P L D 1969 Karachi 653 (PLP)

Government of India Act, 1935, S. 175(3) ‑ Agreement on behalf of Government not required to be expressed in formal deed ‑ Need not necessarily be expressed to have been made in name of Governor ‑ Such agreements not covered by S. 175(3) and cart be used as evidence for purpose of proving oral agreement‑Government bound and liable under oral agreement for adjustment of accounts‑Such agreement a valid acknowledgment of debt in terms of S. 19, Limitation Act (IX of 1908). Disputed accounts of plaintiff and Government were discussed in meetings which were represented on behalf of Government by concerned departmental authorities. Minutes of such meetings indicated decisions regarding liability of Government after settlement of accounts. It was contended on behalf of Government that such minutes were in effect a con tract for payment of certain sum by Government to plaintiff and it should have, in terms of section 175(3), Government of India Act, 1935, been expressed to have been made in the name of Governor. It was further contended that such writing could not be treated as an acknowledgment within the meaning of section 19, Limitation Act, 1908. Held, it can be said that such document was a memorandum of an oral adjustment of accounts and if so, then, this memo randum could be used as evidence for the purpose of proving the oral agreement, particularly when no legal bar had been shown to exist with regard to the Government's competence to enter into such oral adjustments. The writing in question not only incorporated the acknow ledgment of liability by the Government, but it also operated as an agreement, to pay to the plaintiff the specified sum and would therefore further extend limitation period by 3 years. Assuming that the document did not constitute an acknow ledgment then at least it can be treated as the memorandum of an oral agreement between the parties, by which the accounts between them were adjusted and settled. No provision of law was brought to the Court's notice that the Government was not liable under an oral agreement for adjustment of accounts. Ibrahim v. Mst. Rajji and others P L D 1956 Lah. 609; Madhowdas Ram Das v. Santramdas Dharamdas A I R 1933 Sind 324 ; Maniram Seth v. Seth Rupchand 33 I A 165; (1906) I L R 33 Cal., 104 and In re: Rivers Steam Company‑Mitchell's Claim L R (1871) 6 Ch. Ap. 822 rel. Bank of Bahawalpur Limited v. Karim Hayat P L D 1965 Kar. 519 ref. JUDGMENT NOORUL ARPIN, J.‑This Letters Patent Appeal is directed against the judgment and decree given by a learned Single Judge of this Court in favour of the respondents for Rs. 6,43,232‑1‑

0. This claim arose out of a contract, Exh. 63, by which the respondents were appointed agents of the Government of the former Province of Sind for procurement and distribution of foodgrains. This contract was for the period from 1st Novem ber 1948 to 31st October 1949 and was the last of a series of similar contracts which the parties had continued to enter into every year for several years. Under clause 17 of the contract the respondents were made responsible for all trans actions thereunder even after the expiry of the contract and until such time as the accounts of the respondents were accepted by the Government. The respondents continued to submit accounts to the Government from time to time, and the last such accounts were submitted sometime in 1951 and related to the period 1947‑1948 and 1948‑

49. The Government acknow ledged receipt of the accounts by its letter, Exh. 55, dated 31st August 1951, in which it conveyed acceptance of the accounts subject to adjustment with regard to quality allowance, commission, shortages etc. Much correspondence was thereafter exchanged between the parties with regard to accounting and in some of these letters, according to the respondents' contention,. the Government further admitted its pecuniary liability to the respondents. These letters are Exh. 5, dated 23‑5‑1952, Exh. 6, dated 12‑6‑1962, Exh. 8, dated 15‑8‑1952, Exh. 10, dated 12‑10‑1952, Exh. 12, dated 22‑12‑1952, Exh. 23, dated 24‑6‑1953, Exh. 24, dated 26‑6‑1953, Exh. 29, dated 4‑11‑1954, Exh. 32, dated 15‑4‑1954, Exh. 37, dated 29‑12‑1954, Exh. 46, dated 8‑2‑1955 and Exh. 49, dated 13‑5‑1955. It is the further contention of the respondents that differences with regard to the accounts were ‑discussed in several meetings between them and the Government of Sind, which was represented in these meetings by the Minister and Secretary of Food and Agriculture and the Finance Secretary. These meetings were held on 16‑3‑1955, the minutes whereof are recorded in Exh. 58, and on 31‑5‑1955, the proceedings of which are contained in Exh.

61. At this second meeting, according to the respondents, the various differences between the parties were resolved and it was decided that a sum of Rs. 5,87,695‑14‑6 should be paid by the Government to the respondents. But this agreement was not adhered to and hence the respondents filed the suit from which the present appeal has arisen.

2. The Government, in its written statement, admitted that a meeting was held between its representatives and the respondents on 31‑5‑1955, but that the decisions arrived at these were only provisional, subject to the acceptance of the respondents' accounts by the Comptroller of Sind, and the approval of the Minister of Finance, which portfolio‑was then held by the Provincial Chief Minister, and that since neither. the accounts were so accepted, nor approval given by the Chief Minister, the decisions reached at the meetings were not binding on the Government. On these pleadings the following issues were settled by the Court :‑ (1) Is the amount in suit barred by time ? (2) Whether a settlement was arrived at between the parties ; and if so, what were the terms ? (3) Whether the alleged settlement is without authority, void and not binding on the Government ? (4) Whether the alleged provisional settlement became void for reasons mentioned in paragraph 18 of the written statement ? (5) Whether the plaintiff carried out the terms of the alleged settlement ? (6) In case the above issues are decided against the plaintiff, what should the preliminary decree be ?

3. At the hearing of the appeal before us, the main emphasis of Mr. Kazi Akhtar Ahmad, learned Additional Advo cate‑General, was on the plea of bar of limitation which had been raised by the Provincial Government at the trial of the suit; when it was contended that Exh. 61, the minutes of the meeting held on 31‑5‑1955, constituted neither an agreement for payment of certain sums by the Government to the respondents nor acknowledgment by the Government of any pecuniary liability towards the respondents. In addition, Mr. Kazi Akhtar Ahmad reiterated the other pleas taken by the Government before the learned Single Judge, that is, that the arrangement contained in Exh. 61 was only provisional, subject to the approval of the Provincial Chief Minister, and depended on acceptance of the respondents' accounts by the Comptroller and that since neither of these conditions had been satisfied, the agreement could not be given effect to. It was further contended that if Exh. 61 was treated as settlement of accounts, then the arrangement contained therein would operate as a contract and if so, then this contract could not be enforced as it was made in contravention of section 175(3) of the Government of India Act, 1935.

4. Before discussing these points, it will be useful to refer to the controversy between the parties at the trial of the suit with regard to the admission in evidence of Exh.

61. The plaint made a detailed reference to this document. In paragraph 17 of its written statement, the Provincial Government admitted that there was a settlement between the parties at the meeting held on 31‑5‑1955, by which a sum of Rs. 5,87,695‑14‑6 was agreed to be paid to the respondents but that this settle ment was provisional, being subject to acceptance of accounts by the Comptroller. In paragraph 18, the Government again admitted the existence of this settlement, but pleaded that this arrangement. was void for the various reasons enumerated in this paragraph. The original minutes of the meeting dated 31‑5‑1955 were not produced. Only an unsigned copy was produced by the respondents. This copy was admitted to be a true copy on 26th October 1960, by the learned Advocate who was then acting in suit on behalf of the Provincial Government. The subsequent attempts of the appellants to withdraw this admission resulted in failure, as their applications in this connection were rejected by the learned Single Judge It was also admitted by the appellant's witness, Ahmad Ali Memon (D. W. 3), that the written statement, in paragraphs 17 and 18 whereof reference had been made to the settlement arrived at on 31‑5‑1955, has been drafted by the then Addi tional Advocate‑General of the Province after consulting the records and the officers of the Provincial Food Department. In view of this fact, Mr. Kazi Akhtar Ahmad did not consider it proper, in our opinion rightly, to address any arguments on the question of the admission in evidence of Exh. 61.

5. Before considering the plea of limitation, we would first deal with the contention that the arrangement contained in Exh. 61 is unenforceable, as it was only a provisional agreement, subject to satisfaction of certain conditions, and that it violated the requirements of section 175(3), Government of India Act, 1935. It was urged that Exh. 61 was subject to the acceptance of the respondents' accounts by the Comp troller of Sind. But no evidence was given that it was so. and none of the Government Officers who participated in the meeting held on 31‑5‑1955 was brought to give evidence on this point. We are, therefore, unable to accept this contention. With regard to the objection that the settlement incorporated in Exh. 61 was subject to the approval of the Chief Minister under the Government's Rules of Business, we have only to point out that the relevant file containing the original minutes of the meeting held on 31‑5‑1955 was not produced by the Government, although the Government's witness, Mr. Memon, stated in his deposition that this file was available when the Government's written statement in the suit was drafted by the then Additional Advocate‑General. Enough opportunity was given by the learned trial Judge for the production of this file, and even at the haring of the appeal before us, we impressed upon the learned Additional Advocate, General the desirability to have this file traced out and to produce in the Court. But at a subsequent stage in the proceedings he made a statement that the file was untraceable. The plea that the arrangement contained, in Exh. 61 was subject to the approval of the Chief Minister, which approval was not given, had been raised by the appellants, and, therefore, the onus to prove this plea was on the Government. This onus could have been discharged by the production of the relevant Government file, and this not having been done, we have to hold that the appellants have failed to establish that the Chief Minister did not accord his approval to the settlement arrived at in the meeting held on 31‑5‑1955. We would, further say that the failure to produce the relevant file races an adverse inference against the Government to the effect that the agreement incorporated in Exh. 61 had received due approval under the Government's Rules of Business. We would add here that no attempt was made to bring any acceptable evidence to establish that the file in question was in fact lost or even to produce secondary evidence of its contents to show that Exh. 61 was disapproved by the competent authorities. Consequently, we would reject the plea that Exh. 61 could not be given effect to for want of approval under the Rules of Business.

6. As to the objection with reference to section 175 of the Government of India Act, 1935, the emphasis of the learned Additional Advocate‑General was on subsection (3) under which all contracts made in the exercise of the executive authority of a province had to be expressed to be made by the Governor of the province and to be executed on his behalf by such persons and in such manner as he might direct or authorise. The contention of Mr. Kazi Akhtar Ahmad was Exh. 61 is in effect a contract for payment of a certain sum of money by the Government of Sind to the respondents and, therefore, ft should have been expressed to be made in the name of the Governor. To repel this contention, we would only refer to the Division Bench Decision of the High Court of Lahore in Ibrahim v. Mst. Rajji and others (P L D 1956 Lah. 609) in which Yaqub Ali, J. held that subsection (3) of section 175 of the Government of India Act, 1935 contemplated only such contracts which were required to be evidenced by deed and that oral contracts, which were otherwise permissible under law, were not hit by this provision. It has not been shown that the agreement by which the Provincial Government undertook to pay Rs. 5,87,694‑14‑6 was required to be expressed in a formal deed. Exh. 61 is the record of what transpired at the meeting between the parties held on 31‑5‑1955 and of the agreement that the sum of money, just referred to, should be paid by the Government to the respondents. It can be said that this document is a memorandum of an oral adjustment of accounts and if so, then, as held in Madhowdas Ram Das v. Santramdas Dharamdas (A I R 1933 Sind 324) this memorandum can be used as evidence for the purpose of proving the oral agreement, particularly when no legal bar has been shown to exist with regard to the Government's compe tence to enter into such oral adjustments.

7. We would now turn to the Appellant's plea of the bar of limitation. We would repeat here that the contract, Exh. 63, was for the period from 1‑11‑1948 to 31st October 1949 and clause 17 of this agreement provided for continuance of the respondents' liability even after the determination of the agreement and unit submission of accounts by them and acceptance of these accounts by the Government. At the trial of the‑ suit much arguments were addressed as to the articles of the Limitation Act which would apply to the respondents' suit‑Whether Articles 52, 61, 64, 85, 115 or

120. Article 85 would clearly be inapplicable as no evidence was given that there was mutuality of accounts between the parties. The cause could, however, came under Article 64, Article 115 or Article

120. Article 64 would apply if Exh. 61 is treated as settlement of accounts between the parties. Article 115 would apply if this document is treated as agreement by the Government to pay a certain sum of money to the respondents, which sum the Government having failed to pay, the agreement can be said to have been broken, in which case it will not be unreasonable to take the view that the respondents' suit is one for compensation for breach of an agreement in writing. If, however, neither of these two articles apply, then the case would come under Article 120. ‑Reference has been made to clause 17 of the contract, Exh. 63 under which the respondents' liability continued right up to the submission of and acceptance of accounts by the Government. These accounts were submitted sometimes in 1951, and they were accepted by the Government by its letter, Exh. 55, dated 31‑8‑1951, subject, however, to adjustments with regard to quality allowance, commission and shortages etc. In view of the peculiar nature of the respondents' liability for accounts, it is Article 12U which could with reason be made applicable to the suit before us, in which case the limitation period would commence from the date of Exh. 55, dated 31‑8‑1951, and would continue for six years from this date. But Mr. Kazi Akhtar Ahmad, tried to bring the case under Article 52 or Article

61. According to him, if the contract, Exh. 63, is treated as one for sale of goods, then Article 52, which prescribes the period of limitation for payment of the price of goods, would apply. In this view of the matter, since under clause 4 of the contract payments had to be made by the Government to the respondents at the end of the each month, there was a separate cause of action for every month, of the period during which the contract was in operation. If, however, the contract is one of agency, then, according to the learned counsel, Article 61 would apply, which prescribes the limitation period of 3 years for suits for money payable to the plaintiff for money paid for the defendant. If either of these two Articles applies, then, according to the appellants, the respondents' suit should fail as barred by limitation. We may assume that either Article 52 or Article 61 may apply to the suit. The question then arises whether the respondents' claim became barred by the efflux of time prescribed by these Articles. Our answer is in the negative, because we find in the record a number of letters from the Provincial Government which would, in our opinion, constitute acknow ledgment of liability within the meaning of section 19 of the Limitation Act. Thus, by Exh. 55, dated 31‑8‑1951, the Govern ment accepted the respondents account subject to some adjustment indicated in this letter. By Exh. 8, dated 12‑8‑1952, the Government called from the respondents "details of accounts at an early date" to enable the Government "to finalise the accounts". By Exh. 29, dated 4‑11‑1954, the Government for warded audit reports to the respondents for clarification of the points raised therein, with the request that this may be done within a fortnight to enable settlement of accounts. Then there is Exh. 49, dated 13‑5‑1955, by which the respondents were informed that unless the various points raised by the Comptroller of Sind were verified, no payment could be made to them in final settlement of accounts. Lastly there' is Exh. 61, which contains the minutes of the meeting held on 31‑5‑1955. This document goes in detail through the various accounting questions pending between the parties, and after making adjustments of the claims of the parties against each other, it was agreed that Rs. 5,87,694‑14‑6 should be paid by the Government to the respondents. The original of Exh. 61, which we presume to be in the possession of the Government, has not been produced. But we can legitimately draw the inference that these minutes were signed by the representatives of the Provincial Government who participated in the meeting which took place on 31‑5‑1955, these representatives being the Minister, Secretary and Assistant Secretary of the Food Department, Government of Sind. Mr. Kazi Akhtar Ahmad, however, contended that these docu ments would not constitute acknowledgment and for this purpose he relied on the decision of this Court in Bank of Bahawalpur Limited v. Karim Hayat (P L D 1965 Kar. 519). In our opinion, however, the present case is governed by the decisions of the Judicial Committee of the Privy Council in Maniram Seth v. Seth Rupchand (33 I A 165=I L R 33 Cal. 134). In this case the respondent one of the executors of the will of his creditor, Motiram, applied for probate of the will.' In answer to the objection that he was indebted to the estate, the respondent stated in a petition signed by him that for the last five years he bad a current account with the deceased. This statement was treated by the Judicial Committee as a clear admission that there was an open and current account between the parties at the death of the deceased, which admission, according to this decision raised the legal consequence that at that date either of the parties had a right as against the other to an account. Their Lordships further observed that: "It follows equally that, whoever on the account should be shown to be the debtor to the other, was bound to pay his debt to the other, and it appears to their Lordships that the inevitable deduction from this admission is that the respondent acknowledged his liability to pay his debt to Motiram or his Representative, if the balance should be ascer tained to be against him." Referring to th6,lase of In re: Rivers Steam Company‑Mitchell's claim (L R (1871) 6 Ch. Ap. 822) which decision was treated as one of great weight and authority, their Lordships continued .:‑ "Lord Justice Mellish laid it down that an acknowledgment to take the case out of the Statute of Limitations, must be either one from which an absolute promise to pay can be inferred, or, secondly, an unconditional promise to pay the specific debt, or, thirdly, there must be a conditional promise to pay the debt, and evidence that the condition has been performed . . . . An unconditional acknowledgment has always been held to imply a promise to pay, because that is the natural inference, if nothing is said ‑ to the contrary. It is what every honest man would mean to do. There can be no reason for giving a different meaning to an acknowledgment that there is a right to have the accounts settled, and no qualification of the natural inference that, whoever is the creditor shall be paid when the condition is performed by the ascertainment of a balance in favour of the claimant. It is a case of the third proposition of Lord Justice Mellish, a conditional promise to pay and the condition performed."

8. In our opinion, this rule laid down by the Judicial Committee, would fully apply to the present case. It will be noted that Exhs. 55, 8, 29 and 49 which pre‑dates the settle ment Exh. 61, all admit existence of accounts between the parties, and require the respondents to comply with the objections or to submit further details for the purpose of finalisation or the settlement of accounts and consequent payment to the respondents. According to the test recognised by the Judicial Committee each of these documents would constitute acknowledgment of liability, as each of them contains an implied admission that on settlement of accounts, the balance, if any, due to the respondents, would be paid by the Government. Exh. 55 was written before the expiry of the limitation period, whether this period is computed according to Article 52 or according to Article 61, and would thus further extend the period of limitation by three years. Exh. 8, likewise was written before the expiry of the period of limitation as extended by Exh. 55, and so also Exhs. 29 and

49. Exh. 61 was written within three years from the date of Exh.

8. This writing not only incorpo rates the acknowledgment of liability by the Government, but it also operates as an agreement to pay to the respondents B the sum of Rs. 5,87,04‑14‑6 and would therefore further extend limitation period by 3 years. The plaint in the suit from which this appeal has arisen was presented on 8‑5‑1957, and was therefore within three years from 31‑5‑1955, which is the date of this writing. In this view of the matter we cannot sustain the appellants' plea that the respondents' suit was barred by limitation.

9. We may here add that with regard to Exh. 61, the learned Additional Advocate‑General, contended that this writing could not be treated as an acknowledgment within section 19 of the Limitation Act, for want of signatures thereon of the authorised agents of the Government. We have already held that the original of this document should be presumed to be in the possession of the Government, who having failed to produce it, or to have led any evidence on the question of signatures thereon, it would be valid to presume that the original was duly signed by the Government's Representatives who took part in the meeting held on 31‑5‑1955. Assuming that this document does not constitute an acknowledgment then at least it can be treated as the memorandum of an oral agreement between the parties, by which the accounts between them were adjusted and settled. No provisions of law has been brought to our notice that the Government is not liable under an oral agreement for adjustment of accounts. As a matter of fact, it was not the case of the Government that its represen tatives were not competent to enter into this agreement. The case set up in the written statement and at the trial, and even before us, also was that it was only a provisional agreement subject to acceptance of accounts by the Comptroller and to the approval of the Chief Minister. who then held the finance portfolio, and was, under the rules of Business, authorised to accord or withhold the Government's approval. But on this subject we have already said enough. No evidence was shown to us to the effect that the agreement was subject to acceptance of accounts by the Comptroller. The relevant Government file, containing the original minutes, which should contain the approval or disapproval of the Chief Minister, was also not produced, in spite of sufficient opportunities having been given to the appellants. Nor was any evidence led by the appellants to prove that the agreement contained in Exh. 61 was dis approved by the Chief Minister, or by any other competent authority under the Government's Rules of Business. We would therefore decline to hold that respondent's suit was barred by limitation.

10. Our conclusion, therefore, is that this appeal should fail. Accordingly, we dismiss the appeal with costs in favour of the respondents. A. E. Appeal dismissed.