By C.S. Raghu Raman
The facts placed before Lord Justice P. K. Misra in Dilip Chandra were really interesting.
Plaintiff-Bank submitted that Respondent-Defendant’s mother had an overdraft with the bank and that after her death, the defendant had paid Rs. 500 to the bank and also gave a letter dt. 29-12-1981 to the bank that he will pay the balance of the overdraft but without any interest.
The Trial Court dismissed the suit on the main reason that ‘the letter given by defendant cannot operate as an acknowledgement of the debt’ since by the time it was given, the period of limitation was over on 11-8-1980 and it was also held that in absence of necessary pleadings by the bank the letter cannot be taken to be ‘a new contract as in case of novation.’
Though the bank cannot succeed on the basis of above reasons in the lower court, the High Court allowed appeal when it was found that ‘defendant had admitted in his evidence to pay the overdraft amount’ thus bringing it under Sec. 25 (3) of the Act.
It is a promise made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits
Tillakchand Hindumal that “a person may renounce the benefit of the law made for his own protection’ i. e., by making a promise to pay a time barred debt”
‘If the defendant could have extended the period of limitation by acknowledging his liability in accordance with Section 19 of the Limitation Act, or entered into a fresh contract in respect of a time-barred debt in accordance with Section 25 of the Contract Act, there is no reason why he cannot be found liable in a time-barred suit on the basis of admission made in the deposition in such suit.”
Section 25 (3) says
“It is a promise made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.”
Therefore Lord Justice P. K. Misra held that ‘In view of such admission of the defendant in deposition indicating his willingness to pay a sum of Rs. 6,000/-, the claim of the appellant-Bank can be accepted to the above extent even though the suit itself was barred by time.’
No doubt the above decision may be authority for the legal proposition that the promise under sec. 25 need not necessarily be made by the debtor himself but by some other person, here, namely her son, thinking that it his ‘pious duty’ to clear the overdraft of his mother, to the bank.
Lord Justice P. K. Misra’s following judicial dictum is really very much interesting.
The introductory facts necessary to understand the points that arise are as follows. Dr. Edalji Mody, brother of plaintiff, was engaged in a very flourishing business of preparing certain chemicals in partnership with his brother. Defendant No. 1 is his widow.
It was also held that simple interest must be paid on the debt when no interest is prescribed or proved by relying on the decision of SC in 1967.
When Edalji Modi died in 1924, plaintiff left his brother’s house and filed the suit, on promissory note executed on March 6, 1926 by Def-1 in repayment of loan taken by her husband from plaintiff from time to time, but which the plaintiff says given to her personally while plaintiff executed another document releasing defendant No. 1 from all further debts.
The decree was passed with interest.
No doubt the above decision may be authority for the legal proposition that the promise under sec. 25 need not necessarily be made by the debtor himself but by some other person, here, namely her son, who made promise thinking that it his pious duty to clear the overdraft of his mother, to the bank.
It was also a fact that Defendant No. 1 took out letters of administration to the estate of her deceased husband on March 6, 1925. (Generally, therefore, the position was that the plaintiff believed himself to have some claim against defendant No. 1 on account of the advances which he had made, and possibly on
Next, The facts giving rise to the appeal by Pestonji Manekji Mody are also very interesting but it was observed to be a somewhat unfortunate suit. It arises out of family dissensions which might have been better compromised outside a Court of Law. But unfortunately the parties
account of profits which might be due to his share as a partner.) And itis agreed that these loans were long ago time-barred.
The appeal was heard by Lord Justice Crump.
On the basis of pleadings and taking that along with the probabilities of the case, Lord Justice Crump held that ‘it is clear that money was advanced by the plaintiff to his brother but not to defendant No. 1 and the plaintiff always looked to him for these moneys.
It was also held that that ‘Def No. 1 executed this promissory note of her own free will and pleasure’ whatever may have been the inducements emanating from Def No. 2 which led herto do so.
Now as these were time-barred debts, ‘she can, only be held liable by virtue of Section 25 of the Indian Contract Act.”
After examining the language used in the section, Lord Justice Crump held that ‘these words imply that the person making the promise is the person against whom the liability might have been enforced. And if that is the case, a promise made by a person who is under no obligation to pay the debts of another, even though they are time-barred, is clearly not within this exception to the general rule.
If the defendant could have extended the period of limitation by acknowledging his liability in accordance with Section 19 of the Limitation Act, or entered into a fresh contract in respect of a time-barred debt in accordance with Section 25 of the Contract Act, there is no reason why he cannot be found liable in a time-barred suit on the basis of admission made in the deposition in such suit
to the executor to make the same promise. Nor is there wanting authority upon that point. The fact is that she was the administratrix, and see no reason why what she did should not be referred to her capacity as administratrix. What then are the powers of an administratrix as regards the estate? For this purpose refer to the Indian Succession Act and begin with Section 211. Under that section the administrator of a deceased person is his legal representative for all purposes, and all the property of the deceased person vests in him as such.
The Burden of Debt
Now expressing his wonder Lord Justice Crump said:
“fail to see how that principle applies to the case of one who undertakes to pay the time-barred debts of a third party which he would not be bound to pay even if no statute of limitation existed. If exceptions are sought to be made to the general rule that an agreement made without consideration is void, then they must, in my opinion, be brought strictly within the words of the exceptions to Section 25. Therefore, in her personal capacity defendant No. 1, by executing this promissory note, incurred no liability by virtue of anything contained in Section 25 of the Indian Contract Act.”
Therefore on the above reason the suit was dismissed.
But the judgment did not stop there.
On ‘another very interesting legal reason,’ Lord Justice Crump ‘allowed the appeal’ to pass the decree.
Lord Justice Crump, stated broadly,
‘it would appear that an administrator can do that which a deceased could have done, and if it was open to the deceased, as undoubtedly it was, to promise to pay his time barred debts, it seems to me that it must be open
see no logical reason for holding that he cannot undertake to pay a time- barred debt and be bound by such undertaking. The two things must, in my opinion, go together.’
Finally, Lord Justice Crump passed the Decree for the plaintiff by declaring that ‘defendant No. 1 as administratrix is liable to pay the amount of this promissory note, but that the liability is limited to the estate of the deceased in her hands.’
Again quoting Lord Chief Justice Westropp who said in Tillakchand Hindumal that ‘An executor may pay a debt justly due by his testator, although barred by the Statute of Limitations, and will, in equity, be allowed credit, for such a payment,’ Lord Justice Crump held that ‘If an executor can pay a time-barred debt and take credit for the payment, can
Next, Lord Justice Natesan in Perumayammal had to decide as per sec. 25 (3) the Act ‘whether the Plaintiff-Petitioner can recover the amount on a promissory note executed on 22-8-1957 by
Defendant-Respondent by way of renewal of earlier ‘time barred’ note executed by her husband’ on 7-8- 1954 in favour of plaintiff.
In between the letter and deposition, the latter was recognised as vital with no change in the final decision.
Lord Justice Natesan held that ‘wife had no obligation to discharge the debt of her husband which was clearly time barred debt’ as this appeal squarely falls under the decision in Pestonji’s appeal.
Then it was held that it was not shown that ‘wife was an agent of husband either generally or specially authorised in discharge of his debts.’
Chandra) obviously ‘prior to filing of the suit by creditor’ (The Bank) to pay a time barred debt, Lord Justice P. K. Misra ruling that ‘an admission’ made by defendant ‘was sufficient to make it a promise’ in allowing the creditor to recover the amount.
Finally Lord Justice Natesan dismissed the revision when he declared that there was ‘no consideration’ for the promise made wife for giving the promissory note.
Lord Justice Natesan and Crump were not inclined to accept that ‘a third person’s no being the original debtor’s, promise to pay a time barred debt cannot be enforceable as such promise does not fall under Sec. 25 (3) of Act.
As a matter of practical and the legal justification, Lord Justice P. K. Misra moved in the opposite direction when he accepted that ‘defendant’s willingness to pay in his deposition’ constitute ‘a fresh promise’ falling under Sec. 25 (3) of the Act and Lord Justice P. K. Misra may recognised it as also an ‘admission’ coming under Sec. 58 of the Evidence Act, 1872 to make the defendant liable.
These decisions alone are found by the author.
Lord Justice Crump held that ‘If an executor can pay a time- barred debt and take credit for the payment, can see no logical reason for holding that he cannot undertake to pay a time-barred debt and be bound by such undertaking. The two things must, in my opinion, go together
When under Sec. 25 (3) it must be a ‘fresh promise’ made in writing by the debtor (Mr. Dilip Chandra) obviously ‘prior to filing of the suit by creditor’ (The Bank) to pay a time barred debt, Lord Justice P. K. Misra ruling that ‘an admission’ made by defendant ‘was sufficient to make it a promise’ in allowing the creditor to recover the amount.
It is humbly submitted that there stumbling block to legally recognise the ‘letter’ written by son to the bank may as ‘promise under section 25 (3)’ when ‘son’ cannot be put in ‘the position of an agent to make a promise to pay a time barred debt of his mother (principal) who died.
Therefore as a matter of practical and the legal justification Lord Justice P. K. Misra recognized that the ‘admission’ as ‘admitted facts need not proved’ but, of course, ‘the Court may want proof of those facts otherwise than on such admissions’.
Can we take Dilip Chandra as an authority for the legal proposition that ‘third person’ not being the debtor nor his authorised agent, make a ‘promise’ under Sec. 25(3) of the Act giving a right to creditor to recover the amount from him.
It may take some more time period to have some more decisions on this