The main legal point established in the judgment is that a conditional promise to pay on arbitration does not amount to an acknowledgment of liability, and an agreement not to raise the plea of limitation may fall under Section 23 of the Contract Act as defeating the provisions of the Limitation Act.

1. Plaintiff is the appellant. He sued in 1912 to recover damages for breach of a contract of which performance was due before 20th September 1906 and relied upon a letter dated 20th September 1909 to save a bar of limitation. Both the lower Courts dismissed the. plaintiffs suit on the ground that the letter does not contain an acknowledgment of liability sufficient to bring the case within Section 19 of the Limitation Act.

2. The letter Exhibit B signed by the defendants states that, as disputes about the contract were not settled and a suit was threatened, both parties agreed to refer matters to the arbitration of the persons mentioned therein. The material part of the document runs as follows:--" I shall agree to the decision made by them (arbitrators). Without having to do anything with the limitation of time, if they decide that I should pay any amount to you, I shall pay it immediately to you. If, perhaps, for any reason the said three mediators do not give their decision, it is settled that, on this letter, suit etc., proper steps may be taken and conducted in the court without having anything to do with the time-bar."

3. It is argued for the appellant that the letter contains a promise to pay whatever may be found due on arbitration and that there is an acknowledgment of liability. It is also argued that the agreement to refer to arbitration and not to plead limitation as a bar if the arbitration fell through is valid and binding on the parties amounting as it does to a covenant by one party not to sue till the arbitration was over and by the other not to plead limitation should it be necessary to file a suit.

4. We do not think that the terms of Exhibit B amount to an unconditional undertaking by the defendants to pay the debt. The plaintiff was setting up a claim for damages and the defendants were denying that they were liable to the plaintiff. When a suit was threatened, the parties agreed to refer the dispute to arbitration. Exhibit B is a conditional promise to pay whatever the arbitrators may find to be due. What the defendants in effect state is " we deny that anything is due to you but as you threaten a suit we shall agree to refer matters to arbitration and if the arbitrators give an award holding us liable to pay any sum, we shall pay it to you."

5. In cases of conditional acknowledgments of liability the law is clear that where there is a promise to pay on a condition, that condition, in order that the promise may operate as an acknowledgment, must be fulfilled. In In re River Steamer Co (1871) L.R. 6 Ch. App. 822 which has been approved of by their Lordships of the Privy Council in Maniram Seth v. Seth Rupchand (1906) I.L.R. 33 C. 1017 Lord Justice Mellish observed that in order to take the case out of the statute of limitation there must either be an acknowledgment of the debt from which a promise to pay may be implied, or an unconditional promise to pay the debt and evidence that the condition has been performed. This case was referred to and followed in Arunachella Rao v. Rangiah Appa Rao (1906) I.L.R. 29 M. 519 where Justices Subramania Ayyar and Benson were of opinion that the English and Indian Law are the same as regards conditional promises and that an acknowledgment of a conditional liability would not give a fresh start so long as the condition remained unfulfilled.

6. It is well settled law that to operate as an acknowledgment, a subsisting jural relationship of debtor and creditor must be admitted. A mere reference to arbitration which prima facie is only a mode of settling disputes and not an admission of any liability by the parties does not import any such relationship. No authority has been cited for the proposition that the mere fact that parties agree in writing to refer matters to arbitration amounts to an acknowledgment. The result of the English authorities seems to be that a mere submission to arbitration containing a promise to pay whatever the arbitrators decide is not available