Reva Khetrapal, J.— This appeal is directed against the judgment and order of the learned Additional District Judge dated 6th December, 1996 decreeing the suit of the respondent in the sum of Rs. 1,48,240/- with costs and interests.
2. The predecessor-in-interest of the respondents, late Shri Hari Kishan Gupta, as proprietor of Gupta Potteries had filed a suit for recovery of money against the appellant on the following facts.
3. Shri Hari Kishan Gupta, proprietor of M/s. Gupta Potteries was engaged in the manufacture and sale of fire bricks, fire clay, bentonite, fire cement, tiles, B.P Sets, etc. and on the request of the appellant had started supplying B.P Sets, tiles and fire bricks from 1986 to the appellant. The appellant in lieu of the goods supplied was making part-payments from time-to-time, which were duly entered in the account of the appellant maintained by the respondent in his books of account. The appellant was also issuing ‘C’ Forms in the prescribed format of the Sales Tax Department to the respondent. On 28.5.1988, allegedly a sum of Rs. 95,335.28 was due from the appellant as per the books of account maintained by the respondent in the regular course of business. The appellant allegedly did not pay the aforesaid amount despite repeated requests made in this regard and a legal notice dated 23.4.1991 served upon it. The respondent accordingly instituted a suit for the recovery of the balance amount claiming interest @ 18% per annum in accordance with custom, usage and trade practice, that is to say, Rs. 95,335.28 as principal and Rs. 52,210.74 as interest up to the date of the filing of the suit.
4. The appellant was proceeded ex parte in the suit on 28.2.1994 when it failed to appear despite service of summons upon it. An application moved under Order 9 Rule 7 of the CPC by the appellant was dismissed by order dated 22nd May, 1995. The appellant preferred Civil Revision No. 670/1995 before the High Court, which too was dismissed by a detailed order dated 7.8.1996
5. The sum and substance of the order dismissing the Civil Revision Petition was that the entire progress of the suit had been thwarted by the appellant by his persistent defaults and the appellant could not be allowed to take advantage of its own wrong. The appellant, therefore, without filing any written statement joined the proceedings at the stage of arguments, after the respondent had led ex parte evidence by examining himself and proving the documents in support of his case. The hearing of the suit culminated in the passing of the decree in favour of the respondent and against the appellant in the sum of Rs. 1,48,240/- with costs and interest @ 12% per annum on the principal amount of Rs. 95,335/- from the date of the suit till realisation.
6. Aggrieved by the aforesaid judgment and decree, the present appeal has been preferred by the appellant, which was admitted to hearing as far back as on April 29, 1997. In the meanwhile, the respondent died without reaping the benefits of the decree and was substituted by his legal representatives, the respondent Nos. 1 to 6 herein. Initially, the respondent No. 1 contested the appeal, but subsequently chose not to appear. The respondent Nos. 2 to 6 did not contest the appeal despite service effected upon them. Notice of default was also served on the Counsel for the respondents, but to no avail. Accordingly, the appellant through his Counsel Mr. Keshal Dayal, Senior Advocate was heard and the records perused by me.
7. Mr. Keshal Dayal, the learned Senior Counsel for the appellant at the outset contended that the suit was not maintainable in view of the bar of limitation imposed by Section 3 of the Limitation Act, 1963. He submitted that the respondent himself had pleaded in the suit filed by him that as per the books of account, duly kept and maintained by him, on 28.5.1988, a sum of Rs. 95,335.28 was due and payable by the appellant to the respondent towards the price of the goods purchased by the appellant. Thus, the suit of the respondent was barred by limitation as the last bill was dated 28.5.1988 and the suit could only have been filed on or before. 27.5.1991 Mr. Dayal also vehemently contended that Article 1 of the Limitation Act could not be invoked by the respondent in this case as the respondent had failed to prove the existence of a mutual, open and current account, where there, have been reciprocal demands between the parties, and that the only Article for computation of limitation applicable in the instant case was Article 14. Assailing the finding of the learned Additional District Judge that the ‘C’ Forms amounted to acknowledgement of liability for the payment of the amounts mentioned therein within the meaning of Section 19 of the Indian Limitation Act, the learned Senior Counsel for the appellant next contended that the issuance of ‘C’ forms did not amount to acknowledgement of debt as the same were issued in the due course of business, which were meant for paying tax to the Government and not for extending the period of limitation.
8. Adverting to the first contention of the learned Senior Counsel for the appellant, there is no manner of doubt that Section 3 of the Limitation Act places a statutory obligation on the Courts to examine whether the suit is filed within limitation or not, even if no such plea has been taken by the opposite party. If the suit is filed beyond limitation and is clearly time-barred, it cannot be decreed in the teeth of Section 3 of the Limitation Act and the Court has to dismiss it, whether or not limitation has been set up as a defence. [See Central India Chemicals Pvt. Ltd. v. Union of India (UOI) Railways, AIR 1962 MP 301 (DB); Roshan Lal Kuthiala v. Raja Rana Yogendra Chandra, AIR 1996 HP 14; Syed Jalaluddin Hasan Quadri v. Tarapharmacy represented by its Managing Partner, Tarachand Aggarwal, AIR 1966 AP 136 and Ajab Enterprises v. Jayant Vegoiles and Chemicals Pvt. Ltd., AIR 1991 BOMBAY 35.]
9. Before dealing with the next contention of Mr. Keshav Dayal that the respondent had failed to prove the existence of a mutual open and current account, it would be apposite to reproduce Article 1 and Article 14 of the Schedule to the Limitation Act, 1963 for the sake of ready reference, which read as under:
Description of suit
Period of limitation
Time from which period begins to run
1. For the balance due on a mutual, open and current account, where there have been reciprocal demands between the parties
Three years
The close of the year in which the last item admitted or proved is entered in the account; such year to be computed as in the account.
14. For the price of goods sold and delivered where no fixed period of credit is agreed upon.
Three years
The date of the delivery of the goods.
10. A bare reading of the aforesaid Articles set out in the Schedule to the Limitation Act shows that Article 1 relates to suits in respect of balance due on a mutual, open and current account where there have been reciprocal demands between the parties. The period of limitation prescribed by this Article is three years from the close of the year in which the last item admitted or proved is entered in the account and such year is to be computed as in the account. In other words, if the statement of account between the parties is to be regarded as a mutual, open and current account, then the period of limitation of three years would begin from the close of the year in which the last item admitted or proved is entered in the account. In the instant case, however, the learned Additional District Judge has held, and I think rightly so, that Article 1 of the Schedule to the Limitation Act cannot be invoked in favour of the respondent, as the respondent has failed to prove the existence of a mutual account between the parties.
11. It is settled law that merely because there is a running, open or current account in respect of the transactions between the parties does not mean that Article 1 of the Limitation Act, 1963 would apply. It has been so held by the Supreme Court in the case of Kesharichand Jaisukhlal v. Shillong Banking Corporation Ltd., (1965) 3 SCR 110, after referring to the leading case on mutual accounts Hirada Basappa v. Gadigi Muddappa, (1871) VI MHCR 142, wherein it is observed as under:
“To be mutual there must be transactions on each side creating independent obligations on the other, and not merely transactions which create obligations on the one side, those on the other being merely complete or partial discharges of such obligations.”
12. A Division Bench of this Court in the case of Manish Garg v. East India Udyog Ltd., 2001 III AD (Delhi) 493, after referring to the judgment of the Supreme Court in Kesharichand Jaisukhlal's case (supra) and in the case of Hindustan Forest Co. v. Lal Chand, (1960) 1 SCR 563, held as follows:
“8. Thus for an account properly to be called Mutual Account there must be mutual dealing in the sense that both the parties come under liability under each other. In this case, this ingredient is not satisfied. It was simply a case of debtor and creditor only and not a case of mutual obligations which will in the ordinary way result in enforceable liabilities on each side. Mutual Account is when each has a demand or right of action against the other.”
13. The grievance of Mr. Keshav Dayal, the learned Senior Counsel for the appellant, however, is that the learned Additional District Judge while rightly holding that there were no reciprocal dealings between the parties and thus there was no mutual, open and current account within the meaning of Article 1 of the Schedule 1 to the Limitation Act which could keep the debt alive even after 28.5.1988, grossly erred in relying upon the written acknowledgement in the form of Sales Tax Declaration duly signed by the Director of the appellant Company to the respondent. Mr. Dayal contended in this connection that the Sales Tax Declaration forms submitted to the respondent at best could be said to have acknowledged the receipt of the goods delivered to the appellant and cannot be stretch to mean acknowledgement of liability.
14. This Court is inclined to agree with the aforesaid contention of the learned Senior Counsel for the appellant. The record shows that the appellant submitted Central Sales Tax Declaration on 16.9.1988 duly signed by Shri Subodh Kumar, Director of the appellant, proved as Exhibit PW-1/3, acknowledging the receipt of the goods and making a declaration that these goods with details of the bills and dates were worth Rs. 1,46,225.60. Similarly, the appellants under the signatures of the same Director had submitted similar Declaration Exhibit PW-1/12 and Exhibit PW-1/13 on 16.9.1988 admitting the receipt of the goods worth Rs. 22,880/- and Rs. 10,608/- respectively. The learned trial Court opined that these written Declarations duly signed by the Director of the Company not only acknowledged the receipt of the goods detailed therein but also amounted to acknowledgement of liability for the payment of the amounts mentioned therein, within the meaning of Section 19 of the Limitation Act. Relying upon the judgment of the Supreme Court in Shapoor Freeloom Mazda v. Durga Prasad Chamania, AIR 1961 SC 1236 and the observations made therein that the provisions of Section 19 of the Limitation Act must be construed liberally in favour of the creditor as there is no prescribed format for acknowledgement, the learned trial Court, while taking note of the fact that the amount of the aforesaid three Declarations was more than Rs. 1,80,000/- as against the liability of the appellant which was only Rs. 95,000/- and odd, held that the Declarations nonetheless must be construed as acknowledgement in view of the unrebutted and unchallenged testimony of the respondent made on oath, though it held that the respondent was entitled for a decree in the sum of Rs. 95,335.28 only, that is, amount remaining due against the appellant as per the books of account of the respondent with interest amounting to Rs. 52,210.74 @ 18% per annum.
15. In my considered opinion, the learned trial Court clearly erred in construing the ‘C’ Forms as acknowledgements of liability and in relying upon them for extending the period of limitation, inter alia, for the reason that when exemption from limitation is prayed for, it is essential for the plaintiff to very specifically plead such an exemption in the plaint. As a matter of fact, under Order 7 Rule 6, CPC, it is obligatory, as a matter of pleading, to show the ground on which the exemption from limitation is claimed. It was so held in Sha Manmall Misrimall v. K. Radhakrishnan, AIR 1972 Mad 108 by the Madras High Court and by a Division Bench of the Himachal Pradesh High Court in the case of Roshan Lal Kuthiala (supra). In the instant case, this has not been done by the respondent-plaintiff at all, in that the respondent in the plaint does not seek to rely upon any acknowledgement for extending the period of limitation for institution of the suit. Thus, clearly, in my view, it would not be open to the respondent to rely on an exemption not specifically pleaded in the plaint.
16. Apart from the above, in my view, the Central Sales Tax declarations cannot be relied upon as acknowledgements in the instant case for claiming extension of the period of limitation. Section 18 of the New Act (corresponding to Section 19 of the Old Act) deals with the effect of acknowledgement in writing, the relevant portion whereof reads as under:
“18. Effect of acknowledgement in writing—(1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement 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, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed.
(2)……………………………………………………………………..
Explanation.—For the purposes of this section—
(a) an acknowledgement may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or right;
(b) the word ‘signed’ means signed either personally or by an agent duly authorized in this behalf; and
(c) an application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.”
17. In Shapoor Freeloom Mazda (supra), the Supreme Court, while laying down the basic requirements that need to be fulfilled for a document to constitute a valid acknowledgement within the meaning of Section 19 of the 1908 Act, held as follows:
“(6). It is thus clear that acknowledgement as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgement of the liability in respect of the right in question. It need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledge is based 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. Words used in the acknowledgement must, however, indicate the existence of jural relationship between the parties such as that of debtor or creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the Court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing on which a plea of acknowledgement rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally Courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or far-fetched process of reasoning. Broadly stated that is the effect of the relevant provisions contained in section 19, and there is really no substantial difference between the parties as to the true legal position in this matter.”
18. The question was again examined with reference to the right of redemption in Tilak Ram v. Nathu, AIR 1967 SC 935, wherein the Court held:
“The right of redemption no doubt is of the essence of and inherent in a transaction of mortgage. But the statement in question must relate to the subsisting liability or the right claimed. Where the statement is relied on as expressing jural relationship it must show that it was made with the intention of admitting such jural relationship subsisting at the time when it was made. It follows that where a statement setting out jural relationship is made clearly without intending to admit its existence, an intention to admit cannot be imposed on its maker by an involved or a far-fetched process of reasoning.”
19. Again in Reet Mohinder Singh Sekhon v. Mohinder Parkash, (1989) 3 SCR 610, where the suit was resisted on the ground that the recitals in the sale deed served as an acknowledgement, the Supreme Court relying upon Tilak Ram's case (supra) held that:
“…………………………………the period of limitation cannot be extended by a mere passing recital regarding the factum of the mortgage but that the statement on which the plea of an acknowledgement is based must relate to a subsisting liability. The words used must indicate the jural relationship between the parties and it must appear that such a statement is made with the intention of admitting such jural relationship. But, in our opinion, the recitals in the sale deed on November 1, 1913 fulfil the above requirements……………………………………………………The words spell out a clear intention the moneys due under the mortgage still remained unpaid and also that the mortgagor had a subsisting right of redemption which he could enforce against the mortgagee. In this view of the matter the contention on behalf of the appellant that the recitals in the document of November 1, 1913 constituted an acknowledgement of liability for redemption within the meaning of Section 19 of the Limitation Act deserves to be accepted.”
20. The aforesaid principles relating to Section 19 of the Old Act, the provisions of which are similar to Section 18 of the New Act, were reiterated by the Supreme Court in the case of Prabhakaran v. M. Azhagiri Pillai (Dead) by LRs., (2006) 4 SCC 484.
21. In Valliamma Champaka Pillai v. Sivathanu Pillai, (1979) 4 SCC 429, it was held as under:
“Under Section 18 of the Limitation Act, 1908, one of the essential requirements for a valid ‘acknowledgement’ is that the writing concerned must contain an admission of a ‘subsisting liability’. A mere admission of the past liability is not sufficient to constitute such an ‘acknowledgement’. Hence a mere recital in a document as to the existence of a past liability, coupled with a statement of its discharge, does not constitute an ‘acknowledgement’ within this Section.”
22. In the case of Hansa Industries (P) Ltd. v. MMTC Limited, 113 (2004) DLT 474, it was held as under:
“19. We can deduce the following principles from the aforesaid judgments which shall have to be applied in a given case to as certain as to whether writing constitutes an acknowledgement or not:
(a) Acknowledgement means an admission by the writer that there is a debt owned by him either to the receiver of the letter or to some other person on whose behalf it is received. It is not enough he refers to a debt as being due from somebody. He must admit that he owes the debt.
(b) The statement on which a plea of acknowledgement is based must relate to a present subsisting liability though the exact nature of the specific character of the said liability may not be indicated in words.
(c) Words used in the acknowledgement indicate the circumstances of jural relationship between the parties such as that of debtor and creditors.
(d) It must appear that statement is made with the intention to admit such jural relationship.
(e) Such intention can be implied and need not be expressed in words. In construing the words used in the statement, surrounding circumstances can be considered although oral evidence is excluded.;
(f) Although liberal construction is to be given to such statement but where a statement was made without intending to admit the existence of jural relationship, the Court cannot fasten such intention on the maker by an involved or far-fetched process of reasoning.
(g) In deciding, the question in a particular case, it is not useful to refer to judicial decision and one has to inevitably, depend upon the context in which words are used.”
23. The question whether an auditor's report could be treated as an acknowledgement for the purpose of extending the period of limitation came to be considered by this Court in R.K Chemical v. Kohinoor Paints Faridabad Pvt. Ltd., 2005 II AD (Del) 133, wherein the Court held as under:
“An auditors report signed on 27th November, 1996 which reflected a debt existing in the accounting period 1995-1996 (1.4.1995 to 31.3.1996) did not constitute acknowledgement of the debt as the said report merely affirmed the state of affairs prevailing as on 31.3.2006 and cannot be treated as acknowledging the position existing on the date of the report as well, i.e, 27th November, 1996. For even if the position of debtors or creditors had undergone a change between April and November, 1996, the same would not have found place in the said report.”
24. In Taipack Limited v. Ram Kishore Nagar Mal, 2007 (3) ARB. LR 402 (Delhi), a similar question arose as in the instant case as to whether ‘C’ Form supplied by the petitioner therein constituted acknowledgement of debt owed to the respondent so as to give a fresh lease to the commencement of limitation. A learned Single Judge of this Court answered the question in the negative giving the following reasons:
“32. Firstly, there is no acknowledgement of a present and subsisting liability. The said form can at the most be treated as an acknowledgement of the goods received under the contract of supply of goods and the price fixed to be paid for them. Whether or not payments were effected thereafter, or any amount remains due or outstanding cannot be inferred from the said ‘C’ form in the facts and circumstances of this case. Secondly, no intention to acknowledge a liability can be inferred from the contents of the said ‘C’ form. Thirdly, one cannot establish a jural relation of debtor and creditor from the contents of the said ‘C’ form. Thus, the essential requirements for a writing to constitute acknowledgement are missing from the document. (also see Hansa Industries (P) Limited v. MMTC Ltd., 2004 VI AD (Del) 222).”
25. In view of the aforesaid settled legal position, the Central Sales Tax ‘C’ Form dated 16th September, 1988, in my view, cannot be treated as an acknowledgment of the debt owed by the appellant to the respondent as it fails to fulfil the essential requirements for a valid acknowledgement. The C ‘Form’ is dated 16th September, 1988. It is not in dispute that the suit was instituted on 27.5.1991 Whether any payments were made after 16th September, 1988, and whether any amount remained due or outstanding, cannot be inferred from the aforesaid ‘C’ Form. Most importantly, however, the ‘C’ Form cannot be construed as an acknowledgement for the reason that no intention to acknowledge a liability can be inferred therefrom. The Courts though lean in favour of a liberal construction of all documents which are sought to be relied upon as acknowledgements, it would be too far-fetched to hold that a ‘C’ Form handed over by the appellant to the respondent can be construed as an acknowledgement of subsisting liability owed by the appellant to the respondent. The liability could well have been liquidated and wiped off even before the issuance of the ‘C’ Form.
26. For all the aforesaid reasons, the impugned judgment and decree dated 6th December, 1996 is unsustainable and the same is accordingly set aside.
27. RFA No. 54/1997 stands disposed of accordingly.
RFA disposed of.