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M. Somasundarm Pillai v. M. Ramaswamy And Others

Madras High Court

Jan 25, 1983

Judgment

CaseIQ

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Factual and Procedural Background

The plaintiff (appellant) instituted a suit seeking either (a) to set aside a claim order dated 24th September 1974 passed in E.A. 541 of 1973 in O.S. 173 of 1971 (Subordinate Judge, Tirunelveli), or (b) alternatively, for a preliminary mortgage decree for the plaint amount with subsequent interest. The plaint amount claimed was Rs. 56,615.

O.S. 173 of 1971 had been filed by the second defendant against the first defendant on 23rd December 1971 and was decreed on 31st January 1973. In execution of that decree, the second defendant attached certain immovable properties of the first defendant on 10th July 1973 and put the properties up for sale. At that time the plaintiff — who is the elder brother of the first defendant — filed E.A. 541 of 1973 seeking that the properties be sold subject to an equitable mortgage in his favour, alleging money dealings and a debt of Rs. 56,615 secured by equitable mortgage. That petition was dismissed and the present suit followed.

At trial the first defendant remained ex parte. The trial court disbelieved the plaintiff's account of money dealings and held that no money was due to the plaintiff; it also held that the pleaded equitable mortgage was not genuine. The plaintiff appealed. In the appeal the plaintiff did not challenge the trial court's findings concerning the genuineness or validity of the equitable mortgage but argued entitlement to a money decree against the first defendant. The second defendant maintained that the equitable mortgage was collusive and that any money claim was barred by limitation.

Legal Issues Presented

Whether the plaintiff is entitled to a money decree against the first defendant notwithstanding the trial court's finding that the equitable mortgage was not genuine.
Whether an acknowledgment of debt (Ex. A7 — a pass book entry signed by the first defendant on 24th September 1972) can be relied upon to save the suit from the bar of limitation under O.7 R.6, C.P.C., particularly in light of the proviso added to that rule by Central Act 104 of 1976.
Whether the proviso to O.7 R.6 (added by Act 104 of 1976) is applicable to proceedings pending at the time of its enactment and thus permits reliance on a ground for exemption from limitation not set out in the plaint, provided it is not inconsistent with the pleaded grounds.
Whether reliance on the alleged acknowledgment would be inconsistent with the pleadings (i.e., would convert the suit into an accounts suit or otherwise be barred by inconsistency with the plaint).
Whether the plaintiff is entitled to a rateable distribution of the money realised by sale under S. 73, C.P.C. (raised but not finally decided).

Arguments of the Parties

Appellant's Arguments

The appellant asserted entitlement to a money decree against the first defendant, particularly since the first defendant had remained ex parte and had not denied liability.
The appellant relied on Ex. A7 (pass book) in which the first defendant allegedly signed on 24th September 1972 acknowledging liability to pay Rs. 38,000; this, he contended, could be relied upon at trial to save the suit from limitation.
The appellant further contended that the proviso added to O.7 R.6 by Central Act 104 of 1976 (permitting the court to allow a plaintiff to claim exemption from limitation on a ground not set out in the plaint, if not inconsistent with the pleaded ground) applied to pending proceedings and thus permitted him to rely on the acknowledgment even though it was not pleaded.

Second Defendant's Arguments

The second defendant contended that the equitable mortgage claimed by the plaintiff was not genuine but was fabricated to deprive the second defendant of the fruits of his decree; alleged collusive, bogus transactions between plaintiff and first defendant.
The second defendant argued the plaintiff should not be granted any decree unless he satisfies the court that he is entitled to such a decree, because any decree might prejudice the second defendant's ability to recover his decree amount in future execution proceedings.
It was contended that, on the face of it, the suit as a money claim was barred by limitation.
The second defendant further argued that the alleged acknowledgment (24th September 1972) would amount to an acknowledgment of settlement of accounts and relying on it would be inconsistent with the pleading in the plaint, i.e., it would impermissibly convert or change the nature of the suit.
Separately, the second and third defendants contended that under S. 73, C.P.C. the plaintiff would not be entitled to a rateable distribution of money realised by sale; the court should decide that point only on an application under S. 73.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Ramaswami v. Anaiya Padayachi, A.I.R. 1936 Mad 545	Held that it is obligatory, as a matter of pleading, to show the ground upon which exemption from the law of limitation is claimed; a party cannot rely on an exemption not pleaded unless the plaint is amended.	The Court acknowledged this obligation but considered the effect of the proviso to O.7 R.6 (added later). The Court treated the precedent as the established rule of pleading which the proviso modifies by granting the court discretion to permit reliance on an unpleaded ground not inconsistent with the plaint.
Sha Manmall Miscrimall v. Radhakrishnar, 84 L.W. 745 (Division Bench)	Followed the principle that exemption from limitation is a matter of pleading and must be specifically pleaded.	The Court noted that this Division Bench decision followed the same pleading requirement; it used the decision to explain the background rule which the 1976 proviso to O.7 R.6 addresses.
Kalyanmal v. Ahmad Uddin, A.I.R. 1934 P.C. 208 (Privy Council)	Held that the plaintiff will not be allowed to show the ground of exemption at the trial by putting in evidence documents such as an acknowledgment of liability if such ground was not pleaded in the plaint.	The Court treated this as authority for the historical rule that evidence of acknowledgment cannot substitute for pleading; but concluded that the 1976 proviso changes the position by allowing the court discretion to permit reliance on such evidence if it is not inconsistent with the pleaded grounds.

Court's Reasoning and Analysis

The Court began with the legal requirement under Order 7, Rule 6, C.P.C. that the plaint must show the ground upon which exemption from the law of limitation is claimed. The Court cited precedents enforcing this pleading obligation (Ramaswami v. Anaiya Padayachi; Sha Manmall Miscrimall v. Radhakrishnar; and Kalyanmal v. Ahmad Uddin), which had historically precluded reliance at trial on evidence of an unpleaded ground of exemption such as an acknowledgment.

The Court then examined the proviso added to O.7 R.6 by Central Act 104 of 1976, which provides that the court may permit the plaintiff to claim exemption from the law of limitation on any ground not set out in the plaint if such ground is not inconsistent with the ground set out in the plaint. Noting that the proviso was inserted after the suit was filed and during the pendency of the appeal, the Court considered whether the amendment applied to pending proceedings. Observing that the proviso was not one of the provisions listed in S. 97 of Act 104 of 1976 as inapplicable to pending proceedings and that procedural amendments are generally retroactive, the Court held that the contention that the proviso applies to pending proceedings was well-founded.

The Court reviewed the Objects and Reasons of the amendment and considered whether the proviso required formal amendment of the plaint in every case. It concluded that the plain language of the proviso permits reliance on documentary or other evidence showing an acknowledgment of liability to save the suit from limitation, provided the ground relied upon is not inconsistent with the grounds set out in the plaint. The Court emphasized that the proviso confers discretion on the court — the court "may permit" — and thus does not give the plaintiff an absolute right to rely on any unpleaded material.

Addressing the second defendant's argument that the acknowledgment in Ex. A7 would amount to an acknowledgment of settlement of accounts and thus be inconsistent with the plaint, the Court disagreed. The Court construed the acknowledgment in Ex. A7 as referring to the total amount outstanding (a statement of debt) rather than merely evidencing a course of dealings or a settled account. Accordingly, reliance on Ex. A7 was not inconsistent with the pleaded case and could be permitted under the proviso.

On the question of the genuineness and weight of the documents, the Court found no reason to disbelieve Ex. A7. The Court noted that Ex. A7 had been produced by the plaintiff even in the earlier claim petition in E.A. No. 541 of 1973 and was therefore not fabricated subsequent to the suit. The Court also relied on the plaintiff's account books (Exs. A3–A6, A11, A12), many of which bore the seal of the Income Tax Officer, as corroborative material showing the debt recorded from 1967 to 1973. The Court also observed that the first defendant had remained ex parte and had not disputed liability.

On these bases, the Court concluded that there was an acknowledgment of liability by the first defendant on 24th September 1972 which could save the suit from the bar of limitation under the proviso to O.7 R.6.

Holding and Implications

Core Ruling: The appeal is allowed. The decree and judgment of the court below dismissing the suit in its entirety are set aside. The suit is decreed as against the first defendant directing him to pay the suit claim to the plaintiff. The suit as against the second and third defendants is dismissed.

Direct implications and consequences:

The Court held that the proviso to Order 7, Rule 6 (added by Central Act 104 of 1976) may be relied upon in pending proceedings to permit a plaintiff to claim exemption from limitation on a ground not set out in the plaint, provided that ground is not inconsistent with the grounds pleaded; the court has discretion whether to allow such reliance.
On the facts of this case, the Court permitted reliance on Ex. A7 (pass book entry signed on 24th September 1972) as an acknowledgment of liability which saved the suit from the bar of limitation.
The immediate practical effect is that the plaintiff obtains a money decree against the first defendant; the decree and dismissal below are set aside and the suit is decreed as against the first defendant only.
The Court declined to decide, at this stage, the second and third defendants' contention under S. 73, C.P.C. regarding entitlement to a rateable distribution of money realised by sale; that issue is to be decided if and when the plaintiff files an application under S. 73.
The Court made no order as to costs in the appeal.

The Court's disposition also serves to illustrate that procedural amendments expanding a court's discretion to allow unpleaded grounds of exemption may apply to pending proceedings and can change the practical effect of historical precedents that required strict pleading of limitation exemptions.

Show all summary ...

V. Ramaswami, J.

1. The plaintiff is the appellant. He filed the suit to set aside a claim order dated 24th September, 1974 passed in E.A 541 of 1973 in O.S 173 of 1971 on the file of the learned Subordinate Judge, Tirunelveli or, in the alternative, to pass a preliminary mortgage decree for the plaint amount with subsequent interest. The total amount claimed in the suit was Rs. 56,615. The suit O.S 173 of 1971 was filed by the second defendant against the first defendant on 23rd December, 1971, for the recovery of certain amount of money and that was decreed on 31st January, 1973. In execution of the said decree, the second defendant attached certain immovable properties of the first defendant on 10th July, 1973, and b ought the properties to sale. At that time the plaintiff who is the elder brother of the first defendant filed E.A 541 of 1973 praying that the properties should be sold subject to an equitable mortgage in his favour on the ground that there were certain money dealings between him and his brother and a sum of Rs. 56,615 was due and as security for the payment of the money, the first defendant had equitably mortgaged the suit properties. That petition was dismissed. Thereafter the present suit has been filed.

2. The second defendant contended that the equitable mortgage claimed by the plaintiff in his favour was not genuine, that it was created for the purposes of depriving the second defendant of the fruits of his decree and that in fact the first defendant did not owe any money at all to the plaintiff and because of the relationship between them collusively and in order to deprive the rights of the second defendant, to proceed against the first defendant, they have created certain bogus transactions of dealings.

3. It may be mentioned that the first defendant remained ex parte. The trial court did not believe the pleas of the plaintiff regarding the money dealings between the plaintiff and the first defendant and held that no money was due to the plaintiff on such account. The court below also held that the equitable mortgage pleaded was not genuine.

4. In this appeal the plaintiff did not question the finding on the genuineness or validity of the equitable mortgage claimed by him. However, the learned counsel for the appellant contended that the appellant was entailed to a money decree against the first defendant especially when he had remained ex parte, and did not deny his liability. The learned counsel for the second defendant however, argued that the plaintiff was not to be given any decree unless he satisfies this court that he is entitled to such a decree on the ground that any decree obtained by him might in a future execution proceeding affect the chances of the second defendant to recover the full decree amount from the first defendant. The learned counsel for the second defendant also contended that on the face of it if the suit were to be tried only for the money claim, the suit is barred by limitation.

5. The allegation in the plaint is that the borrowing, on the basis of a running account, started from April 1967. The account was verified and settled and a sum of Rs. 13,000/—was found due by way of principal, on 20th February, 1971 and for the said sum of Rs. 13,000 the first defendant executed a pass book in favour of the plaintiff undertaking to repay the same with interest at 18 per cent per annum and also agreed to pay the same rate of interest for the future borrowings also. He further alleged that there was a running account and the first defendant was periodically borrowing from the plaintiff and there were also some repayments. On 4th February, 1972 the first defendant is alleged to have created an equitable mortgage by deposit of title deeds with regard to the plaint schedule properties and gave a letter on that date along with the registration copy of partition deed dated 17 th January, 1927 as his title deed. It is further stated that even after the execution of the equitable mortgage the first defendant continued to borrow and a sum of Rs. 38,000 was due from the first defendant to the plaintiff towards principal and a sum of Rs. 12,684 towards interest as on 28th August 1972. In the cause of action paragraph of the plaint it was stated that the cause of action for the suit arose from April, 1967 when the borrowing began and on 4th February, 172 when the first defendant executed the equitable mortgage and on subsequent dates when the borrowing continued and on 20th September, 1974 when the claim petition in E.A No. 5-1 of 1973, was dismissed. As already stated the execution of the equitable mortgage on 4th February, 1972 was found to be false and therefore, could not save the period of limitation as an acknowledgment of liability. Where is no specific allegation as to what was the last item of borrowing or what was the date of any acknowledgment of liability which would save the suit from the bar of limitation. The only allegation found in the body of the plaint was that the sum of Rs. 13,000 found due is principal on 20th February, 1971 and for that the first defendant executed a pass book. Even if there was an acknowledgment on 20th February, 1972 the suit which was filed on 25th November, 1974 could not be saved.

6. Under O. 7. R. 6, C.P.C when a suit is instituted after the expiry of the period prescribed by law of limitation, the plaint shall show the ground upon which exemption from such law is claimed. In Ramaswami v. Anaiya Padayachi . A.I.R 1936 Mad 545. Venkataramana Rao, J. held that it is obligatory as a matter of pleading to show the ground upon which exemption from limitation is claimed and consequently, unless the plaint is amended it will not be open to a party to rely on an exemption not pleaded in the plaint. This decision was followed by a Division Bench of this Court to which one of us was a party in Sha Manmall Miscrimall v. Radhakrishnar . 84 L.W 745., The Privy Council in Kalyanmal v. Ahmad Uddin . A.I.R 1934 P.C 208. further held that the plaintiff will not be allowed to show the ground of exemption at the trial by putting in evidence documents, such as acknowledgment of liability.

7. The learned counsel for the appellant, however, contended that in Ex. A7 which is the pass book referred to in the plaint the first defendant had signed on 24th September, 1972 acknowledging his liability to pay the sum of Rs. 38,000 and that could be relied on by him at the trial and even at this stage, in view of the amendment of O. 7. R. 6 of the C.P.C by the addition of a proviso. The proviso which was added by Central Act 104 of 1976 reads as follows—

“Provided that the court may permit the plaintiff to claim exemption from the law of limitation on any ground not set out in the plaint if such ground is not inconsistent with the ground set out in the plaint.”

Though the proviso was added to R. 6 subsequent to the filing of the suit and the decree thereon and during the pendency of the appeal, the learned counsel further contended that since this is not one of those sections which are mentioned in S. 97 of Act 104 of 1976 as not applicable to pending proceedings and since generally amendment to procedural rues shall be taken as retroactive applicable to all pending proceedings, he is entitled to rely on the proviso. We are of the view that the learned counsel is well-founded in this contention. The Objects and Reasons for adding the proviso reads as follows:

“R. 6 requires that a ground for exemption from limitation should be specifically pleaded in the plaint. Where, however, the ground for exemption from limitation is not specifically pleaded in the plaint, the question arises whether it can be pleaded later, and whether any new ground for exemption from limitation should be consistent with the ground already specified in the plaint. A proviso is being added to R. 6 to empower the court to parmit the plaintiff to rely on a new ground for exemption so long as that ground is not inconsistent with the ground specified in the plaint.”

It is plausible to contend that the Objects and Reasons given above may be interpreted as meaning that the plaintiff may still have to amend the plaint as the use of the word ‘pleaded’ is associated with the pleadings and not a claim of exemption on the basis of the evidence available. However, the plain language of the proviso shows that no such restricted meaning could be given if there are materials, by way of documentary or other evidence, to show that there was an acknowledgment of liability which could save the suit, that could be relied on by the plaintiff, subject, however, that such ground is not inconsistent with the grounds set out in the plaint. If read in conjunction with the Objects and Reasons, the plaintiff will have to file an application for amendment of the plaint and then only he could claim such exemption, the proviso, in our view, is otiose, because even under the main part of the provision he could file such an application for amendment. Therefore, the amendment of plaint would now be needed only to cover a case of permitting the plaintiff to rely on some ground which is not set out in the plaint or by way of evidence or other material before the court. We may, however, add that the wording used in the Rule that the court ‘may permit’ the plaintiff to claim exemption indicates that the court has got a discretion either to permit or not not to permit the plaintiff to claim exemption having regard to the facts and circumstances of each case and the plaintiff shall not be treated as having an absolute right to claim exemption on any material which is not pleaded in the plaint.

8. The learned counsel for the second defendant contended that the suit was filed for a mortgage decree on the basis of the debt and that though he might be entitled to claim a money decree alone instead of a mortgage decree, it is not open to him to convert the suit into one as a suit on accounts and claim a decree for the balance of the amount due on such account. According to the learned counsel, the acknowledgment made by the first defendant on 24th September, 1972 would amount to an acknowledgment of a settlement of accounts and such an acknowledgment could not be relied on and any such reliance would be inconsistent with the pleading in the plaint. We are unable to agree with this contention of the learned counsel. What is sought to be relied on by the plaintiff is an acknowledgment of the debt of Rs. 38,000, as on 24th September, 1972. It is true that ultimately the signature is made at the end of the pass book which evidences running account. However that acknowledgment is referable to the total of the amount outstanding and not merely as evidencing a course of dealings in money. So construed, on the basis of the proviso to R. 6 of O. 7, the plaintiff will now be entitled to rely on such acknowledgement to save the suit from the bar of limitation, though on the main part of R. 6 he could not have relied on the acknowledgment.

9. We have permitted the plaintiff to raise this ground especially when the first defendant who is personally liable for the money had remained ex parte and had not questioned his liability. We have also no reason to doubt the genuineness of Ex. A7 or the acknowledgment made by the first defendant on 24th September, 1972. In fact Ex. A7 was produced by the plaintiff even in the claim petition in E.A No. 541 of 1973 in O.S No. 173 of 1971 and there can be no doubt that this was not created for the purpose of the suit subsequent to the filing of the suit and before the trial. This debt also finds a place in the account books of the plaintiff right from the year 1967 to 1973. The plaintiff has produced Exs. A3 to A. 6 and Exs. A.11 and A.12 All these account books have been produced before the Income tax officer in the respective accounting year and except Ex. A3, for the year 1967—1968 all the other account books bear the seal of the income tax Office. We have no reason to disbelieve Ex. A3 also because the balance found in Ex. A3 is the amount that was brought in as the opening balance in Ex. A4 in the succeeding year and therefore, the fact that the account book, Ex. A3, does not bear the seal of the Income-tax Officer is of no consequence. Since the debt is genuine and it is not disputed by the first defendant and the genuineness of Ex. A7 also could not be disputed, we are of the view that there was an acknowledgment of liability by the first defendant on 24th September, 1972, which could save the suit from the bar of limitation.

10. The appeal is accordingly allowed. The decree and judgment of the court below dismissing the suit in its entirety is set aside. The suit is decreed as against the first defendant directing him to pay the suit claim to the plaintiff. The suit as against the second and the third defendants is dismissed.

11. The learned counsel for the second and the third defendants contended that under S. 73 of the C.P.C the plaintiff will not be entitled to a rateable distribution of the money now in court which was realised by the sale of the suit property on the ground that in terms of that section, the plaintiff will not be entitled to a rateable distribution but that is a matter to be decided as and when the plaintiff files an application under that provision and we cannot decide it at this stage when the plaintiff himself has not come forward with such a claim under S. 73 of the Code of Civil Procedure.

12. There will be no order as to costs in this appeal.

VCS.