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TMI Blog2007 (4) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... 656, 657 and 658 of Preeti Shah, Adv. in Summons for Judgment No. 762 of 2004 in Summary Suit No. 1138 of 2004, L.H. Rambhai, Adv. in S.J. Nos. 778, 779 and 780 of 2004, Preeti Shah, Adv. in Summons For Judgment No. 275 of 2005 in Summary Suit No. 3486 of 2002, Y.R. John and Ajay K.J. Panicker, Advs. in S.J. Nos. 355 to 373 of 2004, L.H. Rambhia, Adv. in Summons for Judgment No. 402 of 2005 in Summary Suit No. 1270 of 2005, Virag Tulzapurkar, Sr. Counsel, Somya Srikrishna, Adv., Little & Co. in Summons For Judgment No. 524 of 2005 in Summary Suit No. 1126 of 2005, i/b., Naushad Engineer, Adv., Desai and Diwanji,i/b., in Summons For Judgment No. 549 of 2005 in Summary Suit No. 1691 of 2005 For the Respondents : P.K. Vora., Pramodkumar, i/b., & Co. for Defendant No. 1 in Summons For Judgment No. 968 of 2003 in Summary Suit No. 1482 of 2003, Birendra Saraf, Adv., Nankani,i/b., and Associaes in Summons for Judgment No. 1021 of 2003 in Summary Suit No. 3040 of 2003, R.J. Majra, Adv.,i/b. , M.g. Gawde, Adv. in Summons For Judgment No. 140 of 2004 in Summary Suit No. 2387 of 2003, B. Dalal, Adv., i/b., Dalal T.N. Tripathi, Adv. in S.J. Nos. 656, 657 and 658 of 2004, Dipti Das, Adv.,i/b. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks only to recover a debt or liquidated demand in money payable by the defendant with or without interest, arising on a contract express or implied, or on an enactment where the sum sought to be recovered is a fixed sum of money or in the nature of debt other than a penalty, or on a guarantee, where the claim against the principal is in respect of a debt or a liquidated demand only, or in suits in which the landlord seeks to recover possession of immovable property, with or without a claim for the rent or mesne profits against a tenant whose term has expired or has been duly determined by notice to quite, or as become liable to forfeiture for non-payment of rent or against persons claiming under such tenant may in case the plaintiff desires to proceed hereunder, be instituted by presenting a plaint in the form prescribed, but the summons shall be in Form No. 4 in Appendix B or in such other form as may be from time to time prescribed. 4. By a further amendment dated 1st November, 1966 by this Court, the provisions of Order XXXVII Rule 2 of the Code of Civil Procedure was substituted as under: 2. Institution of Summary suits upon bills of exchange, etc.-- (1) All suits upon bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms. Whether a particular document is a receipt of acknowledgment of liability on which a Summary Suit would lie, would depend on the contents and language of the document and not on the nomenclature thereof. It is next submitted that no useful purpose will be served to lay down, as a matter of law, whether a Summary Suit will or will not lie on a document solely based on a particular type of document. This kind of compartmentalization will not solve future controversy on the issue, on the contrary it is likely to create further controversy on the question whether a particular document falls within the category of 'receipt' or 'accounts stated' or 'acknowledgment of liability', etc. In all these matters, it is submitted, what is required to be seen is the substance of the document and not the nomenclature. A document may be titled as a receipt but, in fact, may not be a receipt. Similarly, a document may not be titled 'receipt' or may be titled with some other word, but may actually be a receipt. Hence, the Court ought not to lay down rules based on the title of the document. The only test should be the one which is laid down in Order XXXVII, viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "arising on a contract express or implied" and this was substituted by the words "arising on a written contract". There can be therefore no dispute that after the 1966 Bombay amendment and the 1976 amendment to the Civil Procedure Code, the summary suit can only be filed if there be on a written contract. In other words, no Summary Suit can lie on an implied contract. There seems however some confusion as to the expression an implied contract and "implied terms in a written contract". The expression "implied term in a written contract" in law is distinct and different from an implied contract. We will consider this aspect of the matter whilst construing the legislative changes. 10. In this interpretive process, this Court must consider the effect of deletion of words. Gainful reference may be made to paragraphs 89 to 93, In Bombay Dyeing & Manufacturing Company Ltd. v. Bombay Environmental Action Group and Ors. AIR2006SC1489 : 89. In Venkata Subamma v. Ramayya, it is stated that an Act should be interpreted having regard to its history and the meaning given to a word cannot be read in a different way than what was interpreted in the earlier repealed section. 90. It is also a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limitation Act and 25 of the Contract Act and reliance placed on the judgments, it is argued that the ratio that emerges from all those cases is that Section 25 of the Contract Act requires a promise in writing to pay, and hence, a mere acknowledgement under Section 18 of the Limitation Act, does not comply with the requirements of Section 25 of the Contract Act, as it does not contain a promise in writing to pay. The Plaintiffs', do not dispute the proposition. It is next submitted that a Summary Suit is maintainable on written contract with implied promise to pay. Reference is made to judgments which have also been referred to earlier. Relying on Chitty on the Law of Contracts, it is pointed out that an implied term is a matter of law for the court to decide and that in most cases it has nothing to do with the intention of the parties. In many cases, the terms to be implied are well settled. In these circumstances, as far as acknowledgment, receipt or accounts stated are concerned, it is now settled that they contain an implied promise to pay. This position does not require any evidence. It is an implication which the law draws from the terms of such a document. From this it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is submitted that considering Sections 33 and 37 of the Bombay Stamp Act, in respect of the documents not sufficiently stamped, on paying the penalty, the documents can be admitted in evidence. However, considering Section 35 of the Indian Stamp Act, if a promissory note or a bill of exchange is not stamped or not sufficiently stamped, then, it is not possible to pay the stamp duty and penalty in the court to make them admissible in evidence. 12. On behalf of the Defendants their Counsel contend, that the primary question the Court must answer is whether the different documents which are the subject matter of reference constitute written contracts. The submissions are as under : The documents in question do not constitute contracts at all, at best they are admissions of liability. Once it established that the documents in question do not constitute contracts at all it follows that they also do not constitute written contracts. As a result summary suit cannot be filed on the basis of these documents. The judgment in Hiralal and Ors. v. Badkulal and Ors. AIR1993SC225 , it is submitted, has no applicability to the present case, as the Supreme Court therein was considering whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d contract applies equally and squarely to an implied term in a contract as if it were an implied contract. If a summary suit is filed on the basis of an implied promise in a written contract, it presupposes that there is no express promise to pay in the written contract. In other words, there is no promise to pay in writing. Accordingly a summary suit, purely based on an implied promise to pay in a written contract is really no different and is in fact the same as a summary suit based on an implied promise to pay arising from a document which does not amount to a written contract. If in the later kind summary suit is not maintainable then even the former is not. Referring to the arguments advanced on behalf of the petitioners on the words "arising on a written contract" it is submitted that the words used are "arising on" and not "arising out of" or "arising in respect of" or "arising in connection with" which are words of wide import. It becomes clear that by using the word "on" it was intended that the class of suits that could be filed as summary suits should be restricted to only those which were directly based on the written contract. A Summary Suit is also not maintainable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, it is not possible to draw the ratio decidendi of the judgment in that context. On the facts, there the Court had come to the conclusion that the documents produced would make not amount to an agreement in writing. 14. Let us now consider the other judgments of the Appellate Benches which were considered by the learned Single Judge. Reliance was placed on an unreported judgment in Appeal No. 186 of 1994 in Summons for Judgment No. 718 of 1991 in Summary Suit No. 2372 of 1991, decided on 3.13.1994. This judgment was a judgment on confirmation of accounts. On the facts the Court found that the only document in connection with the claims, is form "C", being a form of declaration under Central Sales Tax Act. On facts, the Court held that it would not constitute a contract between the parties. The next judgment which was considered by the learned Judge was in Appeal No. 178 of 2000 dated 1.3.2000 in respect of an honoured cheque. Considering the facts there, the Court noted that the suit was based on Section 70 of the Contract Act. The Court recorded a finding, that the nature of transaction was strictly not of contract but refers to general quasi contract. The Court held so far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edure Code nor an issue came up before the Apex Court pertaining to the scope and meaning of Order 37 Rule (2) The judgment of the Apex Court was considering whether a suit on account can be filed without going back to the original transaction as contained in the said set of accounts. (3) The Supreme Court has merely held in the aforesaid two judgments that a category exists under the regular law in which a suit on account can be filed because it contains an implied promise to pay. (4) The judgment of the Apex Court in the case of Gordon Woodroffe and Co. v. Shaik M.A. Majid and Co. (supra) in fact holds that suit on account can be filed even if it is not confirmed by the opposite party or even if it is not in writing. Thus if the aforesaid judgements of the Supreme Court are held to be applicable to the provisions of Order 37 Rule 2 of Civil Procedure Code then a further issue will arise whether such a suit on an unwritten account or an unconfirmed account also could be held to be maintainable under Order 37 Rule 2 if the view of the Apex Court is held to apply to the provisions of Order 37 Rule 2 of the Civil Procedure Code. After so saying, the learned Judge was pleased t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods. I doubt whether the objection which is here set up to avoid a business transaction would have been sufficient to support a special demurrer before the passing of the Common Law Procedure Acts, Relying on these observations, the Madras High Court in Lucky Electrical Stores, by Partner Mahendra Kumar Shah and Anr. v. Ramesh Steel House, by Partner Babulal 1988 M L R 187 in a case where the invoice of the bill was not signed by the other party to the contract, however, as a result of the acceptance of the goods delivered in pursuance of the invoice, on the demand for the price of goods admittedly received by the purchaser on the basis of the invoice, observed that it must be held, to arise on a "written contract". A written contract therefore need not be evidenced in a single document written by the parties since the written document can be by exchange of documents in writing between the parties. On the other hand an implied contract would arise by the acts of parties to indicate an implied contract. A written contract, contemplated under Order XXXVII need not be necessarily signed by both the parties. However, the writing must be such to arrive at a conclusion that an ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not merely unreasonableness. (See Liverpool City Council v. Irwin) 1977 A.C.239. Similarly, a term will not be implied if it would be inconsistent with the express wording of the contract. 18. Lord Wright in Luxor (Eastbourne) Ltd. v. Cooper 1941 A.C 108 said: The expression 'implied term' is used in different senses. Sometimes it denotes some term which does not depend on the actual intention of the parties but on a rule of law such as the terms, warranties or conditions which, if not expressly excluded, the law imports, as for instance under the Sale of Goods Act and the Marine Insurance Act. But a case like the present is different because what it is sought to imply is based on an intention imputed to the parties from their actual circumstances. Professor Glanville Williams in "Language and the Law" (1945) 61 L.Q.R., 71 observes: (i) terms that the parties probably had in mind but did not trouble to express; (ii) terms that the parties, whether or not they actually had them in mind, would probably have expressed if the question had been brought to their attention; and (iii) terms that, whether or not the parties they had them in mind or would have expressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icacy to the contract. The basis of such an implication is that the contract is unworkable without it. There is, however, another form of implication. It is not permissible to imply a term simply because the court considers it to be reasonable. On the other hand, it is possible to imply a term, if the court or arbitrator, as the case may be, is satisfied that reasonable men faced with the suggested term which ex hypothesis was not expressed in the contract, would without hesitation say: 'yes, of course that is so obvious that it goes without saying.' 19. In "The Interpretation of Contracts" by Kim Lewison, Q.C., there is extensive discussion on "implied terms". At paragraph 6.03 it is set out that in order for a term to be implied, the following conditions must be fulfilled: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (3) it must be so obvious that it goes without saying; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract. These conditions may overlap. It is not clear whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of the contract, must take great care that they do not make the contract speak where it was intentionally silent; and above all that they do not make it speak entirely contrary to what, as may be gathered from the whole terms and tenor of the contract was the intention of the parties. Lord Wright in Luxor (Eastbourne) Ltd. v. Cooper [1941] A.C. 108, said: It is agreed on all sides that the presumption is against the adding to contracts of terms which the parties have not expressed. The general presumption is that the parties have expressed every material term which they intended should govern their agreement, whether oral or in writing. From the discussion there are sufficient guidelines to hold as to what would be an 'implied term' of the contract. From the above discussion if follows, that these will be some of the tests to be applied whilst considering whether from the written contract it can be held that there is an implied term to pay. 21. The next expression requiring consideration is the word "Debt". Black's Law Dictionary (8th Ed.) defines "Debt" as under: A sum of money due by certain and express agreement. A specified sum of money owning to the perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may or may not reside in the next month. 22. The expression, "acknowledgment" may now be considered. In Black's Law Dictionary, Eighth Edition, "acknowledgment" has been described as under: acknowledgment. 1. A recognition of something as being factual. 2. An acceptance of responsibility. 3. The act of making it known that one has received...something...acknowledgment of debt. Recognition by a debtor of the existence of a debt. In P. Ramanatha Aiyar's, The Law Lexicon, Reprint, 2001, "acknowledgment" has been stated thus: Acknowledgment, is a proceeding whereby a person who has executed an instrument may, by declaring it to be his act and deed, entitle it to be received in evidence without further proof of execution, or Oath The action of acknowledging : a thing done or given in recognition of something received Acknowledgment of debt. An admission in writing that a debt is due or that some claim or liability is still in existence Acknowledgment of debt or liability means an admission in writing that a debt is due or that some claim or liability is still in existence. In Devi Prasad v. Bhagwanti Prasad and Anr. AIR1943All63 , considering the provisions of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering Section 19 and Article 64 of the Limitation Act, 1908, while considering the judgment of the Judicial Commissioner, which was appealed before it, the Supreme Court observed as under: 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 plaintiffs 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 I. A. 165 (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 Mohomed v. Ganga Singh A.I.R. 1929 Lah. 264, the same view was taken. It was held that a suit on the basis of a balance was competent. In Kahanchand Dularam v. Dayaram Amritlal A.I.R. 1929, Lah. 263, the same view was expressed and it was observed that the three expressions "balance due," "account adjusted" and "balance struck" must mean that the parties had been through the account. In Shapoor Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order XXXVII Rule 2). After considering the various contentions consequent upon the Summary Suit having to be filed on a written contract, the learned Judge after referring to several judgments held: The ratio of the decisions in those cases was that mere accounts stated or mere writings of acknowledgments which did not contain express promise for making payments were insufficient to complete a cause of action for a suit on the basis of the provisions of Sub-section (3) of Section 25. Apparently, the ratio of these decisions is that a promise to revive a time-barred debt must be an express promise in writing for payment of the same. That was the condition required to be fulfilled having regard to the provisions of Sub-section (3) of Section 25. Some observations in these cases are relied upon by Mr. Karanee in connection with the true construction to be given to the writing annexed to the plaint. It is not necessary to refer to facts of these cases in that connection. Now, the writing relied upon on behalf of the plaintiffs, in my view, is what is ordinarily known as a "Khata Pete receipt". This kind of writing has been known and understood to constitute not only an acknowledgem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s paid by items on the other side. In an account stated it does not matter if some of the items are time-barred. It would be different thing if all the items are time-barred, and we see no reason to depart from the view expressed on this point in Ganesh prasad v. Rambati Bai I.L.R. (1942) Nag.369. The Privy Council had an occasion to deal with the issue in the case of (Elvira Rodrigues) Siqueira v. (Godnicalo Hypolito Construction) Noronha A.I.R. 1934 P C 144. The Privy Council was considering Section 25(3) of the Contract Act, 1872 and Article 64 of the Limitation Act, 1908 whether - a suit could be maintained on a settled account. It is in that context, that Lord Atkin, speaking for the Privy Council, held 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 be 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. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evidence that the other party has accepted it as correct. But such acceptance need not be express, contemporaneous or subsequent conduct may amount to a sufficient acquiescence. After so observing, considering the contention of the Defendants that there has been a stated or settled account, the Court in paragraph 15 held as under: In this connection it is necessary to state that the expression "account stated" has more than one meaning. It sometimes means a claim to payment made by one party and admitted by the other to be correct. An account stated in this sense is no more than an admission of a debt out of Court: while it is no doubt cogent evidence against the admitting party, and throws upon him the burden of proving that the debt is not due, it may, like any other admission, be shown to have been made in error. Where the transaction is of this character, it makes no difference whether the account is said to be "stated" or to be "stated and agreed": the so-called agreement is without consideration and amounts to no more than an admission. There is, however, a second kind of account stated where the account contains items both of credit and debit, and the figures on both si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account which is not confirmed by the Defendant and "on honoured cheque". Items (II) and (IV) of para 2 are answered accordingly. 28. The issues which remain to be answered would be (a) on settled accounts which are confirmed by the Defendants (b) on acknowledgement of liability, on a mere writing or receipt. We have classified these under two heads as acknowledgement of liabilities or mere writing or a receipt, many a time have to be read together. Before answering the issue we must note that there must be the following requirements before a summary suit would lie: (1) There must be a concluded contract; (2) The contract must be in writing; (3) The contract must contain an express or implied promise to pay. There is no dispute in respect of the first two predicates. The only issue is in respect of the third predicate. As we have noted earlier, we are not concerned here with an implied contract, but an implied term in a written contract. The Defendants would be right to contend that an implied contract is not a written contract. Is a summary suit maintainable on an implied term in a written contract with an implied term to pay. In our discussion we have noted that the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding it is not as if the Defendant is denuded of his defences when he applies for leave to defend. The Supreme Court in Machalec Engineering and Manufacturers v. Basic Equipment Corporation [1977]1SCR1060 has laid down the tests, which thereafter have been reiterated by the Supreme Court in Sunil Enterprises v. S.B.I. Commercial and International Bank Ltd. AIR1998SC2317 . The tests laid down are as under: (a) If the defendant satisfies the Court that he has a good defence to the claim on merits, the defendant is entitled to unconditional leave to defend. (b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence, although not a possibly good defence, the defendant is entitled to unconditional leave to defend. (c) If the defendant discloses such facts may be sufficient to entitle him to defend, that is, if the affidavit discloses that at the trial he may be able to establish a defence to the plaintiffs claim the Court may impose conditions at the time of granting leave to defend the conditions being as to time of trial or mode of trial but not as to payment in to Court or furnishing security. (d) If the defendant has no def ..... X X X X Extracts X X X X X X X X Extracts X X X X
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