sum or such sum as may be found due by him.
I am therefore of the view that a fresh period of limitation started to run since there was an acknowledgment of liability and obligation on either side to lender accounts of the partnership business to the other partner, when the parties exchanged communications between 24.10.2002 and 8.12.2002.
Based on the aforesaid submissions, the argument of the petitioner is that since the respondent has admitted the existence of jural relationship between the parties as the lessor and the lessee, wherein the respondent, as the lessee was obliged to make the payment of lease rentals as well as the residual value, the same is sufficient to constitute acknowledgment for purpose of section 18 of the Limitation Act.
On the other hand, the submission of learned senior counsel for the respondent is that there was no running account between the parties. The case before the Bombay High Court related to a case where there was a running account between the parties. He also submits that there was no acknowledgement of any debt in respect of the lease rentals and it was the categorical case of the respondent that all the lease rentals have already been paid and all that the respondent was obliged to pay at the time of the transfer of title of the equipment in favour of the respondent was the residual value. He argues that there was, therefore, no acknowledgment of any liability in relation to the lease rentals which forms the basis of the claim of the petitioner that there are outstanding liabilities, which the respondent has not paid despite the notice u/s 433 read with section 434 of the Companies Act 1956.
Having considered the rival submissions of the parties, I am inclined to reject the objection raised by the respondent that the petition is barred by limitation. In my view, the claim of the petitioner cannot be said to have been barred by the time on the date when this petition was presented before the court, i.e., on 24th April 2006. In the first of the aforesaid two communications, the respondent vividly sets out the jural relationship between the parties as that of lessor and lessee respectively, and also sets out the further obligation of the respondent to pay an amount of Rs. 1,59,004/- under the said jural relationship. Even according to the respondent this amount of Rs. 1,59,004/- was to be paid upon the petitioner for executing various documents for foreclosure of the lease. In the ultimate paragraph of the first communication dated 10.2.202, as set out herein above, the respondent states that it is ready and willing to pay Rs. 1,59,004/- towards residual value of the leased assets on execution of the documents in this regard. The stand of the respondent was that this amount was to be paid only upon the execution of the necessary documents which, admittedly, was not done on account of the dispute between the parties with regard to the payment of the lease rentals. The following communication dated 24th April 2003 makes a reference to, and relies upon the earlier communication of the respondent dated 10th February 2003. The respondent even called upon to the petitioner to take necessary steps for foreclosure of the lease. This again shows that the respondent acknowledged the jural relationship of lessor and lessee and also its liability there under as a lessee, while asserting its rights as a lessee. As held by the Supreme Court in Food Corporation of India (Supra), so long as the statement amounts to an admission acknowledging the jural relationship and existence of liability (which in this case is admitted to the extent of Rs. 1,59,004/-), it is immaterial that the admission is accompanied by an assertion that nothing would be found due from the person making the admission. In the present case, the communications dated 10.2.2003 and 24.4.2003 admit the liability to the extent of Rs. 1,59,004/-. It is immaterial that they are silent about, or convey the stand of the respondent that nothing is due and payable on account of lease rentals. It is not essential that the acknowledgment should be in respect of the exact amount as is claimed to be outstanding by the plaintiff/ petitioner. These two communications together tantamount to an acknowledgement or liability u/s 18 of the Limitations Act. The petitioner in his rejoinder denies that there was no running account subsisting between the patties. However, to my mind that is not of much relevance, in view of my finding that the aforesaid two communications tantamount to the acknowledgment for purposes of section 18 of the Limitation Act. This objection of the respondent is, therefore, rejected. List for further arguments on 15th July 2008.