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PETITIONER: KASHINATH SANKARAPPA WANI

       Vs.

RESPONDENT: NEW AKOT COTTON GINNING & PRESSINGCO., LTD.

DATE OF JUDGMENT: 18/02/1958

BENCH: BHAGWATI, NATWARLAL H. BENCH: BHAGWATI, NATWARLAL H. KAPUR, J.L. GAJENDRAGADKAR, P.B.

CITATION:  1958 AIR  437            1958 SCR 1331

ACT: Limitation-Suit   on  deposit   receipt--Acknowledgment   of liability-Evidence--Balance sheet obtained from Registrar of ComPanies-Admissibility-Presumption   of  authenticity   and correctness  -Commercial  Documents  Evidence  Act  (XXX  Of 1939), s. 3(b).

HEADNOTE: The  appellant  advanced various sums of money to  the  res- pondent,  in lieu of which the respondent passed  a  deposit receipt for 12 months from August 1, 1939 to July 31,  1940- On  June 16, 1944 the appellant filed a suit to recover  the amount  with  interest  on the allegation  that  the  amount became  due on May 17, 1941 when the demand for  the  amount was made and limitation for the suit expired on May 17, 1944 and  the  suit was filed on the reopening day of  the  Court thereafter.    The   appellant   also   relied   upon    the acknowledgments of his debt by the respondent in the resolu- tion passed by the Board of Directors on May 2o, 1941 and in the  balance  sheet of the respondent for the  year  1940-41 dated October 10, 1941 : Held,  that the suit was barred by limitation as the  monies due  under  the deposit receipt became payable on  July  31, 1941 and as no agreement had been proved that the monies due under the deposit receipt were re-payable on demand. Held  further, that limitation was not saved by the  alleged acknowledgments. The  resolution of the Board of Directors merely proposed  a settlement  of a claim of the appellant, which, if  accepted by the appellant, was to be placed before a general  meeting of the shareholders.  The resolution only referred to a past liability  of the respondent to the appellant and it  could. not be construed as an 169 1332 acknowledgment of the liability of the respondent under  the deposit receipt in question. A  copy  of the balance sheet of 1940-41 obtained  from  the Registrar  of  Companies  which was filed in  the  case  was wrongly  rejected by the High Court as inadmissible  on  the ground that no evidence was adduced to prove it.  This  copy

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was  admissible  under s. 3(b) of the  Commercial  Documents Evidence Act.  Under that section the Court could also raise a presumption as regards the balance sheet having been  duly made  by or under the appropriate authority or in rggard  to the  statements contained therein.  The presumption was  not compulsory  but  was discretionary with the Court.   In  the circumstances of this case, where there were factions in the Company  and  the  regularity of the meeting  at  which  the balance  sheet  was passed was in dispute,  the  High  Court would  have  been  perfectly justified in  not  raising  the presumption.    Consequently,  the  acknowledgment  in   the balance sheet was of no avail to the appellant.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 77 of 1954. Appeal  from the judgment and decree dated August 25,  1949, of  the former Nagpur High Court in First Appeal No.  91  of 1945  arising out of the judgment and decree dated July  31, 1945,  of  the Court of Second  Additional  District  Judge, Akola in Civil Suit No. 7-B of 1944. C.   B. Agarwala and Ratnaparkhi A. G. for the appellant. Veda Vyasa and Ganpat Rai, for the respondent. 1958.  February 18.  The following Judgment of the Court was delivered by BHAGWATI  J.-This appeal with a certificate under s.  109(a) read  with S. 110 of the Code of Civil Procedure (Act  V  of 1908) is directed against the judgment and decree passed  by the Nagpur High Court dismissing the appeal of the appellant and  confirming  the dismissal of his suit  by  the  learned Second Additional District Judge, Akola. The  appellant,  who was the plaintiff in  the  trial  court filed in the Court of the First Additional District Judge, Akola, Civil Suit No. 2-B of 1944 against the                              ---                              7-B respondent, a limited company incorporated under the  Indian Companies Act of 1882, which owned a                             1333 Ginning  and  Pressing Factory and carried  on  business  of ginning and pressing cotton at Akot in District Akola. The  appellant alleged that he was one of the  creditors  of the  company which used to borrow money, from him for  about 35  years past.  He claimed to have acted as Banker  of  the company  and the sums borrowed from him were entered in  the account  books  of the company in two khatas, one  known  as current  account or " chalu khata " and the other  described as ,,fixed deposit khata ". An account used to be made up at the end of’ every year and the amount found due at the  foot of  the  account  was entered in the  balance-sheet  of  the company  which was adopted at the Annual General Meeting  of the  company.  Deposit receipts also used to be  passed  for the amounts standing in the fixed deposit khata from time to time  and at the end of the year ending July 1939, a sum  of Rs. 79,519-12-9 was found due by the company to him on  both these  accounts.  On January 15, 1940, the company passed  a deposit  receipt  in  his favour for this  amount  which  he demanded from the company by his letters dated May 10,  1941 and  May 17, 1941.  The company failed and neglected to  pay the  said  amount  with the result that  he  filed  on  June 16,1944, a suit against the company for recovery of a sum of Rs.  1,03,988 made up of Rs. 79,519-12-9 for  principal  and Rs.  24,468 as interest from August 1, 1939, to January  15, 1944.

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The  claim as laid in the plaint was that all these  amounts which had been borrowed by the company from him were payable on  demand  to  be made by him as  creditor  and  they  were deposits with the company, but in order that the company may not  be compelled to pay a big sum, on demand, items in  the current account were being transferred to the fixed  deposit account  from time to time.  The amounts of  these  deposits being thus payable on demand the cause of action accrued  to him on May 17, 1941, and limitation for the suit expired  on May  17, 1944.  But, as the courts were closed on that  day, the suit was filed on 1334 the  first opening day i. e., June 16, 1944, and  limitation was therefore saved by s. 4 of the Limitation Act.  He  also relied  upon  the acknowledgments of his debt  made  by  the company  in  (a)  the  resolution passed  by  the  Board  of Directors  on  May 20, 1941, (b) the  balance-sheet  of  the company for the year 1940-41 dated October 10, 1941, and for the  years  1941-42 and 1942-43, and (c) the  entry  in  the khata  of the plaintiff in the books of the company made  on or  about July 31, 1941, and signed by the Chairman  of  the company.   He further relied upon an application made  under s. 162 of the Companies Act to liquidate the company on June 16,  1941,  which application was however dismissed  by  the court  on  June 16, 1944, stating that as he was  bona  fide prosecuting this application for the same relief as  claimed in  the  suit and as the court was unable to  entertain  the application because the debt was disputed by the company, he was  entitled to deduct from the period of  limitation,  the time spent by him under s. 14 of the Limitation Act. This claim of the appellant was contested by the  respondent mainly on the ground that the suit was barred by the law  of limitation.  Both the courts below negatived his claim.  The trial  court  dismissed  his suit and  the  High  Court,  on appeal, dismissed his appeal and confirmed the dismissal  of his suit by the trial court; hence this appeal. The only question which arises for our consideration in this appeal  is  whether  the  appellant’s  suit  was  barred  by limitation.   The appellant, in the first  instance,  relied upon the deposit receipt which was passed by the company  in his  favour  on January 15, 1940.  This receipt  (Ex.   P-1) evidenced  a deposit of Rs. 79,519-12-9 for 12  months  from August 1, 1939, to July 31, 1940, and the amount at the foot thereof  became due and payable by the respondent to him  on July 31, 1940.  The appellant, however, sought to extend the commencement of the period of limitation to May 17, 1941, on the  ground  that  the monies, the  subject-matter  of  that deposit  receipt, were payable to him on demand,  that  such demand was made by him 1335 on  May 17, 1941, and that therefore that was the  date  for the  commencement of the period of limitation.   No  express agreement in this behalf could be proved by him nor could an agreement be implied from the course of dealings between him and the company for the period of 25 years during which  the dealings  continued  between the parties.  As  a  matter  of fact,  such  an agreement, either express  or  implied,  was negatived  by the very terms of the deposit  receipt  which, apart  from mentioning that the monies were received by  the company  as  deposit for 12 months from August 1,  1939,  to July 31, 1940, contained on the reverse a note that interest would  cease on due date.  This was sufficient to  establish that  the  amount  due at the foot of  the  deposit  receipt became due and payable on the due date mentioned therein and that  there was no question of the amount being  payable  at

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any  time thereafter on demand being made in this behalf  by the  creditor.  The course of dealings between  the  parties also  negatived any such agreement because it  appears  from the  record  that such deposit receipts were passed  by  the company  in  his  favour from time to  time,  each  of  such receipts  being for a fixed period in the same terms as  the deposit  receipt  in question and  the  receipts  containing similar  notes on the reverse that interest would  cease  on due  date.   Both the courts below were therefore  right  in coming to the conclusion that there was no agreement of  the kind put forward by the appellant that the monies due at the foot  of the deposit receipt in question were  repayable  on demand  and that monies due at the foot thereof  became  due and payable by the company to him on July 31, 1940. The  next  question  to  consider  is  whether  the  bar  of limitation  which  set  in on July 31, 1943,  was  saved  by reason  of  the  circumstances set out  in  the  plaint  for avoidance of the same.  Out of the three acknowledgments  of debt pleaded by the appellant the third was abandoned by him in   the   course   of  the  hearing  and   the   only   two acknowledgments  which were pressed were (a) the  resolution passed  by the Board of Directors on May 20, 194 1, and  (b) the balance-sheet of the company for the year 1940-41  dated October 10, 1336 1941.   It  may be noted that he made no attempt at  all  to prove the balance-sheets of the company for the years  1941- 42 and 194-2-43. In regard to the resolution passed by the Board of Directors on  May 20, 1941, the position is that at that  meeting  one Pandurang  Narsaji Hadole, who was one of the  Directors  of the  company. made a reference to a:proposed  settlement  of the claim of the appellant for a sum of RIB. 67,939 as found due at the end of July 1936, which had been resolved upon by the Board of Directors on December 22,1936, but had not been accepted  by the appellant.  The resolution  then  requested the  appellant to inform the company again if even  then  he was  prepared  to  abide  by  the  terms  of  that  proposed settlement which would be placed before the general  meeting of  all  the  share-holders of the company if  a  reply  was received from him in the affirmative. This resolution of the Board of Directors was alleged by the appellant to be an acknowledgment of a subsisting  liability in regard to the debt due by the company to him at the  foot of  the deposit receipt in question’.  We do not see how  it could  ever  be  spelt  out  as  such  acknowledgment.   The contents of the resolution only referred to a past liability of  the  company  to the appellant  and  there  was  nothing therein which could by any stretch be construed as referring to  the liability of the company, to him at the foot of  the deposit  receipt dated January 15, 1940.  Our attention  was drawn  to the deposit receipts which had been passed by  the company in favour of the appellant on May 30, 1935,  October 18, 1936, and November 30,1938, each of which was for a  sum of  Rs.  47,500.  No connection  was,  however,  established between  the sum of Rs. 47,500, the subject-matter of  these receipts, and the sum of Rs. 79,519-12-9, the subject-matter of the deposit receipt in question and in the absence of any such connection ’having been established the appellant could not avail himself of the alleged acknowledgment of liability contained in the resolution of the Board of Directors  dated May 20, 1941, 1337 even if it could perchance be construed as an acknowledgment of a subsisting liability.  This resolution of the Board  of

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Directors  dated May 20, 1941, could not,  therefore,  avail the appellant as an acknowledgment of his debt. In regard to the balance-sheet of the company for’ the  year 1940-41 dated October 10, 1941, it is to be noted that, even though  the  appellant applied before the  trial  court  for filing  the balance-sheet of 1940-41 on April 28,  1945,  he expressly  stated  that he did not want to adduce  any  oral evidence to prove it.  He was, however, allowed to file  the same.  But it was realised later that the balance-sheet  did not  prove itself and he therefore made another  application on  July  11, 1945, for permission to file a copy  from  the Registrar  of  Companies  and  contended  that  this  proved itself.   This document was, however, rejected by the  trial court  as  filed  too late.  When the  appeal  came  up  for hearing before the High Court, it was contended on behalf of the  appellant  that  the copy which was  adduced  from  the office of the Registrar was admissible in evidence but  that evidence  was rejected by the High Court on a  consideration of  ss. 65 and 74(2) of the Evidence Act.  The attention  of the  High  Court was evidently not drawn to  the  Commercial Documents  Evidence Act (XXX of 1939) which has amended  the Law   of  Evidence  with  respect  to   certain   commercial documents.   Section  3 of that Act enacts that  "  for  the purposes   of   the   Indian   Evidence   Act,   1872,   and notwithstanding   anything  contained  therein,   a   Court: (a)......................................................... (b)  may  presume,  within  the  meaning  of  that  Act,  in relation to documents included in Pt. 11 of the Schedule :- That  any document purporting to be a document  included  in Part  I or Part II of the Schedule, as the case may be,  and to  have  been  duly  made  by  or  under  the   appropriate authority,  was  so made and that the  statements  contained therein are accurate.  " Item No. 21 in Pt. 11 of the Schedule mentions:- 1338 "  Copy,  certified  by the Registrar of  Companies  of  the Balance  Sheet, Profit and Loss Account, and audit i  report of a company, filed with the said Registrar under the Indian Companies Act, 1913 and the rules made thereunder. If  the attention of the High Court had been drawn  to  this provision  of law, we are sure, it would not  have  rejected the copy of the balance-sheet obtained by the appellant from the  office  of the Registrar of Companies.  We are  of  the opinion that the copy should have been admitted in  evidence and we do hereby admit the same. The  appellant  contends that that balance-sheet  which  was signed  by the Directors contained an acknowledgment of  the debt due by the company to the appellant for the sum of  Rs. 67,939  as  and  by  way  of  fixed  deposit  and  that  was sufficient  to  save the bar of  limitation.   The  question therefore  arises whether any presumption can be  raised  as regards the balance-sheet having been duly made by or  under the  appropriate authority or in regard  to the accuracy  of the statement contained therein under s. 3(b) of the Commer- cial Docuinents Evidence Act (XXX of 1939). It is to be noted that this presumption is not compulsory as in the case of s. 3(a) of the Act; it is discretionary  with the court.  The difficulty in the way of the appellant  here is  however  insuperable  because we find  that  there  were factions  in the company at or about the relevant  time.   A Directors’  meeting  was  held on April 27,  1941,  and  the resignation  of the appellant as the Chairman  was  accepted and  another  person was appointed in his place.   A  second meeting  was  called  for May 17, 1941, but  it  had  to  be adjourned for want of a quorum.  The adjourned meeting was

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held on May 20,1941, but no balance-sheet was passed at that meeting.  There is nothing on the record to show that  there was  another meeting of the Board of Directors  for  passing the  balance-sheet of the company for the year  1940-41.   A general meeting of the Shareholders was called for  November 16,  1941, to pass the balance-sheet.  This also had  to  be adjourned to the following day for want of a quorum.  At the 1339 adjourned  meeting the shareholders then present refused  to pass the accounts and it was not till some five weeks later, namely on December 30, 1941, that the rival faction met  and passed the accounts.  But this meeting only purported to  be a continuation of the meeting which bad to be adjourned  for want of a quorum and that clearly was irregular because  the adjourned meeting had to be called within twentyfour  hours. It did not purport to be a fresh meetino, convened after due notice, etc.  Under the circumstances,it could not be  urged that the balance-sheet was duly passed. Even  if the attention of the High Court had been  drawn  to the  provisions  of  s. 3 (b) of  the  Commercial  Documents Evidence  Act,  (XXX of 1939) it would have  been  perfectly justified  in not, raising the presumption in regard to  the balance-sheet  having  been  duly  made  by  or  under   the appropriate  authority and in regard to the accuracy of  the statement  contained  therein.  We are,  therefore,  of  the opinion that this alleged acknowledgment also is of no avail to the appellant. In  regard to s. 14 of the Indian Limitation Act  which  was sought to be relied upon by the appellant, it may be shortly stated  that the liquidation proceedings had not been  filed in  the courts below and there is nothing to show  that  the requirements  of  s. 14 were at all  satisfied.   No  cogent argument  has  been  advanced before us  on  behalf  of  the appellant which would induce us to hold that the  conclusion reached by the High Courtin this behalf was incorrect in any manner whatever. On all the above grounds we have come to the conclusion that the  appellant’s  claim  was  clearly  timebarred  and   the dismissal  of  his suit by the trial court as  well  as  the dismissal of his appeal by the High Court were in order. This appeal will therefore stand dismissed with costs. Appeal dismissed. 170