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Judgment
Kilam, J.—This Plaintiff's first appeal is directed against a decree of our brother Shahmiri J. dated 2nd Magh 2008, and arises out of a suit
for the recovery of a sum of Rs. 19,839/8/9 as the price of maize, wheat, etc., alleged to have been supplied by the Plaintiffs to the Defendant No.
1 Hindustan Forest Company (hereinafter described as Defendant company) under an agreement which has been marked as Ex. Dl entered into
between the Plaintiffs and Defendants 2 to 5 on one side and Defendant company on the other.
The Plaintiffs based their suit on the allegation that they had supplied 2827 mds. and 29 seers of maize, 8 mds. and 15 seers of wheat and 94 mds.
21 seers and 3 chattacks of dal mash to the Defendant company of which the total value according to the rates specified in the agreement arrived
at between the contesting parties comes to Rs. 54,592/9/6. The Plaintiffs further claim Rs. 246/15/3 for the grains supplied to the Defendant
company for the consumption of its employees from 1-7-47 to 15-10-47. The Plaintiffs further aver that against this sum the Plaintiffs received a
sum of Rs. 35,000/- from the Defendant company on various dates, leaving behind a balance of Rs. 19,839/8/9 for the realization of which the
present suit has been lodged.
Out of the Defendants, Defendant 2 has supported the claim of the Plaintiffs. The Defendants 3 to 5 did not put in appearance with the result
that ex parte proceedings were taken against them. The Defendant company has stated in its written statement that the last date of the supply of
grains according to the agreement Ex. Dl was 15th Sawan 2004 and not Katik 2004. The Defendant company further averred in its written
statement that it could not accept the correctness of facts alleged in Clause (3) of the plaint in which it is given that certain quantities of maize wheat
and dal mash valuing at Rs. 54,592-9-6 were supplied to the Defendant company, as all their accounts Books and other papers were destroyed
by fire during the disturbances of Katik-Maghar 2004.
The Defendant company has further refused to take any responsibility for the grains which the Plaintiffs allege they had supplied to the employees
of the Defendant company. The Defendant company admits to have made a payment of Rs. 35,000/- to the Plaintiffs, but denies that this payment
was made by it 'on account' and adds that the payment was made after due settlement of accounts between the parties. It has further been pleaded
in the written statement that the suit is barred by limitation.
It may be stated here that the Defendant company submitted its written statement on 27th Poh 2007 in which some admissions favourable to the
Plaintiffs were made. These admissions were retracted later on in the month of Baisakh 2008 and with the permission of the Court amendments
were effected in the written statement. The main amendments relate to the fact that in the written statement as originally drafted and submitted it
was admitted that the supplies were made upto Katik of 2004 as averred in the plaint, but later on by an amendment it was stated that the last date
of supply was 15th Sawan 2004, and that no supplies were made thereafter.
The admission made in Clause (5) of the written statement that Rs. 35,000/- were paid on account was also repudiated and it was brought out by
means of the amendment that the amount was paid after due settlement of accounts. The learned trial Judge has held that the admissions made in
the written statement in its unamended form were the result of an error on the part of the counsel of the Defendant company. In view of the order
that we propose to pass, we need not go into this question.
The learned Judge in Chambers has framed the following issues in the case:
Is the suit within time?
Did the Defendant 1 receive the delivery of (sic) goods detailed in paras 3 and 4 of the plaint and, if so, what is their price?
Did not the Plaintiff fulfil the terms of the agreement as contained in 01. (3) thereof & is the Defendant entitled to claim compensation from the
Plaintiff on that account?
To what relief is the Plaintiff entitled?
The first point that needs gone into in this case is as to what quantity of grain and of what variety and value was supplied by the Plaintiffs to the
Defendant company. The Plaintiffs have produced a number of receipts alleged to have been issued by the Defendant company to prove the
delivery of the grains. The learned trial Judge has absolved the Defendant company of the value of the grams covered by receipts attached to Ex.
PW 3/20 and amounting to Rs. 246/15/3. He has held that this transaction does not come within the terms of the agreement entered into by the par
ties, as the grains involved in the transaction were supplied not to the Defendant company but to the employees of the Defendant company and that
it was necessary for the Plaintiffs to have proved that this was done by them under express orders of the Defendant company.
The learned trial Judge has further found that Ex. P.W. 3/20 and the attached receipts do not appear to have been checked by anybody on behalf
of the company. We have ourselves gone through these receipts and we do not find ourselves in a position to disturb the finding arrived at in this
behalf by the trial Judge. The Plaintiffs have not proved that they have supplied grains to the employees of the company in pursuance of any
direction by the Defendant company, nor do the receipts attached with Ex. P.W. 3/19 seem to have been checked by any employee of the
company. The quantity of grains under these receipts alleged to have been supplied is found by the learned trial Judge as 219 mds, the value of
which is found by him as Rs. 3996-12-0. The trial Judge has added Rs. 246-15-3 to this sum and the total sum has been deducted from the
amount claimed by the Plaintiffs as not proved.
As regards the other receipts produced by the Plaintiffs to prove the delivery of the grains, the trial Court's finding is that these have neither been
accepted nor denied by the Defendant company. The trial Court after an elaborate discussion which will be referred to at its proper place has
further found that these receipts stand proved and has held that grains worth Rs. 15,595/13/6 have actually been delivered to the Defendant
company. The only point that was argued in this behalf in the trial Court as also in this Court is that it is not proved by the Plaintiffs that the
company's employee who is said to have checked these monthly statements had any authority to do so on behalf of the Defendant company. But it
has to be noted that the transactions with the Defendant company were to be entered into only through their servants. It is admitted-and at any rate
not denied by the Defendant company-that the persons who checked these receipts were their employees.
Under these circumstances it was for the Defendant company to have proved that they had given directions to the Plaintiffs that they should get
their monthly statements checked By some special employee of the company and none else. This they have not done. Under these circumstances,
and in view of the attitude adopted by the Defendant company of neither accepting nor denying these receipts it would be very difficult to hold that
Desraj who was admittedly an employee of the company had no authority to check the monthly statements submitted to the company by the
Plaintiffs.
We have gone through all these monthly statements and the receipts attached to them and we agree with the trial Judge that there is nothing in these
monthly statements which might suggest an inference that these receipts have been fabricated at a later date. The receipts have bed signed by a
number of employees of the company and these pertain to that quantity of grain also for which admittedly Rs. 35,000/- were paid by the
Defendant company to the Plaintiffs. We, therefore, hold that these receipts stand proved and that the quantity covered by these receipts has been
taken delivery of by the Defendant company. The learned trial Judge has found the value of this quantity at Rs. 15,595-13-6.
We might now come to the question of limitation. The learned trial Judge has applied Article 53 of the Limitation Act to this case and has held
the suit barred by limitation. We however think that before deciding the question of limitation, we might make some observations about the nature
of the agreement Ex. Dl. This document was executed on 20th Katik 2003. According to this document 5000 mds of maize at the rate of Rs. 18-
4-per md, 500 mds. of wheat at Rs. 18/- per md and 100 mds of Dal Mash at Rs. 30/- per md. were to be supplied by the Plaintiffs to the
Defendants. Out of this quantity ""at least"" 2500 mds of maize, 300 mds of wheat and 100 mds of Dal Mash were to be supplied upto the end of
Magh 2003, and the remaining quantity was to be supplied from 15th Baisakh 2004 to 15th Sawan 2004. Rs. 3000/- were taken as advance by
the Plaintiffs on the date of the execution of the document and it was further stipulated therein that within 15 days of the execution of the document
Rs. 10,000/- more would be paid as advance to the Plaintiffs. There was a further provision in the agreement that
the remaining balance will be (according to necessity) received by the Plaintiffs after delveries were made at the godowns.
It was further added therein that
the amount due on account of the supplies made at the godowns in a month will be received at the end of each month.
It was also stipulated that the Plaintiffs should obtain receipts for the supplies made without which no supply will be given credit.
A perusal of this agreement, Ex. D1, would show that it has been very inartistically drawn and there are visible contradictions found in it. For
instance, it is given in Clause (3) that the Plaintiffs will be entitled to receive payment at the end of each month for the supplies made by them in that
month. But nowhere is it stated as to how they are to adjust Rs. 3000/- and Rs. 10,000/- which according to the Ex. D1 they were entitled to
receive as advance. Then again we find that this document has not been acted upon in toto and there have been changes effected in it by the
conduct of the parties. For instance, it was stipulated in the agreement that the Plaintiffs were bound to supply about 2500 mds of maize and wheat
up-to the end of Magh 2003 but it is admitted that very small quantity was supplied by the Plaintiffs during this period. The remaining portion of the
grain was to be supplied from 15th Baisakh to 15th Sawan, 2004. But we find that while upto the end of the month of Magh very little quantity
was (sic), some supply was made in the months February, March and April, that is to say, before 15th Baisakh 2004 and after Magh 2003 which
was contrary to the provisions of the agreement.
Under these circumstances we shall have to consider now as to what Article of the Limitation Act would apply to the case. The learned trial Court
has applied Article 53 of the Limitation Act and has held the suit time barred. The trial Court is of the opinion that the limitation for the price of the
supplies made in each month would start from the end of the month in which the said supplies were made. For this finding he has sought support
from a provision in the agreement, Ex. D 1, in which it is provided that the Plaintiffs will be entitled to realize their dues at the end of each month.
We agree that if it were a mere sale of goods with the intention and stipulation that the price of these goods supplied in a month would be paid at
the end of that month, the Limitation would start when the amount will fall due for realization, i.e., the end of that particular month. But as we have
just seen, the document, Ex. D 1, though it contains a provision like this, yet it does not appear to have been acted upon, and this provision when
read with the other clauses and terms in the agreement abundantly shows that the said provision was never meant to be observed as an inflexible
provision. What we find from record is that there has not been a pure and simple sale of goods. The nature and the method of conducting the
transaction abundantly suggests and establishes that there has been a reciprocity of dealings and transactions creating independent obligations and
mutual demands.
The mere fact that the Plaintiffs had to receive Rs. 43,000/- as advance partly on the date when the agreement was executed and partly a few days
after its execution, would negative the theory of a monthly realisation on sale. It is not at all proved that any monthly adjustments were ever made
by the parties or that any payments were made on a monthly basis. The fact that even the trial Court has held that a sum of Rs. 15,595 odd are
due to the Plaintiffs negatives the theory of monthly payments or adjustments. This also would show that Ex. D 1 was not acted upon in toto.
Besides that, as already pointed out in an earlier part of this judgment, what we find is that though upto the month of Magh 2003 half of the
quantity of the grain was to be delivered, yet quite a little portion of this huge quantity was actually delivered without any objection on behalf of the
Defendant company. After the month of Magh the supplies had to be made from 15th Baisakh, but a reference to the receipts would show that the
supplies were made even in the months of Phagon Chet etc. This would show that there was nothing sacrosanct in the eyes of the parties about the
document, Ex. D 1. The parties have not treated it as such. Rather they have actually acted in contravention of its provisions. The document
therefore finally resolves itself to a piece of evidence of the fact that the Plaintiffs had undertaken to supply a specific quantity of the grain and that
the Defendant company had made certain advances to them on this account. The remaining provisions were as already seen, altered by the mutual
conduct of the parties.
The point then reduces itself to the fact that the Defendant company had advanced a certain amount of money to the Plaintiffs for the supply of
grains. This excludes the question of monthly payments being made to the Plaintiffs. The Plaintiffs having received a certain amount of money, they
became debtors to the Defendant company to this extent, and when the supplies exceeded Rs. 43,000/- the Defendant company became debtors
to the Plaintiff and later on when again the Plaintiff's supplies exceeded the amount paid to them, the Defendants again became debtors. This would
show that there were reciprocity of dealings and transactions on each side creating independent obligations on the other.
Taking all this into consideration, we are of the opinion that Article 115 of the State Limitation Act (Article 85 of the Indian Act) will be
applicable to the facts of the present case. This Article visualizes the existence of independent obligations on each side and it further presupposes
that there must be a mutual account and reciprocal demands between the parties. The expression ""mutual account"" has been taken to mean an
account in which the parties have agreed to bring together their items of debits and credits relating to their mutual dealings with a view to set off
against each other and arrive at a balance. This would mean that there must be mutual dealings between the parties giving rise to independent
obligations on both sides. This would naturally give rise to mutual demands. The real test therefore would be to see whether there have been
reciprocal demands in any particular case, i.e., whether there is a dual contractual relationship between the parties.
The position has been summarized in 'Chitaley's Limitation Act, Article 85' (Art. 115 of the State Act) note (3) page 1440:
(1) that there should be two sets of independent transactions between the parties, in one of which one of the parties should hold the position of
debtor and the other that of a creditor, and in the other, the reverse position.
(2) that the dealings should disclose independent obligations on both sides, and not merely obligations on one side, the acts done by the other being
merely discharges of such obligations, and
(3) that each party must be able to say to the other ""I have an account against you"".
Now in the present case, an advance was made by the Plaintiffs to the Defendants company. Upto the time when the demand was paid off by
deliveries to the company, the Defendant company would be in a position to say to the Plaintiffs that ""I have an account against you and you are
my debtor, I am your creditor."" But when the deliveries exceeded the advances or payments made, the position would be reversed and at that time
the Plaintiffs would be in a position to say to the Defendant company that ""I have an account against you"". A time may come when neither party
would be in a position to know as to who has an account against whom which would be-come known only when an account is settled between the
parties and a balance is struck. If the provision in Ex. D. 1 that deliveries would be made each month and payments received at the close of each
month be the correct position, then it would be a simple sale of goods and the Plaintiff would always have been a creditor. But in the present case,
the facts as disclosed above would show that the account remained mutual and current and as such Article 115 of the Limitation Act (Art. 85 of
the Indian Act) is clearly applicable to the facts of the present case. There is enough authority for this view as will be presently seen. In- Firm
Mansa Ram and sons Vs. Hira Lal Sanon and Another, it has been held:
The real test in finding out whether a case is governed by Article 85 (Art. 115 of the State Act) is to find out whether the balance was shifting in
favour of one party or the other. If that is the case and it is possible that one day the Plaintiff can say that Defendant owes him a certain amount and
on other day the Defendant can say that the Plaintiff is indebted to him, then clearly, it is a case of mutual, current and open account. For
determining the question of mutuality, it is not necessary that there must be a large number of transactions between the parties. There should be two
sets of transactions. In one set one party should hold the position of a creditor and the other a debtor, and in the other set the position should be
reversed.
Therefore where a person deposits a certain amount with a bank in the current account and then makes an overdraft of a larger amount which is
allowed on account of his current account and executes a promissory note and a receipt in lieu of the overdraft, the transaction clearly falls within
the purview of Article 85."" This authority is on all fours with the facts of the present case. A certain advance was made by the Defendant company
to the Plaintiffs. As against this, they received deliveries of grain. The price of the deliveries exceeded the amount advanced at a particular time.
Then again payments were made by the Defendant company which all told amounted to Rs. 35,000/-. Then again they received deliveries to the
tune of more than Rs. 50,000/-. The balance was shifting and was at one time in favour of one party and at the other in favour of the other. This
provides the test for finding out whether the present case is to be governed by Article 115 (Art. 85 of the Indian Act) or by any other Article of the
Limitation Act.
A similar view has been taken in- Uma Shankar Prasad Vs. Bank of Bihar Ltd. and Another,
(B) in which it has been held that:
An open and current account between the parties must still be shown to be a mutual account to attract the provisions of Article 85 (Art. 115 of the
State Act). Mutual, open and current account means a course of dealing where each party furnishes credit to the other on the reliance that on
settlement the accounts will be allowed, so that one will reduce the balance due on the other. To be mutual, there must be transactions on each side
creating independent obligations on the other, and not merely transactions which create obligations on the one side, those on the other being merely
complete or partial discharges of such obligations.
In-'Mt. Tapibai v. Shankar Lal', AIR 1939 Nag 113 it has been laid down:
... The absence of a shifting balance is not fatal to the conception of mutuality. The phrase ""reciprocal demands"" in Article 85 does not import that
either party has made an actual demand in fact. But the dealings must be of such a nature that they might lead to reciprocal demands. Once a
mutual, open and current account is started and there are reciprocal demands that account continues to be mutual so long as the account remains
open and current... The fact that after a certain date the account was one sided cannot turn mutual open and current account into a non-mutual
open and current account. The mutuality results from the reciprocal claims which can spring out of the transactions which once made the account
mutual.
In the present case, as already seen, there have been points of time when one party could make a demand of the other, and the other party at a
different point of time could also make (sic) demand, the reason being that the balance has been shifting all along.
In-'Fyzabad Bank Ltd. v. Ram Dayal' AIR 1924 Pat 107 it has been laid down:
Mutual accounts are such as consist in reciprocity of dealings between the parties and do not embrace those having items on one side only though
made up of debits and credits. Although, a shifting balance is a test of mutuality its absence is not a conclusive proof against mutuality.
But in the present case, the shifting balance has not been absent. The accounts show that the balance has been shifting.
A similar view has been taken in- R.N. Kapur, partner of Wright and Co. Vs. The Travancore National and Quilon Bank, Limited (in
liquidation) by Official Liquidator and Others, wherein it has been held that:
Where a customer of a Bank has a current account which at times is in credit and at other times in debit, the Bank having granted to the customer
the right to overdraw, Article 85 (Art. 115 of the State Act) applies and not Article 57.
Quite a similar view has been taken in- Kanthasami Reddiar Vs. Pethusami Reddiar, .
In-'Abubacker v. I.S. & C. Machado', AIR 1953 KER 391 it has been held that:
An-account is open when the balance is not struck-or though struck is not accepted or acknowledged to be correct. A shifting balance though a
test of mutuality is nothing more than a test and an account is mutual so long as the transactions on each side create independent obligations on the
other; and a running or continuous account is an account current.
Reference may also be made to-'Hasanali v. Ratilal', AIR 1953 Sau 141 In that case the Defendants placed orders with the Plaintiffs either for
sale or purchase of goods according to which the Plaintiffs entered into transactions as ""pacca adatias"". Sometimes the balance was in favour of the
Defendant and sometimes in favour of the Plaintiff. In this case, it was held that the account was mutual, open and current account and the suit was
governed by Article 85, Limitation Act.
As against this, the learned Counsel appearing on behalf of the respondent has drawn our attention to- Gopal Rai and Others Vs. Rambhanjan
Rai and Others, . In this case the account did not indicate transactions creating independent ob- ligations on both sides, but that there was some-
times a credit in favour of the Defendant and that only for a few days. It was held that
the account is not a mutual account and in a suit on such an account the Plaintiff is not entitled to the benefit of Article 85, Schedule 1 to the
Limitation Act.
But in the same judgment we find the following passage:
The test of mutuality is that the dealings between the parties should be such that the balance is sometimes in favour of one party and sometimes in
favour of the other. An account which consists of entries of payments made by one party in reduction of a debt to another and of payments made
by the latter on behalf of the former, is not a mutual account.
This authority does not seem to render any assistance however small to the learned Counsel.
The Defendant company's learned Counsel has further referred to- S.T.K.M. Lakshmanan Chettiar and Others Vs. Nalla Sevugam Servai
alias Nalla Sivan Servai, . This case relates to a debtor who sold some of his property to his creditor in part payment of his debt. This transaction
was not held to be a mutual, current and open account. The facts of this case have absolutely no bearing with the facts of the present case.
Reference has also been made to- Atmaram Vinayak Kirtikar Vs. Lalji Lakhamsi, .
According to this ruling the starting point of limitation is the date of delivery of goods and Article 52 has been held applicable for bringing an
action for the price of the goods so delivered. We have just shown that the present case is not a case of pure and simple sale of goods.
Reference has been made to- Abdul Aziz Vs. Munna Lal and Others, but this ruling does not seem to have any relation to the facta of the
present case.
Taking all this into consideration, we hold that Article 115 of the Limitation Act is applicable to the present case. According to the State
Limitation Act, the Limitation prescribed under Article 115 (Art. 85 of the Indian Act) is six years starting from the close of the year in which the
last item admitted or proved is entered in the account. The last item of grain is held proved by the trial Court to have been delivered on or about
15th Sawan 2004. The suit has been brought in Assuj 2007 and as such the suit is quite within limitation.
We, therefore, accept this appeal and set aside the judgment and decree of the trial Court and pass a decree for Rs. 15,595-13-6 in favour of
the Plaintiffs and Defendant 2 against Defendant 1 (heretofore described as Defendant company) with future interest at the rate of 1 1/2 per cent,
(which is said to be the prevailing Bank rate) from the date of the decree to the date of the realization of the decretal amount. In view of the fact
that the parties had to go through the ordeal of facing disturbances of a magnitudinal character, naturally involving them in some sort of losses, we
leave the parties to bear their own costs.
Let this order be communicated to the counsel of the parties at once.