Hiralal And Others vs Badkulal And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 168 of 1952

Decision Date: 12 March 1953

Coram: Mehr Chand Mahajan, Natwarlal H. Bhagwati

In the matter titled Hiralal And Others versus Badkulal And Others, the judgment was rendered on 12 March 1953 by the Supreme Court of India. The opinion was authored by Justice Mehr Chand Mahajan, who sat on the bench together with Justice Natwarlal H. Bhagwati. The parties were identified as petitioner Hiralal and others and respondent Badkulal and others. The citation for this decision appears as 1953 AIR 225 and 1953 SCR 758. The case concerned the legal effect of an acknowledgment of liability and whether such acknowledgment could give rise to a fresh cause of action, particularly in the context of documentary evidence that was in the possession of the party against whom the claim was made.

The headnote of the judgment explained that the defendants, who had engaged in business dealings with the plaintiffs for several years, had signed an entry in the plaintiffs’ account book beneath earlier entries. The entry read: “After adjusting the accounts Rs. 34,000 found correct payable held, that this amounted to an unqualified acknowledgment of liability to pay and implied a promise to pay and could be made the basis of the suit and gave rise to a fresh cause of action.” The Court noted that earlier authorities such as Maniram v. Seth Rup Chand (33 I.A. 165), Fateh Chand v. Ganga Singh (I.L.R. 10 Lah. 745) and Kahan Chand Dularam v. Dayalal Amritlal (I.L.R. 10 Lah. 748) were relied upon, while the decision in Ghulam Murtuza v. Fasihunnissa (I.L.R. 57 All. 434) was overruled. The Court further observed that it was not proper practice for a party wishing to rely on a particular set of facts to withhold from the Court written evidence that was in its possession and that could illuminate the issues in dispute, and then to depend solely on the doctrine of the onus of proof. The Court referred to Murugesam Pillai v. Manickavasaka Pandara (44 I.A. 99) in support of this principle.

The judgment concerned Civil Appeal No. 168 of 1952, which was an appeal from a judgment and decree dated 23 July 1951 of the Court of the Judicial Commissioner, Vindhya Pradesh, in Civil First Appeal No. 26 of 1951. That appeal arose from an earlier judgment and decree dated 14 March 1951 of the District Judge of Umaria in Case No. 32 of 1951. Counsel for the appellants was N. S. Bindra, assisted by S. L. Chhibber, while counsel for the respondents was S. P. Sinha, assisted by K. B. Asthana. The appeal was heard on 12 March 1953, and the judgment was delivered by Justice Mahajan.

Justice Mahajan explained that the original suit, from which this appeal originated, had been instituted by the plaintiff-respondents in the district court of Umaria seeking recovery of a principal sum of Rs. 34,000 together with interest of Rs. 2,626, alleged to be due on the basis of mutual dealings. The district judge dismissed the suit, but the Judicial Commissioner of Vindhya Pradesh reversed that decision and decreed in favour of the plaintiffs. A certificate for leave to appeal to the Supreme Court was granted because the case satisfied all the statutory conditions applicable to appeals to this Court.

The defendants did not admit the claim. They contended that they had never been presented with the accounts when the signatures of Bhaiyalal and Hiralal were obtained in the plaintiffs’ ledger on 3 September 1949, which purported to acknowledge the amount due. The defendants further argued that a suit could not be based solely on an acknowledgment of debt. Their written statement set out these denials and asserted that no explanation of the accounts had been given to them at the time of signing, and therefore they were not bound by the signatures. This constituted the factual and legal background on which the Supreme Court examined whether the entry in the account book amounted to a fresh cause of action.

In the written statement, paragraph four alleged that the second plaintiff, Dipchand, had threatened to institute a suit against defendants one and two, whose financial condition was described as poor. It was further asserted that Dipchand claimed that the first plaintiff, Badkulal, would become angry and would abuse the second plaintiff. Dipchand is said to have sworn an oath by placing his hand on a deity in a temple, promising that no suit would be filed and that the amount of interest would be reduced. On the basis of these representations, Dipchand allegedly asked defendants one and two to sign the khata. The defendants purportedly signed the document without examining the account entries, relying solely on Dipchand’s statements, and thereafter claimed that they were not bound by those signatures. In paragraph nine of the written statement, the plaintiffs contended that, in reality, only a principal sum of fifteen thousand or sixteen thousand rupees was owed by the defendants, and that the suit had been filed for a substantially larger amount than was actually due.

The district judge framed the first issue in the following terms: “Did the defendants Hiralal and Bhaiyala I sign on Bhadon Sudi 11 Samvat 2006 in the capacity of manager and head of the family, on the khata of the plaintiffs after understanding the debit and credit accounts and accepting Rs 34,000 as the correct balance due to the plaintiffs?” While the court observed that a separate issue addressing each of the two points might have been more appropriate, it held that the particular form of the issue was not decisive for the appeal’s outcome. The seventh issue was framed as: “Did the plaintiff Dipchand obtain the signatures of defendants one and two in their bahi under the threat of instituting a suit, while offering the assurance that no suit would be filed and asserting that the interest claimed was incorrect and highly exaggerated, by alleging that Badkulal would become very angry with him?” This framing, the judgment noted, indicated that the learned judge had not taken steps to ascertain the precise nature of the plea articulated in the written statement. It appeared that the judge acted mechanically rather than fulfilling his judicial responsibilities. Before formulating such an issue, the judge was required to examine the parties and determine the exact defence raised—whether it was fraud, coercion, undue influence, or a mistake of fact that would justify reopening the accounts. Counsel for the appellants was unable to explain the true plea underlying the facts presented under this issue. The manner in which the learned judge handled the matter supported the view that he did not comprehend the question he was called upon to decide. Consequently, it was held that the defendants had not signed the entry after having understood, settled, or adjusted the accounts, but rather had signed without such comprehension.

The Court recorded that plaintiff Dipchand obtained the signatures of the defendants on the entry without providing any explanation of the accounts to them. The fact that the entry bore the signatures of both defendants, who were acting on behalf of their family, was not denied. In the witness box, the defendant Hiralal admitted that the defendants were engaged in the trade of gold, silver and kirana and that they kept regular books of account. He further admitted that two or three muntims were employed by them for maintaining these books. When Hiralal was asked how much money the defendants-firm owed to the plaintiffs, he gave an evasive reply, essentially saying that he could not state the exact amount due. Upon further questioning about his own accounts, he said that he had not filed the books because he was ill. He thereafter testified that, after examining his records, a principal amount of ten thousand rupees to fifteen thousand rupees together with interest appeared to be due, but he could not identify the precise figure. When asked whether, on the date of signing the acknowledgment, he had consulted his books to determine the amount owed, he answered in the negative. He also stated that even after receiving notice he did not review his accounts to ascertain the correct balance. A leading question was then put to him regarding whether, on Bhadon Sudi 11 Samvat 2006, there was an entry of thirty-four thousand rupees in the defendants’ khata showing the balance due from them to the plaintiffs. His answer remained evasive; he said that he could not confirm whether such an entry existed in his books.

The Court held that, in these circumstances, there was no justification for dismissing the plaintiffs’ suit on the ground that the accounts had not been explained to the defendants. The defendants themselves had kept books of account from which the true balance could be ascertained, and an inference could readily be drawn from Hiralal’s statements that the entry of thirty-four thousand rupees also appeared in his own records. Counsel for the defendants attempted to avoid producing the books by arguing that the defendants had no duty to produce them unless specifically called upon, and that the burden of proof rested on the plaintiffs. The Court rejected this argument, citing the observations of the Privy Council in Murugesam Pillai v. Manickavasaka Pandara (1). The Privy Council had observed that a practice had developed in Indian procedure whereby parties in possession of important documents or information would “lie by, trusting to the abstract doctrine of the onus of proof, and failing, accordingly, to furnish to the courts the best material for its decision.” While such a practice might be permissible for third parties who have no responsibility for the conduct of the suit, the Court held that for parties to the suit it constituted an inversion of sound practice when they rely on a particular state of facts while withholding evidence that could illuminate those facts.

The Court observed that it was improper for a party to conceal documentary evidence that could illuminate the matters before the tribunal. It quoted the observation of the Privy Council in Murugesam Pillai v. Manickavasaka Pandara that a party should not withhold written evidence simply because the burden of proof ordinarily rests on the opponent. The same principle was reiterated in Rameshwar Singh v. Rajit Lal Pathak. In the present case, the pleadants were both merchants who kept separate books of their commercial transactions. On 3 September, the two parties met and the defendants entered a record in the plaintiff’s ledger on page 58 that read: “Rs. 34,000 balance due to be received up to Bhadon Sudi 11 Samvat 2006 made by check and understanding of accounts with Hiralalji’s books.” That entry appeared beneath several other credit and debit entries in the same account and was signed by Hiralal and Bhaiyalal. An additional endorsement followed, stating: “After adjusting the accounts Rs. 34,000 found correct payable.” The acknowledgment, therefore, reflected a mutual understanding of the amount owed and was signed by the defendants themselves, indicating that they had examined their own records before affixing their signatures.

The Court found that the district judge’s conclusion that the plaintiffs had not proved that the accounts had been explained to the defendants by Dipchand was untenable. The defendants kept their own books and would not have signed the balance of Rs. 34,000 without reference to those books. Plaintiff Dipchand testified that the accounting had been performed by his munim, Puranlal, and Ram Prasad, who explained the figures to Hiralal, after which Hiralal signed. In cross-examination, Dipchand clarified that the munims verified the balance and that Hiralal and Bhaiyalal themselves had not examined any account. The district judge and counsel for the defendants criticized Dipchand’s testimony as false and improbable, alleging inconsistencies regarding the circumstances of the signature. The Court held that these alleged discrepancies were immaterial. The evidence of Dipchand, together with the ledger entry, sufficiently established the plaintiffs’ case, especially because the defendants had withheld their own books, which represented the best evidence to rebut the claim. No satisfactory explanation was offered for the non-production of the defendants’ books, and Hiralal’s own testimony did not enhance his credibility. Counsel for the defendants argued that Bhaiyalal had signed the entry at a later date, not simultaneously with its writing. Hiralal testified that Bhaiyalal was absent at the time of signing and later affixed his signature after being prompted by Kulai, the munim, who claimed that Badkulal and Dipchand had disputed the matter and that Bhaiyalal’s signature was required. The Court rejected the contention that Bhaiyalal’s absence could invalidate the acknowledgment, noting that Bhaiyalal never testified to explain his signature, and no reason was given for his failure to appear. Consequently, the Court concluded that the defendants could not rely on the alleged later signing, and their arguments were not sustainable.

In the testimony, it was recorded that Bhaiyalal asked why the witness had signed the document. The witness responded that Dipchand had told him, while pointing his hand toward God, that he would take no action against him as long as he lived. Consequently, the witness said he did not verify the accounts, nor was anyone able to explain them to him. On that basis, the witness requested Bhaiyalal to sign, and Bhaiyalal complied after being asked. The record shows that Bhaiyalal could have clarified his signature by appearing in the witness box, but he did not give any evidence in the trial, and no reason was provided for his failure to do so. Therefore, the argument advanced by counsel for the defendants that Bhaiyalal was absent when the acknowledgment was signed cannot be upheld.

The defendants also relied on the statements of Kulai Prasad, who was a muneem, and on the statements of two other muneems, Ram Prasad and Puranlal. Regarding Kulai Prasad, it was noted that he had been employed by the plaintiffs and was dismissed by Badkulal, the plaintiff, on 31 March 1950. Because he was a dismissed and disgruntled employee, his testimony could not be given significant weight. Kulai Prasad claimed that Hiralal was never shown any accounts and that Dipchand, on oath, assured him that he would not cause any trouble during his lifetime, asked Hiralal to sign, and that Bhaiyalal signed at a later date. The Court regarded this evidence as partisan and therefore unreliable.

Ram Prasad testified that he had not examined the plaintiffs’ accounts for the year Bhadon Samvat 2006 and that Hiralal had not signed in his presence. During cross-examination, Ram Prasad admitted that there were mutual dealings between the parties and that Hiralal might have signed after the accounts were settled. He also appeared to feign ignorance about the events of Bhadon Samvat 2006.

Puranlal stated that after reviewing the accounts and following a mutual discussion, Exhibit P-1 was prepared at the request of Dipchand. He suggested that the accounts may have been communicated by Dipchand based on a statement he possessed and that no accounts were explained. Puranlal further recounted that Hiralal said to Dipchand, “Please see me,” to which Dipchand, raising his hand toward the temple, replied, “I shall not do anything unfair in my lifetime.” In cross-examination, Puranlal admitted that the phrases “signed Bhurey Naik Raghunandan Prasad Bakalam Hira Lal” and “after adjusting the accounts Rs 34,000 found correctly payable signed Hiralal” were written by Hiralal himself. It was also elicited that the witness had forged a receipt and, for that forgery, had been sentenced to one year’s imprisonment in a criminal case instituted by Badkulal, the plaintiff. Consequently, this evidence was deemed of little consequence.

Considering all the foregoing, the Court concluded that the district judge had approached the case from a mistaken perspective and had misappreciated the material on record. The learned Judicial Commissioner was therefore fully justified in overturning the district judge’s decision and in issuing the present holding.

In this case the Court observed that on 3 September 1949 an adjustment of accounts was actually carried out by the muneems and that the principals accepted this adjustment, thereby rendering the alleged coercion and misrepresentation narrative false. Counsel for the respondent, Mr Bindra, argued that the plaintiff’s suit should be dismissed because it relied solely on an acknowledgment of liability; he contended that such an acknowledgment could only save the suit from the bar of limitation and could not by itself create a cause of action. The Judicial Commissioner, however, held that an unqualified acknowledgment like the one contained in the suit, together with the statement of the account on which the entry was made, were sufficient to give the plaintiffs a cause of action for maintaining the present suit. The Court agreed with this view and found no permissible exception to that conclusion. The Court referred to the Privy Council decision in Maniram v Seth Rupchand (1), which held that an unconditional acknowledgment implies a promise to pay, being the natural inference unless something to the contrary is expressed. The same principle was applied in Fateh Chand v Ganga Singh (2), where the Court ruled that a suit based on a balance is competent. Likewise, Kahanchand Dularam v Dayaram Amritlal (3) expressed that the expressions “balance due”, “account adjusted” and “balance struck” indicate that the parties had examined the account, and that the defendant’s acceptance of the statement of account contained in the plaintiff’s account book, made manifest by his signature, amounted to an “accounts stated between them” under article 64 of the Limitation Act. The Court found that the same factual situation prevailed in the present case. The acknowledgment that formed the foundation of the suit was entered in the plaintiff’s ledger, a book that already contained earlier mutual accounts, and the suit was therefore not based merely on that acknowledgment but on the entire series of mutual dealings and the accounts stated between the parties, making it clearly maintainable. Mr Bindra also cited a decision of the Allahabad High Court in Ghulam Murtuza v Fasihunnissa (4), which held that even if an acknowledgment implies a promise to pay, it cannot be treated as creating a fresh cause of action. After examining that decision, the Court concluded that it did not establish good law. Consequently, the Court found that the appeal had no merits and dismissed it with costs, ordering the appeal dismissed. The agents for the parties were recorded as Govind Saran Singh for the appellants and A. D. Mathur for the respondents. (1) (1906) 33 I.A. 165. (2) (1929) I.L.R. 10 All. 748. (3) (1929) I.L.R. 10 All. 745. (4) (1935) I.L.R. 57 All. 434.