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2016 DIGILAW 333 (JK)

J&K Bank Ltd. v. Surjit Singh

2016-06-28

DHIRAJ SINGH THAKUR, N.PAUL VASANTHAKUMAR

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JUDGMENT : Dhiraj Singh Thakur, J. 1. The present Letters Patent Appeal has been preferred against the judgment and order dated 26.2.2004 passed in Civil 1st Appeal No. 3 of 2000 by a Single Bench of this Court. Briefly stated the material facts are as under: 2. The respondent No. 1 obtained a loan for an amount of Rs. 2,20,000/- from the appellant-Bank in the year 1981. A Hundi dated 12.8.1981 for the loan amount was executed by respondent No. 1 whereas, defendants No. 2 and 3 executed a deed of guarantee dated 12.8.1981 for the said amount. 3. Failure on the part of the defendant No. 1 to discharge his obligation led the bank to raise a notice of demand dated 4.2.1987 against the defendants requiring them to discharge the loan amount with interest which had accrued thereupon. 4. The defendant No. 1 is then stated to have approached the appellant-Bank and executed a demand promissory note purporting to acknowledge the liability of the past debt for a sum of Rs. 2,99,865.52/-. 5. Failure on the part of the respondent No. 1 to repay the amount of loan along with the interest forced the plaintiff-bank to file a suit for recovery of Rs. 3,54,558.18/- both on account of principal and interest accrued thereupon. 6. A preliminary objection was raised by the defendants in the suit, who claimed that the suit was time barred. 7. Upon consideration of the pleadings, as many as five issues were framed by the trial court, one of which was with regard to limitation. These issues were as under: (a) Whether the suit is time barred? OPD (b) Whether the rate of interest agreed between the parties is 11% PA and not 12-1/2%? OPD (c) Whether the plaintiff bank refused to issue NOC to the defendant No. 1 for the renewal of Route Permit, if so, what is its effect on the suit? (d) Whether the plaintiff bank is entitled to recover the suit amount of Rs. 3,54,458.18 NP? OPD (e) Relief. OPP 8. While issues No. 2 to 4 were decided in favour of the plaintiff-Bank, issue No. 1 was decided against it by holding that the suit was barred by limitation. 9. A Civil 1st Appeal was preferred by the Bank against the aforementioned judgment and decree which too was dismissed vide judgment and order dated 26.2.2004. OPD (e) Relief. OPP 8. While issues No. 2 to 4 were decided in favour of the plaintiff-Bank, issue No. 1 was decided against it by holding that the suit was barred by limitation. 9. A Civil 1st Appeal was preferred by the Bank against the aforementioned judgment and decree which too was dismissed vide judgment and order dated 26.2.2004. A single Bench of this court while dismissing the appeal filed by the Bank upheld the finding recorded by the trial court on the issue that the same was barred by limitation. The reasoning given by the learned Single Judge for such a finding was that the demand promissory note executed on 24.4.1987 did not mention that the amount indicated therein pertained to an outstanding debt and therefore, was held not amounting to an acknowledgement of any past liability or outstanding debt. 10. In addition to this, the learned Single Judge held that the demand promissory note dated 24.4.1987 was for an amount of Rs. 2,99,865.52/-, which did not tally with the entries recorded in the original statement of accounts duly certified by the concerned Branch Manager according to which an amount of Rs. 3,09,865.52/- was outstanding as on 24.4.1987. The court further took notice of the fact that on the same day, an amount of Rs. 10,000/- plus 22,000/- stood deposited in cash and after crediting the aforesaid amount, the outstanding amount would be Rs. 2,77,865.52/-, which certainly was not the amount reflected in the demand promissory note. 11. It was thus held that the said DP note could not be treated as an acknowledgement of the outstanding liability by defendant No. 1 so as to extend the period of limitation under Section 19 1 of the J & K Limitation Act. 12. It is in the background of the aforementioned facts that the present Letters Patent Appeal has been preferred. 13. Learned counsel for the appellant reiterated the stand of the Bank that the limitation period for filing the suit stood extended in terms of Section 19 of the Limitation Act on account of the execution of the Demand Promissory Note on 24.4.1987. 14. Heard learned counsel for the parties. 15. The short controversy that falls for our consideration is as to whether the Demand Promissory Note dated 24.4.1987 operates as an acknowledgement of liability with an agreement to pay or not. 14. Heard learned counsel for the parties. 15. The short controversy that falls for our consideration is as to whether the Demand Promissory Note dated 24.4.1987 operates as an acknowledgement of liability with an agreement to pay or not. In this regard, it is necessary to reproduce the exact text of the Promissory Note dated 24.4.1987, which was as under: "On demand I promise to pay the Jammu and Kashmir Bank Ltd. within their office at University Campus Jammu or order a sum of Rs. 299865.52 together with interest on such sum from this date @ 21/2% above RBI rate subject to a minimum rate of 121/2% p.a or such other rate of interest as may be prescribed by the bank from time to time with quarterly rests for value received." 16. Section 19 of the Jammu and Kashmir Limitation Act envisages that where before the expiration of the period prescribed for a suit or application in respect of such property or right, an acknowledgement 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, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed. 17. Explanation (1) to the section 19(supra) inter alia envisages that for purposes of this section, an acknowledgement would be sufficient though it omits to specify the exact nature of the property or right. 18. In Kesavaramayya and Ors. v. Visamsetti Venkatarainam and Ors., AIR 1926 Madras 452, a Division Bench of the Madras High Court held that it was not necessary that in the promissory note itself the fact that it is an acknowledgment should be recited; the execution of the note itself is in acknowledgment of the liability. It was further held that when a person borrows a certain sum of money and executes a promissory note, he executes it for the consideration received by him and when it is executed in respect of a consideration already passed, it is an acknowledgment of the liability to pay the amount mentioned in the note. 19. It was further held that when a person borrows a certain sum of money and executes a promissory note, he executes it for the consideration received by him and when it is executed in respect of a consideration already passed, it is an acknowledgment of the liability to pay the amount mentioned in the note. 19. In Vakkalanka Kondamma v. Kasaneedi Venkatarayadu & Ors., AIR 1939 Mad 34 , the court was dealing with a case where a debtor executed a fresh promissory note in lieu of a previous promissory note and also made an endorsement of cancellation on the old promissory note. The subsequent promissory note, however, was insufficiently stamped. The court held that the endorsement of cancellation amounted to a valid acknowledgement of liability on the date of the endorsement and can be availed by the creditor for the purposes of saving limitation when the fresh promissory note was inadmissible in evidence as insufficiently stamped. 20. In Shapoor Freedom Mazda v. Durga Prosad Chamaria & Ors., AIR 1961 SC 1236 , the Apex Court in paragraph 6 held as under : "6. It is thus clear that acknowledgment as prescribed by S. 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgment of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledgment is based 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. Words used in the acknowledge judgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly s. excluded but surrounding circumstances can always be considered. Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly G. without intending to admit the existence of jural relationship such intention could be fastened on the maker of the statement by an involved or far-fetched process of reasoning. Broadly stated that is the effect of the relevant provisions contained in S. 19, and there is really no substantial difference between the parties as to the true legal position in this matter. 21. As to what constituted an acknowledgement was dealt with in paragraph 8 of the judgment (Supra), which reads as under: "8. The question as to what is an acknowledgment has been answered by Fry, L.J., as early as 1884 A.D. in Green v. Humphreys. [19. Effect of acknowledgment in writing (1) Where before, the expiration of the period prescribed 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 some person through whom he derives title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. (2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but, subject to the provisions of the Evidence Act (XIII of 1977), oral evidence of its contents shall not be received. (2) Where the writing containing the acknowledgment is undated, oral evidence may be given of the time when it was signed; but, subject to the provisions of the Evidence Act (XIII of 1977), oral evidence of its contents shall not be received. Explanation I.- For the purposes of this section an acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come, or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to a set-off or is addressed to a person other than the person entitled to the property or right. Explanation II.- For the purposes of this section, "signed" means signed either personally or by an agent duly authorised in this behalf. Explanation III.- For the purposes of this section an application for the execution of a decree or order is an application in respect of a right.] This answer is often quoted with approval. "What if; an acknowledgment", asked Fry, L.J., and he proceeded, "in my view an acknowledgment is an admission by the writer that there is a debt owing by him, either to the receiver of the letter or to some other person on whose behalf the letter is received but it is not enough that he refers to a debt (1) (1884) 26 Ch.D-474, 481 as being due from somebody. In order to take the case out of the statute there must upon the fair construction of the letter, read by the light of the surrounding circumstances, be an admission that the writer owes the debt". With respect, it may be added, that this statement succinctly and tersely gives the substance of the provisions contained in s. 19 of the Limitation Act. 22. In the backdrop of the case law discussed hereinabove, when we read the demand promissory note dated 24.4.1987, although it does not in so many words use the phrase "I acknowledge the debt", yet it does indicate the existence of a jural relationship between the parties as that of a debtor and creditor. The execution of the promissory note does indicate an intention to admit such a jural relationship. 23. The execution of the promissory note does indicate an intention to admit such a jural relationship. 23. In the absence of any evidence on record that there was any other transaction between the parties to which the demand promissory note dated 24.4.1987 could be related to, it can be said with certainty that the said demand promissory note dated 24.4.1987 was, in fact, an acknowledgement of an existing debt, which had the effect of extending the period of limitation in terms of Section 19 of the Jammu and Kashmir Limitation Act, Svt. 1995 in regard to only defendant No. 1 in the suit. 24. Be that as it may, the present appeal is allowed and the judgment and order dated 26.2.2004 passed by the Learned Single Judge is set aside. Disposed of accordingly along with connected applications, if any.