Whether admission of correctness of accounts is same as acknowledgment of liability?

 An admission of the correctness of accounts is not the same as acknowledgment of liability. The respondent's admission was taken on that memo so that he might not subsequently dispute its correctness. That document therefore could not be regarded as an acknowledgment under Sch. 1, Art. 1, Stamp Act, executed to supply evidence of the debt. In 49 MLJ 306, ('25) 12 MANU/TN/0028/1925 : AIR 1925 Mad 1215 : 91 IC 494 : 49 MLJ 306, Nagappa Ohetty v. V.A.A.R. Firm it was held that a letter admitting that a certain account sent to the writer of it was correct did not require any stamp: see also MANU/TN/0396/1936 : AIR 1936 Mad 936, ('36) 23 MANU/TN/0396/1936 : AIR 1936 Mad 936 : 168 IC 413, Swaminatha v. Narayanaswami and MANU/BH/0137/1937 : AIR 1938 Pat 139, ('38) 25 MANU/BH/0137/1937 : AIR 1938 Pat 139 : 174 IC 585, Ramprabha Ojha v. Bishunath Ojha. That document was therefore admissible only to the extent of proving the admission by the respondent of the correctness of the memo of accounts. Even assuming that it was inadmissible the Courts below failed to see that the document was not the basis of the suit. It was neither being used by the plaintiff as an instrument of obligation nor as an acknowledgment to extend limitation. The suit was to enforce an oral promise to pay the amount which the respondent had failed to account for and the document was produced only as a piece of evidence in support of the plaintiff's allegation. In 27 NLR 56, ('31) 18 MANU/NA/0091/1930 : AIR 1931 Nag 113 : 134 IC 283 : 27 NLR 56, Mohan v. Ramji it was pointed out that even when a promissory note fails for want of necessary stamp a suit would lie on the basis of an oral agreement to pay the debt.

IN THE HIGH COURT OF NAGPUR

Second Appeal No. 112 of 1938

Decided On: 09.09.1940

Appellants: Madhaorao Narayanrao Ghatate
Vs.
Respondent: Hanmant Dhaduji and others

Hon'ble Judges/Coram:
Niyogi, J.
Citation: AIR1941Nag70

1. This is a plaintiff's appeal from the concurring judgment of the third Additional District Judge, Nagpur, in civil Appeal No. 41-A of 1937 delivered on 25th November 1937. Respondent 1, Hanmant was in the service of the appellant as Kamdar, that is agent, up to 18th May 1930 if not 18th July 1930. During the period of his service he failed to account for certain sums for which he was accountable. Some time after he left the service it was discovered that he had not accounted for several sums aggregating Rs. 577-1-9. When he was confronted he admitted the correctness of the total amount found due by him, and he signed the memo of accounts, Ex. P-26 dated 2nd August 1931 expressly admitting its correctness and agreed to pay on the next day, that is 3rd August 1931. The suit was contested on various grounds of which the ground of limitation alone is material for this appeal, as the other contentions of the defendant were negatived by both the Courts below. On the issue of limitation the trial Court held that the cause of action for the suit had arisen on 19th May 1930 when the respondent left his service and that the memo of accounts, Ex. P-26, which bore his signature was inadmissible on account of its being unstamped so that it could not be used for the purpose of extending limitation. In the lower appellate Court it was argued that the memo of accounts, Ex. P-26, was an account stated within the meaning of that expression used in Art. 64, Limitation Act, and that the suit which was filed on the last day of three years period of limitation prescribed in that article should have been held to be within time. The lower appellate Court overruled the contention that the case fell within the Art. 64 and also that the memo of accounts was admissible although unstamped. The lower appellate Court disbelieved the evidence produced by the plaintiff to prove that the sureties were present when respondent 1 signed the memo of accounts on 2nd August 1931 and that they joined with him in the promise to pay the amount on the next day.

2. In this Court the plaintiff's claim is sought to be put on a much wider basis so as to bring the case within Arts. 90, 64 and 57, Limitation Act. The contents of the plaint no doubt countenance the argument to some extent. The plaint states that defendant 1 Hanmant was in the plaintiff's service till 18th July 1930 and that he had not accounted for certain sums aggregating Rs. 577-1-9. Then it alleges that these sums were discovered afterwards and states :

He being called upon to account admitted these items and admitted his liability for the total amount of Rs. 577-1-9 on 2nd August 1931. He had promised to return the amount on 3rd August 1931, but he did not turn up as promised.

3. There is indeed the allegation that certain defalcations have been discovered after respondent 1 left the service, but the precise date or dates on which they came to his knowledge is not stated as would have been done had the plaintiff intended to bring his case under Art. 90, Limitation Act. The argument as to the application of Art. 90 must therefore fall to the ground. As to the application of Art. 64 there has been a good deal of argument whether the memo of accounts, Ex. P-26, could be treated as an account stated, but it appears to me totally irrelevant in view of the claim as laid in the plaint. The plaintiff did not allege that he was suing on the basis of the memo as an account stated but he alleged that he was suing to enforce a promise to pay certain amount on 3rd August 1931. The plaintiff described his cause of action as, having arisen not on 2nd August 1981 but on 3rd August 1931: see para. 1 (b). In his rejoinder filed on 6th July 1935 he reiterated that the respondent had agreed to pay the money on 3rd August 1931. In para. 5 of the rejoinder, he again makes it clear that the suit was not time-barred owing to the agreement to pay on 3rd August 1931. The evidence of P.W. 1 and P.W. 2 is directed to prove the respondent's promise to pay on 3rd August 1931. In view of these facts on the record it is not open to the appellant to shift his ground in second appeal.

4. Although the case does not fall under Art. 90 or Art. 64, Limitation Act, for the reasons stated above, I am unable to agree with the Courts below that the suit was liable to be dismissed on the ground of limitation. Exhibit P-26 contains the various items which respondent 1 had failed to account for and the respondent signed that document admitting the various sums. There is nothing to show that it was meant to be an acknowledgment to serve as evidence of Liability. An admission of the correctness of accounts is not the same as acknowledgment of liability. The respondent's admission was taken on that memo so that he might not subsequently dispute its correctness. That document therefore could not be regarded as an acknowledgment under Sch. 1, Art. 1, Stamp Act, executed to supply evidence of the debt. In 49 MLJ 306, ('25) 12 MANU/TN/0028/1925: AIR 1925 Mad 1215 : 91 IC 494 : 49 MLJ 306, Nagappa Ohetty v. V.A.A.R. Firm it was held that a letter admitting that a certain account sent to the writer of it was correct did not require any stamp: see also MANU/TN/0396/1936 : AIR 1936 Mad 936, ('36) 23 MANU/TN/0396/1936 : AIR 1936 Mad 936 : 168 IC 413, Swaminatha v. Narayanaswami and MANU/BH/0137/1937 : AIR 1938 Pat 139, ('38) 25 MANU/BH/0137/1937 : AIR 1938 Pat 139 : 174 IC 585, Ramprabha Ojha v. Bishunath Ojha. That document was therefore admissible only to the extent of proving the admission by the respondent of the correctness of the memo of accounts. Even assuming that it was inadmissible the Courts below failed to see that the document was not the basis of the suit. It was neither being used by the plaintiff as an instrument of obligation nor as an acknowledgment to extend limitation. The suit was to enforce an oral promise to pay the amount which the respondent had failed to account for and the document was produced only as a piece of evidence in support of the plaintiff's allegation. In 27 NLR 56, ('31) 18 MANU/NA/0091/1930 : AIR 1931 Nag 113 : 134 IC 283 : 27 NLR 56, Mohan v. Ramji it was pointed out that even when a promissory note fails for want of necessary stamp a suit would lie on the basis of an oral agreement to pay the debt. There is very clear evidence consisting of the testimony of Ganpat (P.W. 1) and Sakharam (P.W. 2) to prove the plaintiff's allegation as to the defendant's admission of his liability and promise to pay the sum due by him on the next day. That evidence is confirmed by the memo of accounts which bears the respondent's signature. There can be no question that the promise was made before the claim had become barred by time, whether the defendant left service on 18th May 1930 as he alleged or on 18th July 1930 as the plaintiff alleged; the plaintiff was entitled to ask for rendition of accounts within three years from either date. Respondent 1 admitted the liability within one year, that is on 2nd August 1931 and his promise to pay that amount was to pay a lawful debt. The suit must be held to be within time as against respondent 1.

5. As to respondents 2 to 4 the suit has rightly been thrown out. The plaintiff alleged a fresh agreement with the principal debtor and in order to impose its obligation on the sureties pleaded that they had also joined in the promise to pay. The lower appellate Court has disbelieved the plaintiff's witnesses as being interested in the plaintiff. The absence of their signature on the memo of accounts goes to a great extent to discredit the statement of the plaintiff's witnesses who are his servants. The result is that the appeal succeeds as against respondent 1 Hanmant only and fails as against respondents 2 to 4. Respondent 1 Hanmant will pay the costs of the plaintiff in all Courts and the appellant will pay the costs of respondents 2 to 4 in all Courts.

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