M.S. Daya Chand Uttam Chand ... vs Santosh Devi Sharma
1997 Latest Caselaw 254 Del

JUDGMENT

S.N. Kapoor, J.

(1) In this revision petition the primary question is whether a suit under Order 37 Civil Procedure Code . could be filed on the basis of an "acknowledgment".

(2) The plaintiff respondent filed of suit of recovery for a sum of Rs. 49,956 along with interest on account of loan advanced and written acknowledgment of liability by the defendant.

(3) According to the case of the plaintiff the respondent, gave a statement of account indicating balance amount of Rs. 59.859.50 lor the financial year 1986-87. the respondent acknowledged the same by signing it. Interest of Rs. 7,422.50 was paid in July 1987 and Rs. 8,081 in April 1989 by the petitioner. The defendant made another written acknowledgment of the amount payable by it to the plaintiff showing that Rs. 75,363 was due against the defendant on 31 March, 1989. On demand the defendant paid Rs. 20,500 on 29th July, 1989 leaving a balance of Rs. 42,927.50. The petitioner claimed this amount along with interest at the rate of 18 per cent from 29 July, 1989 till 30th June, 1990 and filed a suit under Order 37 Civil Procedure Code .

(4) The acknowledgment has not been disputed by the petitioner/ defendant except by barely saying that the petitioner has filed the present suit on false documents. The learned counsel for the petitioner Shri G. L. Rawal has challenged the impugned order dismissing application of leave to defend and decreeing the suit on the ground that the suit on the basis of acknowledgment is not maintainable under Order 37 CPC. The learned Additional District Judge did not consider the objections on merits about the payments made by the defendant/petitioner to third party on behalf of the plaintiff/ respondent.

(5) As regards first contention, learned counsel for the petitioner contention, learned counsel for the petitioner contends on the basis of Shri J. S. Sood Vs. Mrs. Premlata Mehta and Am. Ilr 1984 (2) (Delhi) 716(1) that suit under Order 37 Civil Procedure Code . is not maintainable on the basis of an acknowledgment.

(6) Before proceeding further it would be relevant to reproduce Rule I of Order 37 Civil Procedure Code . It reads as under : Subject to the provisions of sub-rule (1), the Order applies to the following classes of suits, namely :- (a) suits upon bills of exchange, bundles and promissory notes; (b) suits in which the plaintiff seeks only to recover a debt or liquidated demand in money payable by the defendant, with or without interest arising,- (i) on a written contract: or (ii) on an enactment, where the sum sought to be recovered is a fixed sum of money or in the nature of a debt other than a penalty; or (iii) on a guarantee, where the claim against the principal is in respect of a debt or liquidated demand only." 3210 HCD/97-8

(7) In this light it is required to be seen whether the present suit relates to recovery of "Debt." arising out of a "written contract or not?"

(8) BLACK'S Law Dictionary (6th Ed.) defines "Debt" as under : "A sum of money due by certain and express agreement. A specified sum of money owing to one person from another, including not only obligations of debtor to pay but right of creditor to receive and enforce payment. State v. Ducey 25 Ohio App. 2d 50, 266 N.E. 2d. 233, 235. Liability on a claim. Bankruptcy Code $ 101.

A fixed and certain obligation to pay money or some other valuable thing or things, either in the present or in the future. In a still more general sense, that which is due from one person to another, whether money, goods or services."

(9) In Food Corporation of India Vs. Bal Kishan Garg. (2) 24 (1982) Delhi Law Times 167 a Division Bench of this Court considered the requisites of debt in connection with the suit for recovery of the price of goods. It was held to be maintainable under Order 37 C.P.C. by treating the unpaid pries as debt In regard to "Debt" following observations of the Division Bench of this Court in para 7 are relevant here: 7. What then, is a debt? Relying in Webb. Vs. Stenton. (1883) 11 Qbd 518 it was held in Commissioner of Wealth Tax v. Pierce Leslie & Co. Ltd., , that the essential requisites of a debt are (1) an ascertained or readily calculable amount; (2) an absolute unqualified and present liability in regard to the amount with the obligation to pay forthwith or in future within a time certain ; (3) the obligation must have accrued and be subsisting and should not be that which is merely accruing. A contingent liability or a contingency debt is, therefore, neither a liability nor a debt. A debt is a 'debitum in praesenti, solvendum in future'. We, therefore, hold that the amount covered by the suit is an ascertained amount payable under an unqualified present liability. The obligation has accrued and subsists. It is a debt accruing under a written contract".

(10) The term "written contract" in the words of Black's Law Dictionary (6th Ed.) (3) means as under : "A" written contract" is one in which all its terms is in writing. Commonly referred to as a formal contract". 11.1. According to Black's Law Dictionary an "acknowledgment"

means as under: "TO" acknowledge" is to admit, affirm, declare, testify, avow, confess, or own as genuine. Favello v. Bank of America Nat. Trust & Savings Ass'n, 24 Cal App. 2d 342, 74 P. 2d 1057, 1058. Admission or affirmation of obligation or responsibility. Weyerhaeuscr Timber Co. v. Marshall, C.C.A. Wash., 102 F. 2d 78, SI. Most states have adopted the Uniform Acknowledgment Act. The debtor's acknowledgment of the creditor's demand or right of action that will revive the enforceability of a debt barred by the statute of limitations. Part payment of obligation which tolls statute of limitations is a form of "acknowledgment of debt".In re Badger's Estate. 156 Kan. 734, 137 P. 2d 198, 205".

11.2. According to Stroud Judicial(4) Dictionary acknowledgement means as under :- (1 ) "an acknowledgment, in writing of a debt. . . . So as to take such debt out of the Limitation Act... . (1) must admit that debt is due, and (2) promise, or justify the inference of promise, of payment unconditionally, or (if conditionally) it must be shown that the condition has been accomplished. . A statement in a balance sheet presented to a creditor-shareholder of a company and signed by the directors or their agents is sufficient acknowledgment (Jones v. Bellgrove Properties (1949) 2 K. B. 700), and an acknowledgment is within the section if it indicates that a debt is due, even if it does not state the amount (Dungate v. Dungate (1965) I W.L.R. 1477). But a signature on a balance sheet, notwithstanding that the debt appeared therein, was held not to be a sufficient acknowledgment (Consolidated Agencies v. Bertram [1965] A.C. 470). An acknowledgment by one of the several executors suffices (Re Macdonald [1897] 2 Ch 181. distinguishing Tullick v. Dunn, Ry. & Moo. 416,and Scholev v. Walton, 13 L.J. Ex. 122; see Astbury V. Astbry infra). "Acknowledges the claim" (s. .23(4) means . "acknowledges the debt or other liquidated pecuniary amounts" (Good v. Parry [1963] 2 W.L.R. 846). "Acknowledgment" (s.24( l )means acknowledgment of liability....". (3) "An acknowledgment of a. Deed, or Speciality, by writing or part. payment in part. satisfaction (Civil Procedure Act 1833(c. 42), s.5) will suffice if it contains a clear admission of the speciality debt (see Moodie v. Bannister, 28 L.J. Ch. 881 ; Howcutt v. Bonser, 3 Ex. 499 ;Forsyth v. Bristowe, 8 Ex. 721, See also Read v. Price [1909] 1 K.B. 77; affirmed [1909] 2 K.B. 724, cited Party Liable, where it was held that parole evidence is admissible to prove the contents of a written acknowledgment which has been lost; see now Limitation Act 1939, 23, 24. As to acknowledgment is writing within Civil Procedure Act, 1933, s.5, see Viscount Burnham v. Atlantic & Pacific Fibre Importing & Manufacturing Co. Ltd., 44 T.L.R. 702. 11.3. In Elvira Rodrigues vs. Godnicalo Hypolito Constancio Air 1934 Privy Council 144(5) it was observed as under : "Their Lordships think that what has been forgotten is that there are two forms of account stated. An account stated may only take the form of a mere acknowledgment of a debt, and in those circumstances, though it is quite true it amounts to a promise and the existence of a debt may be inferred, that can he rebutted, and it may very well turn out that there is no real debt at all, and in those circumstances there would be no consideration and no binding promise. But on the other hand, there is another form of account stated which is a very usual form as between merchants in business in which the account stated is an account which contains entries on both sides, and in which the parties who have stated the account between them have agreed that the items on one side should be set against the items upon the other side and ths balance only should be paid: the items on the smaller side are set off and deemed to be paid by the items on a larger side. and there is a promise for good consideration to pay the balance arising from the fact that the items have been so set off and paid in the way described." Their Lordships were further of the view that : "That was done. The man writes an account which was demanded by the servant for the express purpose of knowing what sum he would be entitled to get and which. it seems to their Lordships, was stated by the managing partner of the business, for the sole purpose of enabling the servant to know what his final remuneration was to be. To make quite clear that it was intended to express something in the nature of an obligation he authenticated the document and that can be the only effect , that particular part of the transaction by writing his signature over two 10 cent stamps. In their Lordships view, that was a plain case of a promise made to pay the balance for a good consideration. One cannot help thinking that if an account stated in those circumstances did not give rise in Kenya to the promise to pay, and for a good consideration, Kenya would be certainly without one of the most ordinary business facilities which has been common to everybody who carries on business under any system which incorporates any of the ordinary principles of English contract law." 11.4. In Gharabharan vs. Sri Radha Kishan & Ors. Air 1958(6) Allahabad 313, a Division Bench of the Allahabad High Court about 'account' stated as under : "(12) .....Where the accounts contain a series of cross-entries, one evidencing payment of loans advanced at various times by the creditor and the other evidencing payment of amounts paid towards the same loans at various times by the debtor, and the parties agree to set one series of entries against the other, & after doing the same, finally arrive at an agreed balance, the final settlement of accounts thus made constitutes an "account stated." That fact that both the entries rotate to the same transaction of loan does not take the transaction out of the category of "account stated", nor does it make the transaction a unilateral one. Such a transaction is really a bilateral one as both the parties have met together and after mutual accounting in respect of the advantages made by the one and payments made by the other have finally agreed by a joint application of their mind? to treat a certain specific figure as the amount, due on that date. Both the parties participating in this transaction have combined in finally adjusting their rights. They have jointly co-operated in winning off then previous or antecedent rights and liabilities and substunting therefor a new or a. fresh right and liability The procedure of surrender and discharge involved in such a transaction for the purpose of arriving nt an agreed settlement truly a bilateral one. The process of "give and lake" which such a transaction demands from either side, itself constitute a sufficient consideration which is enough to sustain the fresh agreement as valid in law. Reference in this connection might be made to the case of Bishnu Chand v. Girdhari Lal , in which their Lordships of the Privy Council have expounded the law in this regard. Then such an "account stated" is signed by the party sought to be made liable or its duly authorised ag,ent, the "account stated" as envisaged in Art. 64 is created. Such an "account stated" gives rise to a new cause of action and a suit brought within three years of the date of such a cause of action is not barred by limitation. Such a suit cannot, be thrown out on the ground that some of the items antecedent to the date of the "account stated" were barred by limitation. Previous rights and liabilities having been swept away by the concerted and agreed will and action of parties themselves, the previous .items which formed the material for arriving at the agreed figure must , the purposes of the suit. be eliminated from consideration, and a fresh cause of action be deemed to be born on the date on which such a transaction is entered into. In such a situation, it is not open to the court to re-open the closed transaction and to scrutinize the antecedent entries for the purpose of applying the bar of limitation. such a procedure would be the very negation of the real purpose of "account stated" and would constitute a violation of fundamental principles underlying the legal decline of "account stated." In the present case, there is also no manner of doubt that this "account stated" was signed by a partner of the firm. Every partner of a firm has in law an inherent right to do it, and must, therefore, be presumed to act as such." 11.5. In Shapoor Fredom Mazda vs. Durga Prasad Chamaria, , it was observed that : 15. In construing this letter it would be necessary to bear in mind the general tenor of the letter considered as a whole. It is obvious that respondent 2 was requesting respondent I to avoid the sale as he did on an earlier 601 occasion in November, 1931. The previous incident. shows that when the property was put to sale by the first mortgagee the mortgagor rushed to the second mortgages to stop the sale, and this obviously was with a view to persuade the second mortgagee to prevent the sale which would otherwise affect his own interest as such mortgagee. The theory that the letter refers to the interest of respondent 1 as an intending lessee or purchaser is far-fetched, if not absolutely fantastic. Negotiations in that behalf had been unsuccessful in 1926 and for nearly five years thereafter nothing was heard about the said proposal. In the context it seems to us impossible to escape the conclusion that the interest mentioned in the letter is the interest of respondent I as a puisne mortgagee and when the said letter appeals to him to take up the whole it can mean nothing other than the whole of the mortgagee's interest including the interest of the prior mortgagee. An appeal to respondent 1 to stop the sale on payment of Rs.10,000 as he in fact had stopped a similar sale in November 1931, is an appeal to ensure his own interest in the security which should be kept intact and that can be achieved only if the threatened sale is averted. We. have carefully considered the arguments urged before us by the learned Attorney-General but we see no reason to differ from the conclusion reached by the Court of Appeal below that til is letter amounts to an acknowledgment. The tenor of the letter shows that it is addressed by respondent 2 as mortgagor to respondent. 1 as puisne mortgagee, it reminds him of his interest as such mortgagee in the property which would be put up for sale by Ihe first mortagee, and appeals to him to assist the avoidance of sale, and thus acquire the whole of the mortgagee's interest. It is common ground that no other relationship existed between the parties at the date of this letter, and the only subsisting relationship was that of mortgagee and mortgagor. This letter acknowledges the existence of the said jural relationship and amounts to a clear acknowledgment under S.19 of the Limitation Act. It is conceded that if this letter is held to be an acknowledgment there can be no other challenge against the decree under appeal." (Emphasis supplied) 11,6. In Hiralal & Ors. vs. P.BadKulal & Ors., it is true to find that Defendent H who was n mutual undertand. With the plaintiff signed an entry in the plaintiff's khata on which earlier mutual account had been entered to the following effect 602 Rs.34,000 balance due to be received up to Bhadon sudi 11 Sam. 2006 made by check and understanding to accounts with H's books' The acknowledgment was signed by H with the following endorsement. After adjusting the accounts Rs. 34;000 found, correct and payable'. The plaintiff brought a suit on the basis of the entry for recovery of the amount. The Supreme Court observed in para-11as under:

(11) Mr. Bindra next urged that the plaintiffs suit should have been dismissed because it could not be maintained merely on the basis of an acknowledgment of liability, that such an acknowledgment could only save limitation but could not furnish a cause of action on which a suit could be maintained. The Judicial Commissioner took the view that an unqualified acknowledgment like the one in the suit, and the statement of the account under which the entry had been made, were sufficient to furnish a cause of action to the planiff's for maintaining the present suit. We are satisfied that no exception can be taken to this conclusion. It was held by the Privy Council in Maniram v. Seth Rupchand, 33 ind. app. 165 (F.C.) (C) that an unconditional acknowledgment implies a promise to pay because that is the natural inference if nothing is said to the contrary. It is what every honest man would mean to do. In Fateh Mahomed v. Ganga Singh, Air 1920 Lah. 264 CD), the same view was taken, ft was held that a suit on the basis of a balance was competent. In Kahanchand Dularam Vs. Dayaram, Amritlal, Air 1929 Lah. 263 (E), the same view was expressed and it was observed that the three expressions "balance dual", "account, adjusted" and "balance struck" must mean that the parties had been through the account. The deft, there accepted the statement of account contained in the plaintiff's account book, and made it his own by signing it and it thus amounted to an "accounts stated between them" in the language of Art. 64, Limitation Act. The same happened in the present case. The acknowledgment which forms the basis of the suit was made in the ledger of the plaintiffs hi winch earlier mutual accounts had been entered and truly speaking, the suit v.as not based merely on this acknowledgment but was based on the mutual dealings and the accounts stated between them and was thus clearly maintainable." U.I. In Mrs. Sushila Mehta Vs. Shri Bansi Lal Arora & Am.. Ilr (1982) (9) I Delhi 320 the plaintiff paid the allocation money of Rs. 1,00,000 for allotment of shares. The defendants accepted the payment as allocation money. The payment, its acceptance and the receipt thereof issued by the defendants held to constitute a written contractor the purposes of Order 37 Rule 1. It was observed that though it may be labelled as receipt but that does not meant that it is no! a contract. In paras 10 & Ii it was further observed as under : "10. The question is whether the receipt doted 26th August, 1978 is a "written contract" or not. In my opinion it clearly is. The plaintiff paid the application money for allotment of shares. The defendants accepted it, though it is true that defendant No. 2 came into existence a few months later. The payment of Rs. 1,00,000 by the plaintiff as application money and its acceptance by the defendants constitutes a contact. It may be labelled ;as a receipt but that does not mean that it is not a contract. 11. It was said that it has not been pleaded that the suit is based on a written contract. This is not required by any provision of law. The Court has to find out whether the suit has been brought upon a negotiable instrument or a written contrast or an enactment or a guarantee to which Order 37 Civil Procedure Code . applies. The acknowledgment of Rs. 1,00,000 by the defendants for the purpose of allotment of shares as application money therefor clearly amounts to a contract. Because it is their own case that the plaintiff paid allotment of shares and they accepted it. There was "consensus of mind". And "consensus of mind" leads to a contract, as Lord Caizns said. (Cundy v. Lindsay (1978) 3 App Cas 459(2) at p. 465). There was promise. There was consideration. There was acceptance. All the elements essential for the formation of the contract are present. What more is needed to make a contact. It was not a nudum pactum." A suit under Order 37 Rule I Civil Procedure Code .was filed by the plaintiff alleging that the plaintiff paid 1,00,00(. to defendant No. 1 as applicat. on money for shares in a proposed private limited company. Receipt of the amount was not disputed by the defendants but Rs. 20,500 was stated to have been transferred to some other account on instructions of the plaintiff. The defendant applied for leave to defendant under Order 37 Rules 3 & 5 Civil Procedure Code . alleging that the suit was not maintainable under Order 37 as the same has not been instituted on the basis of Negotiable Instrument Act or a written contract. In this regard the above paras 10& Ii of the judgment are worth reading.

(12) An incidental question is "Whether such an agreement should be signed by both the parties It is not necessary that HCD/97-9 604 written agreement should be signed by both the parties. If any authority is needed one may refer to jugal Kishore v. Goolbai Hormusji. . In this case Venkatrama Ayyar, J. observed as under : 7. But it is settled law that to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties, and it is sufficient if the terms are reduced to writing and the agreement of the parties thereto is established". In Subhila Mehta (supra) receipt which was taken to be written contact was not signed by both the parties. It was signed by Defendant No.1 Bansi Lal Arora only. 12.3. In this regard one may also refer to Seth Banarsi Das v. Cane Commissioner, . In the construction of a written document, it is legitimate in order to ascertain their true meaning if that be doubtful. In nave regard to the circumstances surrounding the creation of the subject matter to which it was designed and intended that it should apply. It must be seen what is the intention expressed by the words used; hit whether the language is imperfect, and it is impossible to know what the intention is without enquiring further, the circumstances with reference to which the words were used should be looked. The contract must be construed as a whole and the intent of the parties must be ascertained from the documents as a whole. 12.4. In Jiwibai v. Ramkunwar Shriniwas Murarika Agarwala Air (34,) 1947 Nagpur 17(12), a full Bench of the Nagpur High Court took the view that the express authority given to the agent to compromise' under Mukhtarnama included the power to refer the suit to arbitration because the deed set out in separate phrases the two aspects of 'compromise' which the single English word normally connoted. It may further be added that document embodying a business agreement should bs construed formally and broadly and there must in such documents imply a term which Will give such business efficacy to the transaction as must have been intended by the parties. One cannot add to a contract an implied term inconsistent with or which contradicts express terms of the contrract. But in a suitable, case one may imply a term if it is necessary to give it. a business efficacy (sec Gulab Chand Gambhir Mal V. Kudi Lal Govind Ram & Anr. , Choudhri Gulab Chand Jain v. Bhama, ).

(13) A Single Bench of his court in J. S. Sood (supra) took the following view in para 12 p. 724 : 12. As to whether the written contract may be signed by both the parties does not call for decision in the present M's. D":}'. (SIC) V. case though it appellant's that the (sic) envisage some sort of a formal doci.iii]Ciit hetwei..n tlie contracting parties. I would rather think that it would be a condition precedent that there should be a formal agree- ment executed by lhe parties and signed by tlii-m. Plain- t, tiff's own version is that it wa? a verbal contract and the document on the basis of which the suit has been filed merely acknowledge the money due under the aforesaid verbal contilact. Such a writing may at best be a written acknowledgement wh'ch extends the period of limitation under Section 18 of tlie Limitation Act, 1963, but no more. Thus, I do not think that such a document would fall within the decision of written contract and the provision of Order xxxvii would not apply. It must, therefore, be held that the present suit is not maintainable under the summary procedure prescribed under Order xxxvII."

(14) If the judgment of the single Judge is seen in the light of what has been said above it may appear that the aforesaid case was decoded on the basis of the pleadings in that case to the effect that it E was verbal contract and the case law referred to above was not through to the notice of the learned single Judge. 4. In the instant case 'stalemen'; of account', for the assessment (sic) dated 21st October, 1087 indicated that on 1st Novermber (sic) there was an outstanding balance of Rs. 50,422 payable to Smt. Santosh Sharma, Rs. 8,437 had accrued as interest up to 21st October. 1987. Thus, a balai-.K; of Rs. 59,856.40 was mentioned as 'baki jama raha'. It is signed by Naveen Kumar. one of the partners of Dayachand Uttam Prakash. Similary, for tlie assessment year 1989-90 'statement of account' pf Smt. Santosh Sharma from 22nd October, 1987 to 31st March, 1989 was given and it indicated a balance of Rs. 59,854,50p, interest ip to 6th June, 198S amounting to Rs. 7,422 and Rs. 8,081 up to 31st March, 1989 had also been shown to be payable in the 'statement of account'. On 6th July. 1988 Rs. 7,422.50 P. were given and Rs. 67,940.50 p. was shown as 'baki " jama rha' on 31st March, 1989. This account was signed by Shri. Naveen Kumar, partner, if one goes by the judgment 'of the Privy Council in Elvira Rodrigues (supra) this is second kind of account stated as it is very usual form between merchants in business in which the account stated is a kind which contains entries on both sides and in which the parties, who have stated the account between them have agreed that the items on one side should be set aside against the items upon the other side and the balance only should be paid and there is a promises for good consideration to pay the balance arising; from the fact that items have been so said and paid in the way described. It was intended to express the same in the nature of obligation. The partner of the firm authenticated the document. It may further be noted that the interest was also paid in the light of acknowledgment and the promise to pay. It should amount to novation of the earlier contract and the acknowledgment being in writing, and signed by the partner of the firm, it has to be treated as written contract. It appears to me that suit on the basis of written acknowledgment of a pre-existing debt being a written contract could form a basis for recovery of an existing debt based on the said written contract in the shape of written acknowledgment. In view of the observations in Food Corporation of India v.Bal Kishan Garg (supra) the amount of the debt had been ascertained between the parties and the interest is also readily calculable amount in view cf the past conduct of the parties. The acknowledgment was of a pre-existing debt. The purpose of giving this written acknowledgment implies in it an absolute unqualified present liability with an obligation to repay it in future on the understanding that the creditor need not file a suit immediately. Consequently, the written acknowledgment surely falls under the term "written contract" and the parties had consensus of mind when this written acknowledgment was signed by one of the partners of the petitioner firm. There was a promise. There was consideration. There was acceptance. All the elements essential for the formation of a written contract were present. Nothing more R is required in this acknowledgment to make it a written contract. Accordingly, I am of the definite opinion that the present suit has been filed on the basis of a "written contract" for the recovery of the existing debt on the basis of this "account stated" and case on the basis of said written contract in the shape of written acknowledgment is certainly maintainable under Order 37 CPC.

(15) As regards the granting of leave to defend, the defendant though specifically not denied the written acknowledgment but alleged that the case of the plaintiff was based on false document and the claim Was barred by time. There is yet another plea takes by the defendant relating to the claim of adjustment ofRs.,35,000. According to the defendants, on July 1989, the husband of the plaintiff who was employed with the defendant, resigned from the service of the defendants petitioners in November 1989. The husband of the plaintiff wanted to start cloth shop at Jaipur and on his request petitioner respondents sold goods worth Rs. 40.000-to the husband of the plaintiff and allowed the plaintiff to purchase further goods worth Rs. 41,341 from M/s. Paras Nath Textiles on 1st December, 1989 on their guarantee. The plaintiff issued a cheque of Rs. 6,341 as for payment to M/s. Paras Nath Textiles and allowed the applicants to adjust the outstanding amount against credit of Rs. 35.000. The plaintiff gave an undertaking to the applicant that the plaintiff would pay the balance amount of Rs.35,000 to M/s. Paras Nath Textiles herself and in case of any failure on her part, the applicant/defendants would pay the said amount of Rs. 35,000 to M/s. paras Nath Textiles on behalf of the plaintiff Thus, the outstanding amount stand exhausted on failure of the plaintiff to pay the said amount of Rs. 35,000 since the said cheque no. 1963(11) could not be encashed by M/s. Paras Nath Textiles. They also raised the demand of Rs. 35,000 and the petitioner/ defendant had paid the amount of Rs. 35,000 to M/s. Paras Nath Textiles as per undertaking. The application is supported by affidavit of Shri Naveen Kumar, partner of the defendant firm.

(16) It is further notable that before filing this suit a legal notice was given. The payments up to 29th July. 1989 have not been disputed. Simply it has been stated that they are matters of record. Moreover, there i.s virtual admission of the liability, it is sought to be adjusted by alleging an oral agreement of standing surety for cloth sold to the husband of the plantiff and payment of Rs. 35.000 to M/s. Paras Nath Textiles without alleging date and mode of payment either in para 5(e) in which payment is alleged or in any other paras of ew application for leave to defend. It is disputed by the other side on affidavit and certain contradictions have also been pointed out in the stand in this case and the plea in suit filed subsequently and numbered as 169/90. Besides, the affidavit filed in support of the application has been verified by maintaining that "the contents of the above affidavit are true and correct to my knowledge. This kind of omnibus statement of verification appeared to be palpably wrong for apart from legal plea, there is information relating to other firm, which cannot be passed on personal knowledge, sources of information about encashment or non-encashment cheque No. 196311 drawn on Karnataka Bank, Chandni Chowk. In ordinary course such type of affidavit should not be relied upon under Order 19, Rule 3 Civil Procedure Code . unless it is stated that such cheque was received by the other firm in the presence of the deponent and it was presented to the bank in his presence and was subsequently dishonoured and he had seen the letter of the bank conveying the information about the cheque having been dishonoured. Even where allegations in an affidavit are stated to be correct to the best of the knowledge, the nature and source of knowledge must be disclosed. If the nature and source of the knowledge is not disclosed the affidavit would not be as per law (see m/s. Sukhwinder Pal Bipan Kumar & Ors. v. State of Punjab & Ors., . In such circumstances it appears that the defense taken by the petitioner is as good as illusory a sham and practically a moon-shine and therefore, unconditional leave could not be granted. This case is covered by the principles laid down for 5th category of cases in M/s. Mechalec Engineer and Manufacturers v. Basic Equipment Corporation .

(17) It may be mentioned that the revision petition would be maintainable though decree has also been passed in this case in terms of decision of this court in M/s. Skylark Motors India and Others Vs. Lakshmi Commercial. Bank Limited Civil Revision No. 65/85 (17) Decided on 3rd July. 1996 and Shri Krishan Bharadwaj Vs. Manohar Lal Gupta .

(18) For the foregoing reasons the impugned order dated 22nd April 1991 rejecting the application of the petitioner for leave to defend and decreeing the suit is hereby set aside subject to the condition that the petitioner furnishes bank guarantee for the decretal amount calculated till today within a period of four weeks from the date of this order. In case of failure to do so, the revision petition shall stand dismissed.

(19) A copy of this order he sent to the concerned Additional District . Judge through learned District Judge for information and for proceeding further in accordance with law in case the petitioner furnishes the bank guarantee as mentioned above.

(20) In case the bank guarantee is not furnished, within four weeks from the date of this order the plaintiff would be entitled to pursue her execution application.