Whether an entry of debt made in the balance sheet can amount to an acknowledgement of liability as per S 18 of the Limitation Act?

 Going by the above provisions, a balance sheet is the statement of assets and liabilities of the company as at the end of the financial year, approved by the Board of Directors and authenticated in the manner provided by law. The persons who authenticate the document do so in their capacity as agents of the company. The inclusion of a debt in a balance sheet duly prepared and authenticated would amount to admission of a liability and therefore satisfies the requirements of law for a valid acknowledgement under S. 18 of the Limitation Act, even though the directors by authenticating the balance sheet merely discharge a statutory duty and may not have intended to make an acknowledgement.”

31. In Zest Systems Pvt. Ltd. v. Center for Vocational and Entrepreneurship Studies, 2018 SCC OnLine Del 12116, the Delhi High Court held:

“5. In Shahi Exports Pvt. Ltd. v. CMD Buildtech Pvt. Ltd. (supra) this court held as follows:— “7. It is hardly necessary to cite authorities in support of the well-established position that an entry made in the company's balance sheet amounts to an acknowledgement of the debt and has the effect of extending the period of limitation under section 18 of the Limitation Act, 1963. 

 6. In view of the legal position spelt out in judgments noted above, the acknowledgement of the debt in the balance sheet extends the period of limitation. The acknowledgement is as on 31.3.2015. This suit is filed in 2017. The suit is clearly within limitation. The present application is allowed.”

Supreme Court of India

Asset Reconstruction Company ... vs Bishal Jaiswal on 15 April, 2021

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SHORT NOTES ON LIMITATION ACT PART 3

S 18. Effect of acknowledgment in writing:-

Acknowledgment means a definite, clear admission of existing liability.

It is not necessary that there should be promise to pay. An acknowledgment does not create any new right of action but only enlarges the time and has the effect of making a new period run from the date of acknowledgment. Under this section, an acknowledgment is not limited in respect of a debt only, it may be in respect of “any property or right” which is the subject matter of the suit. There must be an unqualified,or an admission qualified by a condition which is fulfilled.

Ingredients of S 18 and essentials of a valid acknowledgment:-

To constitute a valid acknowledgment and thus to give a fresh period of limitation under this section,the following conditions must be satisfied.

1) The acknowledgment must have been made before the expiration of the period prescribed.

2) The acknowledgment must have been made by the party against whom the right is then claimed or by any person through whom he derives his title or liability.

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How to prove execution of revival letter for extending limitation for filing of suit?

 On the contrary, Indra Mal (DW-1) has stated in
examination in chief that the signatures at “A to B” on
Ex.2 to Ex.7 are not of his. These signatures are forged.
Though at one place, he has stated that on Ex.6 and Ex.7
also “A to B” part contains his signatures but it appears
that due to typographical error, the word “not” has been
left out. If we read the examination in chief in whole, it
reveals that at other places, he has not only refused his
signatures on revival letters but also stated that the
signatures are fabricated and forged. In cross examination,
he has further stated that on the revival / acknowledgment
letters Ex.2 to Ex.7, “A to B” signatures are not of his,
rather they are forged one.
9. Documents themselves cannot be taken to be of
any value unless their execution is proved by the legal,
relevant and material evidence of the person who has seen
the person signing the documents or who may be conversant
with the signatures of the person executing the documents.
In absence of any such evidence, Ex.2 to Ex.7 cannot be
said to have been established as valid acknowledgment by
the defendant. In the instant matter, the Manager of the
Bank, examined to prove the acknowledgments has admitted
that he was not posted in that Bank branch at the time of
their execution. Moreover, he has specifically said that
he cannot identify the signatures of the defendant.
Therefore, acknowledgments cannot be taken to be validly
proved. The learned courts below have not noticed this
aspect of the matter. The case N.T. Vijayakumar & Ors. vs
The Allahabad Bank, reported in 1999(2) Civil Court Cases,
571 (Karnataka) cited by the appellant is squarely
applicable in the instant case. In absence of valid proof of
execution of debt acknowledgments, the benefit of
protection of section 18 or 19 of the Limitation Act is not
available to the plaintiff Bank and as such, the suit filed
in the year 2003 for recovery of loan disbursed in the
year 1985, stands time barred.
Reportable
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B.Civil Second Appeal No. 242 / 2013

Indra Mal v State Bank of Bikaner & Jaipur,

MR. JUSTICE VIJAY KUMAR VYAS
Dated: 04/01/2017.
Citation: AIR 2017 Raj 66

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Whether suit for recovery of loan which was advanced by cheque is maintainable as summary suit?

In such a case, the suit must be for recovery of money on a cheque drawn in favour of or endorsed to the plaintiff. A suit, however for recovery of a loan which was advanced by the plaintiff by a cheque is not a suit upon a cheque or a bill of exchange and as such is not maintainable as a summary suit. The contention of the Plaintiff that the suit is upon a bill of exchange was rejected.

Civil - Maintainability of Summary Suit - Order 37, Rule 2 of Code of Civil Procedure, 1908 - Hon’ble Chief Justice placed present Reference, pursuant to conflicting views of Single Judges and Division Benches - “Whether Summary Suit under Order 37, Rule 2 lies on (i) a settled account duly confirmed by Defendants; (ii) On a settled account which is not confirmed by Defendants; (iii) On an acknowledgment of liability; (iv) On honoured cheque; and (v) On a mere writing or a receipt - Held, summary suit would not lie on ‘a settled account’, which is not confirmed by Defendant and "on honoured cheque" - Summary suit lies where concluded contract exist in writing containing express or implied promise to pay - Written contract as contemplated in Order 37 need not be signed by both parties but then writing between parties must be such that certain agreement has been brought into existence and that claim made under such agreement to be indisputable - Where document is not duly stamped and defect is curable, summary suit will be maintainable - To imply a term, in contract as implied term, test laid down by Kim Lewison in 'Interpretation of Contract" is relevant, however, Court must take note that general presumption is, against implying of terms into written contract - Issue of implied promise to pay, necessarily depend on facts of each case - Summary suit lie on 'Settled accounts duly confirmed by Defendants in view of observations of Apex Court in Hiralal and Ors. v. Badkulal and Ors - Not possible to lay down any precise test as to when Summary Suit would lie on an acknowledgement, writing or receipt, which depend firstly on document itself, practice, usage and customs of trade as also facts of each case - By so holding it is not as if Defendant is denuded of his defences when he applies for leave to defend in view of judgments of Apex Court in Machalec Engineering and Manufacturers v. Basic Equipment Corporation and Sunil Enterprises v. S.B.I. Commercial and International Bank Ltd 

IN THE HIGH COURT OF BOMBAY

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

Decided On: 26.04.2007

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

Coram:

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

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How to appreciate evidence in suit for recovery of money based on Bahi Khata?

The case of plaintiff is that the defendant in token of
acknowledgment made bahi entry of the plaintiff. The alleged entry
has been stamped and even signatures are obtained on revenue

stamp. Plaintiff has not produced the bahi itself. He has produced
only a folio i.e. one page of the bahi.
[11]. The fact shows that plaintiff maintains a bahi. The
production of one page i.e. folio from the original bahi has to be
proved by the plaintiff himself with regard to continuity of pages. It is
not the case of plaintiff that it was the only entry appearing in the
bahi which is subject matter of the present suit. In the absence of
such averment, bahi pre-supposes maintenance of account book of
monetary advances made by plaintiff in the capacity of professional
money lender.
 Since onus of issue No.1 was on the plaintiff and he has
failed to discharge the same, therefore, he is not entitled to any
decree for recovery of the amount. The defendant has specifically
pleaded in the written statement that he has not signed any bahi
entry, rather his signatures have been obtained when he was in the
state of intoxication. Since the plaint does not contain any name of

the person who scribed the bahi entry, therefore, evidence of Satbir
Singh has to be treated out of context being beyond pleadings.
[14]. The signature appearing on the alleged bahi entry in Hindi
and his signatures on affidavit and statement in the Court in English
further aggravates the plea of the plaintiff and creates suspicion
whether Satbir Singh is the same person who allegedly signed the
bahi entry and has also appeared in the witness box. Father's name
of Satbir Singh further adds to the mystery as to whether he is son of
Bharat Singh-plaintiff or somebody else? Since the plaintiff has not
removed the cloud in his evidence, rather much of the evidence of
plaintiff is beyond the pleadings.
In respect of questions of law it is relevant to highlight that
mere exhibition of document does not dispense with proof of
execution. The name of the scribe as shown in the document has not
been pleaded by plaintiff in the plaint. Moreover the scribe who
allegedly prepared the bahi entry has signed the same in Hindi
whereas while appearing as witness his signatures are appearing in
English on affidavit as well as on the statement. There is no mention
about the scribe that he used to sign in both languages i.e. in Hindi
as well as in English. The pleadings in bahi entry as well as in the
plaint are at variance inasmuch that in the bahi entry, recital has
been made that amount would be repaid in the month of Jeth,
whereas there is no such averment mentioned in the plaint.
[17]. In view of aforesaid, bahi entry Ex.P1 is surrounded by
mysterious circumstances, hence cannot be read in evidence.

IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
RSA No.1454 of 2011
Date of Decision: 28.08.2015

Bharat Singh  Vs  Ram Chander 

CORAM:  MR. JUSTICE RAJ MOHAN SINGH
Citation:AIR 2016 (NOC) 654 P&H

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Acceptance of letters without acknowledgment is unacceptable: HC

We find this conduct on  the  part of the  Assessing Officer  to

accept a stay application and not immediately give acknowledgement of
its receipt is unacceptable.  The least that is expected of an civil servant
is to be fair and civil.  In the absence of the above, his conduct is not
one becoming of an Officer belonging to the prestigious Indian Revenue
Service.   The least that is expected of an Officer is that when a person
files   an   application   /   letter,   which   is   accepted   by   him,   an
acknowledgement should be forthwith given  to the  party filing the
application or letter.   In case he refuses to accept the letter he should
endorse  on the  letter  / application  the  reason  why  it is not being
accepted with a line or two for the refusal to accept.  In case he does
accept it and give an acknowledgment he can deal with the applications
/ letters as is appropriate in accordance with law.     We believe   that
what has happened in this case is an aberration.  However, the Chief
Commissioner of Income Tax would ensure that his Officers do not
behave in such an high handed and unfair manner, not expected of civil
servants. 
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO.  526 OF 2016 
Piramal Fund Management Pvt. Ltd.
v/s. 
Deputy Commissioner of Income Tax
Mumbai & Ors.

                         CORAM : M.S. SANKLECHA &
            A.K. MENON, J.J. 
                                          DATED  : 17th MARCH, 2016.

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Whether shares of parties in property can be decided on the basis of unregistered acknowledgement?

If the registered sale deed was in the joint names of the plaintiff and the defendant, without indicating the quantum of contribution towards the sale price, even if one of the parties had contributed the entire sale consideration, the same is irrelevant, and each co-owner is entitled to one half of the property in the eye of law. This proposition finds support from the view expressed in the case of Narayana Murthy v. Venkateshalu, MANU/KA/0472/1995 : ILR 1995 Kar 2876.

It is well settled that a document which varies the essential terms of an existing registered deed, must be registered. (See: Sunil Kumar Roy v. Bhowra Kankanee Colleries Ltd., MANU/SC/0448/1970 : AIR 1971 SC 751 (A three judge bench decision).

 Citation: 2015(2) AKR 393,AIR 2015(NOC)763 KAR

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

Regular First Appeal No. 828 of 2009

Decided On: 20.01.2015

P.V. Krishnappa Vs.  M. Ramaswamy Reddy

Coram:Anand Byrareddy, J.

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Whether stamp duty is payable on acknowledgment?

Contract - Admissibility of Document - Article 5 of Stamp Act, 1899 - District Judge permitted Plaintiff to admit unstamped document in evidence on ground that entries in document come within ambit of agreement and thus, it was admissible in evidence on payment of stamp duty together with penalty - Hence, this Application - Whether, document was acknowledgment or bond on payment of penalty - Held, it was found that if rate of interest was mentioned in acknowledgment, then it comes within ambit of term "agreement" and proper stamp chargeable would be under Article 5 of Act - Moreover, it would be observed that unconditional acknowledgment itself implied promise to pay - Thus, wherever interest was mentioned in acknowledgment, it was stipulation on debtor to make payment of interest at rate mentioned therein - However, it was found that Petitioner-Defendant obtained loan and made entry to that effect in Khata in his own hand - Further, Khata showed that Petitioner was meant to pay interest on all amounts which were to be entered in Khata subsequently - Though, Petitioner had written it only with regard to first entry of loan in order to avoid repetition in mentioning rate of interest but condition of interest governed all subsequent transactions - Therefore, second entry also amounts to agreement - Hence, Trial court was correct in saying that document would be admissible on payment of penalty - Application dismissed.

"If rate of interest is mentioned in acknowledgment, then it is stipulation on debtor to make payment of interest at rate mentioned therein."

Rajasthan High Court

Manak Shaw vs Tarachand And Ors. on 6 January, 1956

Equivalent citations: AIR 1957 Raj 65

Bench: Dave, Modi

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Whether promise to pay time barred debts under Section 25 of Contract Act should be express promise?

The award passed was challenged on the ground that claim sought to be passed since was barred by limitation, the award passed was not correct. The claim forming the base of dispute was based on a promise to pay an amount in writing under Section 25(3) of the Indian Contract Act, 1872 (ICA). The claim was preferred well after three years since it become due. Section 25 deals with Agreement without consideration. Such agreement is void unless in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law. Sub-section (3) of Section 25 provides for a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt.

In the instant matter, promise to pay in writing was stated to be made through a letter which though disputing and denying the payment as claimed (in terms of figures) and it was mentioned that correct figure could be arrived only by way of mutual verification. It was further mentioned that payment legally due is not denied.

The Court observed that whatever was shown as outstanding figure was disputed and denied for want of mutual verification and clarification, but dues per se was not denied. Arbitrator considered this aspect as an admission on the part of the Petitioner and accordingly a promise to pay and since it was in writing the same was an express promise to pay. Unless the Petitioner could show that the demand is illegal, the express promise to pay would have to be performed by payment.

The promise to pay must be express. An implied promise to pay inferred from an acknowledgment could not be made the basis of the suit to recover a debt barred at the time of the acknowledgment and since S. 25(3) relates to promise to pay a debt, already time barred.

In the instant matter, the Petitioner failed to show the Arbitrator and also the  Court how the demand made was not legal and consequently the petition was dismissed.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION

M/s. Gem Synth Resins Pvt. Ltd. Vs. M/s. Mahendra Rosin and Turpentine Pvt. Ltd.

ARBITRATION PETITION NO. 168 OF 2012
Coram:
:  MRS. ROSHAN DALVI, J.

:  11   JUNE, 2014.
   th 

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Whether acknowledgement of liability by mortgagor after assignment of his interest whether valid?

The decree passed by the learned Sub Judge in the suit is challenged in the appeal memorandum on various grounds, both under facts and law, and also as against the evidence tendered in the case. However, at the time of hearing, learned senior counsel for the appellants confined his challenges to the decree on a solitary ground that the suit was barred by limitation. Reply notices sent by two among the legal heirs of Joseph (2nd and 4th defendants) admitting the liability of their father after they had assigned the right over the plaint property in favour of the 6th defendant would not constitute acknowledgment of liability even assuming that a mortgage had been created by the father over the plaint property in favour of the plaintiff is the submission of the learned senior counsel. An acknowledgment made by a mortgagor after he had parted with the mortgaged property to another person will not be valid and binding on the property transferred. Any admission of liability after such transfer of the mortgaged property by him do not bind the transferee/purchaser or extend the period of limitation to sue on the mortgage, is the submission of the counsel. The decree passed by the court below holding that the reply notices sent by defendants 2 and 4 as acknowledgments of liability extended the period of limitation is assailed by counsel stating that reply notices had been sent after they had assigned the rights over the mortgaged property, it cannot constitute valid acknowledgment of liability keeping alive the mortgage. There were conflicting decisions by different High Courts as regards the right of creditor to proceed against the property by virtue of acknowledgment made by the debtor after he had parted with his interest in the property after the period of limitation from the date of the original transaction. Previously, the High Court of the Travancore - Cochin had taken a consistent view that an acknowledgment of the debtor even after the transfer of the property would bind that property and also the purchaser. A conflicting and different view that he could not bind the property and the purchaser and the admission of liability by the debtor after transfer of his interest in the property would not constitute an acknowledgment to bind the property was the view taken by some other High Courts. In Pavayi v. Palanivelu Goundou (MANU/TN/0033/1940 : AIR 1940 Mad. 470 (F.B.)), a Full Bench of the Madras High Court, after referring to several conflicting decisions on the subject by various High Courts held that the mortgagor who had lost all interest in the mortgaged property, could not, by an acknowledgment within the meaning of S. 19 or by the payment of interest or principal, within the meaning of S. 20, bind the person on whom his interest had devolved (sections 19 and 20 under the Limitation Act, 1908 corresponding to the present Sections 18 and 19 respectively of the Limitation Act, 1963). Subsequently, the same principle has been laid down by the Privy Council in Bank of Upper India Ltd. v. R.H. Skinner MANU/PR/0017/1942 : (AIR 1942 PC 67). In the above decision, after having a survey and analysis of the conflicting decisions and questions involved, it was held that admission of liability by the mortgagor after he had parted with interest of the purchaser do not bind the purchaser and it would not constitute an acknowledgment under the Limitation Act keeping alive the liability on the mortgaged property. The Travancore - Cochin High Court, following the decision of the Privy Council, in Kunchi Pillai v. Sunny Rebella MANU/KE/0098/1952 : (AIR 1953 Travancore -Cochin 196 (F.B.)), referred to above, has held that an acknowledgment of liability by the mortgagor made after the assignment of the equity of redemption will not be a valid acknowledgment so as to bind the assignee. An acknowledgment by a mortgagor after parting with the mortgaged property cannot be recognised as a valid acknowledgment was the view taken by the High Court of Mysore following the principle laid down in the Privy Council decision, referred to above, in Raghoba Santanna Naik v. Shaba Nalo Naik & Anr. (AIR 1960 Mysore 187). Same view has been taken by the Full Bench of the Madras High Court in Nallathambi Nadar Chellakannu Nadar v. Ammal Nadachi Chellathankom Nadachi & Ors. (MANU/TN/0199/1963 : AIR 1964 Mad. 169 (F.B.)), referred to above, stating that an acknowledgment of liability must involve an admission of a subsisting jural relationship between the parties and a consciousness and an intention of continuing such a relationship until it is lawfully terminated. So, in the present case, where the 2nd and 4th defendants whose reply notices are relied on as acknowledgments had already parted their interest in the plaint property, with other legal heirs of Joseph under Ext. B3 sale deed in favour of 6th defendant much earlier to the suit, reply notices sent by them cannot constitute valid acknowledgment keeping alive the mortgage liability over the plaint property. The learned Sub Judge has gone wrong in holding that the suit is not barred by limitation treating the reply notices of defendants 2 and 4 as constituting acknowledgment extending the period of limitation. Suit was clearly barred by limitation.

IN THE HIGH COURT OF KERALA

A.S. No. 513 of 1994

Decided On: 17.01.2014

Appellants: Francis
Vs.
Respondent: Antony

Hon'ble Judges/Coram:S.S. Satheesachandran, J.

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Whether e-mail/s acknowledging debt would constitute valid and legal acknowledgement of debt though not signed as required U/S 18 of Limitation Act?

A harmonious reading of Section 4 together with definition clauses as extracted hereinabove would indicate that on account of digital and new communication systems having taken giant steps and the business community as well as individuals are undisputedly using computers to create, transmit and store information in the electronic form rather than using the traditional paper documents and as such the information so generated, transmitted and received are to be construed as meeting the requirement of section 18 of the Limitation Act, particularly in view of the fact that section 4 contains a non obstante clause. Since respondent does not dispute the information transmitted by it is in electronic form to the petitioner by way of message through the use of computer and its network as not having been sent by it to the petitioner, the acknowledgement as found in the e-mails dated 14.01.2010 and 06.04.2010 originating from the respondent to the addressee namely, petitioner, such e-mails have to be construed and read as a due and proper acknowledgement and it would meet the parameters laid down under section 18 of the Limitation Act, 1963 to constitute a valid and legal acknowledgement of debt due.

21. For the reasons aforestated and in view of the discussion made herein above, I am of the considered view that point formulated herein above requires to be answered by holding that an acknowledgement of debt by e-mail originating from a person who intends to send or transmit such electronic message to any other person who would be the 'addressee' would constitute a valid acknowledgment of debt and it would satisfy the requirement of Section 18 of the Limitation Act, 1963 when the originator disputes having sent the e-mail to the recipient.2013(4) AKR 654, ILR 2013 KARNATAKA 3941, 2013(4)KCCR3079 ;AIR 2014 karnat 6

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

C.O. P. No. 11/2013

Decided On: 25.06.2013

Appellants: Sudarshan Cargo Pvt. Ltd.
Vs.
Respondent: M/s. Techvac Engineering Pvt. Ltd.

Coram:Aravind Kumar, J.

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Whether there can be valid acknowledgement of debt by karta after partition of joint family?

The words "manager of a family for the time being" occurring in s. 21(3)(b) of the Limitation Act. 1908. indicate that at the time when the acknowledgement was made and signed, the person making and signing it, must be the manager of a subsisting joint Hindu family. If at the relevant time the joint Hindu family, as such, was no longer in existence, any acknowledgement made by the erstwhile karta of such family cannot keep the debt alive and extend limitation as against all the members of the family, his representative capacity as karta being co-terminus with the joint status of the family. 

Supreme Court of India

Nanchand Gangaram Shetji vs Mallappa Mahalingappa Sadalge on 30 January, 1976

Equivalent citations: 1976 AIR 835, 1976 SCR (3) 287

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