Harish Tandon, J.@mdashThe point involved in this company petition is whether the issuance of ''C'' Form under the Central Sales Tax Act constitutes an acknowledgment of the subsisting liabilities as well as the jural relationship giving fresh life of limitation u/s 18 of the Limitation Act. Admittedly on 08.10.2007 the Company placed in order upon the petitioning creditor to provide the automation system for Bar Rolling Mill, Wire Rod Mill and Garret Coiler including D.C. Drive and other allied materials at a price which would be evident therefrom. The purchase order contains the various heads viz., price, delivery, late delivery penalty, payment, guarantee and installation and erection of the said system. By another purchase order dated 05.02.2008, the Company further placed an order for supply of A.C. & D.C. Variable Speed Drives and MS Control Panels containing the similar terms and conditions. Subsequently, another purchase order dated 22.04.2008 was issued by the Company for supply of Thyristor Convertor. According to the petitioner, the supplies were made in terms of the said purchase orders and the tax invoices are raised from time to time. The last tax invoice submitted by the petitioning creditor against the aforesaid three purchase orders was on 16.07.2008. The Company paid in part from time to time and subsequently raises an objection against the successful commissioning of the said automation system. An agreement dated 28th October 2009 was entered into between the petitioning creditor and the company to resolve the objections raised by the company. Under the said agreement, the company agreed to release a sum of Rs. 29 lakhs being the balance outstanding dues towards the supply of goods in terms of the aforesaid three purchase orders and Rs. 8.5 lakhs to be paid upon successful commissioning and the plant achieving the agreed speed within the period of 30 days. It would further gather from the said agreement dated 28th October, 2009 that the Company was entitled to withhold or nullify the whole or a part of the said amount of Rs. 8.5 lakhs against any loss if the petitioning creditor did not commission and/or achieve the speed of the system. According to the Company, the petitioner could not achieve the requisite speed and, therefore, the entire sum of Rs. 8.5 lakhs were withheld in terms of the said agreement. Since the Company intended to purchase a terminal unit and the petitioning creditor offered the competitive price, the fourth order was issued by the Company and the payment is admittedly made by the Company. It would be relevant to record in this context that the Company petition does not reflect the factum of the said agreement and there has been suppression by the petitioning creditor. The Company tried to intertwined the aforesaid four purchase orders to avoid the provision of the Limitation Act by treating the last payment made against the supply under the fourth purchase order on 30 April, 2010. According to the Company, the three purchase orders can be clubbed together because of the agreement entered into in respect thereof but the fourth purchase order was independent and it cannot be correlated to the earlier purchase orders. The payment which was made for supply under the fourth purchase order is independent and distinct which do not constitute the acknowledgment and/or confirmation of the liability, if there be any, in respect of earlier three purchase orders. The Company issued the ''C'' Form from time to time and lastly on 10th June, 2011 for the invoices between 04.07.2008 and 27.08.2008 which as per the petitioning creditor constitutes the acknowledgment of the liability and establishes a jural relationship of a debtor and creditor.
2. The learned Advocate appearing for the petitioner heavily relies upon a division bench judgment of the Andhra Pradesh High Court in case of
3. The learned Advocate appearing for the Company refutes the aforesaid contention of the petitioning creditor in submitting that the submission of ''C'' Form can never be treated as an acknowledgment of the liability to pay but at best be taken as the acknowledgment of the transaction. It is further submitted that the ''C'' Form are issued in discharge of the statutory obligation to enable the seller to avail the reduce rate of Central Sales Tax which is not relatable to liability to pay the price indicated in the tax invoices which the ''C'' Form was issued. In support of the aforesaid contention, reliance is placed upon a judgment of the Delhi High Court in case of
4. reported in
5. Admittedly the transaction in respect of the three purchase orders were issued and the last payment was made on 10.11.2009 for Rs. 29 lakhs. There is no hesitation in my mind that the said amount was paid in terms of the said agreement dated 28th October, 2009 towards the outstanding dues. As indicated above, the winding up petition does not contain any averments relating to the agreements entered between the parties. The winding up petition has proceeded simply on the basis that the Company has failed and neglected to pay the price of the goods supplied in terms of the purchase orders even upon the commission of the system and the supply of the articles successfully and to the satisfaction of the Company. The petitioning creditor tried to link the fourth purchase order with the earlier three purchase orders to overcome the hurdle of the Limitation Act as the payment in respect of the fourth purchase order was made on 30th April, 2010. The meaningful reading of the fourth purchase order would suggest that it was distinct and independent and the entire payment covered therein was paid separately. There is no dispute that the claim if there be any in respect of the three purchase orders are time barred except if the petitioning creditor succeeds on the plea that the submission of Form ''C'' under the Central Sales Tax Act constitutes the acknowledgment of the liability to pay and establishes the jural relationship of debtor and creditor.
6. In case of Electro Flame Ltd. (supra), the Division Bench of the Andhra Pradesh High Court held that furnishing of the Sales Tax Declaration Form regarding the sale transaction between the parties implies the admission of the existence of the jural relationship that of a debtor and creditor in these words:
3. As noted above, the appellant-company did furnish sales tax declaration form regarding the self-same sale transaction between the parties. Does it not mean and imply that there has been an intention on the part of the appellant-company to admit the existence of a jural relationship between the parties such as that of debtor and creditor in regard to the debt in question- in our view, the answer cannot but be in the affirmative. As such, the plea of limitation in the contextual facts, on the basis of the law laid down by the Supreme Court, as noted above, cannot be sustained.
7. The Division Bench relied upon a judgment of the Supreme Court in case of
8. The Bombay High Court in case of Re-union Electrical Manufacture Pvt. Ltd. (supra) was dealing an identical issue as to whether the Sales Tax Declaration Form, if issued, expressly or by implication acknowledges the liability and indicates the existence of the jural relationship in the above perspective, it is held:
11. The form prescribed u/s 8(4)(a) is in Form "C" which, in turn, is prescribed under Rule 12(1) of the Central Sales Tax (Regulation and Turnover) Rules, 1967, which provides that the declaration and the certificate referred to in Sub-clause (4) of Section 8 shall be in Forms "C" and "D" respectively.
12. it is now necessary to see the contents of a Form "C". Form "C" is a declaration issued by the purchaser in order to enable the seller would be required to pay the higher rate specified in Section 6 of the Central Sales Tax Act. A Form "C" requires details such as the name of the issuing State, the office of issue, the date of issue, the name of the purchasing dealer, his registration certificate number and the date from which the registration was valid. It also requires an endorsement to the seller certifying that the goods ordered in the purchase order and supplied as per the bill/cash memo/challan No. are for resale/use in manufacture/processing of goods for sale/use in mining/use in generation/distribution of power/packing of goods for sale/resale, as the case may be and that the same are covered under the purchase registration certificate, issued under the Central Sales Tax Act. The form also certifies that the purchaser is not registered u/s 7 of the Act in the State in which the goods are to be delivered. The form further requires the name and address of the purchasing dealer. The form is to be signed, declaring that the statement therein are to the best of the knowledge and belief of the person signing the same.
13. the primary purpose for the issuance of a Form "C" is to enable the seller to avail of the reduced rate of the sales tax u/s 8(1). There is no other purpose for which the form is issued. A Form "C" was admittedly issued by the respondent.
14. A Form "C", no doubt, is evidence of a contract of sale having been entered into. The form may, in conjunction with other facts and circumstances, evidence that the goods were, in fact, sold and delivered by the seller to the purchaser and the price at which the goods were sold and delivered. In substance, therefore, the form would evidence the fact/existence of an agreement to sell as well as the price at which the goods were agreed to be sold.
15. However, neither Section 8 nor Rule 12 or even Form "C" for that matter", require the purchaser to declare expressly that he has paid the price of the goods in respect of which Form "C" is issued. Thus, it is not possible to infer that the execution and issuance of Form "C" by a purchaser impliedly reflects on the question of payment by the purchaser to the seller in respect of the transactions referred to therein.
16. Form "C" does not contain expressly or even by implication, the acknowledgment of liability in praesenti in respect of the transactions referred to therein. The execution and issuance of Form "C" does not, to use the words in Shapoor Freedom Mazda Case (supra) relate to a present subsisting liability. Nor does the execution and issuance of Form "C" indicate that the statements therein were made with an intention to admit a subsisting liability. In other words, though, a Form "C" certainly indicates the existence of jural relationship at some point of time, of seller and purchaser, it does not acknowledge the existence, in praesenti of a debtor-creditor relationship or the existence of a liability on the date of the making/execution of the Form "C".
9. The similar view was expressed by the Delhi High Court in case of Taipack Ltd. (supra) upon relying a judgment of the Apex Court rendered in case of
29. For the view we take, we derive support from certain observations of this Court in Ganeshi Lal v. Joti Parshad. While discussing the nature and extent of a redeeming co-mortgagor''s right to recover contribution from his co-debtor, this Court speaking through Chandrasekhara Aiyar, J., made these incidental observations which for our purpose are apposite:
Equity insists on the ultimate payment of a debt by one who in justice and good conscience is bound to pay it, and it is well recognized that where there are several joint debtors, the person making the payment is the principal debtor as regards the part of the liability he is to discharge and a surety in respect of the shares of the rest of the debtors. Such being the legal position as among the co-mortgagors, if one of them redeems a mortgage over the property which belongs jointly to himself and the rest, equity confers on him a right to reimburse himself for the amount spent in excess by him in the matter of redemption; he can call upon the co-mortgagors to contribute towards the excess which he has paid over his own share.... While it can be readily conceded that the joint debtor who pays up and discharges the mortgage stands in the shoes of the mortgagee... he will be subrogated to the rights of the mortgagee only to the extent necessary for his own equitable protection... ''so far as it is necessary to enforce his equity of reimbursement''.... It is as regards the excess of the payment over his own share that the right can be said to exist... The redeeming co-mortgagor being only a surety for the other co-mortgagors, his right, strictly speaking, is a right of reimbursement or contribution.
30. It is noteworthy that Ganeshi Lal v. Joti Parshad was a case from Punjab where the Transfer of Property Act was not in force, and this Court had affirmed the judgment of the Punjab High Court determining the claim of the redeeming co-mortgagor for contribution against the non-redeeming co-mortgagors on principles of justice, equity and good conscience.
31. From what has been said above it is clear that where the Transfer of Property Act is not in force and a mortgage with possession is made by two persons, one of whom only redeems discharging the whole of the common mortgage debt, he will, in equity, have two distinct rights: Firstly, to be subrogated to the rights of the mortgagee discharged, vis-�-vis the non-redeeming co-mortgagor, including the right to get into possession of the latter''s portion of share of the hypothec. Secondly, to recover contribution towards the excess paid by him on the security of that portion or share of the hypothec which belonged not to him but to the other co-mortgagor. It follows that where one co-mortgagor gets the right to contribution against the other co-mortgagor by paying off the entire mortgage debt, a correlated right also accrues to the latter to redeem his share of the property and get its possession on payment of his share of the liability to the former. This corresponding right of the "non-redeeming" co-mortgagor, to pay his share of the liability and get possession of his property from the redeeming co-mortgagor, subsists as long as the latter''s right to contribution subsists. This right of the "non-redeeming" co-mortgagor, as rightly pointed out by the learned Chief Justice of the High Court in his leading judgment, is purely an equitable right, which exists irrespective of whether the right of contribution which the redeeming co-mortgagor has as. against the other co-mortgagor, amounts to a mortgage or not.
32. The ground is now clear for ascertaining the appropriate provision of the relevant statute of limitation which prescribes limitation for a suit to enforce this correlated right of the "non-redeeming" co-mortgagor against the redeeming co-mortgagor.
10. The Delhi High Court in case of Alliance Paints and Varnish Works Pvt. Ltd., (supra) held in unequivocal terms that Sales Tax Declaration Form can never be construed as acknowledgment of the liability for extending the period of limitation for institution of the suit in these words:
15. In my considered opinion, the learned trial court clearly erred in construing the "C" Forms as acknowledgments of liability and in relying upon them for extending the period of limitation, inter alia, for the reason that when exemption from limitation is prayed for, it is essential for the plaintiff to very specifically plead such an exemption in the plaint. As a matter of fact, under Order VII Rule 6 CPC, it is obligatory, as a matter of pleading, to show the ground on which the exemption from limitation is claimed. It was so held in
24. In
32. Firstly, there is no acknowledgment of a present and subsisting liability. The said form can at the most be treated as an acknowledgment of the goods received under the contract of supply of goods and the price fixed to be paid for them. Whether or not payments were effected thereafter, or any amount remains due or outstanding cannot be inferred from the said "C" Form in the facts and circumstances of this case. Secondly, no intention to acknowledge a liability can be inferred from the contents of the said "C" form. Thirdly, one cannot establish a jural relation of debtor and creditor from the contents of the said "C" form. Thus, the essential requirements for a writing to constitute acknowledgment are missing from the document. (also see
11. In a recent judgment rendered by the Delhi High Court in case of Lamicoat International Pvt. Ltd. (supra) held that Sales Tax Declaration Form can at best be treated as the acknowledgment of the goods'' receipt and the price but does not establishes the jural relationship of a debtor and creditor in following words:
6. In another judgment of a co-ordinate Bench of this Court reported as
32. Firstly, there is no acknowledgment of a present and subsisting liability. The said form can at the most be treated as an acknowledgment of the goods received under the contract of supply of goods and the price fixed to be paid for them. Whether or not payments were effected thereafter, or any amount remains due or outstanding cannot be inferred from the said "C" Form in the facts and circumstances of this case. Secondly, no intention to acknowledge a liability can be inferred from the contents of the said "C" form. Thirdly, one cannot establish a jural relation of debtor and creditor from the contents of the said "C" form. Thus, the essential requirements for a writing to constitute acknowledgment are missing from the document. (also see
7. Learned Counsel for the petitioner points out that in the case of Alliance Paints and Varnish Works Pvt. Ltd. (supra), there was no averment in the petition that there was any acknowledgment made by the respondent which was the reason as to why the "C" form was not construed as an extension of limitation within the meaning of Section 18 of the Limitation Act; submission being that in the present petition, a specific averment has been made in the para 16 that on 21.07.2006, the respondent had acknowledged the debt due to the petitioner.
12. The plea of limitation is one of the defence available to the other side which is well-recognized in law. Section 18 can be pressed when there is a valid acknowledgment of the subsisting liability and not the past liability. The words used in the acknowledgment must sufficiently indicate the circumstances of the jural relationship as that of her debtor and creditor and there must be a manifest intention to admit such jural relationship. The object behind the issuance of the Sales Tax Declaration Form is to avail of the reduce rate of sales tax. The Declaration Form does not require to contain the statements relating to the payments already made or to be made but can at best be a best piece of evidence relating to the contract of sale and the goods being sold and delivered at a price agreed upon. The letter which contains the Declaration Form does not indicate the acknowledgment of the liability as well as the admission of the existence of a jural relationship. There is no express intention of the Company to acknowledge the liability in a letter containing the Declaration Form. Therefore, the issuance of the Sales Tax Declaration Form does not constitute the acknowledgment of the subsisting liability and/or establishes the jural relationship of a debtor and a creditor.
13. The present matter can be viewed from another angle as well. The petitioning creditor have grossly suppressed the fact that subsequently an agreement was entered into between the parties whereunder it was agreed that a sum of Rs. 29 lakhs, if paid by the Company, would satisfy the outstanding dues. Admittedly, the said sum of Rs. 29 lakhs had been paid by the Company. A further sum of Rs. 8.5 lakhs was withheld in terms of the said agreement and whether the same was withheld illegally is a matter of evidence which cannot be gone into in a proceeding for winding up.
14. This Court, therefore, does not find that the Company should be wound up and, therefore, orders that the Company Petition shall remain permanently stayed.
15. However, there shall be no order as to costs. Urgent photostat certified copy of this judgment, if applied for, be supplied to the parties subject to compliance of all requisite formalities.
