# 623: LAKSHMI~TAN COTTON MILLS CO LTD v. ALUMINIUM CORPORATION OF INDIA LTD

- **Citation:** [1971] 2 S.C.R. 623
- **Court:** Supreme Court of India
- **Decided:** 1970-10-16
- **Case number:** Civil Appeals Nos. 116, 117.and 119 of 1967
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/623-lakshmi-tan-cotton-mills-co-ltd-v-aluminium-corporation-of-india-ltd-5206
- **Pages:** 17

## Headnote

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623:
LAKSHMI~TAN COTTON MILLS CO .. LTD.
v.
ALUMINIUM CORPORATION OF INDIA LTD.
October 16, 1970
[J. M. SHELAT AND C. A. VAIDIALINGAM, JI.]
Limitation Act. 1908, s. 19(1)-Acknowledgment of liability-What·
amounts to--AuthoriFy to make •cknow/edgment 011 behalf of corporation,
when can be implied.
Prior to January )8, 1944 six companies including M/s. Lakshmifataa..
Cotton Mills Co. Ltd. (the appellant-company) and the Aluminium Cor··
poration of India Ltd. (respondent corporation) were jointly managed
by two groups known as the Singhania and Gupta groups. As a result
of disputes. between the two groups there was a reference to arbitratien.
After January 18, 1944, the date of the award, the aforesaid six· concerns.
were brought under the management and control of one or the other
of the two groupg. The C<irporation came under the control and manage·
ment of the Singhania group. In cl. 9 of the award it was said that the
award 'did not cover the advances which either party or their separate.
firms may have made to all or any of them or their moneys which may
be in deposit with them and that they would be payable and paid in their
usual course.
After the award the appellant-Company sent a statement
·of account in respect of advances made to the respondent corporation.
and expenditure incurred on its behalf.
The statement was objected to
on the ground that the appellant company had not properly maintained
its accounts during the period of .joint management.
Efforts at reconciliation of accounts having failed the appellants filed two suits claiming
Rs. 3.56,207 .9 .6 and Rs. 72,595 .4 .6 from the Corporation, being suits
Nos. 63 and 65 of 1949.
In suit No. 63 of 1949 it was claimed that
the suit was within time as after adjustment of •everal items in 1946 and
1947 a sum,of Rs. 2,96,110.11.6 was found due to the appellant-company
~nd that in any event. the suit was saved from bein~ barred by limitation
by a letter (Ex .. 1) dated April 16, 1946 addressed by S the Secretarycum.Chief Accountant of the C-0rporation, thereby acknowledging the·
liability of the Corpdration to pay the amount which would be found due·
and payable under the said accounts.
Similar averments were made in
Suit No. 65 of 1949. The written statements filed on behalf of the Cor··
poration inter alia pleaded that the said claim was . barred by limitation,
that the said lettef, did not amount to an acknowledgement within the·
meaning of s. 19 of the Limitation Act, 1908 which was then applicable
to tho suits, and lastly, that even. if the said letter did amount to an•
acknowledgement, it was not binding on the Corporation. The trial court.
decreed the suits but the High Court dismissed them as being time-barred.
In_ appeals to this Court the questions tliat fell for consideration were :
<!) whether t.he letter in queslit>n amounted to an acknowledgment;
(!!) whether 1t was an acknawled~ment by the corpomion, and if not
(1u) whether the Secretary-cum-Chief Accountant had authority express
or implied, to acknowledge liability on behalf of the Corporation so as.
to bind that corporation. Allowing the appeals,
·
HELD: (!)(a) From the provisions of s. 19(1) Of the Limilation•
Act, 1908 it is clear that the statement on which the plea of acknowledgemeat is founded must relate to a subsisting liability as the section requires.
•624
SUPREME COURT REPORTS
[1971] 2 S.C.R.
.that it must be made before the expiration of the period prescribed by the
Act. It need not, however, amount to a promise to pay, for' an acknowledgement does not create a new right of action but merely exten<l§ the pe'ciod of
limitation. Tl:ie statement need not indicate ·the exact nature or the specific
character. of the liability. The words used in the statement in question, however, must relate to a present subsisting liability and indicate the existence .
.of jural relationship between the partes such as, for instance, that of a
.debtor at1d ·;r· cteditor-fttld-the intention to admit su

## Text

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623:
LAKSHMI~TAN COTTON MILLS CO .. LTD.
v.
ALUMINIUM CORPORATION OF INDIA LTD.
October 16, 1970
[J. M. SHELAT AND C. A. VAIDIALINGAM, JI.]
Limitation Act. 1908, s. 19(1)-Acknowledgment of liability-What·
amounts to--AuthoriFy to make •cknow/edgment 011 behalf of corporation,
when can be implied.
Prior to January )8, 1944 six companies including M/s. Lakshmifataa..
Cotton Mills Co. Ltd. (the appellant-company) and the Aluminium Cor··
poration of India Ltd. (respondent corporation) were jointly managed
by two groups known as the Singhania and Gupta groups. As a result
of disputes. between the two groups there was a reference to arbitratien.
After January 18, 1944, the date of the award, the aforesaid six· concerns.
were brought under the management and control of one or the other
of the two groupg. The C<irporation came under the control and manage·
ment of the Singhania group. In cl. 9 of the award it was said that the
award 'did not cover the advances which either party or their separate.
firms may have made to all or any of them or their moneys which may
be in deposit with them and that they would be payable and paid in their
usual course.
After the award the appellant-Company sent a statement
·of account in respect of advances made to the respondent corporation.
and expenditure incurred on its behalf.
The statement was objected to
on the ground that the appellant company had not properly maintained
its accounts during the period of .joint management.
Efforts at reconciliation of accounts having failed the appellants filed two suits claiming
Rs. 3.56,207 .9 .6 and Rs. 72,595 .4 .6 from the Corporation, being suits
Nos. 63 and 65 of 1949.
In suit No. 63 of 1949 it was claimed that
the suit was within time as after adjustment of •everal items in 1946 and
1947 a sum,of Rs. 2,96,110.11.6 was found due to the appellant-company
~nd that in any event. the suit was saved from bein~ barred by limitation
by a letter (Ex .. 1) dated April 16, 1946 addressed by S the Secretarycum.Chief Accountant of the C-0rporation, thereby acknowledging the·
liability of the Corpdration to pay the amount which would be found due·
and payable under the said accounts.
Similar averments were made in
Suit No. 65 of 1949. The written statements filed on behalf of the Cor··
poration inter alia pleaded that the said claim was . barred by limitation,
that the said lettef, did not amount to an acknowledgement within the·
meaning of s. 19 of the Limitation Act, 1908 which was then applicable
to tho suits, and lastly, that even. if the said letter did amount to an•
acknowledgement, it was not binding on the Corporation. The trial court.
decreed the suits but the High Court dismissed them as being time-barred.
In_ appeals to this Court the questions tliat fell for consideration were :
<!) whether t.he letter in queslit>n amounted to an acknowledgment;
(!!) whether 1t was an acknawled~ment by the corpomion, and if not
(1u) whether the Secretary-cum-Chief Accountant had authority express
or implied, to acknowledge liability on behalf of the Corporation so as.
to bind that corporation. Allowing the appeals,
·
HELD: (!)(a) From the provisions of s. 19(1) Of the Limilation•
Act, 1908 it is clear that the statement on which the plea of acknowledgemeat is founded must relate to a subsisting liability as the section requires.
•624
SUPREME COURT REPORTS
[1971] 2 S.C.R.
.that it must be made before the expiration of the period prescribed by the
Act. It need not, however, amount to a promise to pay, for' an acknowledgement does not create a new right of action but merely exten<l§ the pe'ciod of
limitation. Tl:ie statement need not indicate ·the exact nature or the specific
character. of the liability. The words used in the statement in question, however, must relate to a present subsisting liability and indicate the existence .
.of jural relationship between the partes such as, for instance, that of a
.debtor at1d ·;r· cteditor-fttld-the intention to admit such a jural relationshjp.
Such an intention need not be in. express terms and can be inferred by implication or th epature of the admission and the surrounding circumstances ..
Generally speaking a liberal construction of the statement in
question
should be given. That of oourse does not mean that where a staiement
is made without intending to admit the existence of a particular jural
relationship, such an intention should be fastened on the person making
the statement by an involved or a far fetc~eil reasoning; [629 C-E]
Khan B•hadur Shapoor Fredoom Mazda v. Durga Prosad Chamaria,
[1962] l S.C.R. 140, Tilak Ram v. Natlru, A.LR. 1967 S.C. 935, 938, 939,
Green v. Humphreva, [1884] 26 Ch. D. 474, .481, Tajpal Saraogi v.
Lallanjee Jain, C.A. No. 766/62 dt. 8-2-1965 and Abdul Rahim Oosman
& <:;o. v. Ojamshee Prushottamdas & Co., [1928] I.LR. 56 Cal. 639,
referred to.
(b) FroQl the correspondence between the parties and the surrounding circumstances it must follow that there was a subsisting account in
the name of the appellannt company in the books of the Corporation
in . which interest on the balance sho~ therein from time to time was
being credited and in which amounts· in respect of items passed during
the course of ;econciliation were also iluly credited.
The statement in
the letter Ex. l that "after all the above adjustments the position will be
as per statement attached", that is t~ say, that there was a balance of
Rs. 107447/13/11 due and payable to the appellant company must ~!early
amount to acknowledgement within the meaning of s.
19(1)~ If the
letter be looked at in the background of the controversy between the
parties which controversy was limited to the question as to the correctness of the amount churned by the appellant company as also the correspondence which ensued in regard to it, it would be impossible to say
that the 'letter and"the statement of account enclosed therewith were
merely explanatory and did not amount to an admission of the jural reship of debtor and creditor and of the liability to pay the amount found
due at the foot of the account on finalisation. [635 D-F]
The mere fact that letter called tor confirmation of the amount of
the balance mentioned therein and the fact that the appellant company
failed to confirm it, could not lead to a conclusion that the .. admission of
liability· was conditional and therefore could not operate as an acknqwledgement. The confirmat~on sought in the. l~tter was not a condi~i~ .to
the admission as to the exIStence of a subsIStmg account and the habihty
to pay when accounts we_re finalised but to the specific amou.nt which
''"";ording to the corporatton would be the .a.mount payable bl'. 1t accordirtg1.to its calculation.
There was no cond11on sub1ect to v.·h1_ch the admission was to be made which remained unperformed. [635 G; 636 F-G;
637 BJ
Mmziram v. Rupchand. LR. 33 I.A. 165, Raja Kayali Arunachella
Row Balzadur v. Sri Rajah Rangialz Appa Row Balzad11r, [1906] I.LR. 29
1'fE;d. 519 and Bal/apragada Ran1anurrthy v. Tha111n1ana Gopv.yya, [19!7]
I.LR. 40 Mad. 701, distinguished.
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LAKSHMJRATAN COTTON MILLS v. ALUMINIUM CORP.
SZ5·
(She/at, I.)
In re River Steamer Co. v. Mitchell, L.R. 6 Ch. App. 822, 828,
referred to.
(ii) The plea that the letter Ex. 1 should be regarded as an acknowledgement by the corporation itself was not included among the issues
formulated before the courts below. It cQuld not be_allowed to be raised
for the first time in this Court. [628 BJ
(iii) If the correspondence between the parties together with the
statements of accounts enclosed therewith was closely examined it became
clear that S was authorised to scrutinise the claim made by the appellant
company, the vatious items for which the appellant company claimed
credit and to reject the same and, what is important, to allow others .
. That he had such an authority was clear from the fact that in respect
of such of the items which he allowed, credit was given to the appellant
and necessary entries to the cred.it of the appellant company were posted
in the account maintained by the Corporation in its books of account.
It was impossible to ·say that in the course of finalising the accounts, S
accorded his assent to various items claimed lly the appellant company
«without having been authorised so to do.
Nor was it possible to say
that on his pa.sing those items necessary entries were made in the books
of accounts of the corporation without his having so authorised. Further,
he c<?itld not have,;.'1".'!\ .. l,Q. ~e. appellant coJlm&nY statements o1 account
showing the balance due fo It Aas per the. ledger" \Jnless he WaS authorised
to finalik the accounts and arrive at the amount due and payable to"'
the company. [637 E-F; 638 B-C]
Uma Shankar v. Govind Narain, I.L.R. 46 All. 982, referred to.
CIVIL APPELLATE JURISDICTION:
Civil Appeals Nos. 116,
117.and 119 of 1967 .
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Appeals from"the judgment and decrees dated May 19,. 1966
of the Allahabad High Court in First Appeals Nos. 441 of 1950,
198 of 1952 and 442-0f 1950 respectively.
S. V. Gupte, S. T. Desai, I. P. Goyal and G. N. Wantoo, for
the appellants (in all the appeals).
Sidhartha Ray, A. K. Sen, Rameshwar Nath, Krishna Serr and!
Swaranjit Sodhi, for the respondent (in all the appeals).
The Judgment of the Court was delivered by
Shelat, J, Prior to Jan?ary 18, · 1944-M/s.-Lakshmirat~
Cotton Mills Co. Ltd. (hereinafter ref.erred to as the appellantcompany), Aluminium Corporation o~ I.ndia Ltd. (here~r referred to as the corporation, J .K. Lunrted, . Beharillll Kailashp~t
India Supplies, Northern India Trading <;o:, and Northern India
Brush Manufacturing Co .. Ltd. were all 1omtly .mana&ed tiy twO'
groups, who may .conv7m.en~Y"tie ~aUed fhe Smgharua and the
Gupta groups. · D1spu~ havmg ansen between them, they werereferred. to arbitrati~ by. a deed of. reference, .~~t¢-Deeember 9',
1943. It is not necessary to.go intO the ~tails of the a~,
dated January 18, 1944, by which these disputes were ad1ud1-
626
SUPREME COURT REPORTS
[1971] 2 S.C.R.
cated upon except that from and after the date of the award
the aforesaid concerns were brought unde~ the management and
control of one or the other of the said two groups.
The corporation came under the control and management of the Singhania group.
Cl. 9 of the award provided as follows :
"The above award or directions in respect of Laxr.1i
Ratan Cotton Mils Co. Ltd., Aluminium Corporation
of India Ltd., J. K. Ltd., Beharilal Kailashpat India
Supplies, Northern India Trading Co. and Northern
Brush Manufacturing Co. do not cover the advances
which either party or their separate firms
may have
made to all or any of them or their moneys which may
be in deposit with them and they shall be payable and
paid in their usual course."
According to the appellants, there existed in their trading books
accounts in respect of amounts advanced or spent by them fort
the corporation in respect of which cl. (9) of the .award specifically made provision for and also for interest due
thereon.
After the award was made the appellant-company sent a statement of account to the corporation, but
this· was objected to
on the ground that the appellant-company, during the coun;e of
the previous joint management of the cmporation, had not properly maintained the accounts and that several items were either
not properly accoun~ed for or entered into.
Correspondence
thereafter ensued between the parties. The parties also appointed
their respective officers to meet and reconcile their respective
accounts the corporation being represented by its Secretary-cumChief Accountant, one Subramanayam, and the appellant-company sometimes by one Arora and at other times by one
Newatia. Since no settlement could be arrived at, the appellants
filed two suits claiming Rs. 3,56,207-9-6 and Rs. 72,595-4-6
from the corporation, being Suit Nos. 63 and 65 of 1949.
In para 14 of the plaint in Suit No. 63 of 1949, it was
claimed that the suit was within time
as after adjustment of
several items in 1946 and 1947. a sum of
Rs. 2,96,110-11-6
was found due to the appellant-company and that in any event
the suit was saved from being barred by limitation by a letter
dated Aprii 16, 1946 addressed by the said Subramanayam, thereby acknowledging the liability of the corporation to
pay the
amount which would be found due and pay.able under the said
accounts.
Similar. averments were abo made in the ulaint in Suit
No. 65 of 1949. The written statements tiled by the corporation
.inter alia pleaded rhat the said clnims were harred by limitation,
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LAKSHMIRATAN COTTON MILLS V. ALUMINIUM CORP.
627
(Sire/at, J.)
that the said letter did not amount to an acknowledgement within
the meaning of s. 19 of the Limitation Act, 1908 which was then
applicable to the suits, and lastly, that even if the said letter
did amount to an acknowledgment, it was not binding on the
corporation as the said Subramanayam had no authority to make
any such acknowledgement for and on behalf of and binding on
the corporation. On the question of limitation, the Trial Court
raised three questions for its determination;
(1) whether
the
letter (Ex. 1) was binding on the corporation, (2) whether it
amounted to an acknowledgement, and ( 3) if so, whether it would
extend the period of limitation so as to save the claims made
by the appellants from being barred.
On consideration of the
evidence, both orar and daeumentary, the Trial Court held in
favour of the appellants on all the three questions and passed
decrees )n both the suits.
Three appeals were filed in the High Court against those
decrees, two by the corporation and the third by the appellantcompany as the claim allowed in its favour was for a reduced
amount. As framed by the High Court; the question common to
all the three appeals was whether the said letter (Ex. r) amounied to an acknowledgement extending the period of limitation.
The High Court, on consideration of the correspondence between the parties and the other evidence, reached the conclusion
that the letter (Ex. 1) was "merely explanatory" and was not·
meant to bind the corporation, that even if it did
amount to
"some kind of acknowledgement", its author, the said . Subrarilanayam, had no authority to acknowledge (lny debt or liability
on behalf of the corporation. In this view the High Court held
the two suits barred by limitation and allowed the· corporation's
appeals. It rejected the appellant-company's appeal .and dismissed the two suits.
Hence these three appeals under certificates
granted by the High Court.
It was never disputed that, except for the letter (Ex. 1) relied
on by the appellant-company,
provided it amounted to an
acknowledgement binding on the corporation, the claims of the
appellants would be barred by limitation.
Consequently, .the
questions for determination in these appeals are the same as the
ones before the High Court.
These questions were canvassed
llefore us in their three l)Spects; firstly, whether the letter (Ex. 1)
amounted to an acknowledgement, secondly, if it did. whether
it was an acknowledgement by the corporation, and thirdly, if not,
~hether the said Subramanyam, who addressed if, had the authoH
nty, exp~ess or impli~, to acknowledge liability on behalf of the .
corporallon so as to blnd that corporation.
Counsel for ·the appellant-company sought to argue that inasmuch as the letter, (Ex ... n was written .by t.he corporation's
628
SUPREME COURT REPORTS
[197 !J 2 S.C.R.
Secretary, who also combined the position of the Chief Accountant, and furthermore, addressed that Jetter for and on behalf of
the corporation, the letter was of and
by the
corporation.
Therefore, if the Jetter amounts to an acknowledgement,
such.
acknowledgement wuuld be by the corporation itself and no enquiry would then be necessary to ascertain whether the said
Subramanayam had the
authority to acknowledge the liability
so as to bind the corporation.
No such plea, however, is to be
found in the plant which merely stated that "there are several
letters constituting acknowledgement of the unsettled account.
The: plaintiff files one of such letters which is dated 16th April,
1946." The written statement denied that the corporation ever
made any acknowledgement or that the letter of April 16, 1946
was any such acknowledgement.
It further denied that Subramanayam, who wrote it, hadk any authority to
ac' '1.owledge
any debt.
Such a comprehensive denial
notwithsta1,~mg, no
issue was raised covering the argument now urged that the said
l~tter was and must be treated as one of or by the corporation,
and that therefore, there was no question of Subramanayam
having or not having the authority to make an acknowledgement
on behalf of the corporation.
No such argument ai>o appears
to have been made either in the Trial Court or the High Court
where the controversy was centered around the question whether
the said letter contained an acknowledgement and whether its
writer, addressing it on behalf of the corporation, had the authority
to make such an acknowledgement binding on the corporation. In
our view Mr. Gupte could not, at such a belated stage, raise for
the first time the plea that it was the corporation which through
the said letter made the acknowledgement and that we should
understand that Jetter to mean such an acknowledgement by the
corporation itself.
The questim1, therefore, that really arises for our determination is whether the said letter contains an acknowledgement, which
its writer, Subramanyam, had the authority, express or implied,
to make. Even that question gets reduced in extent and scope
as it was never the case of the appellant-company at any stage
that the corporation had clothed its Secretary with such authority
expressly. Such a case Mr. Gupte did not make out even before
us and proceeded in fact to argue that the ,,vidence on record
showed that he had such authority given to him impliedly.
Sec. 19(1) of the Limitation Act, 1908 provides that where,
before the expiration of the period prescribed for a suit in respect of any property or right, · an acknowledgement of liability
in respect of such property or right has been made in writing
signed by the party against whom such property or right is claimed, a fresh period of limitation shall be computed from the time
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LAKSHMIRATAN COTTON MILLS v. ALUMIN!UM CORP.
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(She!r.t, J.)
when the acknowledgement was so signed. The expression 'signect··
here means not only signed personally by such a party, but also
by an agent duly authorised in that behalf.
Explanation 1 to
the section then provides that an acknowledgement would
be
sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment has not yet
come, or is accompanied by a refusal
to pay or is
coupled
with a claim to a set-off, or is addressed to a person other than
the person entitled to the property or right.
The new Act of
1963 contains in s. 18 substantially similar provisions.
It is clear that the statement on which the plea oi acknowledgement is founded must relate to a subsisting liability as the
section requires that it must be made before the expiration of
the period prescribed under the Act. It need
not,
however,
amount to a promise to pay, for, an acknowledgement does not
create a new right to action but merely extends the period of
limitation.
The statement need not
indicate the exact nature
or the specific character of the liability. The words used in the
statement in question, however, must relat<' to a present subsisting liability and indicate the existence of jura! relationship
between the parties, such as, for instance, that of a debtor and
a creditor, and the intention to admit such jural relationship.
Such an intention need not be in express tem1s and can be inferred by implication from the nature of the admission and the
surrounding circumstances.
Generally speaking, a liberal construction of the statement in question should be given.
That
of-course does not mean that where a statement is made without intending to admit the existence of jural relationship, such
intention should be fastened on the person making the statement
by an involved and far-fetched reasoning. (see Khan Bahadw·
'iihapoor Fredoom Mazda v.
Durga Prosad Chamaria(')
and
Ti/ak Ram v. Nathu(2). As Fry, L.J., in Green v. Humphreys(")
said "an acknowledgement is an admission by the writer that
there is a debt owing by him either to the receiver of the letter
or to some other person on whose behalf the letter is received
but it is •not enough that he refers to a debt as being due from
somebody.
In order to take the case out of the statute there
mu~t upon the fair construction of the letter, read in the light
of the surrounding circumstances, be an admission that the writer
owes the debt."
As already stated, the
person
making
the
acknowledgement can be both the debtor himself as also a person
duly authorised by him to make the admission. In Khan Ba/wdur
(I) (1962) 1 S. C.R. 140.
(21 A.LR. 1967 S. C. 935. at 938. 9)9
(3) (1884) 26 Ch. D. 474 at 481.
13-L436 Sup C l/71
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SUPJlEME COURT REPORTS
[1971] 2 S.C.R.
Sliapoor Fredoom Mazda's case( 1) the Court accepted a statement in a Jetter by a bortgago.11 to a second mortgagee to save the
mortgaged property from being sold away at a cheap price at
the instance of the prior mortgagee by himself purchasing it as
one amounting to an admission of the jural relationship of a
mortgagor and mortgagee, and therefore, to an acknowledgement within s. 19.
Also, an agreement of reference to arbitration containing an unqualified admission that whoever on account
sheuld be proved to be the debtor would pay ta the other has
been held to amount to an acknowledgement. Such an admission
is not subject to the condition that before the agreement should
operate as an acknowledgement, the liability must be ascertained
by the arbitrator. · The acknowledgement operates whether the
arbitrator acts or not.
(see Tejpa/ Saraogi v. Lallanjee Jain(~,
approving Abdul Rahim Gosman & Co. v. Ojamshee Prushottamdas & Co.(3).
The letter (Ex. 1) relied on as an acknowledgement was
written to the appellant-company by Subramanayam signing it
"for Aluminium Corporation of India Ltd." It consists of several
paragraphs dealing with diverse items relating ·to different amounts
claimed by the appellant-company in a statement of claim previously sent by it to the corporation, some of which are refuted
by the writer, while the others are accepted.
The penultimate
·paragraph, which is said to contain the admission, reads as
follows:
"After all the above adjustments, the position will
be as per stlitement attached. ·Interest has been provided on some balances and on others it has not been
provided.
We request you to confirm the balance of
Rs. 1,07,477-13-11, so that we may proceed with the
calculation of interest and settle your claim once and
for all immediately.
Kindly acknowledge this letter and favour us with
an immediate reply."
The Jetter speaks in the last sentence of a copy of it to be sent
to Lala Purshottam Dasji Singhania "for information"
The copy
-of the letter, as is clear from the other evidence· as also the
words "for information" was not sent for approval and
was
obviously not intended to be subject to such approval by Pnmshottam Singhania.
The. statement enclosed with the letter is
1'eaded "Account of M/s. Lakshmiratan Cotton Mills Co. Ltd."
.and first sets out tl!e balance of Rs. 1,00,760-0-7 in favour of
(I) (1962) I. S. C. R. 140.
(1) C.A. No. 766 of 1962, decided. on Feb. 8, 1965.
(3) (1928) I. L R. 56 Cal. 639.
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LAKSHMIRATAN COTTON MILLS v. ALUMINIUM CORP, 631
(Shelot, 1.)
the appellant-company "as per our ledger", meaning the ledger
of the corporation, ;ind the first foot-note ·thereto states that that
amount included interest .. of Rs. 26,490-11-10 calculated up_to
March 31, 1943. Several amounts due to other concerns payable to or by the appellant-company are then adjusted and finally the balance is _struck at Rs.· 1,07,447-13-11
(which is the
one mentioned in the letter (Ex. 1) which if confirmed by the
appellant-company, the corporation would "settle your clainI
once and for all imniediately."
The High Co.urt, as .aforesaid; :held, contrary to the view of
the Trial Court, .. that thise letter was only "explanatory" and was
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nelot !ntenhi~eqbe· to 'tie· a.uth adnii~si<in odf b liabilitdy or d~f thee jural1
r attons p
tween
e parties as e tor an ere 1tor. . ounse
for the corporation . $o argued ~ ·support of the High Court's
view that t,he letter was· written in the 'process of adjustment
and reconciliation of the statement of claim addressed by the
ap~llJlt-cam.pany. and -a counter-statement to it by the corporation, and. therefore, could riot be held to be one intended as
D · an adn)ission' of liability on the part of the coqiorati&n, and that,
in any .event, Sμbramanayam, who wrote\it, had no authority to
acknowledge any such liability on behalf of the corporation.
E
Before . we proceed to inquire into the correctness or otherwise of the High Court's view in regard to ·the letter (Ex. 1),.
it would be . necessary to examine _ the correspondence which
previously ensqed between the parties and the surrounding circumstances which led to that letter.
As already stated, under -cl. (9) of the award by which
the CO!!Cems, once jointly controlled, were separated, moneys adWll1:e!i · 1:iy either of the parties or their firms or standing in
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de~ with them were to be payable by one to
the other.
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also directed the Gupta group to hand over to the
Sillgltlilias account books and other papers and files relating to
the corporation. Accordingly, the Guptas h~ded them over to
the corporation on February 1, 1944.
The complaint of the
corporation was that these books had not been properly posted
• . up and contained discrepencies and that the corporation consequent!.)' required the help of the Guptas to finalise them. Early
in March 1945, the appellant-company had' also · sent a statement of account in respect of the amounts due and payable to
·it by the corporation. On April 20, 1945, one Col. Naidu, a
director. of the corporation, wrote to the
appellant-company
pointing out · from the said statement of account certain items
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which the corporation disputed. On 11th/12th September, 1945,
the appellant-company sent a statement of account claiming Rs.
2,94;000 and odd as payable to it.
On December 17, 1945,
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SUPREME COURT REPORTS
[1971) 2 S.C.R.
a
reply
thereto
was
given by a letter sent'.~y Laks~pat
Singhania, the director-incharge, of the corporat10n, menl!orung
various items disputed by. the corporation and the efforts made
by it to reconcile those items and enclosed with that reply
a
reconciliation statement showing the true position according to
the corporation. Among other things, the reply stated as fol\!Jws :
"You will find from the above that we have tried
our level best to see that these accounts are settled as
early as possible as we have been very anxious for finalising but unfortunately, there has been absolutely no response from your side.
From the reconciliation statement you will find
that according to our books amount due to the Laxmi
Ratan Cotton Mills Co. Ltd., is Rs. 98,101-3-1 which
includes interest calculated and credited to your
account up· to 31st March, 1943.
The interest from
that date till the date of settlement is further to be calculated when this account is properly reconciled and
confirmed by you."
The reply pointed out that as against the said amount of Rs.
98,101-3-1 the corporation claimed Rs. 38,490-2-2
and Rs.
8,256-13-6 which, acceltding to it, had. to be adjusted.
Lastly,
the reply threatened that unless the accounts were fin~!ised with•
in a month "we will not be paying you any interest on any of
your dues beyond 30th September, 1945-". The position, a&
stated in the statement enclosed with the reply, was as follows :
"Reconciliation of Accounts of M/s. Lakshmiratan
Cotton Mills Co. Ltd.
Balance as per A.CJ. Ltd. Bpoks
Balance as per statement
Difference
Rs.
98,101-3-1
Rs. 2,94,658-0-S>
Rs. 1,96,556-13-8"
Then followed detailed items claimed by the corporation totalling Rs. 1,96,556-13-8. The statement referred to above was
the one under . which the appellant-company claimed Rs.
2,94,658:0-9 and· )l!hich was sent earlier in
March 1945
by
Ram Ratan Gupta' to Purushottam Singhania.. The corporation
took objection to it by claiming various amoi,mts
and against
which, according to the corporation, only a sum of Rs. 98,101-3-1
was payable by it "as per AC.I. Ltd. Books", that is to say, as
shown by the books of account maintained by the corporation. The
reply of the appellant-company, dated December 6, 1945, to the
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LAKSHMIRATAN COTTON MILLS V. ALUMINIUM CORP.
633
(She/at, J.)
of the appellant-company, dated December 6, 1945, to the aforeaforesaid Jetter of September 17, 1945 and the statement enclosed
thereto shows that the said Arora on behalf of the appellantcompany and the said Subramanayam on behalf of the corporation met and tried to reconcile the accounts.
The appellantcompany by this reply also sent particulars of certain items apparently called for by Subramanayam at that meeting and in its
tum asked for
particulars of certain items debited to it in the
said reconciliation statement.
On December 21, 1945, Subramanayam replied to the appellant-company's letter of December
6, 1945.
By that letter he conveyed two thing~, (1) that in
respect of certain items claimed by the appellant-company and
which were disputed, those items were either passed or disallowed,
and (2) that since the
appellant-company had combined in its
statement of claim accounts of other allied concerns also, he too
had combined those accounts while preparing the statement of
accounts he was sending along with his letter.
The letter concluded by stating : "we herewith enclose a consolidated statement after merging all these accounts." The consolidated statement, (Ex. 44) enclosed JY Subramanayam with liis reply, reads
as follows:
"Accounts of Messrs Lakshmiratan Cotton Mills
Co. Ltd.
1945
December 1. By balance as per our ledger
Rs. I ,00,304-7-7"
Then follow accounts of other concerns whose accounts
were
brought in in what Subramanayam called the consolidated statement of account.
This statement reflected the position of
the
appellant-company in the corporation's books of account•; as on
December 1, 1945.
It will be noticed that the amount admitted in the st~itc
ment by the corporation as due to the appellant-company wsc
from Rs. 98,000 and odd (as per the earlier statement. dated
September 17, 1945) to Rs. 1,00,304-7-7.
This increase was
due to the fact that, while adjusting the disputed ile111;.
Subramanayam had allowed and ''passed" some o[ them bct11ccn September and December 1945 when the disputed items 11erc di>-
cussed and adjusted, anJ ~ntrics relating to
tho~c \\ hii.:h
''~:\.'
passed were posted to the credit of th.~ appcllanh:nmpany in 1he
books of the corporation.
.
The letter of December 21. I '-J.+.; \\as replied tn by tile ctppe,-
tant-company nn l'cbructry
:~. ! 9.i6 hy u'king
pe1nin11'ir'
:;1
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SUPREME COURT REPORTS
[1971] 2 S.C.R.
respect of item claimed by Subramanayani in his said letter. It
was in answer to this letter that Subramanayam wrote the letter·
(Ex. 1) in controversy and with which he sent the statement showing Rs. 1,07,447-13-11 as "Balance carried down".
Correspondence continued thereafter between the parties, the
appe!lant company maintaining that a much larger amount was
due to it than the sum of Rs. 1,07,447-13-11. Except that, .the
later correspondence would not throw any light on the question
as to acknowledgement, and therefore, we need now detain ourselves on it.
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Leaving aside for. the tiinei being the question as to Subra· c
manayam's authority, the following facts emerge from the correspondence ·and the statements of accounts accompanying some of
the letters sent on behalf of the corporation :
(a) In pursuance of cl. ( 9) of the ·said award, the
appellant-company sent to the corporation · in
the beginning of March 1945 a stateme.nt qf
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account claiming Rs. 2,94,000 and odd as due
to it.
(b) At no time .during the Jengtny correspondenct
which ensued between the parties, the corporation denied its liability to pay; what it did waE
to dispute the correctness of the amount claimed by the appellant-company by challenging
certain items for which the appellant-company
claimed credit and by making certain counter
claims of its own. · As against the statement of
account sent by the appellant-conipany, the corporation sent its own statement which . it called
the 'reconciliatfon account'.
( c) During the process of adjustment and reconciliation of the several items claimed by the
appellllillt -company some were allowed and some
were rejected, and the corporation sought to
debit certain items claimed by it against the
appellant-company.
(d) According to the f!lCOnciliation statement sent
. by the corporation on September 17, 1945
only Rs. 98,000 and odd was due to the appellant-company as against its claim for Rs.
2,94,000 and odd. Later, this · figure was
raised from time to tiine as some of . the -items
claimed by the appellant-company were allowed
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LAKSHMIRATAN COTTON MILLS V. ALUMINIUM CORP.
635
•
(Shelat, J.)
••
wnn the result that in the statement sent along
with the letter (Ex. 1) the balance due to the
appellant-company was shown at Rs. 1,07,447.
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(e) The statements of accounts, (Exs. 43 and 44)
and the one enclosed with the letter, (Ex. 1)
in clear terms stated that the--balances
s~n
therein were as shown in the ledger maintained by the corporation. The letters equally
clearly stated that interest on such balances was
being credited up to certain dates and for the
further period would be credited when the
accounts were finalised.
It must follow from these facts that there was a subsisting
account in the name of the appellant·company in the books of
the corporation in which interest on the balance shown therein
from time to time was being credited and in which amounts in
respect of items passed during the course of reconciliation were
also being credited.
The statement in the letter (Ex. 1) that
"after all the above adjustments the position will be as per state·
ment attached", that is to say, that there was a balance of Rs.
1,07,447·13·11 due and payable to the appel!ant-company, must
clearly amount to an a~knowiedgement within the meaning of', -
s. 19(1). In our view if the letter (Ex. 1) were to be looked
at in the background of the controversy between the
parties,
which controversy was, as aforesaid, limited to the question as to
the correctness of the amount claimed by the appellant-company
as also the correspondence which ensued in regard to it,
it would be impossible to say that the letter (Ex. 1) and the
statement of account enclosed therewith were merely explanatory
and dicl not amount to an admission' of the jural relationship
of debtor and creditor and of the liability to pay the amount
found due at the foot of the account on finalisation.
But the argument was that since the letter (Ex. 1) called
for confirmation of tile amount of Rs. 1,07,447 as being the
balance due to the appellant-company and as the appellant com·
paoy failed to confirm it, the admission of -liability was condi·
tional, and :herefore, cannot operate as an acknowledgement. In
this connection the decision in Maniram v. Rupchllnd(1)
was
relied on and in particular the famous dictum of Mellish, L.I.,
in bl, re_ River Steamer Co. v. Mltc.he/1( 9 )
·approvingly cited
therein.
The dictum was thai an acknowledgement to take the
case out cf the statute of limitation must be either one from which·
an absolute promise to pay can be inferred, or secondly, an
(I) LR. 33 I. A. 16S.
(2) L. R. 6 Ch. App. ~22, •t 828.
636
SUPRH!E COURT REPORTS
[1971] 2 S.C.R.
unconditional promise to pay the specific debt, or thirdly, that there
must be a conditional promise to pay the debt and evidence
that the condition has been performed.
The statement rflied
on in Maniram's case( 1) as an acknowledgement was by the respondent in a written statement filed by him in an earlier probate proceeding in which it was averred that the applicant Rupchand Nanabhai (the respondent) "had for the last five years
open and current accounts with the deceased (the testator) and1
that the alleged indebtedness did not affect .his right to apply
for probate", as one of the executors. It was held that the statement was sufficient to constitute an acknowledgement.
"An
unconditional acknowledgement",
said
their Lordships,
''has
always been held to imply a promise to pay, because that
is
the natural inference if nothing is said to the contrary. It
is
what every hone3t man would mean to do
There can be no
reason for giving a different meaning to an acknowledgement
that there is a right to have the accounts settled, and no qualification of the natural inference that whoever
is
the creditor
shall be paid when the condition is performed by the ascertainment of a balance in favour of the claimant. It is a case of the
third proportion of Mellish. L.J ., a conditional promise to pay
and the condition performed." We do not see how this decision
can support the corporation since in the present case also there
was an admission of a subsisting account on the finalisation of
which the corporation was prepared to pay the balan~e found
due at the foot thereof.
The only dispute was what would be
such as balance. Rs. 1,07,447, according to the corporation, and
a larger sum according
to the appellant-company. The confirmation sought for in the letter (Ex. 1) was not a condition
to the admission as to the existence of a subsisting account and
the liability to pay when accounts were finalised, but to
the
specific amount which, according to the corporation, would
be
the amount payable by it according to
its
calculation.
The
decision in Raja Kavali Arunachella Row Bahadur v. Sri Rajalt
Rang/ah App Row Bahadur(") does not apply· as the condition
subject to which the settlement there was made was not performed, and therefore. the document was held to be one which could
not be spelt out as an acknowledgement. In Ral/apragada Ru11111m11rthy v. ,Thammana Gopay,va(")' also, the letter relied on as
an acknowledgement stated that if certain arbitrators should decide that the defendant should pay
any
amount he
"otild
immediately pay but if the arbitrators failed to decide the plaintiff mipht .su.; and the defendant in that case would not ;ikad
limitation.
The arbitrators failed to decide.
It was held that ·
the letter being conditional and the condition not having been
rl) L. R. J3 IA. 165.
I'.!) [1906] T. L. R. '.!9 Mad. 51'1.
13/ [1917] T. L. R 40 Mad. 701.
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LAKSHMIRATAN COTTON MILLS V. ALUMINIUM CORP.
637
(She/at, J.)
performed did not operate as an acknowledgement.
This decision too has no bearing on the facts of the present case. Unlike
the cases relied on by Mr. Sen, the present case is one of an
admission of a subsisting account and the jural relationship and
the liability to pay whatever amount would be found due on
finalisation of accounts. There is no condition subject to which
the admission was made which remained unperformed.
Ordinarily, the functions of · Subramainym as the secretary
of the corporation would be ministerial and administrative.
As
a secretary only, he would have no authority to bind the corporation by entering into contracts or other commitments on 'its
behalf.