Bachawat, J.:— This is an appeal by the defendant from a decree passed by his Lordship Mr. Justice H.K Bose in a Money Suit. The defendant is a limited company. During the years 1928 to 1936 one Golam Hossain Cassim Ariff lent and advanced various sums of moneys to the defendant company. The loans carried interest at the rate of 7½ per cent par annum. The defendant company made various part payments. The balance due to Golam Hossain Cassim Ariff on November 30, 1936 was Rs. 2,77,010-10-7 pies. He died testate on January 1, 1937. The present plaintiff is the sole surviving executor to his will. Pending the suit, the defendant company has gone in liquidation. Various defences were raised but the only outstanding defence is that of limitation. Apart from limitation it is not now disputed that the moneys claimed in the suit are justly due to the plaintiff.
2. The suit is for recovery of Rs. 2,77,010-10-7 pies being the balance due on November 30, 1936 for moneys lent up to that date. By Article 57 of the Indian Limitation Act the period of limitation is three years from the dates when the loans were made. The suit was instituted on December 19, 1939. To save the suit from the bar of limitation the plaintiff relies upon the acknowledgements of liability contained in the balance-sheets of the defendant company for the years ended 30-11-1930, 30-11-1931, 30-11-1932, 30-11-1933, 30-11-1934, 30-11-1935 and 30-11-1936. Copies of these balance-sheets were tendered at the trial and were marked exhibits by consent of the parties. During the relevant years a continuous and current account of the loans and part payments was kept in the books of both Golam Hossain Cassim Ariff and the defendant company. The books of account of the defendant are not available. The relevant books of G.H.C Ariff have been made exhibit in the suit. If the necessary adjustments are made and the balances are struck on November 30 of every year, the balances found to be due to G.H.C Ariff from these books will tally with the balances shown as due to him in the balance-sheets of the defendant company. Each of the balance-sheets is signed by the auditors as also by Messrs. Hashim Ariff Brothers and Co., the managing agents of the defendant company. Each of them shows the amount owed by the defendant company to G.H.C Ariff as at the end of the previous accounting year. The dates on which the balance-sheets were signed, the end of their respective previous years and the balances shown to be then due to G.H.C Ariff are as follows:
Date of signature. Ends of the previous year. Balance due. Rs. As. Ps. 16-3-1931 30-11-1930 12,585- 9- 3 20-2-1932 30-11-1931 1,06,504- 14- 10 20-2-1933 30-11-1932 1,49,119- 3- 8 27-2-1934 30-11-1933 1,54,003- 10- 11 17-3-1935 30-11-1934 2,07,306- 6- 4 1-4-1936 30-11-1935 3,01,792- 10- 1 1-6-1937 30-11-1936 2,77,010- 10- 7
3. The exact admission made in the balance-sheet for the year ended 30-11-1936 is as follows: The balance-sheet is headed “Statement of accounts — The Bengal Silk Mills Co. Ltd. — Balance sheet as at 30th November, 1936”. Under the heading “liabilities” it is stated “debts owing by the company — to Mr. Golam Hossain Kassim Ariff — Rs. 2,77,010-10-7 pies.” Similar admissions are made in the other balance-sheets. Each contains the admission that a certain sum was a debt owing by the company as on November 30 of the preceding year.
4. During the relevant period the managing agents, Hashim Ariff Brothers and Co. Ltd. were a firm consisting of the creditor G.H.C Ariff and his eldest son. One of the points in issue is whether the managing agents could acknowledge a debt in favour of one of their partners. Prior to 1938 the defendant company had no directors. The entire management of its affairs was vested in the managing agents. It is not disputed that the managing agents had authority to borrow moneys from G.H.C Ariff for and on behalf of the defendant company. Sections 131 and 132 of the Indian Companies Act, 1913 provided that the balance-sheet of a limited company must contain a summary of its properties and assets and its capital and liabilities at the end of the period for which its accounts were made up and must be audited by the auditors of the company. By articles 101, 102 and 103 of the articles of association of the defendant company the managing agents were required to lay before the company at its ordinary meeting every year the yearly balance-sheet containing a summary of its properties and liabilities accompanied by their annual report and also to send a copy of the balance-sheet and the report to the members of the company seven days previously to the meeting. By article 108 the auditors of the company were required to report on the accounts and balance-sheet intended to be laid before the company in general meeting. Article 110 provided that every account of the managing agents audited and approved by a general meeting would be conclusive except as regards any error discovered therein within three months after the approval thereon.
5. Yearly balance-sheets of the company used to be prepared and signed by the managing agents in accordance with the articles. The accuracy of the entries in the balance-sheets used to be checked by the auditors who used to append thereto their accuracy certificates and then sign at the foot of those certificates. Notices of the annual general meetings used to be sent to the shareholders. The meetings used to be called inter alia for the purpose of passing the annual balance-sheets and copies of the balance-sheets used to be sent to the share-holders prior to the holding of the meetings.
6. The learned trial Judge had held that all the relevant balance-sheets were duly passed at the general meetings of the company, but this finding was not supported by the evidence adduced at the original trial. For the reasons given in the judgment delivered by my Lord on March 14, 1960 we remitted the following issue to the trial court under Order 41, rule 25, C.P.C 1908: “Whether the balance-sheets as referred to in paragraphs 3 and 6 of the plaint or any of them were or was passed by the defendant company at its annual general meeting?” The trial court took additional evidence on the point and has answered the issue in the affirmative and returned the evidence to this Court together with its finding. We have gone through the evidence and we entirely agree with the finding of the trial court on the additional issue. The finding is supported by the oral evidence of Mohammed Ali Ariff and Ismail Golam Hossain. Mohammed Ali Ariff was present at all the annual general meetings of the company held during the years 1931 to 1937. He has said that the company duly passed the balance-sheets for the relevant years. On some points his evidence is open to criticism and is not quite accurate; but his evidence on the point in issue is true and we accept it. His testimony is corroborated by Ismail Golam Hossain. This witness was present at the annual general meeting of the company held on July 8, 1937 which passed the balance-sheet for the year ended November 30, 1936. Ismail Golam Hossain was not shaken in cross examination. Year after year notices used to be sent out to the shareholders calling annual general meetings of the company for the purpose of passing the balance-sheets. Those meetings were duly held and there was no reason why the company would not pass the balance-sheets at those meetings. Paragraph 6 of the plaint specifically stated that the balance-sheet for the year ended 30-11-1936 was duly passed by the defendant company at its annual general meeting held on or about the 8th July, 1937. This allegation was not specifically denied in the written statement. The original records of the company such as the peon book, the attendance register and the minute book of the annual general meeting of the company are no longer available. On the materials we are satisfied that the balance-sheets for the years ended 30-11-1930, 30-11-1931. 30-11-1932, 30-11-1933. 30-11-1934, 30-11-1935 and 30-11-1936 were duly passed by the defendant company at its annual general meetings held respectively on 24-3-1931, 29-2-1932, 28-2-1933, 23-3-1934, 17-4-1935, sometimes in 1936 and 8-7-1937.
7. Prior to 1938 the defendant company had no directors and consequently the relevant balance-sheets were not signed by any director. They were all signed by the managing agents in accordance with the power conferred on them by the articles of association of the company. Before the trial court counsel for the defendant contended that the Indian Companies Act, 1913 both before and after its amendment by the Indian Companies Amendment Act, 1936 required that the company must have directors, that the balance-sheets must be prepared and signed by the directors and that the relevant balance-sheets not being signed by any director were not valid in law and could not be relied on as acknowledgements made on behalf of the company. The trial court repelled that contention. The balance-sheets were signed by the managing agents in accordance with the power conferred on them by the articles of association of the company and whether or not they were prepared regularly and in conformity with the statutory requirements they were adopted and passed by the company as its balance-sheets in its annual general meetings. In this Court Mr. Banerji, counsel for the defendant company, abandoned the contention that the balance-sheets were invalid or defective or that in view of their defective character they could not be relied on as acknowledgements made on behalf of the defendant company. Consequently we need not now consider this contention.
8. On behalf of the respondent Mr. Deb contends that the balance-sheets contain sufficient acknowledgements of liability signed by the agents of the company duly authorized in this behalf. On behalf of the appellant Mr. Banerji contends that the balance-sheets are not sufficient acknowledgements within the meaning of section 19 of the Indian Limitation Act because (1) they were prepared under compulsion of statute and of the articles of association of the company, (2) they do not contain admissions of liability existing on the dates on which the admissions were made and (3) they were not signed by any person duly authorized on behalf of the company to make acknowledgements of liability to the plaintiff.
9. In support of the contention that the balance-sheets do not amount to acknowledgements of liability, because they were prepared under compulsion of law Mr. Banerji relies upon the decision in Kashinath v. New Akot Ginning and Pressing Co. Ltd. (1) I.L.R 1950 Nag. 562 at 568 : A.I.R 1951 Nag. 255. It is true that the balance-sheets were required to be made both by the Indian Companies Act, 1913 as also by the articles of association of the defendant company. There was a compulsion upon the managing agents to prepare the documents but there was no compulsion upon them to make any particular admission. They faithfully discharged their duty and in doing so they made honest admissions of the Company's liabilities. Those admissions, though made in discharge of their duty, are nevertheless conscious and voluntary admissions. A document is not taken out of the purview of section 19 of the Indian Limitation Act merely on the ground that it is made under compulsion of law, see Venkata v. Partha Saradhi, (2) 1892 I.L.R 16 Mad. 220 at 222, Udaya Thevar v. Subrahmania Chetti, (3) (1896) 6 M.L.J 266, 269, Good v. Jane Job, (4) 1 E1 and E1 6 at 11: 120 E.R 810 at 812. I am unable to agree with the reasoning of the Nagpur decision that a balance-sheet does not save limitation because it is drawn up under a duty to set out the claims made on the company and not with the intention of acknowledging liability. The balance-sheet contains admissions of liability; the agent of the company who makes and signs it intends to make those admissions. The admissions do not cease to be acknowledgements of liability merely on the ground that they were made in discharge of a statutory duty. I notice that in the Nagpur case the balance-sheet had been signed by a director and had not been passed either by the Board of Directors or by the company at its annual general meeting and it seems that the actual decision may be distinguished on the ground that the balance-sheet was not made or signed by a duly authorized agent of the company.
10. Mr. Banerji next contends that none of the balance-sheets contains an admission of liability subsisting on the date of which it is made. According to him the balance-sheet for the year ended 30-11-1936 which was made on 1-6-1937 contains an admission of past liability as on 30-11-1936 but not an admission of liability existing on 1-6-1937. Mr. Banerji contends that such an admission does not satisfy the test of an acknowledgement under section 19 of the Indian Limitation Act. His contention is supported by Jwala Prasad v. Jwala Bank Ltd., (5) A.I.R 1957 All. 143 at 145. In that case the Allahabad High Court held that the balance-sheet did not contain any acknowledgement of an existing liability and therefore could not be treated as an acknowledgement under section 19. Mr. Banerji also relied upon the decisions in Kandasami Reddi v. Suppammal, (6) I.L.R 45 Mad. 443, Venkata v. Partha Saradhi (2) I.L.R 18 Mad. 220, Rustomji on Limitation, 6th Edition, pages 191–193 and the cases collected therein. Now it is well settled that in order to satisfy the test of an acknowledgement under section 19 the admission of liability must be an admission of subsisting liability. In Kandasami Reddi v. Suppammal, (6) I.L.R 45 Mad. 443 at 445, Ayling J. said, “Liability can only signify present liability at the time of acknowledgement and this is clearly laid down in Venkata v. Parthasaradhi (2) (1893) 16 Mad. 220.” In Venkata v. Parthasaradhi (2) I.L.R 16 Mad. 220 at 223 Muttasami Ayyar, J. said, “It is therefore necessary that upon a reasonable construction of the language used by the debtor in writing the relation of debtor and creditor must appear to be distinctly admitted, that it must be admitted also to be a subsisting jural relation, and then an intention to continue it until it is lawfully determined must also be evident.” The section requires a definite admission of liability in respect of the debt, but even an admission that the debt existed at a previous date may, having regard to the language used and the surrounding circumstances, amount to an implied representation that the debt is still subsisting, see (Maniram Seth v. Seth Rupchand) (7) I.L.R 33 Cal. 1047 P.C In my opinion the balance-sheets satisfy the test of an acknowledgement under section 19. Each of them contains an admission that balances have been struck at the end of the previous year and that a definite sum has been found to be the balance then due to the creditor. The natural inference to be drawn from the balance-sheet is that the closing balance due to the creditor at the end of the previous year will be carried forward as the opening balance due to him at the beginning of the next year. In each balance-sheet there is thus an admission of a subsisting liability to continue the relation of debtor and creditor and a definite representation of a present intention to keep the liability alive until it is lawfully determined by payment or otherwise. There is necessarily a time lag between the date of the signing of the balance-sheet and the end of the previous year. The balance-sheet contains no admission of the amount due on the date of the signature, that amount may be and often is different from the amount shown as due at the end of the previous year, but that fact alone does not take the document out of the purview of section 19. Take the case of a banker and its depositor. Suppose the banker sends to the depositor a monthly statement of account made for the month of February 1961 and signed on March 15, 1961. The statement gives the balance due on February 28, 1961. The amount due on March 15 may be quite different; the banker might have been made payments for the customer, nevertheless the statement amounts to a sufficient acknowledgement under section 19. I am therefore unable to agree with the decision in Jwala Prasad v. Jwala Bank Ltd. (5) A.I.R 1957 All. 144.
11. To come under section 19 an acknowledgement of a debt need not be made to the creditor nor need it amount to a promise to pay the debt. In England it has been held that a balance-sheet of a company stating the amount of its indebtedness to the creditor is a sufficient acknowledgement in respect of a specialty debt under section 5 of the Civil Procedure Act, 1833 (3 and 4 Will — 4c. 42), see Re: Atlantic and Pacific Fibre Importing and Manufacturing Co. Ltd., (8) 1928 Ch. 836 under section 1 of Lord Tentenden's Act, 1828 (9 Geo. 4, c. 14) read with section 13 of the Mercantile Law Amendment Act, 1856 (19 and 20 Vict. c. 97), see Re: The Coliseum (Burrow) Ltd., (9) (1930) 2 Ch. 44 at 47 and under sections 23 and 24 of the Limitation Act, 1939 (c. 21), see Ledingham v. Bermejo Estancia Co. Ltd., (10) (1947) 1 A.E.R 749 and Jones v. Bellgrove Properties Ltd., (11) (1949) 2 K.B 700, on appeal from (1949) 1 A.E.R 498. Section 5 of the Civil Procedure Act, 1833 did not require that the acknowledgement should be given to the claiming creditor and consequently a balance-sheet containing an admission of indebtedness to the debenture holders was a sufficient acknowledgement of liability in respect of the debentures under that section, though it was sent only to the debenture holders who happened to be the shareholders of the company and not to the other debenture holders, see Re: Atlantic and Pacific Fibre Importing and Manufacturing Co. Ltd. (8) (1928) 1 Ch. 836. Under Tentenden's Act, 1828 as also under the Limitation Act, 1939 (c. 21) the acknowledgement must be made to the creditor or his agent and if the balance-sheet is sent to a shareholder who is also a creditor the requirements of those Acts were satisfied, see Re: The Coliseum (Burrow) Ltd., (9) (1930) 2 Ch. 44 at 47, Jones v. Bellgrove Properties Ltd., (11) (1949) 1 A.E.R 498 at 504 affirmed (1949) 2 K.B 700. The decision in the last case has been followed in India and it has been held that an admission of indebtedness in a balance-sheet is a sufficient acknowledgement under section 19 of the Indian Limitation Act, see The Rajah of Vizianagram v. Official Liquidator, Vizianagram Mining Co. Ltd., (12) (1951) 2 M.L.J 535 at 550-1 : A.I.R 1952 Mad. 136 at 145, Lahore Enamelling and Stamping Co. Ltd. v. A.K Bahalla (13) A.I.R 1958 Punjab 341 at 347, First National Bank Ltd. v. The Mandi (State) Industries Ltd., (14) (1957) 59 Punjab Law Reports 589 and in an unreported decision of S.R Das Gupta, J. in matter No. 449 of 1955 Re: Vita Supplies Corporation Ltd. (15) decided on December 7, 1956.
12. Mr. Banerji next contends that the balance-sheets are not signed by any person duly authorized by the company to acknowledge on its behalf the debt due to the plaintiff. The balance-sheets are signed by Hashim Ariff Brothers and Co. the managing agents of the defendant company. Now the managing agents had authority to borrow moneys from G.H.C Ariff and to repay them. The authority to repay the debt implies an authority to acknowledge it, “….for if he could pay the amount of the claim, he could plainly also arrange to prevent time from becoming a bar to it”, see Raja Braja Sundar Deb v. Bholanath (16) 24 C.W.N 153 : A.I.R 1919 P.C 120 Besides they had the general power to manage the affairs of the company and to do all acts and things in the name and on behalf of the company. But Mr. Banerji contends that the prima facie authority of the managing agents is taken away because in this case the creditor is one of its partners. Now it has been held that a director cannot make an acknowledgement of a debt due to himself so as to bind the company, see Re: Transplanters (Holding Company) Ltd. (17) (1958) 2 A.E.R 711 and Re: The Coliseum (Burrow) Ltd. (9) (1930) 2 Ch. 44. Similarly the managing agency firm cannot make an effective acknowledgement of a debt due to one of its partners so as to bind the company. The reason is that the managing agents are interested in the loan and by reason of their fiduciary capacity they are not competent to make the acknowledgement without the express consent and knowledge of the company. The company is entitled to repudiate an acknowledgement given by the managing agents in its own favour without its express consent. In the instant case the company did not repudiate the acknowledgement. Instead the company passed the balance-sheet at the annual general meeting of its shareholders. The company therefore elected to ratify the acts of the managing agents. The effect of the ratification is that the acknowledgement has the same effect as if it had been made with the express authority of the company. In these circumstances the managing agents must be held to have been duly authorized by the company to acknowledge the liability of the company in respect of the debt due to one of its partners, see Ledingham v. Bermejo Estancio Co. Ltd., (10) (1947) 1 A.E.R 749 at 753. In view of this finding it is not necessary to consider the further question whether the auditors acknowledged the debt and if so, whether they had any authority to make any acknowledgement on behalf of the company.
13. It must follow that the balance-sheets in question are sufficient acknowledgements within the meaning of section 19 of the Indian Limitation Act and consequently the claim of the plaintiff is not barred by the law of limitation.
14. There is no merit in this appeal. I propose that the appeal be and is hereby dismissed. The appellant do pay to the respondent the costs of and incidental to the appeal and the remand.
15. The liquidator will be entitled to retain the cost of and incidental to the appeal and the remand out of the assets in his hands as between attorney and client. Certified for two counsel.
Lahiri, C.J:— I agree.
S.K.B
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