Summons For Judgment No.1007 of 2000,Summary Suit No.3164 of 2000

5th October, 2002

Petitioner Counsel: Mr. ASHPI CHINOY, Mr. P.K.SAMDANI, ASHOK PARANJAPE, Ms. SANDHYA NAIR, Wadia Ghandhy & Co
Respondent Counsel: Mr. Janak Dwarkadas, Mr. Berjis Colabawala, M/s. Gagrat & Company

Cases Cited:
Hiralal Vs.Badkulal, AIR 1953 SC 225 [Para 26]
Khan Chand Vs. Dayaram, AIR 1929 Lahore, 263 [Para 27]
Gordon Woodroffe Vs. Sk. M.A.Majid., AIR 1967 SC181 [Para 27,40]
Bhichunchand Vs. Girdharilal, 34, Privy Council, 147. [Para 28]
M/s. Manekchand Mohanlal Poonawala Vs. Shah Bhimji Kundanmal & Co., 1971 BLR 370 [Para 31,35]
R.Kumar Vs. Chemicals Unlimited, AIR 2001 Bombay 116. [Para 32,38]
Quinn Vs. Letham, (1901 AC 495) [Para 38]
Dyes and Chemical Workers Union Vs. Bombay Oil Industries Ltd., (2001) 1 CLR 544 [Para 38]
Bishun Chand Vs. Girdhari Lal, AIR 1934 PC 147 [Para 40]

JUDGMENT

JUDGMENT :- The suit is filed as a Summary Suit under Order XXXVII Rule 2 of the Code of Civil Procedure, 1908, to recover a sum of Rs.5,04,26,250/- towards principal and interest upto 15th July, 2000 together with further interest at the rate of 18% per annum on Rs.3,57,00,000/- from 16th July, 2000 till payment.

2. The Plaintiff's case is that between 24.2.1995 and 23.7.1997 it had placed deposits of various sums arregating to Rs.4,79,00,000/- with the Defendant which the Defendant agreed to repay with interest, initially at the rate of 16% per annum and at the rate of 18% per annum with effect from 1.1.1997 on the basis of simple interest payable quarterly.

The Defendant repaid an aggregate amount of Rs.1,22,00,000/- towards the principal amount. The Last payment towards the principal amount was of a sum of Rs.25,00,000/- on 29th June, 1996, leaving a balance of Rs.3,57,00,000/-.

The Defendant also paid various sums towards interest between 1.4.1995 and 31.3.1998 at the intervals and at the rates mentioned above. After 31st March,1998 the Defendant did not pay any amount to the Plaintiff.

3. This brings me to two important documents viz. balance confirmation letters signed by the Defendant, on the basis whereof the plaintiff has filed this suit.

The Plaintiff, under the cover of its letter dated 7th April, 1998 enclosed a Statement of Account for the period 1st, April, 1997 to 31st March, 1998 and sought the Defendant's confirmation thereof. The Defendants' Accountant confirmed the same. Thereafter, the Defendant sought the Plaintiff's confirmation of its account, contained in the Defendant's letter dated 31.3.1999 which the Plaintiff did.

4. Before dealing with the Defendant's case in respect of the above confirmation letters, it is necessary to refer to the contents thereof.

(a) The Plaintiff's said Ledger Account for the period April, 1997 to March, 1998 confirmed by the Defendant, contains details regarding the principal amount lying with the Defendant, the amount of interest paid for the quarters between 1st April, 1997 and 31st March, 1998 and the rate at which such interest was paid viz. 18% per annum. The account confirms the "Closing Balance" to be Rs.3,57,00,000/-. Interest for the first four quarters was paid in full at the rate of 18% per annum. Only a part of the interest viz. Rs.2,00,000/- was paid for the quarter 1st. January, 1998 to 31st March, 1998. As stated earlier, the Defendant confirmed this account.

(b) The Defendant's Account, confirmed by the Plaintiff, also confirms the Closing Balance as on 1st April,1998 to be Rs.3,57,00,000/-. The credit column recites that Rs.3,57,00,000/- was the "Balance b/d" i.e. the balance brought down or brought forward on 1.4.1998. The debit column recites that this amount of Rs.3,57,00,000/- was the "Balance c/f" i.e, the balance carried forward on 31.3.1999. It further confirms that on 4th April, 1998 and 31st July, 1998 the Defendant paid to the Plaintiff towards interest a sum of Rs.10,00,000/- and Rs.4,06,500/- respectively, aggregating to Rs.14,06,500/-

It would be convenient in view of a point made on behalf of the Defendant, which I shall come to later, to explain the reference to the interest paid in the Defendant's Account. The interest for the quarter 1st January, 1998 to 31st March, 1998 was Rs.16,06,500/-. As stated in the Plaintiff's said Ledger Account dated 8th April, 1998, the Defendant on 16th March, 1998 paid only a part of this amount viz. Rs.2,00,000/-. The balance amount was paid by the Defendant to the Plaintiff on 4th April, 1998 and 31st July, 1998 as reflected in the Defendant's Account.

5. Thus, the effect of the aforesaid balance confirmation letters is as under :-

i) The accounts of the Plaintiff and the Defendant are consistent with each other.

ii) The Plaintiff and the Defendant acknowledged that the principal amount due by the Defendant to the Plaintiff was Rs.3,57,00,000/-.

iii) The Defendant paid the Plaintiff interest every quarter, commencing from the quarter 1st April, 1997 to 30th June, 1997 at the rate of 18% per annum.

iv) Interest with effect from 1st March, 1997 was paid at 18% per annum.

I will come to legal effect of the balance confirmation letters after dealing with the Defendant's case.

6. Mr. J.D.Dwarkadas, the learned Senior Counsel appearing on behalf of the Defendant firstly denied that the Defendant's Accountant signed the Plaintiff's Ledger Account dated 8th April, 1998. He further stated that the person who signed the Defendant's confirmation letter is not the Accountant of the Defendant and not binding on the Defendant. The submission was made on the basis of paragraph 14 of the Defendant's affidavit in reply dated 19th July, 2002. The denial is ex-facie false and in any event of no legal consequence as it was accepted by the Defendant.

7. After filing this suit, the Plaintiff made an application for ad-interim reliefs for attachment before judgment under Order XXXVIII Rule 5 of the C.P.C in terms of a Draft Notice of Motion subsequently numbered as Notice of Motion No. 2813 of 2000. The Defendant filed its affidavit in reply dated 14th March, 2002. The balance confirmation letters were extremely important documents. Indeed, the suit has been filed on the basis thereof. If, in fact, the same had not been signed by or on behalf of the Defendant, the Defendant would have denied the same at the first available opportunity. But, the Defendant did not do so. On the contrary, in paragraph 7 of its affidavit in reply dated 14th March, 2002, while dealing with the balance confirmation letters, this is what the Defendant stated :

"The purported confirmations were part of the arrangements between the Advani Group and the Kamat Group."

Thus, the Defendant expressly admitted the confirmation of the Plaintiff's Ledger Account and the execution of its confirmation letter as having been done on its behalf. The Defendant's case as to the circumstances in and purpose for which it did the same is a matter I shall deal with separately. Suffice it to say at this stage that the Defendants did not deny their knowledge and execution of the documents.

8. The Defendants have also denied the basis on which, according to the Plaintiffs, the said amounts were advanced and were to be repaid. The defence is unsustainable. The Defendant does not deny the receipt of the amount. The nature of the Defendant's case in this regard is such that I would rather let the Defendant's affidavit speak for itself. This is what the Defendant says about the circumstances in and the terms on which they received the amounts and the manner and conditions on which the same were to be repaid:

"I say that Sun N Sand Hotel at Juhu, Mumbai, is owned by the Advani Group with whom the Kamat Group has long standing business relationship since the year 1982-83. The Advani Group and the Kamat Group have extended such need based accomodation/ cash advance facilities between themselves from time to time as mutually agreed. It was also the practice between both the groups that such sums would be routed through one or any of their affiliates or companies to the concerned affiliate of the other group. On sums so received/ routed, the company/affiliate of the Kamat Group used to pay interest in the mutual interest of both the groups as mutually agreed from time to time between them, though on fact and in reality, it was clear understanding between both the groups that the need based accomodation/cash advance facilities shall bear no interest and such sums would always consider as the sums received/routed between the groups. There were no independent transactions which took place between the Plaintiff and the companies of the Kamat Group, the company or its officers or its directors never had any direct dealings or negotiations at any time. However, for the purpose of accounting, the Accountant of the company/affiliate of the groups used to sign letters and statements/confirmation in mutual interest of both the groups. Hereto annexed and marked as Exhibit 6 is a copy of the statement showing some of the entries of the amounts between the groups showing routing/re-routing of money between the groups which indicates that payments originated from affiliate of one group goes back to the attiliate of the same group."

The affidavit also contains details which according to the Defendant evidences its above defence.

9. To make good the Defendant's case that no interest was payable, Mr. Dwarkadas, referred to various factors.

10. Before dealing with the same, it is important to reiterate that the balance confirmation letters indicate beyond any doubt that interest was agreed to be and was in fact paid by the Defendant at the rates, for the period and at the time stated by the Plaintiff. I have already rejected the Defendant's contention that the balance confirmation letters were not signed on their behalf. The balance confirmation letters belie the Detendant's case that it was agreed between the parties that no interest was payable.

11. There are two farther facts which belie this case. In the correspondence that ensued prior to the suit, the Defendant never contended that it was agreed between the parties that no interest would be paid. On the contrary, in a letter dated 13th January, 2000, the Defendants stated that at a meeting with the Plaintiff's representative, the Defendant made it clear that it was not possible to pay interest at the rate of 18% per annum and offered to pay interest at the rate of 14% per annum instead. In the subsequent correspondence, the Defendant merely denied that interest at the rate of 18% per annum was payable.

Had it been agreed that no interest would be payable, the Defendant would certainly have stated so in reply to the Plaintiff's notices of demand. The Defendant is part of a large business group. If the parties had agreed that no interest would be payable, it was an essential term of the agreement and too important not to be mentioned in the reply to the first demand for the same, if not contemporaneously at the formation of the agreement atself.

There is nothing on record to indicate such an agreement. The available material militates against the Defendant's case and in fact establishes an agreement to pay interest.

12. Mr. Dwarkadas was thus driven to merely poking holes at the evidence on record to try and create some defence. I must now deal with each his endeavors in this respect.

13. He submitted that the Plaintiff's ledger Account dated 8th April,1998 refers to a payment of Rs.2,00,000/- towards interest for the quarter 1st January, 1998 to 31st March, 1998 and stated that the same bears no correlation to any principal amount. In other words interest at 18% for a quarter on Rs.3,57,00,000/- would be Rs.16,06,500/- and not Rs.2,00,000/-. He submitted that there is no explanation for the payment of Rs.2,00,000/- by the Defendant.

The fallacy of the argument lies in the fact that it was the Defendant who made the payment and the Defendant had offered no explanation for the same. Further in the affidavit in reply, nothing to this effect has been stated. Moreover the explanation is quite simple. What Mr. Dwarkadas omitted to notice was that the entry in the Plaintiff's said Ledger Account clearly states that it was only a "part" payment towards interest for that quarter. As I have already explained above, the balance amount of the Rs.14,06,500/ was paid on 4th April, 1998 and 31st July, 1998 as confirmed by the Defendant's own letter dated 31st March, 1998 which clearly states that the same was paid towards interest.

14. Before this position was clarified by Mr. Chinoy, the learned Senior counsel for the Plaintiffs, Mr. Dwarkadas also stated that there was no explanation for the payment of Rs.14,06,500/ referred to in the Defendant's confirmation letter. Once again, the Defendant, who made the payment and addressed the confirmation letter made no such point in its affidavit in reply. After the explanation was tendered on behalf of the Plaintiff, I did not hear anything to the contrary on behalf of the Defendant.

15. Mr. Dwarkadas then referred to the table in paragraph 5 of the Plaint which contains the particulars of payments made by the Defendant to the Plaintiff towards interest. He submitted that the same belies the Plaintiff's case that the payment mentioned therein were made towards interest as, for the same period viz. a quarter, different amounts have been paid by the Defendant to the Plaintiffs. Incidentally the payments have not been denied.

The answer really is quite obvious. During the periods mentioned in the table, in paragraph 5 of the Plaint, the Plaintiff continued to deposit/advance various amounts. Interest on such further advances had also to be calculated and payment thereof made. Moreover, during that period the Defendants also repaid various amounts aggregating to Rs.1,22,00,000/- as stated above. Interest on this amount would cease to run from the date of receipt of the payment by the Plaintiff. Thus, interest for one quarter would not necessarily be the same as the amount of interest for another quarter.

Moreover, it is pertinent to note that once again, no such point was raised by the Defendant in its affidavit in reply. Even assuming, therefore, that there was no such explanation available for this contention, this is a defence which was necessarily required to be taken on affidavit so that the Plaintiff had an opportunity of dealing with the same. Not having done so, it is not open to the Defendant to argue the point at all.

16. The Defendant's case is belied by another equally, if not more significant fact. In Summons for Judgment No. 1008 of 2000 filed by the Plaintiff against another member of the Defendant's group viz. M/s Vitthal V. Kamat & Brothers & Ors, Defendant No.1 therein had even issued in favour of the Plaintiff T.D.S. Certificates. This conclusively establishes the falsity of the Plaintiff's case that no interest was paid by any of the members of the Defendant's group in respect of any advances made by various members of the Plaintiff's group.

17. This brings me to the defence regarding the advances having been made by the Plaintiff pursuant to the alleged agreement for need-based accomodation that there were no independent transactions which took place between the Plaintiff and the companies of the Kamat group and that the companies/consintuents of one group had no direct dealings with the constituents of other group.

Mr. Dwarkadas submitted that no person or entity in the Plaintiff's group was entitled to recover the money in his or its independent capacity against any particular company or person of the Defendant's group. According to him, the liability was inter-se the two groups and not between individual members of each group.

This is not a defence which I would term as moonshine. It is concocted. At the outset, it must be mentioned that this theory was never mentioned in the correspondence that ensued between the parties prior to the suit.

18. If in fact, such was the agreement or understanding between the parties, a variety of consequential issues and contingencies would necessarily have arisen, requiring the parties to necessarily resolve them as well. For instance, which of the constituents of a particular group would be entitled to the benefit of the accounts when made up ? Which of the constituents of the other group would be liable to make good the same ? It is impossible to believe that especially parties, such as those before me, would leave such matters vague and without being reduced to writing. I asked Mr. Dwarkadas whether it was the Defendant's case that upon on taking accounts the Kamat group was found to be the debtor of the Advani group, each and every person or company or firm of the Kamat group would be liable for the same ? In fairness to Mr. Dwarkadas, he did not pretend to have an answer.

19. Mr. Dwarkadas also relied upon several vouchers in support of this defence. The vouchers were made by the Defendant and forwarded to the plaintiff for its signature to evidence the payment made by the Defendant to the Plaintiff of the amount mentioned therein. Mr. Dwarkadas relied upon the following endorsements allegedly made in the vouchers:

" Being repayment of the amount as per mutual understanding with Advani Group."

The Plaintiff was required to sign the voucher acknowledging receipt of the amount. The Plaintiff initially did mention that it was not in possession of the vouchers. However, they thereafter produced copies of some of the vouchers with it. The copies produced by the Plaintiff do not bear the endorsement. Looking at the over all facts and circumstances of the case, I find it difficult to accept the Defendant's case that the vouchers when presented to the Plaintiffs for its signature, contained the said endorsement. Further, even assuming that the endorsement was there, it cannot take the Defendant's case much further in view of the fact that the alleged "mutual understanding with Advani Group" has itself not been satisfactorily explained or pleaded, as I have observed earlier. To me, it appears that the Defendant is merely clutching at straws. I therefore, have no hesitation in rejecting this defence too.

20. Yet another attempt has been made to confuse matters. The Defendant, in the affidavit in reply alleged that it has also advanced large sums of money to the Plaintiff. In this regard the Defendant relied upon payments of Rs.15,00,000/- and Rs.37,500/-. The defendant has also stated that it advanced a sum of Rs.5,00,00,000/- to the Plaintiff. As far as the amount of Rs.5,00,00,000/- is concerned, the Defendant furnished no particulars whatsoever. This was pointed out in the Plaintiffs' affidavit in rejoinder. The Defendant filed a sur-rejoinder but failed yet again to give any particulars.

As far as the sums of Rs.15,00,000/- and Rs.37,500/- are concerned, it is proved beyond doubt by the Plaintiff that the same were not advanced by the Defendant but were repayments by the Defendant, of the loans taken by it. It is further pertinent to note that the said loans pertain to the year 1994 after which the Defendants executed the said balance confirmation letters. Thus, in any event, the same are irrelevant and were introduced only for the purpose of confusing the issue.

21. Mr. Dwarkadas invited my attention to stray sentences in the correspondence between the parties where the Plaintiff had referred to the dues of the "Group". By a letter dated 17th December, 1999 the Plaintiff stated that the amounts outstanding from the Defendant's group amounted to more than Rs.7,06,00,000/-. The Plaintiff further annexed a statement showing the amounts due from the various companies of the Defendant's "group".

I do not see how this would assist the Defendant in establishing its alleged agreement. It is true that various members of the Plaintiff's group advanced various amounts to the members of the Defendant's group. This, however, does not support the Defendant's case. The use of the expression "group" was only a compendious method of referring in the body of the letter to the various transactions between the members of the groups and the outstanding by each member of one group qua the relevant member of the other group as specified in the annexure.

22. In this regard, it is further pertinent to note that the Plaintiff in its affidavit in rejoinder categorically stated that the Defendant never advanced any monies to the Plaintiff or to any member of the Advani group. The Plaintiff further stated that the Defendant nowhere specified the amounts that they allegedly extended/ advanced to the Advani Group and that the allegations were malafide only to dispute the Plaintiffs admitted dues.

There is no denial of this very material fact. Despite a sur-rejoinder filed by the Defendants, neither is the statement refuted nor is there any evidence produced to rebut the same. The irresistible conclusion is that the material in the Defendant's possession does not support its case. Otherwise, in the sur-joinder atleast the Defendant would have disclosed this material. Indeed, what we have seen thus far is that the admitted material emanating from this defendant militates against its case.

23. Lastly, Mr. Dwarkadas referred to an order passed by Kochar, J. dated 8th June, 2001 in Company Petition No. 113 of 2001. The Petition was filed by one Mrs. Gitanjali R. Shivdasani, a member of the Advani group, against Indira Investment Pvt. Ltd., a member of the Kamat group. The Petitioner claimed that Indira Investment Pvt. Ltd. was indebted to her in the sum of Rs.20,00,000/-. Kochar J. dismissed the Petition observing that the transactions between the two groups had been taking place for some time and were not simple stray loan transactions. He further held that it will have to be decided and determined as to who actually advanced the loan and who was responsible for repaying the same. Mr. Dwarkadas submitted that by virtue of this order all the claims made by every member of the Advani Group ought to be dismissed on the basis of the order as it has the effect of reflecting on all the transactions of the group.

The submission is not well founded.

24. The reliance upon the order of Kochar, J. is misplaced. It is true that the parties before Kochar, J. and the parties before me belong to the same groups. The findings, however of Kochar, J. in that case cannot have any effect on the Plaintiff's case before me, as the Plaintiff was not a party before Kochar, J. It is trite law that orders are binding only between parties and not strangers thereto. It makes no difference that the party to the order and the stranger thereto i.e. the Plaintiff belong to the same group. To hold to the contrary, would lead to absured consequences.

It is also clear from the order that the various facts mentioned herein were not considered by Kochar, J.

Considering the view I have taken, it is not necessary to deal with Mr. Chinoy's submission that the order is not binding on me as an appeal from the said order is pending. Nor it is necessary therefore to refer to the judgments cited by him in this regard.

25. This brings me to two questions of law viz.

(a) Whether the suit based on the balance confirmation letters is maintainable as a Summary Suit ?

(b) Whether the balance confirmation letters contain a promise to pay the amount with interest at 18% per annum ?

26. In Hiralal & Ors. Vs. Badkulal & Ors. reported in A.I.R. 1953 Supreme Court 225 the Supreme Court was concerned with a suit which was instituted for recovery of an amount due at the foot of mutual dealings. In the Plaintiff's book, the Defendant signed the following entry :

"Rs.84,000 balance due to be received up to Bhadon Sudi 11 Samvat 2006 made by check and understanding of accounts with Hiralaji's books."

The entry was signed by the Defendant with the following endorsement :-

"After adjusting the accounts Rs.34,000/- found correct payable"

It was contended on behalf of the Defendant that no suit could be based merely on an acknowledgement of a debt. Rejecting the contention the Supreme Court observed that the Defendants, who also had kept accounts would not have signed the balance in the Plaintiff's books without reference to their own books. Holding that the suit was maintainable, the Supreme Court observed as follows in paragraph 11 of the judgment :-

"Mr. Bindra next urged that the Plaintiffs' suit should have been dismissed because it could not be maintained merely on the basis of an acknowledgment of liability, that such an acknowledgment could only save limitation but could not furnish a cause of action on which a suit could be maintained. The Judicial Commissioner took the view that an unqualified acknowledgment like the one in the suit, and the statement of the account under which the entry had been made, were sufficient to furnish a cause of action to the Plaintiffs for maintaining the present suit. We are satisfied that no exception can be taken to the conclusion. It was held by the Privy Council in Maniram V. Seth Rupchand, 33 Ind. App.165(p.c.)(c) that an unconditional acknowledgment implies a promise to pay because that is the natural inference if nothing is said to be contrary. It is what every honest man would mean to do. In Fateh Mohammed V. Ganga Singh, A.I.R 1920 Lah. 264 (D), the same view was taken. It was held that a suit onthe basis of a balance was competent. In Kahanchand Dularam V. Dauram Amritlal, A.I.R., 1929 Lah, 268 (D) the same view was "expressed and it was observed that the three expressions balance due," "account adjusted" and "balance struck" must mean that the parties had been through the account. The deft there accepted the statement of account contained in the Plaintiff's account book, and made it his own by signing it and it thus amounted to an "accounts stated between them" in the language of Art.64, Limitation Act. The same happened in the present case. The acknowledgment which forms the basis of the suit was made in the ledger of the plaintiffs in which earlier mutual accounts had been entered and truly speaking, the suit was not based merely on this acknowledgment but was based on the mutual dealings and the accounts stated between them and was thus clearly maintainable." (emphasis supplied).

27. In Khan Chand Vs. Dayaram (A.I.R. 1929 Lahore, 263 affirmed by the Supreme Court in the above case) the Division Bench held that even a balance struck and accepted implies a promise to pay.

In Gordon Woodroffe & Co. Vs. Sk. M.A. Majid & Co., A.I.R. 1967 Supreme Court, 181 the Supreme Court held.

"The legal position is that the accounts are settled or stated if they are submitted and accepted as correct by the other side to whom the accounts have been rendered. Such a statement of accounts need not be in writing, nor is it necessary, that before the accounts are settled, they should be gone into by the parties and scrutinized and supported by vouchers. It is sufficient if the accounts are accepted and such acceptance may be inferred by conduct of parties."

Thus, the balance confirmation letters furnish the Plaintiff a cause of action on which the suit is maintainable.

28. The balance confirmation letters were accepted by the Defendant unconditionally, answer the description of an account stated and imply a promise to pay. If the Defendant's case viz. that there were mutual dealings between the parties is accepted, the balance confirmation letters are clearly accounts stated or settled. If the Plaintiff's case is accepted, viz. that the Defendant did not advance any monies to the Plaintiff, and that the amounts received by the Plaintiff from the Defendant were only in discharge of the Defendant's liabilities, it will still amount to an account stated. The Privy Council in Bhichunchand Vs. Girdharilal 34, Privy Council, 147 held that it matters not whether the only payments made on the other side were simply payments in reduction of indebtness or were payments made in respect of other dealings.

29. The balance confirmation letters do not contain expression identical to those in the above judgment. But their effect in fact and in law is the same. After setting out the principal amount and giving credit for the amounts paid, it was stated by the Plaintiff and confirmed by the Defendant that the "closing balance" was Rs.3,57,00,000/-. This is a commonly and widely used expression to indicate the balance amount due after setting the account between parties. It is an unconditional acknowledgment of its liability by the Defendant. It contains an implied promise that the amount stated to be the closing balance would be paid by the Defendant. To hold to the contrary would be contrary to common sense, the law well established in the above authorities and would rid such accounts of their commercial efficacy.

30. The question really is whether the present suit filed on the balance confirmation letters is maintainable as a Summary Suit ?

The above judgments furnish an answer to this question. They hold that an account stated or accepted, implies a promise to pay. Thus, the cause of action is based on a written agreement containing an implied promise to pay.

31. In M/s. Manekchand Mohanlal Poonawala Vs. Shah Bhimji Kundanmal & Company. - 1971 BLR, 370 this Court held that an implied obligation contained in a writing, creates a liability to pay a debt or liquidated demand in money and can be enforced by instituting a Summary Suit. In that case, the writing on the basis of which the suit was filed, was in the Sahi book and read as follows :-

“Rs.13,000/-	Shah Himaji Kundddanmal and Company. (Sd/-) Manekchand Mohanlal Poonawala.
Rs.13,000/-	cash-full Khata Pete Jama (received on Sarati account and so credited) Interest 14 annas (fourteen annas) S.Y.2023 Posh Vad. 12 Monday 6-2-67. (Sd/-) Mota Visraj.”

It was contended that the writing did not disclose any promise to make payment, that the promise, if any, for payment was previous or oral and not on a written contract and that it was merely an acknowledgment. Negating the contention K.K.Desai,J. held that the writing contained an obligation and an implied promise that the amount would be repaid by the Defendant. Answering in the affirmative the question whether it constitutes a written contract within the meaning of Order 37 rule 2, K.K.Desai, J held as follows :-

"Now, it is true that prior to the amendment of r.2, a summary suit could be instituted in all cases where a debt or liquidated demand in money arose on contract, express or implied. It is quite clear that previously a written contract was not a necessary condition for institution of a summary suit to recover debt or liquidated demand in money. Where express or implied obligation to pay debt or liquidate demand in money arose, even on an oral contract, a summary suit could be instituted. Under the amended Rule, summary suits cannot be instituted when such debt or demand in money arises on oral contracts. Mr. Karanee, however, is not right in his submission that the deletion of the phrase "express or implied" from amended r.2 indicates that when implied obligation to pay debt or liquidated demand in money arises on a written contract, a summary suit cannot be filed. Obligations arising on a written contract can in some parts be express and in other parts be implied by law or otherwise. Such implied obligations, if they create, a liability to pay debt or liquidated demand in money, can be enforced by instituting a summary suit having regard to the language of the amended r.2. In my view, it is not correct that implied obligations to pay debt or liquidated demand in money when they arise on a written contract cannot be good causes of action for institution of summary suits."

32. In R. Kumar & Company Vs. Chemicals Unlimited, A.I.R. 2001 Bombay, 116 Kochar,J. dealt with a Summons for Judgment in which the Plaintiff based its cause of action on three letters, addressed by the Defendant to the Plaintiff, stating that in the account of the Plaintiffs certain amounts were shown as due by them to the Plaintiffs. In that case, the Defendant had also issued a T.D.S. Certificate. The learned Judge held in paragraph 10 and 14 as under :

10. "According to me, to take any other narrow, pedantic or technical view of the matter would be to encourage dishonesty and immorality in life. I fail to understand how the defendants having written to the plaintiffs that certain amounts were shown payable by the defendants to the Plaintiffs, can now turn about and say that no suit will lie for recovery of the said amounts shown to be the liability of the defendants towards the plaintiff. To accept such contention would amount to encourage and accept dishonesty and immorality."

14. "In our case, the defendants have themselves addressed the three letters to the plaintiffs pointing out to the plaintiffs the amount stated in their books of accounts to be their liability towards the plaintiffs. I fail to understand why this admission cannot be taken as the basis of a summary suit as an admitted or liquidated claim. The defendants on their own voluntarily, informed the plaintiffs that the balance in the plaintiffs' account as shown was payable by the defendants to plaintiffs. An honest and straight forward businessman writes to the creditor that the latter is entitled to receive a certain amount from the former. In these circumstances, I am at loss to understand why no summary suit would lie on such a clear cut admission. To take any other view would be contrary to the honest and moral view of the law."

The learned Judge went on to pass a decree in favour of the Plaintiff at the stage of the hearing of the Summons for Judgment.

33. The judgments squarely apply to the present case. The authorities have uniformly held that an unconditional acknowledgment implies a promise to pay because that is the natural inference, if nothing is said to the contrary. In the present case there is no express agreement by Defendant to pay any amount to the Plaintiff. The unconditional confirmation / acknowledgment of the Closing Balance constitutes an implied promise by the Defendant to pay the same. The suit is maintainable as a Summary Suit.

34. It was further submitted on behalf of the Defendants that the balance confirmation letters in any event do not contain an agreement in writing to pay interest. It was submitted that the balance confirmation letters and even the T.D.S. Certificates for that matter only evidence an agreement for the payment of interest for the period for which payment was made. They do not evidence an agreement for payment of interest in future. I heard the learned counsel for the Defendants in Summons for Judgment No. 1008 of 2000 as well, as the same is between the members of the two groups, involve similar questions and was heard along with this matter.

35. Mr. Chinoy on the other hand submitted that such acknowledgment necessarily implies a promise to repay the debt acknowledged in terms of the liability acknowledged. Accordingly, he submitted, an acknowledgment of debt with a stipulated rate of interest necessarily implies a promise to pay such debt along with the stipulated rate of interest. In support of this submission he relied upon the judgment in 1971 BLR 370 (supra).

36. I am unable to accept the submission on behalf of the Defendant. However, though the conclusion I have reached is in favour of the Plaintiff on this question it is for reasons different from those submitted on its behalf.

37. I am in agreement with Mr. Chinoy's submissions on the question of interest. But these submissions do not conclude the matter in his favour. If a rate of interest is stipulated in the unconditional acknowledgment then the matter does not admit of any difficulty. The Plaintiff would be entitled to a decree with the stipulated rate of interest. This was the case in 1971 BLR 370 as is clear from the part of the judgment extracted by me earlier.

However, in the present case the rate of interest was not stipulated, in the sense that the Defendants while acknowledging their liability did not mention that the amount is repayable with interest. At one stage I did think that the judgment in 1971 BLR 370 concluded the matter in the Plaintiff's favour. But that is not so, for in that case the Defendant stipulated the rate of interest at which the amount received on account was to be repaid. In the present case the Plaintiff's account which the Defendant confirmed does not contain such a stipulation. I would view the matter differently.

38. Before doing so there is one further submission I must deal with Mr. Chinoy submitted that in R. Kumar & Co. (supra) Kochar, J. granted a decree in similar circumstances and the judgment thus decides this question in his favour sub-silentio. The submission is not well founded. This point was neither raised nor decided in that case. In Quinn versus Letham ( 1901 AC 495) it was held that a judgment is only an authority for what it decides and not what is logically deducible thereof. The judgment has been followed consistently by this Court ( see Dyes and Chemical Workers Union Vs. Bombay Oil Industries Ltd. (2001) 1 CLR 544).

39. I would view the matter differently. While adjusting accounts the parties acknowledged without any reservation that with effect from 1st January, 1997 interest was paid and received at 18% per annum. That the confirmation of the balance in the Plaintiff's account implied an agreement to pay interest upto the date on which it was paid is not disputed. Indeed it cannot be disputed. It would be stretching thing to suggest that the Defendant paid interest without there being any agreement to do so.

40. There is nothing, apart from the counsels submission, that this agreement to pay interest was restricted to the period for which it was to be paid. If interest has been paid in the past and the balance is confirmed by the debtor and the creditor, then subject to anything to the contrary it would imply a promise to continue to pay interest at that rate on the balance confirmed. It is not necessary in such circumstance for an express and independent stipulation that the balance therein would be paid with interest. This must be implied. To hold to the contrary would run counter to the basis on and the purpose for which parties have accounts stated and deprive such documents of any commercial efficacy.

A catena of judgments of various Courts has affirmed the principle that implied in an account stated or accepted or settled is a promise to pay. The Privy Council in Bishun Chand Versus Girdhari Lal- AIR 1934 PC 147 (affirmed by the Supreme Court in Gordon woodroffe's case (supra) observed that an account stated gave rise to a promise to pay and was one of the most ordinary business facilities which has been common to everybody who carries on business under any system which incorporates any of the ordinary principles of English Contract Law. To hold that when an account stated contains intrinsic evidence of the rate at which interest has been paid and received without demur does not imply a promise to continue to pay interest at that rate would render this facility otiose and denude the commercial efficacy of such documents recognized by these judgments.

41. Hence, the following order :-

i) The Defendant is granted conditional leave to defend the suit on the Defendant depositing in this Court a sum of Rs.5,04,26,250/- on or before 1st April, 2003.

The Defendant however shall be at liberty instead to furnish on or before 1St. April, 2003 an unconditional guarantee of a Nationalised Bank to the satisfaction of the Prothonotary and Senior Master for the said sum together with interest thereon at the rate of 10% per annum. The guarantee shall be valid pending the final judgment in the suit and for a period of 12 weeks thereafter.

I have granted the Defendant sufficient time in view of the large amount involved and as an important question of law on the aspect of interest payable in such circumstances is involved which the Defendant would I presume wish to test in Appeal.

ii) On such deposit being made, the suit be transferred to the list of commercial causes. The Defendant shall file its written statement within a period of six weeks thereafter. Discovery and inspection to be completed within further six weeks thereafter.

iii) In the event of the amount being deposited as aforesaid, the Prothonotary and Senior Master to deposit the said amount in a Nationalised Bank initially for a period of one year and thereafter for equal successive periods till the disposal of the suit.

iv) On the failure of the Defendant to deposit the aforesaid amount or furnishing the guarantee as aforesaid, liberty to the Plaintiff to apply for further orders.

Summons For Judgment is disposed of in the aforesaid terms. There shall be no order as to costs.

Parties to act on an ordinary copy of this order duly authenticated by the Associate of this Court.

Certified copy expedited.

Order accordingly.