1968 (8) TMI 206 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the suit could be founded on the basis of the document Ex. 1.
2. Whether Ex. 1 contained an express promise to pay by the defendants.
3. Whether an unconditional acknowledgment implies a promise to pay and can form the basis of a suit.

Detailed Analysis:

1. Whether the suit could be founded on the basis of the document Ex. 1:
The primary issue was whether the suit could be based on the document Ex. 1, which was an entry in the plaintiff's account books. The trial court decreed the suit for Rs. 6215/- with costs and future interest, but the District Judge dismissed the suit, holding that Ex. 1 was merely an acknowledgment and not a basis for the suit. The District Judge relied on previous decisions, including Hastimal v. Shankerdan and Ramdayal v. Maji Deodiji of Riyan.

The High Court examined whether Ex. 1 could be considered an "account stated," which would create a new debt and a new cause of action. The court found that Ex. 1 did not meet the criteria for an "account stated" as laid down by the Privy Council in Bishunchand v. Girdharilal, because it lacked cross-items and mutual agreement on the balance payable. Therefore, Ex. 1 could not be the basis of the suit.

2. Whether Ex. 1 contained an express promise to pay by the defendants:
The appellants argued that the words "Dena Chhe" in Ex. 1 indicated an express promise to pay Rs. 6022/-. However, the court held that these words only meant that Rs. 6022/- were payable and did not constitute an express promise to pay. The court referred to Phoolchand v. Mangilal, which held that expressions like "Lena Dena, Baki Lena, Baki Dena or Baki rahe" do not import a distinct promise to pay and merely amount to an acknowledgment.

3. Whether an unconditional acknowledgment implies a promise to pay and can form the basis of a suit:
The court discussed the divergent views on whether an unconditional acknowledgment implies a promise to pay and can form the basis of a suit. The court noted that the Rajasthan High Court had consistently held that an acknowledgment only extends the period of limitation but does not create a new cause of action. This view was supported by previous decisions, including Kanraj v. Vijaisingh and the Full Bench decision in Hastimal v. Shankerdan.

However, the Supreme Court in Hiralal v. Badkulal had observed that an unconditional acknowledgment implies a promise to pay, which could form the basis of a suit. The High Court acknowledged this, but also noted that the Supreme Court's observations were obiter dicta and not a binding precedent. The court also referred to Shapoor Freedom Mazda v. Durga Prosad Chamaria, where the Supreme Court stated that an acknowledgment merely renews the debt and does not create a new right of action.

Ultimately, the majority view in the High Court was that an acknowledgment, whether conditional or unconditional, cannot form the basis of a suit and can only serve to extend the period of limitation. The court emphasized the potential dangers of allowing suits to be based on unconditional acknowledgments, particularly for illiterate and unwary debtors.

Conclusion:
The High Court, by majority, allowed the appeal, set aside the judgment and decree of the District Judge, and remanded the case to the trial court with permission for the plaintiffs to amend their suit to base it on the original cause of action. The court also reduced the decree amount to Rs. 6022/- and adjusted the interest rate accordingly.