LAKSHMIRATAN COTTON MILLS CO. LTD. versus ALUMINIUM CORPORATION OF INDIA LTD.

Citation: [1971] 2 S.C.R. 623 · Decided: 16-10-1970 · Supreme Court of India · Bench: J.M. SHELAT · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
D 
.E 
F 
G 
H 
623: 
LAKSHMI~TAN COTTON MILLS CO .. LTD. 
v. 
ALUMINIUM CORPORATION OF INDIA LTD. 
October 16, 1970 
[J. M. SHELAT AND C. A. VAIDIALINGAM, JI.] 
Limitation Act. 1908, s. 19(1)-Acknowledgment of liability-What· 
amounts to--AuthoriFy to make •cknow/edgment 011 behalf of corporation, 
when can be implied. 
Prior to January )8, 1944 six companies including M/s. Lakshmifataa.. 
Cotton Mills Co. Ltd. (the appellant-company) and the Aluminium Cor·· 
poration of India Ltd. (respondent corporation) were jointly managed 
by two groups known as the Singhania and Gupta groups. As a result 
of disputes. between the two groups there was a reference to arbitratien. 
After January 18, 1944, the date of the award, the aforesaid six· concerns. 
were brought under the management and control of one or the other 
of the two groupg. The C<irporation came under the control and manage· 
ment of the Singhania group. In cl. 9 of the award it was said that the 
award 'did not cover the advances which either party or their separate. 
firms may have made to all or any of them or their moneys which may 
be in deposit with them and that they would be payable and paid in their 
usual course. 
After the award the appellant-Company sent a statement 
·of account in respect of advances made to the respondent corporation. 
and expenditure incurred on its behalf. 
The statement was objected to 
on the ground that the appellant company had not properly maintained 
its accounts during the period of .joint management. 
Efforts at recon-
ciliation of accounts having failed the appellants filed two suits claiming 
Rs. 3.56,207 .9 .6 and Rs. 72,595 .4 .6 from the Corporation, being suits 
Nos. 63 and 65 of 1949. 
In suit No. 63 of 1949 it was claimed that 
the suit was within time as after adjustment of •everal items in 1946 and 
1947 a sum,of Rs. 2,96,110.11.6 was found due to the appellant-company 
~nd that in any event. the suit was saved from bein~ barred by limitation 
by a letter (Ex .. 1) dated April 16, 1946 addressed by S the Secretary-
cum.Chief Accountant of the C-0rporation, thereby acknowledging the· 
liability of the Corpdration to pay the amount which would be found due· 
and payable under the said accounts. 
Similar averments were made in 
Suit No. 65 of 1949. The written statements filed on behalf of the Cor·· 
poration inter alia pleaded that the said claim was . barred by limitation, 
that the said lettef, did not amount to an acknowledgement within the· 
meaning of s. 19 of the Limitation Act, 1908 which was then applicable 
to tho suits, and lastly, that even. if the said letter did amount to an• 
acknowledgement, it was not binding on the Corporation. The trial court. 
decreed the suits but the High Court dismissed them as being time-barred. 
In_ appeals to this Court the questions tliat fell for consideration were : 
<!) whether t.he letter in queslit>n amounted to an acknowledgment; 
(!!) whether 1t was an acknawled~ment by the corpomion, and if not 
(1u) whether the Secretary-cum-Chief Accountant had authority express 
or implied, to acknowledge liability on behalf of the Corporation so as. 
to bind that corporation. Allowing the appeals, 
· 
HELD: (!)(a) From the provisions of s. 19(1) Of the Limilation• 
Act, 1908 it is clear that the statement on which the plea of acknowledge-
meat is founded must relate to a subsisting liability as the section requires. 
•624 
SUPREME COURT REPORTS 
[1971] 2 S.C.R. 
.that it must be made before the expiration of the period prescribed by the 
Act. It need not, however, amount to a promise to pay, for' an acknowledge-
ment does not create a new right of action but merely exten<l§ the pe'ciod of 
limitation. Tl:ie statement need not indicate ·the exact nature or the specific 
character. of the liability. The words used in the statement in question, how-
ever, must relate to a present subsisting liability and indicate the existence . 
.of jural relationship between the partes such as, for instance, that of a 
.debtor at1d ·;r· cteditor-fttld-the intention to admit such a jural relationshjp. 
Such an intention need not be in. express terms and can be inferred by im-
plication or th epature of the admission and the surrounding circumstances .. 
Generally speaking a liberal construction of the statement in 
question 
should be given. That of oourse does not mean that where a staiement 
is made without intending to admit the existence of a particular jural 
relationship, such an int

Excerpt shown. Read the full judgment & AI analysis in Lexace.