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Kuppuswami Ayyar And Others v. Sabapathy Pathan And Others S

Madras High Court

Apr 1, 1936

Judgment

Subsequent
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Factual and Procedural Background

This second appeal concerns whether a suit to enforce a mortgage is barred by the law of limitation. The core facts, as stated in the opinion, are:

On 16 October 1911 the suit property was sold by the vendors (including the father of the second plaintiff) to Chidambara Pathan and Vaithyalinga Pathan. The second plaintiff was a minor on that date.
As part of the transaction Rs. 800 was retained with the vendees to be paid either when the second plaintiff attained majority or when the vendors gave security.
On the same date (16 October 1911) a mortgage-deed was executed by Vaithyalinga Pathan and Chidambara Pathan in favour of the first plaintiff and the father of the second plaintiff for Rs. 800, securing that amount. The mortgage contained a recital promising payment of Rs. 800 with interest when demanded after giving security.
On 19 December 1915 the vendees usufructuarily mortgaged the property to Kandaswami Pillai, with a stipulation that the usufructuary mortgagee should pay the Rs. 800 secured by the earlier mortgage in accordance with the directions contained therein.
In August 1916 a demand was made by the mortgagees to pay the amount due under the 1911 mortgage. In reply, Vaithyalinga Pathan and Chidambara Pathan sent a letter dated 3 October 1916 (marked Ex. C) stating that they had arranged for payment with the usufructuary mortgagee and that the mortgagees should deal with him; they added that they would not be liable for court costs or damages claimed in the notice.
The present suit to enforce the mortgage dated 16 October 1911 was filed on 31 March 1928.
Both lower courts held that Ex. C did not constitute an acknowledgment of liability under the Limitation Act and thus concluded the suit was barred by limitation. The case is now before the court on second appeal addressing that conclusion.

Legal Issues Presented

Whether the reply letter dated 3 October 1916 (Ex. C) constitutes a sufficient acknowledgment of liability under Section 19 of the Limitation Act so as to save the suit filed on 31 March 1928 from the bar of limitation.
Whether a written admission that a debt is due but that the mortgagors have arranged payment with a third party (and a statement that the mortgagees should seek payment from that third party) amounts to a repudiation of liability or, alternatively, to an acknowledgment within the meaning of the Limitation Act.

Arguments of the Parties

Appellant's Arguments

The opinion records the appellant's contention (challenging the lower courts' view) that Ex. C is a valid acknowledgment of liability within the meaning of Section 19 of the Limitation Act and therefore saves the suit from the bar of limitation.

Respondent's Arguments

The respondent (represented in argument by Mr. Sitarama Rao) relied strongly on precedent to contend that the statement in Ex. C was not a sufficient acknowledgment of liability and that the suit was therefore time-barred. Specific cases were cited in support of this contention (discussed in the precedents table and in the court's analysis).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Shrinivas v. Narhar (1908) I.L.R. 32 Bom. 296	Held that a statement by a judgment-debtor that the plaintiff may take payment from a third person (with whom the debtor had deposited the sum) amounted to an acknowledgment of liability sufficient to save the instalment from limitation.	The court found the Shrinivas decision analogous and followed it: Ex. C was treated similarly as an admission of present debt coupled with a statement that payment had been arranged with a third party, and thus a sufficient acknowledgment under Section 19.
Chhaterdhari Mahto v. Nasib Singh (1923) 78 I.C. 919; A.I.R. 1924 Pat. 806	Held that a statement that the debt was paid off by sale of mortgaged property (and vendees in possession) was not a sufficient acknowledgment for the purposes of limitation.	The court considered this authority relied upon by the respondent but expressed disagreement with the reasoning; it distinguished the present case and rejected the strict inference drawn in Chhaterdhari Mahto that an admission of a debt discharged by other means necessarily negatives an implication of a promise to pay.
Kandaswami Reddi v. Suppammal (1921) 42 M.L.J. 268; I.L.R. 45 Mad. 443	Decided that a mere admission of a past liability does not necessarily imply a subsisting debt; each case must be decided on its language and circumstances.	The court cited this case for the proposition that admissions must be assessed on their facts. It relied on this approach to hold that Ex. C, considered on its wording and context, was an acknowledgment of a present debt despite the accompanying arrangement for payment through a third party.
Ranganayakalu Aiya v. Subbayan (1908) 5 M.L.T. 71	Identified (per Miller, J.) a view that admission of past liability unaccompanied by an allegation of discharge should be interpreted as admission of subsisting liability (not followed in Kandaswami Reddi).	Referenced as a ruling not universally followed; the court noted that Kandaswami Reddi declined to follow Miller, J.'s formulation, and therefore each case must be examined on its merits.
Andiappa Chetty v. Alagasinga Naidu (1911) 21 M.L.J. 1024; I.L.R. 36 Mad. 68	Quoted with approval in Kandaswami Reddi for the proposition that admissions must be evaluated in context and each case treated on its own merits.	Used indirectly via Kandaswami Reddi to support the court's approach that Ex. C should be judged by its language and circumstances rather than by a rigid rule.
Venkata v. Parthasaradhi (1892) 3 M.L.J. 36; I.L.R. 16 Mad. 220	Held that a deposition admitting execution of a bond but stating the bond was superseded was not a sufficient acknowledgment of a subsisting right.	The court treated this case as distinguishable on its facts and therefore not controlling for the present situation.
Pandit Saligram v. Radhay Shiam A.I.R. 1931 All. 560	Held that an endorsement stating that a second promissory note had been executed "in lieu of" the first (thereby making the first void) could nonetheless operate as a sufficient acknowledgment where the endorsement indicated a different security for a subsisting liability.	The court relied on this case to show that statements indicating substitution of security (rather than termination of liability) can amount to acknowledgments; it treated Ex. C similarly as indicating arrangement of payment rather than termination of liability.

Court's Reasoning and Analysis

The court's analysis proceeded by applying the language of Section 19 of the Limitation Act and its Explanation 1 to the content of Ex. C and by comparing Ex. C with relevant precedents. The court's reasoning can be summarized step-by-step as follows:

The court began with the statutory test under Section 19 of the Limitation Act: words relied on to constitute a valid acknowledgment must show an existing jural relationship of debtor and creditor.
Reading Ex. C, the court found a clear admission that an amount was due and payable under the mortgage; thus Ex. C "prima facie imports an acknowledgment of liability." This admission was not denied by the respondent.
The respondent argued that the concluding portion of Ex. C repudiated liability (by stating the mortgagors had arranged payment with the usufructuary mortgagee and would not be liable for costs or damages), but the court rejected that characterization. The court concluded there was no statement amounting to a refusal to ever discharge the debt or an outright repudiation.
Instead, Ex. C was interpreted as: "There is an amount due and payable; we have arranged for payment with Kandaswami Pillai and it is your (mortgagees') primary duty to apply to him for payment. If, without recourse to him, you file a suit, we would not be liable either for costs or any loss incurred by an unnecessary action." Thus the document admitted present debt while explaining an alternative mode of payment and warning against unnecessary litigation.
The court relied on Explanation 1 to Section 19, which permits an acknowledgment to be sufficient even if accompanied by a refusal to pay. The court regarded the present case as falling within that principle: an acknowledgment coupled with a statement that payment has been arranged with a third party.
The court found Shrinivas v. Narhar directly analogous: there a debtor's statement that a sum for an instalment had been deposited with a third person and that the plaintiff should take it from that person was held to be an acknowledgment. The court followed that decision and applied the same reasoning to Ex. C.
The court considered and distinguished authorities relied upon by the respondent (for example Chhaterdhari Mahto, Kandaswami Reddi, Venkata v. Parthasaradhi). It stated that certain decisions emphasize that each case must be judged on its language and facts; some authorities disallow drawing an inference of a subsisting debt from mere admission of past liability, but the court found that Ex. C does admit a present debt and creates an obligation sufficiently analogous to the situations where acknowledgment was held to be valid.
Having found Ex. C to be a sufficient acknowledgment within Section 19, the court concluded the suit is not barred by limitation and proceeded to determine appropriate relief and incidental directions (decree for sale, interest, time for redemption, costs directions).

Holding and Implications

Core Ruling: The court held that Ex. C (the reply dated 3 October 1916) constitutes a sufficient acknowledgment under Section 19 of the Limitation Act, and therefore the suit filed on 31 March 1928 is not barred by limitation; the decrees of the lower courts are reversed and a preliminary decree for sale is passed.

Direct consequences and orders given by the court (as stated in the opinion):

A preliminary decree for sale was passed (reversing the lower courts' decrees).
Interest directions: interest to be allowed on Rs. 772 at six percent per annum from the date of the plaint up to the date fixed for redemption and thereafter at six percent per annum on the aggregate amount.
Time for redemption: four months.
Costs: each party to bear their own costs in the second appeal; the first court costs are to be included in the mortgage decree; costs of the Lower Appellate Court to be paid by defendants 3 to 6 and not to be added to the mortgage decree.
Leave refused.

The opinion does not purport to establish a new general rule beyond its application of Section 19 and existing precedents; it applies established authorities (notably Shrinivas v. Narhar) and distinguishes other cited cases on their facts to reach its conclusion in this case.

Show all summary ...

1. This second appeal raises limitation. The main facts are not in dispute. 3 and the father of the second plaintiff sold the suit property to one Chidambara Pathan and his brother Vaithyalinga Pathan, by a sale-deed dated the 16th October, 1911, and as on the said date the second plaintiff was a minor, a sum of Rs. 800 was retained with the vendees to be paid either on the second plaintiff attaining majority or on the vendors giving security. On the said date a mortgage-deed was executed by both Vaithyalinga Pathan and Chidambara Pathan in favour of the first plaintiff and the father of the second plaintiff for Rs. 800 securing that amount. The recital as regards payment under the said mortgage is to this effect:

We will pay you the said sum of Rs. 800 without any objection together with interest at 11 as. per cent, per mensem at any time whenever you demand us to pay after giving security for the sum.

2. On the 19th December, 1915, the vendees appear to have usuf ructuarily mortgaged the said property to one Kandaswami Pillai by a deed in and by which it was stipulated that the usufructuary mortgagee should pay the said sum of Rs. 800 secured by the mortgage as aforesaid in accordance with the directions contained therein. In August, 1916, a demand appears to have been made by the mortgagees to pay the amount due under the mortgage dated the 16th October, 1911. In answer thereto Vaithyalinga Pathan and Chidambara Pathan gave ajeply dated the 3rd October, 1916, to the effect that they had arranged for the payment of the mortgage amount with the usufructuary mortgagee under the mortgage-deed dated the 19th December, 1915. This suit was filed on the 31st March, 1928, to enforce the mortgage dated the 16th October, 1911.

3. In the plaint the reply notice dated the 3rd October, 1916, which is marked as Ex. C in the case is relied on for the purpose of saving limitation. Ex. C is in the following terms:

On 19th December, 1915, we have usufructuarily mortgaged our lands to one Darasuram Kandaswami Nayanakkar, and we have therein directed that after giving security to him for minor's share you should receive the amount of principal and interest due in respect of the mortgage executed in favour of both of you. It is a mistake that you have given me this notice on Nala year Ani 9th without receiving the said amount from him. Since we have directed on 19th December, 1915, in the abovesaid manner, please take notice that we will not be liable for any Court costs or damages as claimed by you in your notice.

4. Both the lower Courts came to the conclusion that there was no acknowledgment of liability in Ex. C and that therefore the suit was barred. It is contended before me in second appeal that that view is wrong. I think the contention must prevail. Under Section 19 of the Limitation Act the words relied on, in order to constitute a valid acknowledgment, must be such as to show an existing jural relationship of debtor and creditor. From Ex. C it is clear that there is an admission of a debt due and payable under the mortgage which would prima facie import an acknowledgment of liability. It is not denied that there is an admission of liability, but what is contended is, that the concluding portion of the letter makes it clear that the mortgagors repudiated their liability. I am unable to agree with this view. There is nothing in the document which amounts to a repudiation of liability or to a statement that the mortgagors would never discharge the debt. Reading the document as a whole, what the mortgagors say is this:

No doubt there is an amount due and payable under the mortgage; but we have arranged for payment with Kandaswami Pillai and it is your (mortgagees') primary duty to apply to that Kandaswami Pillai for payment and if without recourse to him you file a suit, we would not be liable either for costs or any loss incurred by an unnecessary action.

5. There is therefore an admission of a present debt but coupled with a refusal to pay because they have arranged for payment elsewhere. Under Section 19 of the Limitation Act, Explanation 1, an acknowledgment may be sufficient though accompanied by a refusal to pay. In my opinion this case is covered by the decision of the Bombay High Court in Shrinivas v. Narhar (1908) I.L.R. 32 Bom. 296. In that case a decree provided for the payment of the amount decreed in instalments. The question arose whether the second instalment payable under the said decree was barred by limitation. A statement made by the judgment-debtor in answer to an execution application was relied on, and it was to this effect:

I have asked plaintiff by a written notice to take away the sum of Rs. 300 relating to the second instalment from a third party with whom I have deposited that sum. Therefore I am not responsible to pay the said amount.

6. This was held to be sufficient acknowledgment within the meaning of the Limitation Act for saving the bar of limitation. Chandavarkar, J., observed thus:

This in effect means ' I am liable to pay the second instalment; but I have deposited the amount of that instalment with a third person and let the plaintiff take it from him. But so far as I am concerned I refuse to pay'. In other words, there is an acknowledgment of the liability coupled, however, with a refusal to pay on the ground that the amount is deposited with a third party. We think that is the natural construction of the words. We must therefore hold that the second instalment is not barred.

7. I am inclined to take a similar view of the document in question. I would therefore follow the above decision and hold that Ex. C is sufficient acknowledgment within the meaning of Section 19 of the Limitation Act and that the suit is not barred.

8. I shall now deal with the cases relied on by Mr. Sitarama Rao for the respondent. The first case on which he places very strong reliance is the case reported in Chhaterdhari Mahto v. Nasib Singh (1923) 78 I.C. 919 : A.I.R. 1924 Pat. 806. In that case in answer to a suit on a mortgage the statement made by the mortgagors in a written statement in a suit was relied on. That statement was to the effect that in order to pay off the mortgage debt they sold half of the mortgaged property and from the said date the vendees have been in possession thereof. This was held not to be a sufficient acknowledgment. The learned Judges drew this inference on a construction of the document as a whole, but I am not inclined to agree with the reasoning on which their decision is based. Their Lordships, observe, that there is an acknowledgment of the debt, but then they proceed to consider whether it is a sufficient acknowledgment of liability and state:

On the other hand, the statement that there was a debt due but it has been discharged is not sufficient. The present case seems to stand somewhere between these two....There is no express statement that it was discharged, but there is a statement that that in order to pay it off a sale was effected on the 13th July, 1903, and since that date the vendees have been in possession of the property. The inference to be drawn from this will at least negative the implication of a promise to pay.

9. It is well settled that under the Indian law in order to constitute an acknowledgment there need neither be an express nor an implied promise to pay, whatever may be the English law on the point. I dissent from the view of the learned Judges that in order to constitute an acknowledgment there must be an implied promise to pay. The next case relied on by Mr. Sitarama Rao is the case in Kandaswami Reddi v. Suppammal (1921) 42 M.L.J. 268: I.L.R. 45 Mad. 443. What that case decided was that from a mere admission of a past liability it cannot be inferred that there is a subsisting debt and the learned Judges declined to follow the ruling of Miller, J., in Ranganayakalu Aiya v. Subbayan (1908) 5 M.L.T. 71 to the effect that an admission of past liability unaccompanied by an allegation of discharge should in all cases be interpreted as an admission of subsisting liability. The learned Judges cite with approval the case in Andiappa Chetty v. Alagasinga Naidu (1911) 21 M.L.J. 1024: I.L.R. 36 Mad. 68 and observe that 'each case must be treated on its own merits and that from the language used and the circumstances in which the acknowledgment is made it must be decided whether it amounts to an implied acknowledgment of subsisting liability'. In this case, as I have pointed out, there is no question of there being an acknowledgment of subsisting liability, though it was accompanied by a refusal to pay. The case in Venkata v. Parthasaradhi (1892) 3 M.L.J. 36: I.L.R. 16 Mad. 220 is also distinguishable. In that case the statement in a deposition where the deponent had admitted the execution of a certain bond, but stated that that bond was superseded, was held not to be a sufficient acknowledgment, on the ground that there was no acknowledgment of a subsisting right. There are on the other hand cases to show that where a debtor states that for the debt due a different security was given, that statement was held to operate as a good acknowledgment. In Pandit Saligram v. Radhay Shiam A.I.R. 1931 All. 560 a renewed promissory note was found to be inadmissible in evidence on the ground that it was unstamped. The plaintiff in that case wanted to rely upon an earlier promissory note which on the date of suit would admittedly be barred by limitation but for an endorsement on the back thereof which was to the following effect:

On the 7th November, 1925, in lieu of the present promissory note, a second promissory note of the amount of Rs. 1,350 has been executed and this promissory note has become void.

10. This endorsement was held to be a sufficient acknowledgment of the note in spite of the fact that it was stated in the endorsement that the promissory note had become void. The ground on which it was held to be so is, because the allegation is not that the liability had terminated but that a different form of security for the subsisting liability had been created. Similarly, as I have pointed out, it was never intended to repudiate the liability. Ex. C indicates that a method of payment had been provided which it was the duty of the creditors to resort to before seeking to enforce their remedy against the debtors.

11. I am therefore of opinion that Ex. C operates as a sufficient acknowledgment of the mortgage in question and that the suit is not barred by limitation. In the result, I reverse the decrees of the lower Courts and pass a preliminary decree for sale. Interest shall be allowed on Rs. 772 at six per cent, from date of plaint up-to-date fixed for redemption and thereafter at six per cent, on the aggregate amount. Time four months. I direct each party to bear their own costs in the second appeal. I direct the first Court costs to be included in the mortgage decree. I direct the Lower Appellate Court's cost to be paid by defendants 3 to 6 and not to be added in the mortgage decree.

12. Leave refused.