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Manekchand Mohanlal Poonawala v. Shah Bhimji Kundanmal And Company
Factual and Procedural Background
This opinion arises from a revisional application filed by Mr. Karanee on behalf of the original defendants challenging the trial Court's refusal to grant unconditional leave to defend a summary suit. The defendants contended that the plaintiffs’ suit was not maintainable as a summary suit because the writing relied upon by the plaintiffs did not constitute a written contract containing a promise to pay, but was merely an entry in the plaintiffs' Sahi book or an acknowledgement. The trial Court had directed the defendants to deposit Rs. 7,000 and denied unconditional leave to defend, which prompted the revision.
Legal Issues Presented
- Whether the writing relied upon by the plaintiffs constitutes a written contract containing an express or implied promise to pay, sufficient to sustain a summary suit under Rule 2 of Order XXXVII of the Code of Civil Procedure.
- Whether an implied promise arising from a written contract qualifies as a cause of action for a summary suit under the amended Rule 2, which excludes suits based on oral contracts.
- The legal effect of the deletion of the words "express or implied" from Rule 2 of Order XXXVII and its impact on the maintainability of summary suits based on implied obligations in written contracts.
Arguments of the Parties
Appellant's Arguments
- The plaintiffs’ suit was not based on a written contract containing a promise to pay but on a mere entry or acknowledgement in the Sahi book.
- The writing annexed to the plaint did not disclose any express or implied promise to pay; any promise was oral and prior to the writing.
- The amount claimed was not a debt or liquidated demand arising from a written contract, a necessary condition for a summary suit under Rule 2 of Order XXXVII.
- Reliance was placed on precedents (Ramji v. Dharma, Chowksi Himutlal Harivulubhdas v. Chowksi Achrutlal Harivulitihdas, Maganlal Harjibhai v. Amichand Gulalji) which held that mere acknowledgements or entries without express promises are insufficient to constitute a cause of action on a written contract.
- The deletion of "express or implied" from Rule 2 indicates that implied obligations under a written contract do not support summary suits.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ramji v. Dharma (1882) I.L.R. 6 Bom. 688 | Determining sufficiency of writing as a promise to pay for revival of time-barred debts under Section 25 Indian Contract Act | Used to illustrate that mere acknowledgements without express promises do not constitute cause of action for summary suits. |
| Chowksi Himutlal Harivulubhdas v. Chowksi Achrutlal Harivulitihdas (1888) I.L.R. 8 Bom. 194 | Same principle as above regarding written promises and revival of debts | Supported the appellant’s contention on the necessity of express promises in writing. |
| Maganlal Harjibhai v. Amichand Gulalji (1928) I.L.R. 52 Bom. 521; s.c. 30 Bom. L.R. 783 | Interpretation of written promises under Section 25 Indian Contract Act for time-barred debts | Relied upon to argue that acknowledgements without express promises are insufficient. |
| Rule 2 of Order XXXVII of the Code of Civil Procedure (as amended) | Defines conditions under which summary suits can be instituted—only for debts/liquidated demands arising on written contracts | Central to the dispute on whether implied promises in written contracts support summary suits under amended Rule 2. |
Court's Reasoning and Analysis
The court analyzed the nature of the writing annexed to the plaint, identifying it as a "Khata Pete receipt," a type of document that, while not containing an express promise to pay, implies a promise by the debtor to repay the amount acknowledged. The court distinguished between mere acknowledgements and writings that create obligations, noting that the writing was made in the lender's book by the debtor, indicated receipt of money on account, mentioned interest, and bore a revenue stamp, all of which demonstrated intention to create a binding obligation rather than a mere receipt.
Regarding the amended Rule 2 of Order XXXVII, the court rejected the appellant’s interpretation that the deletion of "express or implied" excludes implied obligations arising from written contracts. The court held that implied obligations within a written contract remain enforceable by summary suits, as the amended Rule requires the debt or liquidated demand to arise on a written contract, which can include implied promises.
The court further clarified that the precedents cited concerned revival of time-barred debts under Section 25 of the Indian Contract Act and do not negate the existence of implied promises in a valid written contract for the purpose of summary suits. Thus, the court concluded that the Khata Pete receipt constituted a written contract with an implied promise sufficient to maintain the summary suit.
Holding and Implications
The revisional application was dismissed, and the trial Court's order refusing unconditional leave to defend was upheld.
The court ordered the discharge of the Rule with costs and extended the time for the defendants to make the deposit directed by the trial Court to November 20, 1968, with a strict warning that no further time would be granted.
The decision confirms that implied promises arising from written contracts, such as Khata Pete receipts, are sufficient to sustain summary suits under the amended Rule 2 of Order XXXVII, clarifying the scope of written contracts in this procedural context. No new precedent was set beyond this clarification, and the ruling directly affects the parties by upholding the trial Court’s directions.
1. In this revisional application Mr. Karanee on behalf of the original defendants has contended that the trial Court was wrong in not granting unconditional leave to defend, inasmuch as the trial Court should have accepted the defendant's contention that the plaintiffs' suit was not on a written contract. The writing relied upon by the plaintiffs as constituting the cause of action for the claim in suit did not contain any promise to pay and was merely an entry in the Sahi book and/or an acknowledgement. The trial Court should have, therefore, held that the plaintiffs' suit was not maintainable as a summary suit and should not have directed the defendants to deposit Rs. 7,000 and should have granted unconditional leave to defend.
2. A translation of the writing on which the plaintiffs relied is annexed as exh. A to the plaint. A part of the translation is not entirely correct. The writing, when translated, runs ass follows:
Rs. 13,000/- Shah Bhimaji Kundanmal and Company.
(Sd/-) Manekchand Mohanlal Poonawala.
Rs. 18,000/- cash-full Khata Pete Jama (received on Sarafi account and so credited). Interest 14 annas (fourteen annas).
S.Y. 2023 Posh Vad. 12. Monday 6-2-67.
(Sd/-) Mota Visraj.
3. Mr. Karanee contends that the above writing is merely an entry in the Sahi book of the plaintiffs. This writing does not disclose any express promise or any promise at all to make payment. The promise, if any, for payment was previous and oral. In the result, the amount mentioned in the writing is not debt or liquidated demand in money arising on a written contract as necessary for institution of a suit as summary suit. In support of his contentions he has relied upon the decisions in Ramji v. Dharma (1882) I.L.R. 6 Bom. 688, Chowksi Himutlal Harivulubhdas v. Chowksi Achrutlal Harivulitihdas (1888) I.L.R. 8 Bom. 194 and Maganlal Harjibhai v. Amichand Gulalji (1928) I.L.R. 52 Bom. 521. s.c. 30 Bom. L.R. 783 and Rule 2 of Order XXXVII of the Code of Civil Procedure as amended by this High Court.
4. The relevant part of Rule 2 runs as follows:
... and all suits in which the plaintiff seeks only to recover a debt or liquidated demand in money ... arising on a written contract.
In the submission of Mr. Karanee the debt or liquidated demand in money claimed in a summary suit must arise on a written contract which contains an express promise to pay the debt or the liquidated demand in money. An implied contract or obligation for payment of such debt or money even if it arises on a written contract would not justify institution of a suit as a summary suit. In justification of that argument he has referred to Rule 2 as existing before the same was last amended. The relevant part of the Rule as previously existing ran as follows:
... and all suits in which the plaintiff seeks only to recover a debt or liquidated demand in money ... arising on contract, express or implied ....
Mr. Karanee emphasises that the word "implied" has been removed from the now existing Rule 2. He further argues that the present writing does not include any express or implied promise and is merely an acknowledgement by the defendants for having received the sum mentioned in the writing.
5. In connection with the three authorities cited by Mr. Karanee, it may at once be stated that in all the three cases the Court was concerned to decide the question as to whether the writing relied upon on behalf of the plaintiffs was sufficient to constitute a cause of action for a suit in respect of an already time-barred debt. The question was whether the writings relied upon were promises made in writing and signed by the persons to be charged with the debts within the meaning of Sub-section (3) of Section 25 of the Indian Contract Act. In dealing with the question it was observed that acknowledgements and/or Rujus made might revive the old debts and even so might not contain promises made in writing by the persons to be charged with the claims and/or liabilities for payment of time-barred debts. The ratio of the decisions in those cases was that mere accounts stated or mere writings of acknowledgements which did not contain express promise for making payments were insufficient to complete a cause of action for a suit on the basis of the provisions of Sub-section (5) of Section 25. Apparently, the ratio of these decisions is that a promise to revive a time-barred debt must be an express promise in writing for payment of the same. That was the condition required to be fulfilled having regard to the provisions of Sub-section (3) of Section 25. Some observations in these cases are relied upon by Mr. Karanee in connection with the true construction to be given to the writing annexed to the plaint. It is not necessary to refer to facts of these cases in that connection.
6. Now, the writing relied upon on behalf of the plaintiffs, in my view, is what is ordinarily known as a "Khata Pete receipt". This kind of writing has been known and understood to constitute not only an. acknowledgement for receipt of the money but to contain an implied promise that the money having been received "Khata Pete" i.e. "on account" would be repaid by the debtor signing the writing.
7. The question is as to whether the Khata Pete receipt in this case is not a written contract within the meaning of Rule 2 cited above. In this connection it may at once be noticed that the writing does not contain express promise to repay the sum of Rs. 13,000 mentioned in the writing. Even so it is apparent that the writing contains an implied promise to repay the sum of Bs. 13,000 mentioned therein. This is so because the writing is made in lender's book by the debtor and the debtor states that the amount is received on Sarafi account and is credited to the account of the creditor in the ledger of the debtor. The rate of interest is also mentioned. The writing relates to a fresh loan and has no reference to adjustment or otherwise of accounts of previous dealings. It bears a 4-anna revenue stamp. It is quite clear that the parties did not intend the writing to be and it is not merely a receipt. The Writing was executed to create an obligation and promise to repay the amount mentioned therein.
8. Now, it is true that prior to the amendment of Rule 2, a summary suit could be instituted in all cases where a debt or liquidated demand in money arose on contract, express or implied. It is quite clear that previously a written contract was not a necessary condition for institution of a summary suit to recover debt or liquidated demand in money. Where express or implied obligation to pay debt or liquidated demand in money arose, even on an oral contract, a summary suit could be instituted. Under the amended Rule, summary suits cannot be instituted when such debt or demand in money arises on oral contracts. Mr. Karanee, however, is not right in his submission that the deletion of the phrase "express or implied" from amended Rule 2 indicates that when implied obligation to pay debt or liquidated demand in money arises on a written contract, a summary suit cannot be filed. Obligations arising on a written contract can in some parts be express and in other parts be implied by law or otherwise. Such implied obligations', if they create a liability to pay debt or liquidated demand in money, can be enforced by instituting- a summary suit having regard to the language of the amended Rule 2. In my view, it is not correct that implied obligations to pay debt or liquidated demand in money when they arise on a written contract cannot be good causes of action for institution of summary suits.
9. As I have already stated, the Khata Pete receipts ordinarily executed by debtors in favour of lenders must be held to contain an implied promise to repay the money mentioned in such receipts. These obligations to repay must be held to arise on a written contract. Under the circumstances, the contentions made by Mr. Karanee are rejected.
10. Rule discharged with costs. The time to make deposit as directed by the trial Court is extended to November 20, 1968. No further time should be granted.
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