The award passed was challenged on the ground that claim sought to be passed since was barred by limitation, the award passed was not correct. The claim forming the base of dispute was based on a promise to pay an amount in writing under Section 25(3) of the Indian Contract Act, 1872 (ICA). The claim was preferred well after three years since it become due. Section 25 deals with Agreement without consideration. Such agreement is void unless 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. Sub-section (3) of Section 25 provides for a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt.
In the instant matter, promise to pay in writing was stated to be made through a letter which though disputing and denying the payment as claimed (in terms of figures) and it was mentioned that correct figure could be arrived only by way of mutual verification. It was further mentioned that payment legally due is not denied.
The Court observed that whatever was shown as outstanding figure was disputed and denied for want of mutual verification and clarification, but dues per se was not denied. Arbitrator considered this aspect as an admission on the part of the Petitioner and accordingly a promise to pay and since it was in writing the same was an express promise to pay. Unless the Petitioner could show that the demand is illegal, the express promise to pay would have to be performed by payment.
The promise to pay must be express. An implied promise to pay inferred from an acknowledgment could not be made the basis of the suit to recover a debt barred at the time of the acknowledgment and since S. 25(3) relates to promise to pay a debt, already time barred.
In the instant matter, the Petitioner failed to show the Arbitrator and also the Court how the demand made was not legal and consequently the petition was dismissed.
ORDINARY ORIGINAL CIVIL JURISDICTION
M/s. Gem Synth Resins Pvt. Ltd. Vs. M/s. Mahendra Rosin and Turpentine Pvt. Ltd.
ARBITRATION PETITION NO. 168 OF 2012
Coram:
: MRS. ROSHAN DALVI, J.
: 11 JUNE, 2014.
th
The petitioner has challenged the arbitration award dated 29 th
1.
December, 2010 only on the ground that the claim of the respondent before
the learned Arbitrator was barred by limitation but has been considered
and that could not have been so considered. The petitioner would contend
that since limitation is held to be on the plea of the public policy, a stale
could not be considered in arbitration. [See. Municipal Corporation of
Greater Mumbai Vs. Prestress Products (India) 2003(3) Bom. C. R.
117.]
2.
The claim has been considered as a promise to pay an amount
in writing under Section 25(3) of the Indian Contract Act, 1972 (ICA).
3.
The parties had business relationship. Supplies were made by
the respondent to the petitioner herein from time to time. Part payments
were made. The last of such payments has been made on 29.06.2005. The
claim has been referred well after 3 years. The learned Arbitrator has
considered a promise made in writing and signed by the petitioner to pay
that debt under Section 25(3) of the ICA which could be enforced by a
separate suit which runs thus:
The promise to pay in writing is made by the petitioner under
4.
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. .......
(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
authorized 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.
its letter dated 1st September, 2007, the relevant part of which runs thus:
Your outstanding figure we dispute and deny since we have mutually
never so far verified and clarified how your outstanding figure
arrives. This is possible by mutual verification of the account and
finalizing the figures mutually.
We have never denied the legal due payment. Delay in payment was
due to helplessness but not intentionally.
This is our business ethics maintained as an entrepreneur since
1972. This, please verify and clarify the legal dues mutually for
which we will always cooperate.
5.
The learned Arbitrator has sought to consider what to make of
the aforesaid statement. The Learned Arbitrator was called upon to
consider whether the statement was a promise to pay under Section 25(3)
of the ICA. This Court would also, therefore, have to see only that aspect.
6.
Whatever was the outstanding figure shown by the respondent
was disputed and denied. That was because it was not mutually verified
and clarified. Hence the petitioner did not know how it was arrived. But
the petitioner accepted that it would be possible to arrive at figure which
would be payable by the petitioner upon mutual verification and
finalization. The petitioner clarified that it never denied its legal due
payment. Consequently it admitted the legal due payment. It accepted
that there was delay. That was because of helplessness (due to a certain
fire) but not intentional (to avoid or evade payment or to defeat the
plaintiff's right). This is a matter of business policy of moral ethics of the
petitioner. Hence the petitioner called upon the respondent to verify and
clarify the legal dues mutually and the petitioner offered to cooperate.
The respondent sent a further reply dated 1 st June, 2008
7.
annexed to which was the entire statement of account of the balance
amount payable and the interest claimed thereof together with the total
amount payable. This the petitioner denied on the ground that in an
earlier notice the respondent claimed the principal amount and in the
notice dated 1st June, 2008 the respondent claimed the principal as also the
interest and hence proper accounts were not furnished and true and
correct information and the description of the business transaction was not
given. This was despite the promise to pay what was the legal due
payment upon verification and clarification, albeit mutually, and with the
petitioner's cooperation. If the petitioner would not cooperate, the
verification and clarification made by the respondent would have to be
seen to ascertain the legal due payment which the petitioner expressly
stated it has never denied.
8.
The learned Arbitrator has considered this aspect as an
admission on the part of the petitioner herein. The admission would be the
promise to pay. The promise to pay in writing would be an express
promise to pay. The express promise to pay in this case is what is legally
due. The respondent has shown the precise amount which is legally due.
Unless the petitioner shows how it is an illegal demand, the express
promise to pay would have to be performed by payment. This is what the
Arbitrator has considered. The mere stating that it is an admission, instead
of a promise to pay would not make the award liable for being set aside as
that would not be an error of jurisdiction but an error in exercise of
jurisdiction, if at all [See. Municipal Corporation of Greater Mumbai Vs.
Prestress Products (India) 2003(3) Bom. C. R. 117 Para 14.]
It has been argued that an implied promise to pay is not
9.
contemplated under Section 25(3) of the ICA, 1972 as it would be upon a
ig
written acknowledgment of liability under Section 18 of the Limitation Act,
1963. That does not matter because the acknowledgment of liability has
not been made within the period of limitation and consequently does not
apply in this case and has not been considered by the learned Arbitrator
also. All that has to be seen is whether there was an express promise to
pay in writing under the petitioner's letter dated 01.09.2007, the relevant
part of which has been extracted above.
10.
The promise to pay must be express. [See. Reunion
Engineering Co. P Ltd. Vs. Mrs. Uma Kumar, Proprietor, Kandhan
.
Electricals and Engineers in Appeal (L) No. 319 of 2006 in Company
Petition No. 570 of 2005 of this Court dated 21.06.2010 as held by the
Division Bench of this Court and the case of Balkrishna Mansukhram Vs.
Jayshankar Narayan in Letters Patent Appeal No. 16 of 1937 of this
Court decided on 23.06.1938] in which the distinction was made
between Section 18 of the Limitation Act, 1963 (earlier Section 19 of the
Indian Limitation Act) and Section 25(3) of the ICA. In that case it was
specifically held that an implied promise to pay inferred from an
acknowledgment could not be made the basis of the suit to recover a debt
barred at the time of the acknowledgment and since Section 25(3) related
to the promise to pay a debt which was already barred. It was held that
under Section 25(3) of the ICA there must be an express promise as
opposed to an unconditional acknowledgment involving an implied
promise to pay.
11.
What is seen is that the petitioner has expressly admitted to
pay whatever is legally due though the petitioner disputed the outstanding
figure then shown by the respondent herein which was shown to be
Rs.13,80,859/ (without interest later claimed).
12.
The petitioner having not shown the learned Arbitrator or
even this Court how that is not a legal demand cannot challenge the
(ROSHAN DALVI J.)
impugned award. Consequently the petition is dismissed.
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