Suresh Kumar Joon vs Mool Chand Motors & Ors.
2012 Latest Caselaw 4879 Del

       *          IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                     Judgment reserved on : 14.08.2012
                                      Judgment pronounced on: 22.08.2012

+      IAs No. 8561/2011 and 8562/2011 in CS(OS) 389/2009

       SURESH KUMAR JOON                                                ..... Plaintiff

                          Versus

       MOOL CHAND MOTORS & ORS.                                    ..... Defendants

Advocates who appeared in this case:
For the Plaintiff    :      Mr. Dattatray Vyas
For the Defendants   :      Mr. Sajan Kumar Singh

CORAM:
HON'BLE MR. JUSTICE V.K.JAIN

V.K. JAIN, J.

1. This is a suit for recovery of Rs.74,88,340/-. The suit was filed under Order

37 of the Code of Civil Procedure and unconditional leave to defendants No. 1 and

3 was granted on 09.02.2011 whereas defendant No.2 who had admitted having

received Rs.12 lakhs from the plaintiff was granted leave to defend subject to

deposit of the aforesaid amount with Registrar General of this Court.

2. Defendant No.1 is a partnership firm of defendants 2 & 3. It is alleged that

the plaintiff advanced a loan of Rs.35 lakhs to defendants and an agreement dated

08.05.1999 was executed by them with the plaintiff. It is alleged that defendants

had agreed to pay 50% of the gross profits of defendant No.1 firm to the plaintiff.

The defendants are also alleged to have agreed to pay interest at the rate of 24% per

annum on the principal amount borrowed from the plaintiff. The monthly

instalment of gross profit according to the plaintiff was agreed to be deducted from

the principal amount of Rs.35 lakhs. It is further alleged that defendants neither

shared the gross profits nor returned the amount taken by them from the plaintiff.

They rather offered the plaintiff to operate the petrol pump of defendant No.1 firm.

The plaintiff accepted the offer and also agreed to extend, a further loan of Rs.12

lakhs to defendants. A fresh loan agreement was then executed between the

plaintiff and defendants on 13.07.2000. It is also the case of the plaintiff that

despite the agreement, he was not allowed to take charge of the petrol pump on one

pretext or the other.

It is alleged in the plaint that on re-consideration of the accounts, defendant

No.2 issued a cheque dated 13.03.2007 for Rs.51,29,000/- to the plaintiff towards

re-payment of the debt and requested him to present the same after two weeks so

that they could arrange necessary funds in the meanwhile. However, on verification

from the bank, the plaintiff came to know that the funds in the account of the

defendants were not sufficient to honour the said cheque. The plaintiff has now

claimed the aforesaid principal sum of Rs.51,29,000/- along with the interest

amounting to Rs. 23,59,340/-.

3. IA 8561/2011 has been filed by defendants 1 & 3 and IA 8562/2011 has been

filed by defendant No.2 for rejection of the plaint. Rejection of the plaint has been

sought primarily on the ground that the suit is barred by limitation. Defendant No.2

has also taken an additional plea that the purported acknowledgment dated

13.03.2007 has not been executed by him for on behalf of defendant No.1 firm.

The first loan agreement between the parties was executed on 08.05.1999 whereas

the second agreement was executed on 13.07.2000.

4. The defendants 2 & 3 who are the partners of defendant No.1 are party to the

first agreement whereas only defendant No.2 Shri Rajender Kumar Sharma has

executed the second loan agreement. The plaintiff has also relied upon an

acknowledgment dated 13.07.2007, which reads as under:-

"This amount up to 13/03/2007                         47,00,000/-

       2.91 Interest
       76   Balance
       62   Cash
       _____________
       4.29 lakh

+      Tanker              S/d                           S/d
                                                      13/3/2007"

5. The contention of the learned counsel for the plaintiff is that the loan was

acknowledged in writing by the defendant no.2 on 13.3.2007 and computed from

that date, the suit is within the limitation. This contention, however, is not tenable in

law. Section 18 of Limitation Act, to the extent it is relevant, provides that where,

before the expiration of the prescribed period for a suit or application in respect of

any property or right, an acknowledgment 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, or by any person through whom he derives his title or liability, a

fresh period of limitation shall be computed from the time when the

acknowledgment was so signed. It would be seen that in order to extend limitation,

the acknowledgment needs to be before the period prescribed for filing the suit has

expired. In case the limitation has already expired before the acknowledgement is

made, it would not save limitation. In the case before this Court, the first loan

agreement between the parties was executed on 8.5.1999, whereas the second loan

agreement was executed on 13.7.2000. Article 19 of the Limitation Act prescribes a

limitation of three years from the date of loan, for the suit for recovery of the money

payable or money lent. Computed from 13.7.2000, the period of limitation expired

on 13.7.2003. The acknowledgment made on 13.3.2007, therefore, does not save

the limitation.

6. The next contention of learned counsel for the plaintiff was that Section 25(3)

of The Indian Contract Act expressly saves the agreement which is a promise, made

in writing and signed by the person to be charged therewith, or by his agent

generally or specially authorized in that behalf, to pay wholly or in part a debt of

which the creditor might have enforced payment but for the law for the limitation of

suits. Illustration (e) states that if A owes B Rs. 1, 000, but the debt is barred by the

Limitation Act and A signs a written promise to pay B Rs. 500 on account of the

debt, this is a contract. Therefore, if defendants have made an agreement in writing,

promising to pay either whole or part of the amount which the plaintiff claims to

have lent to them, such an agreement would be perfectly legal and enforceable in

law.

7. The next question which comes up for consideration is as to whether a

dishonoured cheque, which defendant no.2 issued to the plaintiff can be said to be a

promise made to pay the amount of the cheque to the plaintiff. The contention of

learned counsel for the defendants was that Section 25(3) envisages a contract

whereby the debtor expressly promises to pay the whole or part of the debt and a

cheque which is only a bill of exchange and does not contain any such promise, it is

not a contract saved by the said provision.

8. It is true that the cheque does not contain an express promise in writing, to

pay the amount of the cheque to the payee or the cheque. However, Section 9 of the

Indian Contract Act makes it very clear that the promise can be express as well as

implied. In my view, when a debtor issues a cheque to his creditor, he makes an

implied promise to him to pay the amount of the cheque being issued by him. It is

only towards fulfillment of that such promise that a cheque is issued by the debtor

to the creditor. Once it is alleged that the relationship between the parties was that

of debtor and a creditor and it is further alleged that the cheque was issued by the

debtor to the creditor, it would be difficult to dispute that a cheque contains an

implied promise, in writing, to pay the amount of the cheque. Since, even a time-

barred debt is saved by Section 25(3) of the Indian Contract Act, 1872, the issuance

of a cheque towards repayment of a time-barred debt constitutes a contract within

the meaning of Section 25(3) of the Indian Contract Act, 1872.

9. In taking this view, I find support from the decision of the Kerala High Court

in Ramakrishnan v. Parthasaradhy [2003 (2) KLT 613] and the decision of

Karnataka High Court in Adivelu (dead by L.Rs) vs. Narayanchari [2005(2) CLT

17(kar]. In the case before the Kerala High Court, the Division Bench of the High

Court, inter alia, observed and held as under:

"13......It is, undoubtedly, true that „to draw‟ means to write and sign. However, even if the claim is barred by limitation on the date of the drawing of the cheque, on delivery to the other person, it becomes a valid consideration for another agreement.

Xxxx

15........It may, however, be mentioned that under Section 25(3), a promise can be made even in a case where the limitation for

recovery of the amount has already expired. Such a promise has to be in writing. It can be in the form of a cheque...."

In the care before the Karnataka High Court, the High Court while examining

the provisions of Section 25(3) of the Indian Contract Act, inter alia, observed and

held as under:

"16. But, when the word „promise‟, defined in Section 2(b) besides Section 9 of the Act are kept in mind with the decision of the Supreme Court in the case of Shapoor Freedom Mazda (supra) wherein it is held that an admission could be „express‟ or „implied‟, „promise‟ covered by Section 25(3) of the Act, need not be „express‟. If the legislature had intended that such promise should be an „express promise‟ only, it would have indicated so but the word „express‟ is not found in Section 25(3) of the Act. So, it would not be proper to read so and restrict the scope of Section 25(3) of the Act to "express promise‟ only..."

10. The learned counsel for the plaintiff in support of his contentions has relied

upon the decision of Madras High Court in A.R.M. Nizmathuallah vs.

Vaduganathan [2008 Crl.L.J. 880], wherein the High Court of Madras, inter alia,

observed and held as under:

"8. In view of Section 25(3) of the Act, when a debt has become barred by limitation, a written promise to pay, furnishes a fresh cause of action. Section 25 (3) of the Act in substance does is not a revive a dead right, resuscitate the right is never

dead at any time, but to? the remedy to enforce payment by suit, and if the payment could be enforced by a suit, it means that it still has the character of legality enforceable debt, as contemplated by the explanation under Section 138 of the Act. In view of the Illustration (e), the cheque becomes a promise made in writing, to pay under Section 25(3) of the Act" .

11. Similar view was taken by the Kerala High Court in Gopinathan v

Sivadasan [ 2006(4) KLT 779], wherein the Court, inter alia, held as under:

"8. Even assuming it to be time barred, when the cheque is written and signed, there is a promise to pay the amount to the payee, through the drawee of course. Such promise, even if the liability is barred, is valid and enforceable under law in view of Section 25(3) of the Contract Act. Thereafter, when the delivery takes place, the drawal is completed. Such cheque drawn is issued for the discharge of a liability, which is promised under the cheque itself. That being so, I do not find any reason to refer the matter to a Division Bench for further consideration. The argument of the learned Counsel for the petitioner that there must be another agreement - other than the cheque - in order to reckon the promise in the cheque to be a valid agreement for the purpose of Section 25(3) cannot obviously be accepted. The promise made in the cheque is an enforceable agreement as is directed in Section 25(3) of the Contract Act....."

12. The learned counsel for the defendants has placed reliance upon a decision of

this Court in, Vijay Polymers Pvt. Ltd. & Anr.v. Vinnay Aggarwal [162(2009)

DLT 23] and Tulsi Ram v. Same Singh [19(1981) DLT 378]. In the case of Vijay

Polymers (supra) the Court examined the effect of a dishonoured cheque in the

continuation of Section 18 of the Limitation Act and analyzed the limitation of a

civil liability beyond the period of three years and held that the acknowledgement,

if any, must be there before the period of limitation is over. The Court did not

specifically held that a dishonored cheque does not constitute a contract within the

meaning of Section 25(3) of the Indian Contract Act, 1872. In Tulsi Ram (supra),

the appellant before this Court had executed a pronote of Rs.1300/- in favour of the

respondent and a promise to pay the amount with interest. The amount, however,

was not paid. The plaintiff also did not file the suit within three years from the date

of the pronote. On 10.7.1996, the defendant made an endorsement on the back of

the pronote whereby he accepted the pronote ot be valid for next three years. The

contention of the learned counsel for the plaintiff before this Court was that the

endorsement was not merely an acknowledgment, but also a promise within the

meaning of Clause (3) of Section 25 of Indian Contract Act, 1872 and therefore he

was entitled to recover the same on the basis of said endorsement. It was in this

context that the court observed that for the purpose of sub section (3) of Section 25

of the Indian Contract Act, a written pronote should be dishonorable in the

agreement itself, whereas the appellant before this Court was asking for reading the

endorsement in conjunction with the promise contained in the promissory note,

which was clearly unjustifiable. The Court, in that case, did not find any express

promise to pay in the endorsement made by the respondent on the back of the

promote. Thus, in this case also, the Court was not dealing with the question as to

whether a cheque when issued by a debtor to his creditor constitutes a contract for

the purpose of Section 25(3) of the Indian Contract Act.

13. It is settled preposition of law that while considering an application under

Order VII Rule 11 of the CPC the Court has to consider only the averments made in

the plaint and the documents filed by the plaintiff. Neither any plea was taken in the

written statement nor the documents filed by the defendant can be considered at this

stage. The averments made in the plaint have to be taken as true and at their face

value, while considering an application for rejection of the plaint. It is true that

there is no specific averment in the plaint that the cheque issued by defendant no.2

to the plaintiff amounts to a „contract‟ within the meaning of Section 25(3) of the

Indian Contract Act. But, this, to my mind, would not be relevant if such a contract

can otherwise be culled out from the averments made in the plaint. It has been

specifically alleged in para 11 of the plaint that on 13.3.2007, the principal amount

due on the defendants was Rs.47 lac along with Rs.4,29,000/- and the cost of the

tanker which the defendants had taken on rent and on reconciliation of amount an

acknowledgment of debts took place by intervention of the mediators, whereupon

defendant no.2 issued cheque bearing number 352451 drawn on Union Bank of

India for a sum of Rs.51,29,000/- towards repayment of debt to the plaintiff and the

plaintiff accepted the cheque upon reconciliation of the account of tanker‟s

payment. These averments are sufficient, in my view, to constitute a contract under

Section 25(3) of the Indian Contract Act, 1872.

14. As regards, the liability of the defendants no.1 and 3 on account of cheque

issued by defendant no.2, it is the case of the plaintiff is that defendants no.2 and 2

are partners carrying on business in the name and style of defendant no.1. The loan

from the plaintiff is alleged to have been taken by the defendants for the business of

the firm. It is specifically alleged in para 3 of the plaint that defendants no.1 to 3

had taken the loan to run their retail outlet smoothly. The first agreement was

executed between M/s Mool Chand Motors through its partners Smt. Moorti Devi

and Shri Rajesh Kumar Sharma on one hand and the plaintiff Mr. Suresh Kumar

Joon on the other hand. The second agreement purports to have been executed by

defendant no.2 on behalf M.C. Motors. Even if the second loan agreement is

excluded from consideration, the plaint cannot be rejected even qua defendant no.3.

Moreover, Section 19 of Indian Partnership Act, 1932 specifically provides that

subject to the provisions of Section 22 of the said Act, the act of partner which is

done to carry on, in the usual way, the business of the kind carried on by the firm

binds the firm. It is further stated that the authority of a partner to bind the firm

conferred by the said section is called an „implied authority‟. Section 22 of the said

Act provides that in order to bind a firm, an act or instrument done or executed by a

partner shall be done or executed in the firm‟s name or in any other manner

expressly or impliedly with an intention to bind the firm. The second loan

agreement purports to have been executed by defendant no.2 in the name of

defendant no.1 firm and since the loan from the plaintiff had been taken for the

business of the firm, it was within the implied authority of the defendant no.2, as a

partner of the firm, to issue any cheque to the plaintiff towards repayment of the

said loan. Section 23 of the Indian Partnership Act, 1932 provides that an admission

or representation made by a partner concerning the affairs of the firm is evidence

against the firm if it is made in the ordinary course of business of the firm. Section

25 of the said Act provides that every partner is liable jointly, with all other partners

and also severally, for all acts of the firm done while he is a partner. Therefore, the

cheque issued by defendant no.2 to the plaintiff binds not only defendant no.1 firm

but also defendant no.3 who was the other partner in the firm along with defendant

no.2. Therefore, the plaint cannot be rejected either qua defendant no.2 or qua

defendants no.1 and 3.

15. For the reasons stated hereinabove, both the applications are hereby

dismissed. However, the observations made and the view taken in this order would

not affect the final decision on merits.

CS(OS) 389/2009

16. List on 24.01.2013 for framing of issues.

V.K.JAIN, J

AUGUST 22, 2012/'sn/rd'///