ORDER
1. The petitioners, partners of the erstwhile M/s. Vikram Industries, Kakinada, in these proceedings sought a declaration that Section 52-A of A.P. Revenue Recovery Act, 1864 (for short ‘the Act’) is unconstitutional and that the action of the A.P. State Finance Corporation (R2) seeking to enforce its dues by the notices dated 5-10-1988 and 15-11-1988, against the petitioners under the provisions of the Act, is illegal,
2. The facts in brief:
(A) M/s. Vikram Industries, Kakinada, a partnership firm was sanctioned a term loan of’Rs.67,000/- in 1971, to meet part of the cost of the land, buildings, plant and machinery and for setting up a unit for manufacture of melamine products. The petitioners are stated to have run the unit fora time but without any payment i.e., towards instalments or interest.
(B) Two individuals Jagarlamudi Durga Prasad and Mating Sambasivaram (impleaded as respondents 3 and 4 in the writ petition, but against whom the writ petition was dismissed, for default, by this Court’s order dated 22-6-1999) are stated by the petitioners to have been admilled into the partnership along with the petitioners on 1-1-1981 under a registered partnership deed and that the partnership itself was dissolved on 25-2-1981. The petitioners have also urged tliat as per the deed of dissolution all the assets and liabilities of the., said firm were taken over by the newly introduced partners J. Durga Prasad and M. Sambasivaram, and that from the said date of dissolution the petitioners ceased to have any interest in the assets or liabilities of the firm. The petitioners also pleaded that Durga Prasad and Sambasivaram had reestablished the business in the name and style of M/s. Coastal Plastics, Kakinada, and also undertook to discharge all the liabilities mentioned in the balance sheet attached to the dissolution added, within one year including the loans due to the respondent-Corporation and the State Bank of India. It is also pleaded that the factum of dissolution and taking over of the assets and liabilities by Durga Prasad and Sambasivaram was intimated to the respondent-Corporation and that from then onwards the Corporation was dealing with the said individuals and that M/s. Costal Plastics never claimed anything from the petitioners.
3. The APSFC however denied the above averments in its counter-affidavit stating that the proposal of Durga Prasad and Sambasivaram taking over the assets and liabilities of the unit was accepted on certain conditions by the Corporation and that the conditions not having been complied with approval was not accorded. The Corporation also denied the knowledge of admission of Durga Prasad and Sambasivaram as partners of M/s. Vikram
Industries and the Corporation contended that the admission of the said individuals into the partnership without the prior consent of the corporation is viotative of the terms and conditions of the loan documents executed and that in the circumstances the petitioners as partners of the firm are jointly and severally liable to the Corporation or the debts due.
4, In view of these contentious facts Sri V.LN.G.K. Mitrthy, learned Counsel for the petitioners fairly submitted that the question of the petitioners not being liable in the circumstances above is not susceptible to adjudication by this Court, under Article 226.
(C) The respondent-Corporation addressed a letter dated 5-10-1988 to the petitioners informing that an amount of Rs.2,46,218.70 is due towards the loan sanctioned to M/s. Vikram Industries, Kakinada, and that the unit has been included in the Revenue Recovery Act. The letter informed that before proceeding under the Act the Corporation would like to settle the issue ambicably and in the circumstances that the petitioner is called upon to pay the amount by 20-10-1988 and in default the Special Deputy Tahsildar will attach the properties to realise the amounts.
(D) To the above letter petitioners 1 and 3 responded by letter dated 18-10-1988 stating that they are not liable to discharge the amounts on account of taking over of the assets and liabilities of M/s. Vikram Industries, Kakinada, by Durga Prasad and Sambasivaram. Para 9 of this letter specifically stated that the claim of the Corporation against the petitioners is barred by time and thus the Corporation cannot recover the amounts. In Para 10 of the letter the petitioners 1 and 3 stated that without prejudice to their rights and, contentions, they representing the dissolved:
firm, propose “to pay Rs.40,000/- in full quittance of all claims against us and other partners of the said dissolved firm M/s. Vikram Industries, Kakinada” and requested that further action against them be dropped. Reasons for the said proposal were also set out in the letter.
(E) To the above offer of the petitioners the Corporation responded by reiterating that the unit is in arrears specified in its letter dated 5-10-1988 towards principal, interest and other expenses. The Corporation also denied that its claim is barred by time and asserted that it is within the period of limitation. In conclusion the Corporation called upon the petitioners to clear the dues immediately and on failure to pay atleast a substantial part of the dues at once, proceedings under the Act for recovery of the dues were threatened.
5. The question of the validity of Section 52-A of the Act, urged in the writ petition was not pressed at the hearing of the writ petition in view of the decision of the Division Bench of this Court in Grandhi Kamaraj and others v. Government of Andhra Pradesh, 1996 (2) ALD 1193, upholding the vires of the provision.
6. The only question that survives and has been urged at the hearing of this writ petition is that the demand by the Corporation of the amounts due from the petitioners is barred by limitation and as such unenforceable per se or under the provisions of the Act.
7. In view of the decision of the Supreme Court in State of Kerala v. Kaliyani Kutty, , proceedings under the Act cannot lie for recovery of amounts that are barred by limitation, the question that arises is whether the claim of the respondent-Corporation is barred by limitation and whether this question would be adjudicated in these proceedings.
8. Facts relevant to the aspect as available on record:
A term loan was sanctioned to the partnership firm of M/s. Vikram Industries in the year 1971 and no payment either towards instalments or interest has been paid. As the arrears due from the unit were mounting it was advertised for sale on 11-3-1986. As the corporation could not dispose of the unit despite its best efforts the provisions of Section 52-A of the Act were invoked after serving demand notice dated 5-10-1988.
9. It is the Corporation’s case (Para 4 of the counter) that the firm acknowledged the debt in the letter dated 18-10-1988 and requested the Corporation to accept an amount of Rs.40,000/- towards arrears and requested for extension of time for repayment of the debt and to drop further action.
10. On the facts pleaded in response to the specific plea of the petitioners that the claim is barred by limitation it is clear that the claim was barred by limitation even by 5-10-1988 the date of demand by the Corporation. Both an action for enforcement of payment of money secured by a mortgage or otherwise charged upon an immovable property (12 years under Article 62, the Limitation Act, 1963, for short ‘the Limitation Act’) and an action where no period of limitation is provided (Article 137 of the Limitation Act), was available by 1988.
11. There are no merits in the contention of the Corporation that the letter of the petitioners 1 and 3 dated 18-10-1988 constitutes an acknowledgment of debt. In terms of Section 18 of the Limitation Act an acknowledgment of liability needs to be made before the expiration of the period prescribed. Only thus shall a fresh period of limitation commence from the time the acknowledgment is so signed. As the letter
dated 18-10-1988 is itself beyond the period of limitation, the provisions of Section 18 of the Limitation Act would have no application and the letter cannot constitute as an acknowledgment of the debt, in terms thereof.
12. Sri Y.N. Lohita learned Standing Counsel for the respondent-Corporation contended alternatively that the petitioner’s letter dated 18-10-1988 constitutes an agreement in terms of Section 25(3) of the Contract Act.
13. Section 25(3) of the Indian Contract Act, 1872 (for short ‘the Contract Act’) is in the following terms:
“Section 25. Agreement without consideration void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law :–An agreement made without consideration is void, unless-
1. …..
2. …..
3. 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 credit or might have enforced payment but for the law for the limitation of suits.
In any of these cases such an agreement is a contract.”
14. This Court in Lalam Sambayya v. Pattan Shemsher Khan, 1963 (1) ALT 501, has considered the provisions of Section 25(3) of the Contract Act in relation to a deposition made during the course of a cross-examination of a witness in a case, such deposition having been urged to constitute an agreement in terms of Section 25(3) of the Contract Act.
15. Considering the provisions of Section 19 of the Indian Limitation Act, 1908 (which is in terms in para materia Section 18 of the Limitation Act) and Section 25(3) of the Contract Act, this Court held in the aforesaid judgment that-
“Under the Limitation Act an acknowledgment made in writing signed by the party and addressed to a person other than the person entitled to the property or right would save a subsisting debt, but Section 25(3) of the Contract Act contemplates a promise made in writing and signed by the person in favour of the creditor. The latter postulates a novation of the contract while the former provides for mere acknowledgment. In order to bring a deposition within the meaning of a fresh contract, the necessary ingredients of ‘proposal and acceptance’ with the consciousness of the purpose for which the contract is being entered into have to be clearly brought out.
It is well settled that, in determining whether a particular statement is an acknowledgment or promise, the language of the document has to be considered in every case. If it amounts to an acknowledgment, the writing would not be useful for the plaintiff under Section 25(3) of the Contract Act. The statement attributed to the petitioner and reproduced in the preceding paras, appears to be nothing more than an acknowledgment. It is to be borne in mind that the said statement was made in the course of the cross-examination obviously with the intention fo showing the motive which had led the petitioner to appear as a witness against the respondent. In other words, it was elicited to damage and destroy the evidentiary value of his deposition. A statement made in those circumstances cannot be placed on the same pedestal as a fresh contract, which to my mind involve a
deliberate undertaking to renew time-barred claim. Further, if the statement is to be taken on its face value it is no more than a proposal or an offer. Admittedly, it has not been made to respondent and there is nothing on record to show that the respondent has accepted this offer so as to bring it within the definition of a contract. It cannot be urged from the subsequent notices that passed between the parties that the offer has been accepted nor could it be said that the advocate who was representing the respondent in the suit was an agent of the respondent and was competent to accept the offer on his behalf. On a consideration of these facts, I am not inclined to agree with the lower Court that the statement made by the petitioner came within the purview of Section 25(3) of the Contract Act.”
16. In view of the decision above with which I am in respectful agreement, in view of the clear provisions of Section 18 of the Limitation Act as well as on first principles this Court is of the considered view that the letter of the petitioners 1 and 3 dated 18-10-1988 does not and cannot in law constitute acknowledgment of a debt within the meaning of Section 18 of the Limitation Act.
17. Does the letter dated 18-10-1988 constitute an agreement in terms of Section 25(3) of the Contract Act is the next question; in the view of this Court it does not. The petitioner recorded a clear demurrer in Paras 1 to 8 of the letter dated 18-10-1988 with regard to their liability to pay in the circumstances recorded therein, and categorically stated in Para 9 thereof that he claim of the Corporation is barred by limitation and that no recoveries can be made from them. Thereafter, in Para 10 a proposal was set out to pay Rs.40,000/- in full quittance of all claims
against the petitioners 1 and 3 other partners of the dissolved firm M/s. Vikram Industries, Kakinada, with a request to drop further action against them. This proposal was set out clearly recording that it is without prejudice to their rights and contentions. There is thus, no proposal emanating from the petitioners which founds an agreement to pay the total amount as demanded in the corporation’s letter dated 5-10-1988.
18. In response to the letter dated 18-10-1988 the Corporation unit letter dated 15-11-1988 denied the claim of the petitioners that the Corporations claim is barred by limitation and thereafter called upon the petitioners to clear all the dues immediately and also stated that in case of failure to pay atleast a substantial part of the dues, the Corporation would proceed against them under the Act for recovery of the dues. There is thus neither an implied much less an express acceptance of the proposal of the petitioners even in respect of Rs.40,000/-proposed to be paid. There is thus no agreement between the petitioner and the Corporation in terms of Section 25(3) of the Contract Act that could be culled out from the contents of the letters dated 18-10-1988 and 15-11-1988 of the petitioners and the respondent-Corporation respectively. This Court is thus of the considered view that the letter of the petitioners dated 18-10-1988 does not, by itself or even taken in conjunction with the Corporation’s letter dated 15-11-1988, constitute an agreement in terms of Section 25(3) of the Contract Act.
19. Sri Y.N. Lohita, learned Standing Counsel for the Corporation has vehemently contended that the question of limitation is often a mixed question of law and fact and as such ought not to be decided in these proceedings under Article 226 of the Constitution and as the petitioners have multitude of remedies including a remedy under Section 59 of the Act, any proceedings
initiated under the provisions of the said Act could be assailed in the civil Court. It is also contended that the question of limitation is more appropriately adjudicated in civil proceedings. In the limited context of the facts of the case on hand this contention of the respondent-Corporation does not commend itself to this Court. True it is that a question of limitation is normally a mixed question of law and fact. However, all the relevant facts are already pleaded in the case and the specific plea of the petitioners contained in iheir letter dated 18-10-1988 and in this writ petition, the respondent-Corporation has categorically denied such contention and set out the relevant facts which are necessary to adjudicate and to pronounce on this aspect of the matter. The Corporation has contented itself with pleading that the petitioners’ letter dated 18-10-1988 constitutes an acknowledgment of the debt. Orally, it was alternatively contended, that the letter dated 18-10-1988 constitutes an agreement within the meaning of Section 25(3) of the Contract Act. This Court has considered both these contentions on the basis of the established facts as available on record. The respondent had ample opportunity to plead all the relevant facts in support of their contentions in view of the specific plea taken by the petitioners in the writ petition. No other factor has been pleaded, canvassed to rebut the contention of the petitioners in this regard.
20. In these circumstances this Court is not inclined to relegate the petitioners, to pursue adjudication on this aspect of the mater, to an alternative Forum, merely as a ritualistic exercise. In the premise this contention of the respondent-Corporation has been rejected and this Court has proceeded to adjudicate upon this question in these proceedings.
21. In the circumstances above, this Court declares that the claim of the
respondent-Corporation that the petitioners are due an amount of Rs.2,46,218.70 pursuant to the term loan advanced to them in the year 1971 is barred by limitation and cannot be recovered under the provisions of the A.P. Revenue Recovery Act.
22. The writ petition is allowed as
above. No costs.