2004 Supreme(SC) 1354

2004(8) Supreme 9
SUPREME COURT OF INDIA
(From Gauhati High Court)
R.C. Lahoti, CJI., Ashok Bhan, J.
Food Corporation of India -Appellant
versus
Assam State Co-operative Marketing & Consumers Federation Ltd. and Ors. -Respondents
Civil Appeal No. 2259 of 1999
Decided on 26-10-2004
Counsel for the Parties :
For the Appellant : Y. Prabhakar Rao and J.P. Mishra, Advocates.
For the Respondents : P.K. Goswami, Sr. Advocate, Rajiv Mehta, B. Aggarwala, Sanjay V.S. Choudhury, V.K. Siddharthan, Niraj Kumar, Advocates for M/s. Corporate Law Group, Advocates.

IMPORTANT POINT
To amount to an acknowledgement of liability within the meaning of Section 18 of the Limitation Act, it need not be accompanied by a promise to pay either expressly or even by implication. The words used in the acknowledgement must indicate existence of jural relationship between the parties such as that of debtor and creditor.

Headnote:Limitation Act, 1963-Section 18 -Acknowledgement of liability-Suit for recovery-Extension of period of limitation-Effect of commencing a fresh period of limitation from the date on which acknowledgement was signed by the party against whom such right is claimed-Statement providing foundation for a plea of acknowledgement must relate to a present subsisting liability-Agreement to take over procured paddy of kharif season-Plaintiff was to pay 90 percent of the amount as advance-Balance 10 percent will be paid after fixation of price by the Government of India-Value of paddy supplied by Federation, procuring agent of State was Rs. 1,60,63,190 as against an advance of Rs. 2 crores by the plaintiff to the Federation-There was an amount of Rs. 39,36,810/- paid by plaintiff to the Federation in excess-Plaintiff also claimed an amount of Rs. 7,03,541/- from the Federation on account of quality cut-Plaintiff filed a suit for recovery of Rs. 79,82,105/- on 13-5-1980-Defendants pleading bar of limitation as cause of action had arisen to plaintiff on 20-9-1976-Two letters written by Federation admitting its liability-Federation disputed its liability to pay the amount in view of certain disputes relating to settlement of accounts-Whether these two letters have the effect of extending the period of limitation-(Yes).

       Held : According to Section 18 of the Limitation Act, an acknowledgement of liability made in writing in respect of any right claimed by the opposite party and signed by the party against whom such right is claimed made before the expiration of the prescribed period for a suit in respect of such right has the effect of commencing a fresh period of limitation from the date on which the acknowledgement was so signed. It is well-settled that to amount to an acknowledgement of liability within the meaning of Section 18 of the Limitation Act, it need not be accompanied by a promise to pay either expressly or even by implication. The statement providing foundation for a plea of acknowledgement must relate to a present subsisting liability, though the exact nature or the specific character of the said liability may not be indicated in words. The words used in the acknowledgement must indicate the existence of jural relationship between the parties such as that of debtor and creditor. The intention to attempt such jural relationship must be apparent. However, such intention can be inferred by implication from the nature of the admission and need not be expressed in words. A clear statement containing acknowledgement of liability can imply the intention to admit jural relationship of debtor and creditor. Though oral evidence in lieu of or making a departure from the statement sought to be relied on as acknowledgement is excluded but surrounding circumstances can always be considered. Courts generally lean in favour of a liberal construction of such statements though an acknowledgement shall not be inferred where there is no admission so as to fasten liability on the maker of the statement by an involved or far-fetched process of reasoning. (Paras 14 and 15)

       So long as the statement amounts to an admission, acknowledging the jural relationship and existence of liability, it is immaterial that the admission is accompanied by an assertion that nothing would be found due from the person making the admission or that on an account being taken something may be found due and payable to the person making the acknowledgement by the person to whom the statement is made. (Para 15)

       The two letters dated 29/03/1977 and 30/07/1977 (Exhibits 8 and 9) clearly acknowledge the amount of Rs. 2 crores having been received by the Federation from the Food Corporation of India whether by way of advance or by way of deposit. The letters also indicate that the amount of two crores was by way of advance or deposit against paddy procurement. This is admission of jural relationship of buyer and seller which stood converted into relationship of creditor and debtor on the failure of the principal transaction. However, the acknowledged liability is sought to be disowned by submitting that on an account being taken nothing would be found due and payable by the plaintiff to the Federation. Disputing the liability to repay the amount acknowledged to have been received does not dilute the fact of acknowledgement in so far as Section 18 of the Limitation Act is concerned. The two letters have the effect of extending the period of limitation prescribed for filing the suit and calculated from the date of the latter of the two letters i.e. 30/07/1977, the suit filed on 30/05/1980 was well within the period of limitation. (Para 16)