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AMICUS AI
Citation Codes
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citation codes
Case Number
Attorney(S)
  • G. Venkataramayya for the appellant.
  • P. Venkataramana Rau for the respondent.
Judges
  • Kumaraswami Sastriyar
  • Phillips, JJ.
Acts
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Cites
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • G. Venkataramayya for the appellant.
  • P. Venkataramana Rau for the respondent.
Judges
  • Kumaraswami Sastriyar
  • Phillips, JJ.
Acts
See more information ...
Smart Summary

Summary of Opinion — Kumaraswami Sastriyar and Phillips, JJ.

Factual and Procedural Background

The plaintiff (appellant) sued in 1912 to recover damages for breach of a contract whose performance was due before 20 September 1906. To overcome the bar of limitation, the plaintiff relied on a letter dated 20 September 1909 (Exhibit B). Both Lower Courts dismissed the plaintiff's suit on the ground that the letter did not contain an acknowledgment of liability sufficient to bring the case within section 19 of the Limitation Act. The present opinion disposes of the Second Appeal and affirms the decrees of the Lower Courts.

Legal Issues Presented

  1. Whether Exhibit B (the letter of 20 September 1909) amounts to an acknowledgment of liability under section 19 of the Limitation Act sufficient to revive or extend the period of limitation.
  2. Whether the agreement to refer the dispute to arbitration, coupled with a promise not to plead the statute of limitation if arbitration failed, is valid and enforceable (including whether such a promise can prevent the operation of the Limitation Act).
  3. Whether the period between the date of the agreement to refer to arbitration and the date when the plaintiff knew the arbitration had become abortive should be excluded from computation of the period of limitation.
  4. Whether the defendants are estopped from pleading limitation by reason of their written undertakings in Exhibit B.

Arguments of the Parties

Appellant's Arguments

  • The letter dated 20 September 1909 contains a promise to pay whatever may be found due on arbitration and therefore constitutes an acknowledgment of liability within section 19 of the Limitation Act.
  • The parties' agreement to refer the dispute to arbitration, together with the defendants' promise not to plead limitation should arbitration fail, is valid and binding—effectively a covenant by one party not to sue until arbitration is over and by the other not to plead limitation if a suit becomes necessary.
  • The period between the agreement to refer and the plaintiff's knowledge that arbitration was abortive ought to be excluded from the period of limitation.

Respondents' / Defendants' Position (as reflected in the opinion)

  • The defendants denied liability; Exhibit B was a conditional undertaking to pay only if the arbitrators found them liable.
  • The defendants did not, by the written submission to arbitration, unconditionally acknowledge the debt; therefore the letter cannot be treated as an acknowledgment under section 19 unless the condition was performed.
  • The promise not to raise a plea of limitation (if arbitration failed) is not valid insofar as it would defeat the statutory provisions relating to limitation.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
In re River Steamer Company Establishes that to take a case out of the statute of limitation there must be either (a) an acknowledgment of the debt from which a promise to pay may be implied, (b) an unconditional promise to pay, or (c) a conditional promise to pay together with evidence that the condition has been performed. The court relied on this principle to hold that Exhibit B was a conditional promise and that, unless the condition (arbitration award) was performed, it could not operate as an acknowledgment to revive limitation.
Maniram Seth v. Seth Rupchand Approval by the Privy Council of the principle stated in In re River Steamer Company regarding conditional acknowledgments and the necessity for performance of the condition. The court cited this approval to reinforce that the English authority applies and supports the proposition that conditional promises do not revive limitation unless the condition is fulfilled.
Arunachella Row v. Rangiah Appa Row Confirms that English and Indian law are the same with respect to conditional promises: an acknowledgment of conditional liability does not give a fresh start while the condition remains unfulfilled. The court relied on this case to apply the same principle to the facts: Exhibit B's conditional promise to pay (subject to arbitration) did not revive limitation because the condition was not performed.
Sitharama v. Krishnaswami Supports the proposition that parties cannot estop themselves from pleading provisions of a statute (i.e., they cannot by agreement prevent invoking statutory defences such as limitation). The court invoked this authority to reject the argument that the defendants were estopped from pleading limitation by the terms of Exhibit B.

Court's Reasoning and Analysis

The court proceeded by closely examining the language and legal effect of Exhibit B and the applicable statutory and common law principles as cited in precedent.

  1. Nature of Exhibit B: The court found that Exhibit B was not an unconditional undertaking by the defendants to pay the plaintiff. The defendants explicitly denied liability and only agreed, because a suit was threatened, to submit the dispute to arbitration and to pay "if the arbitrators give an award holding us liable." Thus the promise was conditional on an award finding liability.
  2. Legal effect of conditional promises: The court relied on established authorities (In re River Steamer Company, as approved in Maniram Seth, and Arunachella Row) to state the rule that a conditional promise to pay will not operate as an acknowledgment for the purposes of the Limitation Act unless the condition is fulfilled. The court applied that rule to hold that Exhibit B could not revive or extend limitation in the absence of performance of the arbitration condition.
  3. Submission to arbitration does not equal acknowledgment: The court emphasized that a mere agreement to refer disputes to arbitration is generally only a mode of settling disputes and does not prima facie import an admission of a debtor-creditor relationship. The opinion notes that English authorities indicate a submission promising to pay what arbitrators decide is not an acknowledgment if arbitration proves abortive unless the submission contains an unqualified acknowledgment of the debt.
  4. Validity of promise not to plead limitation: The court rejected the appellant's argument that the defendants' promise not to plead limitation (if arbitration failed) was valid. While section 28 of the Contract Act was referenced by counsel, the court concluded the matter fell under section 23 of the Contract Act, which voids agreements that defeat statutory provisions (here, the Limitation Act). Therefore the covenant could not be enforced to defeat the Limitation Act.
  5. Effect of section 9 of the Limitation Act and postponement: The court held that once the period of limitation begins to run it cannot be stopped by subsequent events, citing section 9 of the Limitation Act. Although parties can agree to postpone accrual of contractual rights, they cannot postpone or extend the statutory period of limitation for bringing a suit. The agreement to refer came long after the limitation period had commenced and so could not prevent operation of the law of limitation.
  6. Estoppel argument rejected: Citing Sitharama v. Krishnaswami, the court held there can be no estoppel which prevents a party from pleading provisions of a statute; consequently the defendants could not be estopped from pleading limitation by their written undertaking.

Holding and Implications

DISMISSED — The Second Appeal is dismissed with costs.

Direct effect: The decrees of the Lower Courts, which had dismissed the plaintiff's suit on the ground that Exhibit B did not constitute an acknowledgment under section 19 of the Limitation Act, are affirmed. The plaintiff's attempt to revive or extend the period of limitation by reference to Exhibit B has failed.

Broader implications: The opinion applies established authorities to confirm that conditional promises to pay subject to arbitration do not operate as acknowledgments for limitation purposes unless the condition is performed; agreements that would have the effect of defeating the provisions of the Limitation Act fall within section 23 of the Contract Act and are void. The court did not purport to lay down a new legal principle but applied existing precedent and statutory provisions to the facts of the case.

K.R
Show full summary ...

    Ballapragada Ramamurthy v. Thammana Gopayya

    Kumaraswami Sastriyar and Phillips, JJ.:— Plaintiff is the appellant. He sued in 1912 to recover damages for breach of a contract of which performance was due before the 20th September, 1906 and relied upon a letter dated 20th September, 1909 to save the bar of limitation. Both the Lower Courts dismissed the plaintiff's suit on the ground that the letter did not contain an acknowledgment of liability sufficient to bring the case within section 19 of the Limitation Act.

    The letter (Exhibit B) signed by the defendants states that, as disputes about the contract were not settled and a suit was threatened, both parties agreed to refer matters to the arbitration of the persons mentioned therein. The material part of the document runs as follows:—

    “I shall agree to the decision made by them (arbitrators) without having to do anything with the limitation of time, if they decide that I should pay any amount to you, I shall pay it immediately to you, If, perhaps, for any reason, the said three mediators do not give their decision, it is settled that, on this letter, suit, etc., proper steps may be taken and conducted in the court without having anything to do with the time bar.”

    It is argued for the appellant that the letter contains a promise to pay whatever may be found due on arbitration and that there is an acknowledgment of liability. It is also argued that the agreement to refer to arbitration and not to plead limitation as a bar if the arbitration fell through, is valid and binding on the parties amounting, as it does, to a covenant by one party not to sue till the arbitration was over and by the other not to plead limitation, should it be necessary to file a suit.

    We do not think that the terms of Exhibit B amount to an unconditional undertaking by the defendants to pay the debt. The plaintiff was setting up a claim for damages and the defendants were denying that they were liable to the plaintiff. When a suit was threatened, the parties agreed to refer the dispute to arbitration. Exhibit B is a conditional promise to pay whatever the arbitrators may find to be due. What the defendants in effect state is:

    “We deny that anything is due to you, but as you threaten a suit, we shall agree to refer matters to arbitration and if the arbitrators give an award holding us liable to pay any sum, we shall pay it to you.”

    In cases of conditional acknowledgments of liability, the law is clear that where there is a promise to pay on a condition, that condition in order that the promise may operate as an acknowledgment, must be fulfilled. In In re River Steamer Company(1) which has been approved of by their Lordships of the Privy Council in Maniram Seth v. Seth Rupchand(2), Lord Justice Mellish observed that in order to take the case out of the statute of limitation, there must either be an acknowledgment of the debt from which a promise to pay may be implied, or an unconditional promise to pay the debt, or a conditional promise to pay the debt and evidence that the condition has been performed. This case was referred to and followed in Arunachella Row v. Rangiah Appa Row(3), where Subrahmanya Ayyar and Benson, JJ., were of opinion that the English and Indian Law are the same as regards conditional promises and that an acknowledgment of a conditional liability would not give a fresh start so long as the condition remained unfulfilled.

    It is well settled law that to operate as an acknowledgment, a subsisting jural relationship of debtor and creditor must be admitted. A mere reference to arbitration which primâ facie is only a mode of settling disputes and not an admission of any liability by the parties, does not import any such relationship, No authority has been cited for the proposition that the mere fact that parties agree in writing to refer matters to arbitration amounts to an acknowledgment. The result of the English authorities seems to be that a mere submission to arbitration containing a promise to pay whatever the arbitrators decide, is not available as an acknowledgment if the arbitration proves abortive unless the submission contains an unqualified acknowledgment of the debt (Halsbury's Laws of England, volume 19, page 66 and Banning on Limitation, page 45.) There is nothing in section 19 of the Limitation Act to suggest that the law in India is different.

    We do not think that the promise of the defendants not to raise the plea of limitation, should a suit have to be filed, is valid. It is argued that the effect of the clause is not to restrict the time but to extend it and that section 28 of the Contract Act which only applies to cases where time is limited has no application. Reference has been made to the observations of Sir Frederick Pollock in his commentaries on the Contract Act at page 179.

    Whatever doubts may exist as to the applicability of section 28, we think that the case falls under section 23. The effect of the covenant is, in our opinion, to defeat the provisions of the Limitation Act and falls under section 23 of the Contract Act as being an agreement which defeats the provisions of the Limitation Act.

    It has been argued that the period between the date of the agreement to refer and the date when the plaintiff knew that the proceedings became abortive, should be excluded.

    It is difficult to see how a reference to arbitration though it may imply a covenant not to sue, would prevent the operation of the law of limitation when once the period commences to run. Though parties to a contract may agree to postpone the accrual of any rights under it, they cannot postpone the period of limitation in case a suit should have to be filed for its breach. In the present case the agreement to refer was long after the period when limitation for a suit on a breach of contract began to run and section 9 of the Limitation Act is clear, as it enact that when once limitation begins to run, it cannot be stopped by anything that happens subsequently. The case does not fall within the provisions relating to stay of suits by injunction.

    As regards the argument that the defendants are estopped from pleading limitation, there can be no question of estoppel as the parties cannot estop themselves from pleading the provisions of the statute: Sitharama v. Krishnaswami.

    We are of opinion that the decrees of the Lower Courts are right and dismiss the Second Appeal with costs.

    K.R

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    Comments

    Ballapragada Ramamurthy v. Thammana Gopayya
    (Apr 28, 1916)