Suit on Account and Suit for Accounts: The Crucial Distinction

 A suit on account is generally a money recovery suit based on an existing account, account stated, or bills/invoices, where the amount claimed is already ascertained or can be claimed as a definite sum; by contrast, a suit for accounts is filed when the plaintiff does not know the exact amount due and asks the court to direct rendition and taking of accounts first, with the final amount to be determined later.

Core distinction

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Whether Summary suit based on settled account or Account stated is maintainable?

 In so far as the 'settled account is concerned,' it is no doubt true as noticed by the learned single Judge, that the various judgments adverted to, for holding that the summary suit would lie on a settled account, either of the Privy Council or of the Supreme Court did not arise from suits filed as summary suits. However, after the judgment of the Privy Council (Elvira L. Rodrigues) Sequeira (supra) which has been considered by the Supreme Court in Hiralal & Ors. (supra), a summary suit on a settled account, duly confirmed by the Defendant is maintainable as it is an acknowledgement by the Defendant in the ledger in which mutual accounts have been entered and the accounts settled between them. Such settling of accounts gives rise to a written contract on a fresh cause of action, with an implied promise to pay the amount settled. A summary suit would therefore lie on 'Settled accounts duly confirmed by the defendants. Issue (1) is answered accordingly.{Para 29}

IN THE HIGH COURT OF BOMBAY

Summons for Judgment No. 1117 of 2003 in Summary Suit No. 1551 of 2003 

 Jyotsna K. Valia and Ors. Vs. T.S. Parekh and Co. and Ors.

Hon'ble Judges/Coram:

F.I. Rebello, V.K. Tahilramani and Abhay Shreeniwas Oka, JJ.

Author: F.I. Rebello, J.

Decided On: 26.04.2007

Citation: citations: 2007 (3) BomCR 772, 2007 (4) CTC 257, 2007 (4) MhLj 517,MANU/MH/0252/2007.

Read full Judgment here: Click here.

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What is basic concept of Account stated?

With that, let us consider what constitutes a "settled account" or "account stated". Before further discussing the issue, it would be relevant to refer to some judgments which, in our opinion, shed light on the issue and can be said to have conclusively decided that aspect of the matter. In Tulsiram Shrikisan Marwadi v. Zaboo Bhima Shankar MANU/NA/0041/1947, learned Division Bench was considering as to what would be an account stated. After relying on various judgments, the Court observed as under:

that a real account stated is a very different thing from an acknowledgment. In a real account stated there is consideration in the shape of an agreement that items on one side of the account be taken as paid by items on the other side. In an account stated it does not matter if some of the items are time-barred. It would be different thing if all the items are time-barred, and we see no reason to depart from the view expressed on this point in Ganesh prasad v. Rambati Bai I.L.R. (1942) Nag.369 : MANU/NA/0022/1941 .

The Privy Council had an occasion to deal with the issue in the case of (Elvira Rodrigues) Siqueira v. (Godnicalo Hypolito Construction) Noronha A.I.R. 1934 P C 144. The Privy Council was considering Section 25(3) of the Contract Act, 1872 and Article 64 of the Limitation Act, 1908 whether - a suit could be maintained on a settled account. It is in that context, that Lord Atkin, speaking for the Privy Council, held as under:

Their Lordships think that what has been forgotten is that there are two forms of account stated. An account stated may only take the form of a mere acknowledgment of a debt, and in those circumstances, though it is quite true it amounts to a promise and the existence of a debt may be inferred, that can be rebutted, and it may very well turn out that there is no real debt at all, and in those circumstances there would be no consideration and no binding promise.

But on the other hand, there is another form of account stated which is a very usual form as between merchants in business in which the account stated is an account which contains entries on both sides, and in which the parties who have stated the account between them have agreed that the items on one side should be set against the items upon the other side and the balance only should be paid; the items on the smaller side are set off and deemed to be paid by the items on the larger side, and there is a promise for good consideration to pay the balance arising from the fact that the items have been so set off and paid in the way described.

This judgment was considered by the Supreme Court, in Gordon Woodroffe & Co. (Madras) Ltd. v. Shaikh M.A. Majid & Co. A.I.R. 1976 Sup Cou 181. The second question in issue before the Supreme Court was whether there was a settled account between the parties and whether it was open for the Plaintiff to reopen it. It was an admitted fact that to the statement of accounts, no objections were raised by the Plaintiff any time nor was a single document produced to show that the Plaintiff ever wrote to the Defendant raising an objection to the statements of account. At one stage, the Plaintiff sent a memorandum to the Defendant, accepting the accuracy of the accounts. It is in that context that the Court was considering the concept of "account settled" or "stated" We may gainfully refer to a portion of paragraph 14:

(14) The legal position is that the accounts are settled or stated if they are submitted and accepted as correct by the other side to whom the accounts have been rendered. Such a statement of accounts need not be in writing, nor is it necessary that before the accounts are settled, they should be gone into by the parties and scrutinised and supported by vouchers. It is sufficient if the accounts are accepted and such acceptance may be inferred by conduct of the parties. As observed in Daniell's Chancery Practice, eighth edition, Vol. I, p. 419:

The mere delivery of an account will not constitute a stated account without some evidence of acquiescence which may afford sufficient legal presumption of a settlement.

There is also the following passage in Bullenn and Leake's Precedents of Pleadings ninth edition, p. 584:

It is not enough for the accounting party merely to deliver his account; there must be some evidence that the other party has accepted it as correct. But such acceptance need not be express, contemporaneous or subsequent conduct may amount to a sufficient acquiescence.

After so observing, considering the contention of the Defendants that there has been a stated or settled account, the Court in paragraph 15 held as under:

In this connection it is necessary to state that the expression "account stated" has more than one meaning. It sometimes means a claim to payment made by one party and admitted by the other to be correct. An account stated in this sense is no more than an admission of a debt out of Court: while it is no doubt cogent evidence against the admitting party, and throws upon him the burden of proving that the debt is not due, it may, like any other admission, be shown to have been made in error. Where the transaction is of this character, it makes no difference whether the account is said to be "stated" or to be "stated and agreed": the so-called agreement is without consideration and amounts to no more than an admission. There is, however, a second kind of account stated where the account contains items both of credit and debit, and the figures on both sides are adjusted between the parties and a balance stuck.

Accounts stated which contains entries on both sides and parties who have stated the account between them have agreed that the items on one side should be set off against the items on the other side and the balance amount should be paid, would amount to a written contract for good consideration arising from the fact that the items have been so set off. Such an account stated gives cause to a contract in writing on a fresh cause of action, with an implied promise to pay. {Para 25}

 IN THE HIGH COURT OF BOMBAY

Summons for Judgment No. 1117 of 2003 in Summary Suit No. 1551 of 2003 

 Jyotsna K. Valia and Ors. Vs. T.S. Parekh and Co. and Ors.

Hon'ble Judges/Coram:

F.I. Rebello, V.K. Tahilramani and Abhay Shreeniwas Oka, JJ.

Author: F.I. Rebello, J.

Decided On: 26.04.2007

Citation: citations: 2007 (3) BomCR 772, 2007 (4) CTC 257, 2007 (4) MhLj 517,MANU/MH/0252/2007

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