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Kalpana Trading Co., Coimbatore v. Executive Officer, Town Panchayat, Tiruchirapalli And Another
Factual and Procedural Background
The plaintiff, a contractor, supplied two drainage carts and four rubbish carts to the first defendant as per an invoice dated 16-11-1972, with a payment due of Rs. 10,634.98. The plaintiff received letters from the Divisional Development Officer indicating that payments were made by cheques dated 30-11-1973, 14-3-1974, and 3-7-1974, but later the first defendant informed the plaintiff by letter dated 7-10-1976 that the second defendant had misappropriated the amount. Despite repeated demands, the defendants did not pay the amount. The plaintiff filed suit claiming the amount along with interest at 9%, asserting the suit was not barred by limitation since the fraud was only discovered on 7-10-1976.
The defendants resisted the suit on the ground of limitation. The trial court decreed the suit in favor of the plaintiff, but the first appellate court set aside that judgment and dismissed the suit. The plaintiff then filed the present second appeal.
Legal Issues Presented
- Whether it is open to the contesting defendants to take up the plea of limitation on the ground that their own officer misappropriated the money?
- Whether the payments by cheques dated 30-11-1973, 14-3-1974, and 3-7-1974, as pleaded by the plaintiff, constitute acknowledgments sufficient to save the suit from the bar of limitation?
Arguments of the Parties
Appellant's Arguments
- The plaintiff argued that although the defendants claimed payment by cheques, the plaintiff never received the cheques.
- The plaintiff only became aware of the fraud on 7-10-1976 when the first defendant informed them that the second defendant had misappropriated the amount and a complaint was lodged with police.
- Therefore, the suit filed on 17-11-1976 was within the limitation period starting from the date of fraud discovery.
Respondents' Arguments
- The defendants contended that the goods were supplied on 16-11-1972 and no acknowledgment of liability was made thereafter.
- The limitation period of three years started from the date of supply, and since the suit was filed beyond that period, it was barred by limitation.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| S.F Mazda v. Durga Prasad, AIR 1961 SC 1236 | The acknowledgment must indicate a jural relationship of debtor and creditor and be intended as an admission of such relationship. | The court applied this principle to find that the letters and documents did not constitute a valid acknowledgment of liability. |
| Valliama v. Sivathanu, (1979) 4 SCC 429 : AIR 1979 SC 1937 | Under Section 18 of the Limitation Act, a valid acknowledgment must contain an admission of a subsisting liability, not merely a past liability. | The court held that none of the plaintiff's documents showed such an acknowledgment, thus limitation was not extended. |
| L.C Mills v. Aluminium Corpn. of India, (1971) 1 SCC 67 : AIR 1971 SC 1482 | Clarifies the requirements for acknowledgment of liability under the Limitation Act. | The court found no acknowledgment signed by the defendants within the limitation period. |
| Jagdish Lal v. Madan Lal, ILR (1960) 1324 | To benefit from Section 18 of the Limitation Act on grounds of fraud, a party must show that fraud prevented knowledge of the right to sue. | The court noted that the plaintiff failed to establish that the fraud kept him from knowledge of his right within the limitation period. |
| Chintamoni v. Krushnaprasad Singh, AIR 1960 Orissa 75 | Fraud must have kept the plaintiff from knowledge of the right to sue to invoke Section 18. | The court applied this to reject the plaintiff’s claim since the suit was filed after limitation expired despite knowledge of non-payment. |
| Swarnamoyee v. Probodh Chandra, AIR 1933 Calcutta 253 | Defines fraud as intentional imposition or concealment of facts that prevents a party from asserting rights. | The court held that mere intimation of fraud after limitation period did not suffice to extend limitation. |
| In re Marappa Goundar, AIR 1959 Madras 26 | For Section 18 to apply, fraud must have prevented knowledge of right, and time extension applies only against the fraudster or their representatives. | The court found the plaintiff did not meet these conditions to extend limitation. |
| Kasturi v. S.V Rao, AIR 1970 AP 440 | General allegations of fraud are insufficient; particulars must show plaintiff was kept in the dark about the right to sue. | The court held that the plaintiff did not establish such particulars and thus could not invoke Section 17 to extend limitation. |
Court's Reasoning and Analysis
The court examined the timeline and documents related to the payment and alleged fraud. It noted that the invoice dated 16-11-1972 established the supply and the due payment. Letters from the Divisional Development Officer and other authorities indicated payments by cheques, but the plaintiff denied receiving these payments. The court analyzed Section 18 of the Limitation Act, which requires a written acknowledgment of liability signed by the party to restart the limitation period.
The court found that none of the letters or documents constituted such an acknowledgment as they did not admit a subsisting liability within the limitation period. Further, the plaintiff’s letter threatening legal action if payment was not made did not amount to acknowledgment of liability.
The plaintiff relied on Section 17 of the Limitation Act, arguing that the limitation period started only after the fraud was discovered on 7-10-1976. However, the court held that the plaintiff failed to show that the fraud kept him from knowledge of his right to sue within the limitation period. The alleged fraud was informed long after the limitation period had expired.
The court referred to precedents requiring that for fraud to extend limitation, it must have prevented the plaintiff from knowing his right to sue. Mere late intimation of fraud does not suffice. The plaintiff was aware of non-payment well before the expiry of the limitation period but did not file suit timely.
Therefore, the court concluded that the suit was barred by limitation, and the first appellate court’s dismissal of the suit was correct.
Holding and Implications
The second appeal is dismissed.
The suit filed by the plaintiff is barred by limitation as no valid acknowledgment of liability was made within the prescribed period, and the fraud alleged was communicated after the limitation period had expired. The decision affirms the first appellate court’s judgment dismissing the suit. This ruling directly affects the parties by upholding the dismissal of the plaintiff's claim but does not establish any new legal precedent beyond the application of established principles under the Limitation Act.
1. Plaintiff is the appellant.
2. The case of the plaintiff is as follows:—
The plaintiff is a contractor and the first defendant placed order with the plaintiff for supply of two drainage carts and four rubbish carts and the plaintiff has sent those carts under invoice dated 16-11-1972 to the defendants. As per the invoice the defendants had to pay a sum of Rs. 10,634.98. The plaintiff received letters from the Divisional Development Officer. Tiruchy stating that the amount has been sent to the plaintiff by means of cheques dated 30-11-1973, 14-3-1974 and 3-7-1974. The plaintiff received that letter on 9-1-1975. The first defendant then sent a letter dated 7-10-1976 stating that the second defendant has misappropriated that amount. In spite of repeated demands, the defendant did not pay that amount. The plaintiff came to know about the fraud only. On 7-10-1976 and so, the suit is not barred by limitation. The plaintiff also claims interest at 9% and so, the plaintiff is entitled to a sum of Rs. 14,462.98.
3. The defendant resisted the suit on the ground that the suit is barred by limitation.
4. The suit was decreed by the trial Court, on Appeal, the first appellate Court set aside the judgment and decree of the trial Court dismissing the suit.
5. As against that, the plaintiff has come forward with the present second appeal.
6. The substantial questions of law that were framed at the time of admission of the second appeal are:—
i) Whether it is open to the contesting defendants to take up the plea of limitation on the ground that its own officer misappropriated the money?
ii) Whether the plaintiff had pleaded about defendants' payments by cheque dated 13-11-1973, 14-3-1974 and 3-7-1974, and if so, whether these payments by cheques would constitute acknowledgments to save limitation?
7. Counsel for the appellant submitted that the defendant has sent a letter dated 26-8-1974 to the plaintiff under Ex.A 21 stating that the amount was paid under three cheques, but the plaintiff did not receive any cheque and the plaintiff has also received the letter Ex. A23 from the first defendant stating that the second defendant has misappropriated the amount and that fraud came to be known to the plaintiff only on 7-10-1976 when Ex. A23 was sent by the first defendant informing the plaintiff that the cheques have been misappropriated by the second defendant and the suit having been filed on 17-11-1976 is not barred by limitation.
8. Counsel for the respondents submitted that the goods were supplied to the defendants on 16-11-1973 and there is no acknowledgment of liability by the defendants subsequently and so, the suit ought to have been filed within a period of three years from 16-11-1972 and the period of limitation runs from 16-11-1972 and as the suit has not been filed within the period of limitation it is hopelessly barred by limitation.
9. As per Ex. A1 invoice, the goods were supplied to the defendant on 16-11-1972. The plaintiff takes shelter under the letters dated Exs. A21 and A23 stating that fraud has been played by the defendants and from the date of knowledge of fraud committed by the defendants, the suit is filed within the time and so, it is not barred by limitation, Ex. A21 is sent by the Divisional Development Officer to the plaintiff on 26-8-1981 stating that on verification of records, it is seen that payments have been made by the Executive Officer, Ariyamangalam Town Panchayat by means of cheques dated 30-11-1973, 14-11-1974 and 3-2-1974 and they were encashed. The plaintiff sent letter to the defendants on 5-9-1974 under Ex. A14 stating that they have not received payments from the defendants till then and the invoice had been pending for more than 24 months and if the payment is not received within 15 days, they have no alternative but to take up the matter through Courts of law for recovery of money. So, after receipt of the letter Ex. A21, the plaintiff sent letter to the defendant on 5-9-1974 demanding payment of the amount from the defendants. The Collector sent letter Ex.A 16 to the plaintiff on 23-9-1974 directing the defendants to settle the due giving intimation to their office. These letters do not in any way constitute acknowledgment of liability as per Section 18 of the Limitation Act which reads that,
“Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, afresh period of limitation shall be computed from the time when the acknowledgement was so signed.”
10. In S.F Mazda v. Durga Prasad, AIR 1961 SC 1236, the Supreme Court lays down that the words used in the acknowledgment must indicate the jural relationship of debtor and creditor and it must appear that the statement is given with the intention to admit such jural relationship. In Valliama v. Sivathanu, (1979) 4 SCC 429 : AIR 1979 SC 1937, it has been held that,
“Under S. 18, Limitation Act (S. 19 of the Travancore Limitation Act) one of the essential requirements for a valid ‘Acknowledgment’ is that the writing concerned must contain an admission of a subsisting liability. A mere admission of a past liability is not sufficient to constitute such an ‘acknowledgment’.”
11. The above said principle has also been laid down in L.C Mills v. Aluminium Corpn. of India, (1971) 1 SCC 67 : AIR 1971 SC 1482. None of the documents filed by the plaintiff establishes that there was acknowledgment of liability by the defendants within the period of limitation. The plaintiff has clearly stated in Ex. A14 letter dated 5-9-1974 that if the payment is not received within 15 days, they have no other alternative other than to take up the matter through Courts of law for recovery of money. To constitute acknowledgment of liability, there must be acknowledgment of liability made in writing signed by the party and that too must be before the expiry of the prescribed period and only if there is acknowledgment of liability signed by the party against whom such property or right is claimed, a fresh period of limitation starts from the time of acknowledgment of liability. Ex. A16 does not constitute acknowledgment of liability. It was sent by the Collector's office to the defendants asking them to settle the dues under intimation to that office. Sending of letter by the higher authorities to settle the accounts does not constitute acknowledgment of liability. There is no acknowledgment of liability signed by the defendants so as to invoke Section 18 of the Limitation Act. So, it can be safely concluded that there is no acknowledgment of liability by the defendants after Ex.A 1. So, the limitation period runs from the date of the invoice viz., 16-11-1972.
12. Counsel for the plaintiff submitted that Section 17 of the Limitation Act is applicable to the instant case. As per that Section the date of limitation starts only when the plaintiff came to know about the fraud committed by the defendant. In the instant case in Ex. A23 dated 7-10-1976 the first defendant has informed the plaintiff that the second defendant has misappropriated the amount and a complaint has been lodged with the police. Basing upon Ex. A23, counsel for the plaintiff submitted that the period of limitation starts from 7-10-1976 and the suit having been filed within the period of limitation, is not barred by limitation.
13. The supply was made under Ex.A 1 on 16-11-1972, so, the suit ought to have been filed within a period of three years from 16-11-1972. The suit has been filed on 18-11-1979. Even with regard to the case of misappropriation of fund by the second defendant, it was informed to the plaintiff on 7-10-1976 long after the period of limitation. The plaintiff was well aware that the amount due under the invoice Ex. A1 was not paid by the defendants. Even then, the plaintiff has not chosen to file the suit within the period of limitation. The intimation by the defendants that payments were made by three cheques was sent on 26-8-1974. The plaintiff ought to have been diligent enough to file the suit within the period of limitation. It has been clearly stated in Ex. A21 with regard to encashment of the cheques. Then also, the plaintiff was keeping quiet and had come forward with the suit on 18-11-1979. The plaintiff had not taken any steps within the period of limitation.
14. In Jagdish Lal v. Madan Lal, ILR (1960) 1324 (sic) it has been held that:
“Before a party can avail of the benefit of S. 18 of the Limitation Act, he must show that there has been a fraud upon him and further that on account of that fraud, he has been kept back from the knowledge of his right to institute a suit or make an application against the person guilty of such fraud or accessory thereto.”
15. In Chintamoni v. Krushnaprasad Singh, AIR 1960 Orissa 75, it has been held that (at page 76):
“A person, who in such circumstances desires to invoke the aid of S. 18, must establish that there has been fraud and that by means of such fraud he has been kept from his knowledge of his right to sue or of the title wherein it is founded.”
16. In Swarnamoyee v. Probodh Chandra, AIR 1933 Calcutta 253, it has been held that (at page 257):
“In order to constitute fraud there must be some abuse of confidential position, some intentional imposition, or some deliberate concealment of facts; a designed fraud, by which a party knowing to whom the right belongs conceals the facts, and circumstances giving that right.”
17. In the case of In re Marappa Goundar, AIR 1959 Madras 26, it has been held that (at page 27):
“A person desiring to invoke the aid of this section must establish three things viz.,
(1) that there has been fraud;
(2) that by means of such fraud he was kept from the knowledge of his right to sue or apply or of the title on which such right is founded; and (3) time will be extended under the Section only as against the person guilty of fraud, or who is accessory thereto or who claims through the person guilty of fraud otherwise than in good faith and for valuable consideration. These three conditions must concur in proceedings to set aside execution sales or the grounds set put in Section 18 of the Limitation Act. It is not enough for instance for the plaintiff or the applicant to show that the action by the defendant or respondent was fraudulent.”
18. In Kasturi v. S.V Rao, AIR 1970 AP 440, it has been held that:
“Limitation Act (1908), S. 18 — Plea of fraud as a ground of exemption from limitation. It is necessary for plaintiff to give particulars of fraud alleged — General allegations not enough — Particulars should be such as to make out that plaintiff was kept in dark about her right to sue.” In the instant case, Ex.A 23 letter has been sent long after the period of limitation. The plaintiff ought to have filed the suit within the period of limitation. The plaintiff cannot take shelter under Ex.A 23 for invoking Section 17 of the Act. The plaintiff has not established that in spite of reasonable diligence, it was not in a position to discover the fraud prior to the intimation by the defendants. After supply of goods under Ex.A 1 invoice the plaintiff has not chosen to file the suit when the payment was not forthcoming. The letter informing the fraud played by the second defendant, sent long after the period of limitation will not save the period of limitation. Section 17 of the Act supplies only when the plaintiff has been kept from the knowledge of his right to sue. Mere intimation by the first defendant to the plaintiff about the misappropriation of cheques by the second defendant that too long after the period of limitation does not constitute fraud committed by the second defendant. So, the plaintiff is not entitled to take shelter under Section 17 of the Act to compute the period of limitation. The plaintiff ought to have filed the suit within three years from 16-11-1972. The plaintiff has not chosen to do so. So, the suit is clearly barred by limitation. The view taken by the first appellate Court is perfectly in order. There is no infirmity in the judgment and decree passed by the first appellate Court.
19. In the result, the second appeal fails and is dismissed. No costs.
20. Appeal dismissed.
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