This case[1] is originally an appeal of its original case with the same name, its judgement being passed in 1973. It basically revolves around Section 226 of the Indian Contract Act and Section 19 of the Indian Limitation Act. The trial court in the original case misinterpreted the concept of the Limitation Act. Hence, the higher court rectified the error and passed the judgement in favour of the plaintiff.
Section 226 of the ICA, deals with the enforcement and consequences of a contract entered by an agent. According to it, contracts entered through an agent, and obligations arising from the acts done by an agent may be enforced in the same manner and will have the same legal consequences as if the contracts had been entered into the acts done by the principal in person[2].
The basic concept behind the appeal was the misguidance of the trial court. It can be elaborated as per the fact of the case involving the case relating to 1973, wherein the case is filed in the court for the deferred payment, which had become irrecoverable despite certain requests. The court accepted all the points in the petition despite the point of filing the suit, and justified it through the Section 19 of ILA. On being the judgement decided against, the aggrieved party went on appeal in the higher court, which turned the judgement in favour of the plaintiff.
Furthermore, the higher court referred to a judgement of the apex court, and justified the true applicability of the Section 19 of the ILA. Despite the case being a personal issue, it proved to be a milestone in the journey of cases involving contract law, where not being able to file a case due to getting barred by the limitation of time, hindering the access to justice to the needy. This case, in itself, laid new principles and guidelines to be referred from, and thus gave apt reasoning to the Limitation Act, and its applicability in modern-day cases.
Table of Contents
Factual Scenario
The case facts relate to the plaintiff being engaged by the defendant for the purpose of preparing coloured moves, and photography for the occasion of marriages of the defendant’s sons Navneet Baba and Balkrishan Baba, and for the thread ceremony of the defendant’s daughter’s son. For this purpose, the plaintiff submitted a bill having the amount of Rs. 24,766 on the completion of the job. The defendant paid Rs. 5000 in advance for the job, and also paid Rs. 4000 in 1974. The job was completed in 1973, the payment of the remaining amount of Rs. 15,766 was not done even after repeated requests by the plaintiff[3].
Therefore, the plaintiff filed a suit in 1977 for the recovery of the above amount and claimed the interest at 12% per annum. The trial court decided all the issues in favour of the plaintiff, except one issue. The court observed that since the job was accomplished in 1973, and the suit being filed in 1977, it had now become barred by time, followed by the Limitation Act. As per the trial court, the Limitation Act provides the period of filing a suit being 3 years.
The trial court observed the validity of the suit in the event of acknowledgement coupled with the part payment. If done, it should be in the writing of the defendant in order to save the limitation for filing the suit. The plaintiff in response, submitted the existence of acknowledgement of the suit by not the defendant, but by the agent of the defendant, which can be used equitably. The trial court refused to entertain this plea of extension concerning the period of limitation filed by the plaintiff on grounds of the lack of existence of acknowledgement in writing. Nonetheless, the trial court passed the judgement against the plaintiff. The aggrieved party went in appeal in the higher court, having acknowledgement of the suit justified by the agent of the defendant.
Issues Raised
The High Court basically observed the following issues:
- Whether the plaintiff’s suit is barred by time or not.
- Whether the plaintiff is entitled to an extension of the period of limitation in light of the fact to the payment being made by the defendant, and the acknowledgement being submitted by the defendant’s agent.
- Whether the acknowledgement provided by the agent can be considered valid.
Judgment
The High Courts decision on the point of extension of the period for filing of suit concerned with the fact of the trial court had misread the law laid down by the Hon’ble Supreme Court. The trial court delivered the judgement which involved the point that if part payment is made within the period of limitation of filing the suit, and the acknowledgement of the suit is done after the expiry of the period of limitation, then the benefit of extension of period of limitation is not available. However, the Hon’ble Supreme Court decided in the case of Sant Lal Mahton v. Kamla Prasad[4] that the acknowledgement in writing of the part payment can be even after a period of limitation, but must be before the filing of the suit by the plaintiff. Also, the acknowledgement of the part payment can be made either by the debtor directly or by his agent. Hence, the learned trial judge has misinterpreted the law and held the suit filed by the plaintiff getting debarred by time. But on the other hand, even after the acceptance of this point by the High Court, one more crucial point comes into the picture, which connects Section 19 of the ILA with Section 226 of the ICA.
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According to the Section 19 of the ILA[5], it follows as, “where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when payment was made.” A special explanation delivers that, provided that, say in the case of payment of interest made before the 1st day of January, 1928, an acknowledgment of the payment appears in the hand-writing of, or a writing signed by the person making the payment.”
Similarly, Section 226 of the ICA[6] reads as, “Enforcement and consequences of agent’s contracts. Contracts entered into through an agent, and obligations arising from acts done by an agent may be enforced in the same manner, and will have the same legal consequences as if the contracts had been entered into the acts done by the principal in person.” If both the sections are read together, this would lead to a contradictory situation. Section 19 applies the principle that if the payment is done by the principal, the acknowledgement has to be done by him only, and the authorized agent cannot provide the same. But the High Court followed the contract law, which clearly states through Section 226 the effect of relation between principle and debtor, and thus leads towards the point of any work done by the agent shall be undertaken as if done by the principle himself. This, in itself, proves the point of conflict. The respondent side also raised an issue on the point of allowance of 12% interest over the deferred payment. They mentioned that there was no mention in the contract of this kind of clause, and this point was not even accepted by the plaintiff. If allowed, this would lead towards absolute illegality, having the plaintiff wrongfully benefitted.
The court nullified this point raised by the respondent’s side, justifying it by the defendant wrongfully retaining the amount payable, clubbed with the right of the plaintiff to claim the interest over the couple of years. Hence, summing up, the HC held that the appeal by the appellant is true and justified with the final judgement by the trial court holding the suit debarred by time being set aside. The court allowed the recovery amount to be Rs. 24,766. It also included the entitlement to the interest over the principal amount of Rs. 15,766 from the date of filing of the suit till the date of recovery. Lastly, the plaintiff shall also be entitled to the cost of the suit as well as of the appeal.
Case Analysis
The High Court has been truly justified in proving the point of conflict in this case where the question persists with the validity of the appeal of the suit, after it has been decided against by the trial court. The trial court indeed misinterpreted the very law that was established through a prior case law by the Supreme Court. The High Court didn’t just explain the precedent law, but also provided an apt reasoning followed by the deliverance of judgement in the true sense. The issues were pertaining to the point that the defendant had made the part payment of Rs. 4000 before the expiry of the period of limitation. Also, whether the payment was made by the defendant in addition to the submission of the acknowledgement, and lastly whether the acknowledgement is admissible as it was made by the agent of the defendant, and not by the defendant himself.
The High Court decided all the issues with the providing of apt reasoning for all. It accepted the appeal filed in addition to the acceptance to the very first issue concerning the acknowledgement to be resultant for the extension of the period of limitation. Through the reference of a prior case judgement delivered by the Apex court, the High Court was successful in justifying the current pertaining issues. Not only this, the High Court was even successful in eradicating the ambiguity created through the existence of Section 19 of the ILA and the Section 226 of the ICA being read together. The High Court adhered to the maintainability of the Section 226, and thus accepted the extension of the period of limitation through the acknowledgement being provided by the agent of the defendant. Also, the High Court denied the acceptability of the plea of the respondent’s side to strike off the clause of allowance of interest on the deferred payment. It provided the explanation of the claiming of interest being the right of the plaintiff, which was even allowed to the extent of all the costs bearable in the filing of the suit in addition to the filing of the appeal.
Conclusion
Conclusively, this case has been successful in becoming a benchmark for such types of cases where due to the expiry of the period of limitation, the delivery of justice gets hindered. This case has become inspirational for many previous cases as well as for future ones. It could now be ensured that just because of the principle of the period of limitation, the right to justice could not be taken away. This case had laid down the very principle of the acceptance of acknowledgement of the part payment even after the period of limitation if the payment was made by the defendant within the period of limitation. Not only this, the relevant case also provided an explanation for the ambiguity created between the relations of an agent and a principle in legal subjects pertaining to the period of limitation.
If this decision of the High Court could be referred to in the future, it could also throw light on the topic concerning the part payment made by the agent, with the acknowledgement of the same being accomplished by the principle itself, which is just the inverse situation of the current case. But, as similarly in this case, the principles established through this case shall also be invoked at that point of time. Same situations shall apply wherein the acknowledgement shall be considered valid if the part payment would be done within the period of limitation. This principle has been established through the correct interpretation of the Section 226 of the Indian Contract Act, which believes the contracts entered through an agent have the same legal consequences, as if the contracts had been entered into and the acts being done by the principle in person. Last but not the least, all the issues pertaining to the appeal filed by the appellant have been settled perfectly by the High Court. It has also been successful in clearing the ambiguity created through the simultaneous interpretation of both sections concerning the case. As popularly said, the HC during the case represented the applicability of the Contract Act, in place of the Limitation Act due to its general nature. The Contract Act provides the very existence to even the subject matter of these cases, and hence it shall be the deciding factor in event of a conflict between different Acts.
REFERENCES
[1] Nand Lal Thanvi v. Legal Representatives of Goswami, RLW 2003 (2) Raj 1147.
[2] The Indian Contract Act, 1872,s.226.
[3] Supra note 1.
[4] Sant Lal Mahton v. Kamla Prasad, AIR 1951 SC 477.
[5] The Indian Limitation Act, 1963,s.19.
[6] Supra note 2.
BY SARANSH SAXENA | NATIONAL LAW UNIVERSITY ODISHA