Hiralal v. Badkulal , AIR 1953 SC 225

HIRALAL V. BADKULAL

ISSUE:

Whether the acknowledgment of liability by the defendants in the plaintiff’s account book amounted to an unqualified acknowledgment, creating a fresh cause of action?
Whether the plaintiff’s suit could be maintained solely on the basis of an acknowledgment of liability?
Whether the acknowledgment was obtained through coercion, misrepresentation, or fraud?
Whether the defendants, despite maintaining their own accounts, could dispute the balance without producing their own books of account?

RULE:

An acknowledgment of liability, when unqualified, is sufficient to create a fresh cause of action as it implies a promise to pay. A person who acknowledges a debt as correct is presumed to intend payment, unless they specify otherwise. The law does not require an express promise—accepting the correctness of a balance implies an obligation to discharge it.
A suit can be maintained on an acknowledgment when it is made in the context of prior mutual dealings. An entry in the account book, signed by the debtor, along with a history of transactions, constitutes more than a mere acknowledgment for limitation purposes. It represents an “account stated” between the parties, which can be the basis of a claim.

FACTS:

The plaintiffs, Badkulal and others, filed a suit against the defendants, Hiralal and others, for the recovery of Rs. 34,000 as principal and Rs. 2,626 as interest, based on mutual business dealings over several years.
On September 3, 1949, the plaintiffs recorded an entry in their ledger account, stating that after checking the accounts, Rs. 34,000 was found to be the correct balance payable. This entry was signed by Hiralal and Bhaiyalal, representing the defendant firm.
The defendants disputed the acknowledgment, arguing that their signatures were obtained without an explanation of the accounts. They claimed that plaintiff No. 2, Dipchand, induced them to sign by assuring on oath in front of a deity that no suit would be filed and that interest would be reduced.
The defendants also contended that a suit could not be maintained solely on the basis of an acknowledgment of liability, as such an acknowledgment could only extend limitation and not serve as an independent cause of action.
The District Judge, Umaria, dismissed the suit, holding that the plaintiffs failed to prove that the accounts were explained to the defendants. The judge relied on Hiralal’s testimony, where he claimed that he signed the ledger without checking the accounts.
On appeal, the Judicial Commissioner, Vindhya Pradesh, reversed the decision and decreed the suit in favor of the plaintiffs. The court held that the acknowledgment was voluntary, unqualified, and created a valid basis for the claim. It also found that the defendants, being businessmen who maintained their own books of account, could not dispute the correctness of the balance without producing their own records.
The defendants appealed to the Supreme Court with special leave, challenging the maintainability of the suit and reiterating their claims of misrepresentation and undue influence.

HELD:

The Supreme Court held that an acknowledgment of liability, if unqualified, creates a fresh cause of action. When a person admits a debt as correct, it naturally implies an obligation to pay, unless there is a clear condition to the contrary. A debtor is expected to fulfill an admitted liability, and such an acknowledgment cannot be treated as a mere extension of limitation.
The court ruled that a suit on a stated account is maintainable when it is made in the context of prior mutual dealings. A signed entry in the creditor’s books, reflecting ongoing transactions and a balance struck after adjustments, is not merely an acknowledgment but a confirmation of liability, forming a legitimate basis for a claim.
The Supreme Court dismissed the defendants’ claims of coercion and misrepresentation, holding that allegations affecting the validity of an acknowledgment must be specifically pleaded and proved. The defendants failed to establish that their signatures were obtained under undue influence or fraud.
The court emphasized that a party disputing an account cannot simply rely on the onus of proof while suppressing material evidence. The defendants maintained their own books of account but did not produce them, which suggested that the balance recorded in the plaintiff’s books was accurate.
The Supreme Court dismissed the appeal and upheld the judgment of the Judicial Commissioner, Vindhya Pradesh, confirming the decree in favor of the plaintiffs.