DEPUTY CUSTODIAN OF ENEMY PROPERTY Versus KARACHI ELECTRIC SUPPLY CORPORATION LTD.

1. The Deputy Custodian of Enemy Property has filed this suit for recovery of amount of unpaid dividends of shares owned by Bank of India Limited. Before they became vested in the plaintiff as enemy property on 30‑8‑1948, 20,835 fully paid shares stood registered in the register of the defendants in the name of Bank of India Limited, Bombay, hereinafter referred as the company incorported under the Indian Companies Act 1913 having its registered office at Fort Bombay. The company maintained a local branch office in Karachi. The dividends received on the shares by Karachi branch were remitted to the company till 29‑12‑1953 when restriction on remittance of dividends to non residents were imposed by the Government of Pakistan under the Foreign Exchange Regulation Act, 1947. Thereafter, remittance could be made only with the prior sanction of the State Bank of Pakistan. The Karachi branch applied to the State Bank of Pakistan for remitting dividends for the year ending 31‑12‑1953 but it was refused. The company made inquiries and it was found that the defendants had unauthorisedly altered their share registers by deleting the words 'Fort Bombay' or 'of Bombay' from the company and substituted Karachi, therefore, and the company's name was not listed as non‑resident share‑holders in the list of non‑resident share‑holders submitted by them to the Exchange Control Department of the State Bank except for 427 shares which are not subject‑matter of the present litigation. It transpired that such unauthorised alteration was made behind the back of the company to save the defendant's concern from being taken over by the Custodian Evacuee Property. The company protested to the defendants against the alteration but receiving no reply filed a suit against them on 3‑2‑1956 praying for rectification of share register and for mandatory injunction directing the defendants to classify the said share as belonging to non‑resident share‑holder. The suit was dismissed but in the first appeal on 14‑7‑1962 the judgment was set aside and suit was decreed as prayed. The second appeal preferred by the defendants was dismissed and the petition for permission to file a Letters Patent Appeal was dismissed. The defendants then filed Civil Petition for leave to appeal to the Supreme Court but it was dismissed as withdrawn on 3‑9‑1968. By this time the shares in dispute had become vested in the Custodian of Enemy Property.

2. During the litigation the defendants continued to draw the dividend Warrants in the name of Bank of India Limited Karachi instead of Bank of India Ltd. Bombay in respect of the share for each of the years 1954 to 1960 but each of them were returned to the defendants unrealised from year to year for correction, but they were neither corrected nor returned nor was the share register rectified despite the judgment and decree passed by the Court. The said 20,835 shares including shares which are not in dispute, by a notification were vested by the Central Government in Custodian Enemy Property in Pakistan as enemy property under Rule 182 of Defence of Pakistan Rules. On enquery being made by the plaintiff the defendants supplied information/ statement dated 5‑11‑1965 (Exh.5/45) and 4‑5‑1968 Exh.5/82 showing that the dividends for the years 1954 to 1960 were outstanding. When the plaintiff demanded payment of the outstanding dividends for the year 1954 onwards the defendants stated that the dividends for the year 1954 to 1960 were time barred and no claim could lie for that period. Consequently, the plaintiff filed this suit on 14‑10‑1969 for recovery of Rs.9,70,602.50 being the amount of unpaid dividend on the shares for the years 1954 to 1960 with interest at the rate of 9% per annum.

3. The defendants pleaded that the plaintiff's claim was barred by time. Consent issues were filed but the learned Court framed only one issue namely.

4. 'Whether the claim for dividends for the years 1954‑6b is time‑barred. If not, what is the effect?

5. The parties did not lead any evidence and on the basis of admitted documents, by judgment, dated 13‑8‑1974 the suit was decreed. The defendants filed Appeal No. 66 of 1974. The learned appellate Court took the view that the first two consent issues filed by the parties were material and since those issues were not allowed to be raised the parties might have been prejudiced and, therefore, by consent decree and judgment passed by the learned Single Judge was set aside and case was remanded with the observation that the consent issues filed by the parties be adopted, the parties shall be free to apply for amendment of their pleading if any within a month from the date of the order; consequently, if any additional issues are raised the same may be framed and the parties shall be entitled to lead additional evidence. The plaintiff applied for amendment, of the plaint which was allowed by order dated 14‑11‑1982. By amendment it was pleaded that on 15‑11‑1965 the defendants acknowledged that the dividends on the shares in suit for the years 1954 to 1960 were outstanding which amounted to acknowledgement of debts together with admission to pay. By second amendment it was pleaded that the balance‑sheet incorporated in the annual report of the defendants company for the years 1954 to 1960 referred to unclaimed dividends in suit and constituted acknowledgement of the debt due to the plaintiff. The third amendment was that the dividend warrants returned to the defendants from time to time for correction in the name of Bank of India Ltd. Bombay resulted in creating trust in terms of section 10 of the Limitation Act and no period of limitation is applicable. Consequential amendments were made relating to cause of action which are not necessary to state. The amendment was thus made with a view to bring the suit within time. The defendants filed amended written statement in which these amended pleas were denied. The following consent issues filed by the parties were adopted.

6. (1)Whether dividend warrants for the years 1954‑60 were returned to the defendants from year to year for their correction? If so what is the effect?

7. (2)Whether on 4‑5‑1968 defendants admitted and acknowledged that dividends for the years 1954‑60 were outstanding? If so what is the effect?

8. (3)Whether claim for dividends for the years 1954‑60 is time‑barred?

(4) Relief?

9. Both the learned counsel have addressed arguments on issue No.3 which according to them would cover issue No.2 also. At the outset it may be mentioned that in para. 11 of the judgment passed on 13‑8‑1974 it was mentioned that Mr. A. Aziz, the learned counsel for the defendants had admitted that unpaid dividends in the balance‑sheet of the defendants issued to shareholder every year in which the item 'dividends unclaimed' under 'Sundry creditors' included the unpaid dividends in suit. There does not seem to be any dispute about the fact that the shares in respect of which the dividend is being claimed belonged to the company which was taken over by the Government of Pakistan and vests in the plaintiff. The amount of unclaimed dividends is also not disputed. In view of the statement made by the learned counsel for the defendants as observed earlier and as the same has not been denied by Mr. A.R. Akhtar the learned counsel for the defendants, it stands admitted that the unclaimed dividends under item 'Sundry creditors' as mentioned in the balance‑sheet produced in Court include the dividends claimed by the plaintiff. This clearly proves that no part of the unclaimed dividends was paid by the defendants during the years 1954 to 1960. It is also an admitted position that the defendants had not issued the dividends warrants in the name of the company but had unauthorisedly and illegally changed the name as Bank of India Limited Karachi, and in spite of judgment and decree passed by the Court the register was not rectified. In the background of these admitted and prove facts it is to be considered whether the suit is barred by time. According to the learned counsel for the plaintiff Article 120 of the Limitation Act will apply to the present suit, therefore, in view of acknowledgement of liability made in the yearly balance‑sheets. The suit is within time. Alternatively, it was contended that the amount of unclaimed dividends remained in the hands of the defendants as a trust, therefore, no period of limitation is applicable as provided by section 10 of the Limitation Act. In order to bring the suit within time Mr. Afzal Nabi the learned counsel for the plaintiff has referred to Exhs.6/14 to 6/19 which are annual reports and balance‑sheets of the defendants for the years 1955, 1957, 1958, 1959, 1960 and 1961. In all these balance‑sheets under the heading 'Sundry Creditors amount of unclaimed dividend has been mentioned. It is now to be considered whether entries in the balance‑sheet can be treated as an acknowledgement of liability within the meaning of section 19 of the Limitation Act. Mr. Afzal Nabi the learned counsel for the plaintiff has relied on Jone v. Bellgrove Properties Ltd. (1949) i All. E.R. 498 in which the entry 'Sundry Creditors .638‑8%‑lop' was held to be an admission of liability to anyone who could on the evidence show that the general figure included a specific amount due to a creditor. This case was followed in Rajah of Vizianagaram v. The Official Liquidator AIR 1952 Mad. 136 and Lahore Enamelling and Stamping Co. Ltd. v. A. K. Bhalla and others A I R 1958 Pb. 341 at page 347.

10. Mr. A. R: Akhtar the learned counsel for the defendants has contended that balance‑sheet cannot be taken as acknowledgement of liability. In this regard he has referred to consolidated Agency Limited v. Bertan Limited 1964(3)WLR 671. In this judgment the Privy Council has considered all the available cases on the point including the judgment cited by the learned counsel for the plaintiff and it was held that to comply with section 19 of the Indian Limitation Act 1908 the acknowledgement must be 'in writing signed by the parties and must in order to constitute an effective acknowledgement be acknowledgement of liability existing as on the date of signature'. It was pointed out that in most of the cases relied upon for the proposition advanced by the learned counsel for the plaintiff, the question whether on the date of acknowledgement of liability the debit amount claimed, existed or not, was not taken into consideration. In the case referred by the learned counsel for the defendants the facts were that in the balance‑sheet amount of loan was shown existing on 31‑12‑1954 but it was signed in October 1956. During this period (31‑12‑1954 to October, 1956) the liability on account of loan had already been reduced as was shown by the balance‑sheet for the year ending 31‑121955. It was, therefore, observed that on the date when the balance‑sheet was signed it did not represent the liability on the date of signature and consequently, there was no acknowledgement in respect of an existing liability on that date. In the present case the balance‑sheets of the defendants were signed almost on year after the expiry bf the financial year. But this is not the only aspect which is to be taken into consideration while applying the principle laid down by the Privy Council that the acknowledgement of liability should be of an existing liability on the date when acknowledgement is made. In the referred Privy Council case, on the expiry of the year for which the balance-sheet was prepared and before it was signed, the defendant had paid certain amount and reduced its liability and, therefore, on the date of signature the liability mentioned in the balance-sheet had been reduced. In the present case, admittedly no payment has been made by the defendants. The dividends which were returned and claimed by the plaintiff were included in the amount mentioned against 'Dividends unclaimed' under 'Sundry Creditors' in the balance-sheets. On evidence it is established that the liability of the defendants was not reduced at any time and the same liability which was mentioned in the balance-sheet existed on the date when the balance-sheet was signed. In my view, this material fact in this case distinguishes it from the Privy Council's case as there the liability on the date when the balance-sheet was prepared and before it was signed had been reduced. In the present case the liability A which existed on the date of preparation of the balance-sheet remained the same when it was signed. Therefore, the entries in the balance-sheet amounted to acknowledgement of liability. The suit is, therefore, within time.

11. Mr Afzal Nabi, the learned counsel for the plaintiff has referred -to Exhs.5/45 and 5/82 being letters, dated 5-11-1965 and 4-5-1968 in which acknowledgement of liability has been made by the defendants Exh.5/45 can save limitation in respect of unpaid dividends for the years 1958 (which was declared on 2-12-1959), 1959 and 1960 and not the earlier claim. Exh.5/82 independently cannot save limitation as in this letter of acknowledgement of liability was made after the expiry of the period of limitation. However, reading this letter with the acknowledgement of liability made in the balance-sheet it can be pressed for extension of period of limitation.

12. The other ground for bringing the suit within the period of limitation is that the dividends returned by the company to the defendants were for specific purpose of correcting the dividend warrants and returning the same to the company. The dividends were thus returned in trust and no period of limitation is applicable. Reference has been made Muhammad Akbar Khan v. The Province of West Pakistan P L D 1959 Lah. 295 where it was held as follows:-

13. "The language of section 10 leaves no room for doubt that unless the property of one person is, transferred to another as a trust for a specific purpose, the transaction cannot be regarded as a trust for the purposes of that section.'

14. In order to avail of the provision of section 10 of the Limitation Act it is necessary that an express trust should have been created and established, Mr. Afzal Nabi has contended that return of warrant for B the purposes of correcting it and re-paying to the company is sufficient to create a trust. Reference has been made to Kishtappa Chetty v. 1,akshmi Ammal A I R 1923 Mad. 578, Mahmed Habeeb Alum v. Anjuman Ara Begum I L R 1935 62 Cal. 393. In Madras case, it was held that word vested under section 10 means nothing more than, having control of the property. In Muhammad Habib Almas case, it was observed that the word 'specific purpose' under section 10 mean an obligation to[ apply the money for the benefit of another person. Section 10 requires a trust to be created expressly and not merely by implication or inferences. In the correspondence by which the dividends warrants were returned and claimed the company had not anywhere mentioned that the dividends amount shall remain in trust with the defendants for a specific purpose. Mere returning them and asking the defendants to remit back after correction, was a normal commercial transaction between the parties without any notice of creating any trust. In my view in the facts and circumstances of the case, section of the limitation Act is not applicable.

15. My finding on the issue are as follows:.

16. Issue no.1. in view of the admitted facts my finding is in the affirmative.

17. Issue no.2. in the affirmative. The defendants are liable to pay it to the plaintiff.

18. Issue no3. in the negative.

19. Issue no4. in view of the above discussion, the suit is decreed against the defendants for Rs9,70,602,50 with interest @ 9% per annum from the date of suit till recovery, with costs.

20. A.A Suit decreed.