HC Calcutta (27.06.1973) in Pandam Tea Co. Ltd. vs Unknown [AIR 1974 Cal 170, 1975 45 CompCas 67 Cal] held that;
Now the question is whether the statements, which are contained in the profits and loss accounts and the assets and liabilities side indicating the liability of the petitioning creditor along with the statement of the Directors made to the shareholders as Directors' report should be read together and if so whether reading these two statements together these amount to an acknowledgment as contemplated under Section 18 of the Limitation Act, 1963,
In my opinion, both these statements have to be read together. The balance-sheet is meant to be presented and passed by the share-holders and is generally accompanied by the Directors' report to the shareholders. Therefore, in understanding the balance-sheets and in explaining the statements in the balance-sheets, the balance-sheets together with the Directors' report must be taken together to find out the true meaning and purport of the statements.
In order to find out the intention of the document by which acknowledgment was to be construed the document as a whole must be read and the intention of the parties must be found out from the total effect of the document read as a whole.
Facts of the case;
- In this case it appears that at page 12 of the balance- sheet for the year ending 31st December, 1968 the entry against the claim of the petitioning creditor appears as follows, as it is shown as the liabilities of the company.
- "Raghunath and Son Private Ltd.(Partly secured by deposit of the Company's own debentures as per contra) (Unconfirmed)."
But apart from the said statement the Director's report in this case contained the following statement:
"Your Directors are of the opinion that the liabilities shown in Schedules 'A' and 'B' of the Balance Sheet excepting those of United Bank of India. M/s. Goenka and Co. Private Ltd. and Caritt, Moranand Co., Pvt. Ltd. are barred by limitations, hence these liabilities are not confirmed by your Directors."
Excerpts of the order;
# 1. This is a petition for winding up of the company. The company in question is Pandam Tea CompanyLimited. The petitioner Raghunath and Sons Private Ltd. claims to be a creditor of the said Companyin respect of moneys lent and advanced during the 14th July, 1958 and 19th December, 1967. As a result of these transactions and repayments according to the petitioner, a sum of Rs. 1,58,875.25remained unpaid upto 30th June, 1967. Thereafter interest had accrued due to the petitioner and the petitioner has filed this petition for a claim of Rs. 2,67,492.72. According to the petitioner, the said liability or debt of the petitioner had been acknowledged by the Company in the balance-sheets of the company year after year from 1958 to 1968. . . . .
# 2. . . . . .The only point that was urged before me in this application on behalf of the Company was that the claim of the petitioning creditor was barred by limitation. It was urged that this application had been presented on the 9th March, 1972,The petitioner had relied on the alleged acknowledgment made in the balance-sheet for the year 1968which was signed on 20th July, 1970. The previous balance-sheet for the year 1967 had been signed on3rd June, 1968. The balance-sheet which was signed by the Directors on the 20th July, 1970 contained an acknowledgment as required under Section 18 of the Limitation Act. 1963, which is in similar terms with Section 19 of the Indian Limitation Act, 1908. Therefore, it is necessary to determine whether the statement contained in the balance-sheet for the year 1968 signed on the 20th July, 1970 amounts to an acknowledgment of liability under Section 18 of the present Limitation Act . In the case of Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff ., , there was a balance-sheet which showed the amount claimed in that suit as "debt owing by the company to the plaintiff" under tine liabilities of the Company and it was relied upon by the plaintiff in that suit as an acknowledgment. It was contended that it was not a sufficient acknowledgment within Section 19 of the Limitation Act of 1908 because it has been prepared under compulsion of statute and of the Articles of Association of the Company and it did not contain admissions of liability existing on the date on which admission was made and it was not signed by the person duly authorised on behalf of the Company to make an acknowledgment of liability to the plaintiff. It was held by the Division Bench that though there was a compulsion upon the managing agents to prepare the document under the Companies Act and the Articles of Association there was no compulsion upon them to make any particular admission. An admission though made in discharge of their duty was nevertheless conscious and voluntary admission. A document was not taken out of the purview of Section 19 merely on the ground that it was made under compulsion of law.It was further held an admission of indebtedness in a balance-sheet was a sufficient acknowledgement under Section 19 of the Limitation Act of 1908. In this case it appears that at page 12 of the balance- sheet for the year ending 31st December, 1968 the entry against the claim of the petitioning creditor appears as follows, as it is shown as the liabilities of the company "Raghunath and Son Private Ltd.(Partly secured by deposit of the Company's own debentures as per contra) (Unconfirmed)."
Rs. 1,49,110 It would be noted that against the said entry there is a statement 'unconfirmed'. It appears that similar entry was there in the case of Darjeeling Commercial Co. Ltd v. Tandam Tea Co. Ltd .which was the subject-matter of the judgment delivered by Ghose. J., referred to hereinbefore. This Aspect of the matter had also been considered and it was held by the learned Judge that this made no difference in making the acknowledgment. But apart from the said statement the Director's report in this case contained the following statement:
"Your Directors are of the opinion that the liabilities shown in Schedules 'A' and 'B' of the BalanceSheet excepting those of United Bank of India. M/s. Goenka and Co. Private Ltd. and Caritt, Moranand Co., Pvt. Ltd. are barred by limitations, hence these liabilities are not confirmed by yourDirectors."
Now the question is whether the statements, which are contained in the profits and loss accounts and the assets and liabilities side indicating the liability of the petitioning creditor along with the statement of the Directors made to the shareholders as Directors' report should be read together and if so whether reading these two statements together these amount to an acknowledgment as contemplated under Section 18 of the Limitation Act, 1963, or Section 19 of the Limitation Act, 1908. In my opinion, both these statements have to be read together. The balance-sheet is meant to be presented and passed by the share-holders and is generally accompanied by the Directors' report to the shareholders. Therefore, in understanding the balance-sheets and in explaining the statements in the balance-sheets, the balance-sheets together with the Directors' report must be taken together to find out the true meaning and purport of the statements. Counsel appearing for petitioning creditor contended that under the statute the balance-sheet was a separate document and as such if there was unequivocal acknowledgment on the balance-sheet the statement of the Directors' report should not be taken into consideration. It is true the balance-sheet is a statutory document and perhaps is a separate document but the balance-sheet not confirmed or passed by the shareholders can-not be accepted as correct. Therefore, in order to validate the balance-sheet, it must be duly passed by the shareholders at the appropriate meeting and in order to do so it must be accompanied by a report, if any made by the Directors. Therefore, even though the balance-sheet may be a separate document these two documents in the facts and circumstances of the case should be read together and should be construed together, It was held by the Supreme Court in the case of L. C. Mills v. Aluminium Corpn of India Ltd., , that it was clear that the statement on which the plea of acknowledgment was founded should relate to a subsisting liability as the section required and it should be made before the expiration of the period prescribed under the Act. It need not, however,amount to a promise to pay for an acknowledgment did not create a new right of action but merely extended the period of limitation. The statement need not indicate the exact nature or the specific character of the liability. The words used in the statement in question must, however, relate to a present subsisting liability and indicate the existence of a jural relationship between the parties such as, for instance, that of a debtor and a creditor and the intention to admit such jural relationship. Such an intention need not, however, be in express terms and could be inferred by implication from the nature of the admission and the surrounding circumstances. Generally speaking, a liberal construction of the statement in question should be given. That of course did not mean that where a statement was made without intending to admit the existence of jural relationship, such intention should be fastened on the person making the statement by an involved and far-fetched reasoning. In order to find out the intention of the document by which acknowledgment was to be construed the document as a whole must be read and the intention of the parties must be found out from the total effect of the document read as a whole. In support of this proposition counsel for the company relied on several decisions. Reliance for instance was placed on the decisions in the case of Pt. Ram Hazari v. Ram Narain.; Aiyappan Ittaman v. Raphael Thieyyol. AIR 1952 Trav-Co 518 at p. 521; Chhaterdhari Mahto v. NasibSingh. AIR 1924 Pat 806, Karmadai Naickeon v. R. Raju. AIR 1949 Mad 401. It is not necessary in my opinion to discuss the aforesaid decisions in details. Having regard to the nature of the language used in the directors' report it is not possible to say that there was an acknowledgment of liability by the balance-sheet itself. At least prima facie the defence that there was no acknowledgment of the liability by the company to the petitioning creditor by the statement contained in the balance sheet cannot be described as either un-reasonable or not bona fide. This, however, does not involve a determination of the question whether the claim had become barred by limitation or not. It may be that the statement in the directors' report was not correct or not true. As mentioned hereinbefore, the directors' statement by itself does not conclude the matter. But it appears to me that it cannot be said that prima facie the contention that the statement contained in the balance sheet for the year ending 31st December. 1968 did not contain an acknowledgment to save the limitation in favour of the petitioning creditor cannot be said to be an unreasonable or mala fide defence. Having regard, therefore, to this aspect of the matter I am unable to accept the position that the defence raised in this case was not bona fide because the statute of limitation permits that defence to be raised, that defence is bona fide however unmeritorious that might be.
# 4. In the premises. I am of the opinion that the petitioner cannot enforce the claim in this winding up petition and should take recourse to have its remedy if any, by other proceedings. In the premises, thisapplication fails and is accordingly dismissed.
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