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HIGH COURT OF CALCUTTA
S. C. LAHIRI, C. J. , R. S. BACHAWAT
BENGAL SILK MILLS CO. - Appellant
Versus
ISMAIL GOLAM HOSSAIN ARIFF - Respondent
Appeal 120 Of 1958
Decided On : APRIL 17, 1961
LIMITATION ACT - ACKNOWLEDGMENT OF DEBT - BALANCE-SHEET - SUFFICIENCY - INDIAN LIMITATION ACT, 1908, SECTION 19 - INDIAN COMPANIES ACT, 1913, SECTIONS 131, 132.
Fact of the Case:
The plaintiff, the sole surviving executor of Golam Hossain Cassim Ariff, sued the defendant company to recover a balance of Rs. 2,77,010/10/7 pies due on November 30, 1936, for moneys lent to the company between 1928 and 1936. The defendant company raised the defense of limitation, arguing that the suit was barred by the three-year limitation period under Article 57 of the Indian Limitation Act. The plaintiff relied on acknowledgments of liability contained in the balance-sheets of the defendant company for the years ended 30-11-1930 to 30-11-1936 as saving the suit from limitation.
Finding of the Court:
The court held that the balance-sheets contained sufficient acknowledgments of liability signed by the agents of the company duly authorized in this behalf. The court rejected the defendant's contention that the balance-sheets were not sufficient acknowledgments because they were prepared under compulsion of law, did not contain admissions of liability existing on the dates on which the admissions were made, and were not signed by any person duly authorized on behalf of the company to make acknowledgments of liability to the plaintiff.
Issues: 1. Whether the balance-sheets contained sufficient acknowledgments of liability to save the suit from limitation under Section 19 of the Indian Limitation Act? 2. Whether the balance-sheets were prepared under compulsion of law and therefore did not constitute valid acknowledgments? 3. Whether the balance-sheets contained admissions of liability existing on the dates on which the admissions were made? 4. Whether the balance-sheets were signed by any person duly authorized on behalf of the company to make acknowledgments of liability to the plaintiff?
Ratio Decidendi: 1. The court held that the balance-sheets contained sufficient acknowledgments of liability because: - They were made by the managing agents of the company, who had authority to borrow moneys from and repay debts to the plaintiff. - The balance-sheets were passed by the company at its annual general meetings, which ratified the acts of the managing agents. - The balance-sheets contained admissions of subsisting liability, as they showed the balances due to the plaintiff at the end of each previous year, which were carried forward as the opening balances for the next year. 2. The court rejected the defendant's contention that the balance-sheets were prepared under compulsion of law, holding that the compulsion to prepare the balance-sheets did not negate the intention of the managing agents to make admissions of liability. 3. The court held that the balance-sheets contained admissions of liability existing on the dates on which the admissions were made, as they showed the balances due to the plaintiff at the end of each previous year, which were carried forward as the opening balances for the next year. 4. The court held that the balance-sheets were signed by persons duly authorized on behalf of the company to make acknowledgments of liability to the plaintiff, as the managing agents had authority to borrow moneys from and repay debts to the plaintiff, and the company ratified the acts of the managing agents by passing the balance-sheets at its annual general meetings.
Final Decision: The court dismissed the appeal and held that the plaintiff's claim was not barred by the law of limitation.
( 1 ) THIS is an appeal by the defendant from a decree passed by his Lordship Mr. Justice H. K. Bose in a Money Suit. The defendant is a limited company. During the years 1928 to 1036 one 'golam Hossain Cassim Ariff lent and advanced various sums of moneys to the defendant company. The loans carried interest at the rate of 7 1/2 per cent per annum. The defendant company made various part payments. The balance due to Golam Hessain Cassim Ariff on November 30, 1936 was Rs. 2,77,010/10/7 pies. He died testate on January 1, 1937. The present plaintiff is the sole surviving executor to his will. Pending the suit the defendant company has gone in liquidation. Various defences were raised but the only outstanding defence is that of limitation. Apart from limitation it is not now disputed that the moneys claimed in the suit are justly due to the plaintiff.
( 2 ) THE suit is for recovery of Rs. 2,77,010/10/7 pies being the balance due on November 30, 1936 for moneys lent up to that date. By Article 57 of the Indian Limitation Act the period of limitation is three years from the date when the loan was made. The suit was instituted on December 19, 1939. To save the suit from the bar of limitation the plaintiff relies upon the acknowledgments of liability 'contained in the balance-sheets of the defendant company for the years ended 30-11-1930, 30-11-1931, 30-11-1932, 30-11-1933, 30-11-1934, 30-14-1935 and 30-11-1936. Copies of these balance-sheets were tendered at the trial and were marked exhibits by consent of the parties.
( 3 ) DURING the relevant years a continuous and current account of the loans and part payments Was kept an the books of both Golam Hossain Cassim Ariff and tile defendant company. The books of account of the defendant are not available. The relevant books of G. H. C. Ariff have been made exhibits in the suit. If necessary adjustments are made and the balances are struck on November 30 of every year, the balances found to be due to G. H. C. Ariff from these books will tally with the balances shown as due to him in the balance sheets of the defendant company. Each of the balance-sheets is signed by the auditors as also by Messrs. Hashim Ariff Brothers and Co. , the managing agents of the defendant company. Each of them shows the amount owed by the defendant company to G. H. C. Ariff as at the end of the previous year. The dates on which the balance-sheets were signed, the ends of
their respective previous years and; the balance shown to be then due to G. H. C. Ariff are as follows :
Signature due
.
16-3-1931 30-11-1930 12,585-- 9-- 3 . 20-2-1932 30-11-1931 1,06,504--14--10 . 20-2-1933 30-11-1932 1,49,119-- 3-- 8 . 27-2-1934 30-11-1933 1,54,003--10--11 . 17-3-1935 30-11-1934 2,07,306-- 6-- 4 . 01-4-1936 30-11-1935 3,01,792--10-- 1 . 01-6-1937 30-11-1936 2,77,010--10-- 7 .
Date of End of the Balance previous year
Rs . As. P.
( 4 ) THE exact admission made in the balance-sheet for the year ended 30-11-1938 is as follows : the balance-sheet is headed "statement of accounts - The Bengal Silk Mills Co. Ltd.-Balance-sheet as at 30th November, 1936". Under the heading "liabilities" it is stated "debts owing by the company - to Mr. Golam Hossain Kassim Ariff - Rs. 2,77,010-10-7 pies". Similar admissions are made in the other balance-sheets. Each contains the admission that a certain sum was a debt owing by the company as on November 30 of the preceding year.
( 5 ) DURING the relevant period the managing. agents, Hashim Ariff Brothers and Co. Ltd. were a firm consisting of the creditor G. H. C. Ariff and his eldest son. One of the points in issue is who their the managing agents could acknowledge a debt in favour of one of their partners. Prior to 1938 the defendant company had no directors. The entire management of its affairs was vested in the managing agents. It is not disputed that the manag ing agents had authority to borrow moneys from G. H. C. Ariff for and on behalf o
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