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Karsondas Dhunjibhoy Vs. Surajbhan Ramrijpal - Court Judgment

LegalCrystal Citation
SubjectLimitation;Civil
CourtMumbai
Decided On
Case NumberO.C.J. Appeal No. 50 of 1932
Judge
Reported inAIR1933Bom450; (1933)35BOMLR929; 145Ind.Cas.630
AppellantKarsondas Dhunjibhoy
RespondentSurajbhan Ramrijpal
DispositionAppeal allowed
Excerpt:
indian limitation act (ix of 1908), article 85-mutual, open and current account-limitation-plaint-amendment-civil procedure code (act v of 1908), order vi, rule 17-game of action-nature of cause of action.;in determining whether a suit falls within article 85 of the indian limitation act, 1908, the first question to be decided is whether there was at any time a mutual, open and current account between the parties, and if so, when it was closed.;in order to bring himself within article 85 a plaintiff must show that he is suing for the balance on a mutual, open and current account. if in fact at the date when he starts the suit there is no open account but an account which is already closed, than he cannot say that he is suing for the balance due on an open account.;gonesh lal v. sheo golam.....john beaumont, kt., c.j.1. this is an appeal from a decision of mr. justice kania. the plaintiff's are suing the defendants as their agents in respect of moneys due on account of various transactions of cotton, wheat, linseed, etc., in bombay, for about two years up to october 20, 1922, and they ask for an account of those dealings and payment of the amount due to them. in the alternative, they ask for payment of rs. 2,865 odd on an admission which is alleged to have been made by the defendants. the defence is that the plaintiffs' suit is barred by limitation; and that being so, it is necessary to state the relevant dates.2. the first dealing between the parties took place on august 1, 1921. there was no general agency agreement, and i think that in law the defendants were appointed as.....
Judgment:

John Beaumont, Kt., C.J.

1. This is an appeal from a decision of Mr. Justice Kania. The plaintiff's are suing the defendants as their agents in respect of moneys due on account of various transactions of cotton, wheat, linseed, etc., in Bombay, for about two years up to October 20, 1922, and they ask for an account of those dealings and payment of the amount due to them. In the alternative, they ask for payment of Rs. 2,865 odd on an admission which is alleged to have been made by the defendants. The defence is that the plaintiffs' suit is barred by limitation; and that being so, it is necessary to state the relevant dates.

2. The first dealing between the parties took place on August 1, 1921. There was no general agency agreement, and I think that in law the defendants were appointed as agents for the plaintiffs in respect of each particular transaction committed to them. The last dealing between the parties took place on April 4, 1922, and, in my opinion, till about that date there was a mutual, open and current account between the parties. On July 10, 1922, the defendants wrote to the plaintiffs a letter sending them an account showing the amount due from the defendants to the plaintiffs as Rs. 2,123 odd, and they stated that they had settled that amount by a hawala entry in favour of another shop, in which they alleged the plaintiffs were partners. To that letter the plaintiffs replied on July 16, saying that they did not admit the accuracy of the account, and they also challenged the right of the defendants to settle the account by means of the hawala entry, and they stated that the money due must be paid to themselves. After some further correspondence, on July 28, the defendants wrote saying that they would send the moneys due, viz., Rs. 2,123 odd to the plaintiffs, and they further contended in the correspondence that the accounts were correct. On July 13, 1925, the plaintiffs commenced a suit in the Subordinate Judge's Court at Delhi claiming the moneys due from the defendants, and that suit finally terminated on May 3, 1928, by its dismissal for want of jurisdiction. Then, on July 25, 1928, the present suit was filed.

3. The plaintiffs' case is that the moneys which they sue for are due on a mutual, open and current account within Article 85 of the Indian Limitation Act, 1908, that the last item in that account was in April 1922, and that accordingly time runs from the end of the year according to the account. It is not in dispute that the end of the year according to the account was in October. So that the plaintiffs' claim is that time began to run from October 1922. Then they say that credit must be given to them under Section 14 of the Indian Limitation Act, 1908, for the time spent in prosecuting the Delhi suit, and on that basis their suit is in time. The learned Judge accepted that view and gave judgment for the plaintiffs.

4. I may observe in passing that in the course of the trial the learned Judge gave the plaintiffs leave to amend the plaint by alleging that the account of the plaintiffs with the defendants was a mutual, open and current account, and he says that this amendment was allowed because the point raised was merely one of law. In my opinion that amendment ought not to have been allowed, because on the assumption that it was not open to the plaintiffs on the plaint as drawn to raise the case of mutual, open and current account, the plaintiffs' claim was undoubtedly barred by limitation; and it is settled that in the absence of special circumstances leave to amend ought not to be given where the effect of the amendment is to deprive the opposing party of an acquired right. But I agree with the contention of Mr. Setalvad for the plaintiffs that the amendment was not necessary, and that on the plaint as drawn it is open to the plaintiffs to allege that the moneys are due upon a mutual, open and current account.

5. The case of the defendants is that the account was closed at any rate on July 28, 1922, and that time began to run from that date at the latest, and that accordingly the suit was out of time even if credit be. given for the period of prosecution of the Delhi suit; but they contend, further, that credit should not be given in respect of the Delhi suit, because they say that the suit was not prosecuted bona fide and that it was not in respect of the same cause of action, and that, therefore, the conditions necessary to bring the case within Section 14 of the Indian Limitation Act, 1908, were not fulfilled.

6. In determining whether the suit falls within Article 85, the first question to be decided is, whether there was at any time a mutual, open and current account between the parties, and if so, when it was closed. As I have already said, I think that at any rate down to April 1922 there was a mutual, open and current account between the parties, but, there being no general agency agreement, it would only remain an open and current account with the consent of both the parties. Whether that consent was withdrawn or not at any particular time is a question of fact. In my opinion the fact that all dealings between the parties ceased from April 1922, coupled with the fact that in the following July the defendants sent in an account showing the amount due and made an unconditional offer to pay that amount, shows that it was the intention of the defendants to close the account, and I hold as a matter of fact that the account was closed, at any rate from July 28, 1922. The learned Judge thought that the account remained open because two additions were made to the amount credited to the plaintiffs at a subsequent date. But those additions were not in respect of any new matter; they were in respect of matters which but for a mistake would have been included in the original account, and it seems to me that by merely correcting two items in an account it cannot be said that the defendants intended to re-open the account as a current account.

7. Mr. Setalvad has argued that even if the account was closed at the end of July 1922, he still comes within Article 85, because he says his suit is a suit to recover moneys which during the current year were due upon a mutual, open and current account and that, therefore, ho gets till the end of the year in which to bring his suit, and for that proposition he refers to a decision of the Calcutta High Court in Gonesh Lal v. Sheo Golam Singh (1879) 5 C.L.R. 211. In that case the plaint was filed on December 6, 1877, and the District Judge had held that the account, which had been a mutual, open and current one, was closed on October 25, 1877, and accordingly he held that Article 85 did not apply. But this decision was reversed by the High Court, who held that on the District Judge's own finding, namely, that there had been a mutual, open and current account which had been closed before the suit was brought but during the current year, the suit was in time; and the learned Judges of the High Court professed themselves as unable to follow the reasoning of the District Judge. With all respect to the learned Judges it seems to me that the learned District Judge was quite right. The nature of the cause of action must be determined at the date when the action is brought. In order to bring himself within Article 85 a plaintiff must show that he is suing for the balance due on a mutual, open and current account. If in fact at the date when he starts the suit there is no open account, then he cannot say that he is suing for the balance due on such an account. And it seems to me irrelevant to observe that if the suit had been brought somewhat earlier in the year it would then have been for the balance due on an open account. I am not, therefore, prepared to follow the decision in Gonesh Lal v. Sheo Golam Singh, and I observe that the Lahore High Court in Firm Gurdas Ram-Kotu Ram v. Bhagwan Das (1922) 68 I.C. 815 took the same view of Article 85 as I am taking. In my view, therefore, the case does not fall within Article 85, and having regard to the decisions which have been given as to the meaning of 'moveable property' in Article 89, I think the case falls within that Article, and that the plaintiffs' suit would be out of time even if credit be given for the period spent in prosecuting the Delhi suit.

8. I am not, however, prepared to agree with the learned Judge's view that the period spent in prosecuting the Delhi suit should be allowed to the plaintiffs. I am not impressed with the argument that the Delhi suit was not a bona fide one, but I think the plaintiffs have failed to prove that the cause of action in this suit and the cause of action in the Delhi suit were the same, and that is one of the conditions which must be complied with in order that Section 14 of the Indian Limitation Act may operate. The plaintiffs did not give evidence either in the Delhi suit or in this suit, and therefore one can only judge the relative causes of action by comparing the plaints in the two suits. In the present suit the claim is in respect of cotton, wheat, linseed, etc., up to October 20, 1922, and in the alternative in respect of an admission. In the Delhi suit the claim is in respect of transactions in cotton only and no period is assigned during which transactions are alleged to have taken place. The plaint in the Delhi suit was filed on July 1, 1925, and there is nothing whatever to show that the transactions covered in that suit would not include transactions in the years 1923 and 1924, which are outside the scope of the present suit. There is an allegation in the plaint in the Delhi suit that the cause of action arose in the month of June, the year not being specified, and that allegation seems inconsistent with the theory that the cause of action in that suit is the same as the cause of action in this suit, because there is no suggestion in this suit that the cause of action arose in the month of June in any year. I think, therefore, the plaintiffs have failed to prove that the causes of action in the two suits are the same. Mr. Setalvad has relied on an admission made by one of the members of the defendant firm in this suit in the course of his cross-examination to the effect that in respect of cotton transactions of the plaintiffs there was only one continuous account in the defendants' books and that there was no other transaction, with the plaintiffs. That may have been the defendants' view in 1932, but it does not follow that it was the plaintiffs' view in 1925.

9. With regard to the claim on the alleged admission on which the learned Judge was against the plaintiffs, I agree with his decision and have nothing to add on this point.

10. For these reasons I think the plaintiffs' suit is barred by limitation, and the appeal must be allowed with costs and the suit dismissed with costs including the costs of the summons. Defendants must pay the costs of the commission, which appears to me to have been entirely unnecessary.

Rangnekar, J.

11. This is an appeal from a judgment of Mr. Justice Kania awarding the plaintiffs' claim in the suit. The main question in the appeal is whether the suit is barred by limitation. The learned Judge held that it was not, and the appellants contend it is. The material facts and the dates are not in dispute.

12. The plaintiffs carry on business in Delhi, and in August 1921 they employed the defendants as their commission agents in Bombay to enter into various transactions in cotton and other commodities. The defendants accordingly bought and sold cotton on their behalf from August 1921 vaida. The business continued up to April 1922 vaida, and admittedly that was the last transaction in cotton that was entered into by the defendants on behalf of the plaintiffs. Somewhere between April and May the defendants made up the accounts and struck a balance of Rs. 2,123 odd in favour of the plaintiff's. It appears that in March 1922, that is, after the transaction of April vaida was entered into, the defendants intimated to the plaintiffs that they were not willing to continue business dealings with them. This appears from a letter dated March 7, 1922. In reply the plaintiffs stated that they were giving up cotton business and promised to make up accounts on receiving a statement of account from the defendants. On July 10 the defendants wrote to the effect that Rs. 2,123 odd were due to the plaintiffs and along with that letter sent a full statement of account. They further stated that they had entered a hawala in respect of this sum in favour of the firm of Maheshdas in which according to them the plaintiffs were partners or otherwise interested. The Ankda showed the transactions entered into right from the beginning of August 1921, and it is common ground that up to this time no detailed statement of account was sent by the defendants to the plaintiffs. The Ankda at the foot of it showed the sum of Rs. 2,123-14-9 as 'balance payable.' In their letter of July 16 the plaintiffs repudiated the hawala and called upon the defendants to furnish particulars or a detailed statement of their account with them, and further stated that they would recover what was found due to them directly from the defendants. On July 21, 1922, the defendants stated that the Ankda sent was correct and asked the plaintiffs to compare it with the slips they had sent from time to time and that nothing further could be done in the matter. On July 20 the plaintiffs again protested against the hawala and called upon the defendants to give them credit for interest on certain items in the account. On July 28 the defendants wrote to the plaintiffs stating that as the plaintiffs had objected to the hawala entry, they would cancel the same and that they themselves would pay the amount of Rs. 2,123 to the plaintiffs. No further correspondence is alleged to have taken place between the parties.

13. In 1924 the defendants instituted a suit against the firm of Maheshdas and in their plaint at para. 4 stated that one of the accounts of the defendants stood in the name of the present plaintiffs, and at the foot of that account the sum of Rs. 2,865 was due.

14. On July 13, 1925, the plaintiffs instituted a suit against the defendants in the Court of the Subordinate Judge at Delhi for recovering, as alleged by the defendants in this suit, the amount due by them at the foot of the commission agency account. The defendants denied the jurisdiction of the Court. The contention was upheld, and the decision confirmed by the appellate Court on appeal by the plaintiffs.

15. The present suit was filed on July 30, 1928. In the plaint the plaintiffs set oat two grounds for exemption from the law of limitation :

(1) the time taken for prosecution of the Delhi suit and appeal-Section 14 of the Indian Limitation Act, 1908;

(2) the admission of the defendants made in their suit against the firm of Maheshdas.

It is common ground that the time taken for the prosecution of the Delhi suit and appeal was between July 13, 1925, and May 2, 1928. As to the second ground of exemption, namely, the alleged admission in the suit against the firm of Maheshdas the learned Judge held that the plaintiffs were not entitled to rely on it. In this view I agree.

16. Almost at the end of the case the plaintiffs pleaded as an answer to the plea of limitation that the account between the parties was a mutual, open and current account, and applied for an amendment to that effect. The amendment was opposed but allowed by the learned Judge.

17. The contentions raised by the learned Advocate General in appeal are : (1) that the plaintiffs are not entitled to rely on Section 14 of the Indian Limitation Act, 1908, as it is not proved that the cause of action in this suit is the same as that in the Delhi suit, and further that the plaintiffs were not prosecuting the Delhi suit in good faith, (2) that the learned Judge was wrong in allowing amendment of the plaint to the effect that the account between the plaintiffs and the defendants was a mutual, open and current account, (3) that even if the account was mutual, it was not open and current at the end of the year, nor at the date of the suit, and (4) that the case was governed by Article 89 and not by Article 85, because the plaintiffs having demanded the accounts the same were refused by the defendants, and, secondly, because the agency between the parties had come to an end in the month of July 1922. Mr. Setalvad for the plaintiffs-respondents in a forcible argument urged, (1) that the cause of action in both the suits is the same, (2) that there is nothing to show that the plaintiffs were not prosecuting their suit in Delhi in good faith, (3) that the amendment was unnecessary and may be ignored as the account in fact is mutual, open and current, (4) that even if the account was closed in July 1922, still the case would be governed by Article 85 and the plaintiffs would be entitled to bring the suit within three years from the close of the year, that is October 1922, as the last admitted item was entered in the accounts in July 1922, (5) that if Article 89 applied there was no request to render accounts, and (6) that the agency did not terminate in July as the account was open till the end of the year.

18. With regard to the first contention as to whether the plaintiff's are entitled to claim exemption from the law of limitation on the ground that they were prosecuting their salt in Delhi, it seems to me that there is considerable force in the argument of the Advocate General that the cause of action in the present suit is not the same as in the Delhi suit. The Delhi suit was confined only to accounts in respect of cotton transactions and the defendants were sued there as brokers. The suit was filed on July 13, 1925, and the cause of action in the body of the plaint is said to have arisen in June. There is nothing to show what particular month of June the plaintiffs refer to in that plaint, nor is there anything to show that the account in that suit was in respect of the transactions of 1921-1922. In the present suit the defendants are sued as commission agents, not only in respect of cotton but also in respect of various other commodities, such as wheat, linseed, etc., and also in respect of certain dividends recovered by the defendants on behalf of the plaintiffs. The cause of action, according to the plaintiffs, in the present suit arose on October 20, 1922. On these facts it is difficult to hold that the causes of action in both these suits are identical.

19. Assuming, however, that the plaintiff's are entitled to claim exemption from the law of limitation on the ground mentioned in the plaint, the main question in the appeal is whether the account on which the plaintiffs rely is a mutual, open and current account, and whether Article 85 is applicable to the facts of this case. If Article 85 applies and if the plaintiffs are entitled to claim credit for period during which they prosecuted the Delhi suit, then it is obvious that the suit would be in time.

20. Article 85 refers to a suit to recover the balance on a mutual, open and current account between the parties and time begins to run from the close of the year in which the last item admitted or proved is entered in the account. The plaintiffs did not state in the plaint that the account between the parties was mutual, open and current, and almost at the end of the case asked for an amendment to that effect. The amendment was opposed but allowed by the learned Judge. I agree with the learned Advocate General that the amendment was wrongly allowed, because the effect of it was to deprive the defendants of a right which was vested in them, namely, a right to plead limitation. But in my opinion there is considerable force in Mr. Setalvad's argument that the amendment was unnecessary and that the plaintiffs would be entitled to say on the account put in on behalf of the defendants that it was a mutual, open and current account. The effect of the amendment was only to enable the plaintiffs to plead that the account on which the suit was brought was mutual, open and current, whether successfully or not is a different matter.

21. Now whether an account is mutual, open and current so as to attract the application of Article 85 is a pure question of fact and must depend upon the nature of the dealings between the parties, nature of the entries and other relevant circumstances. In order that an account should be mutual there must be dealings between the parties and such dealings must be capable of giving rise to independent obligations on each side of the account at any given period or stage. One test commonly applied is the possibility of shifting balances sometimes in favour of one party and sometimes in favour of the other. But as observed in several reported decisions that test is not decisive or conclusive of the matter. The real test is whether the dealings between the parties are of such a nature that the balance might so shift. An account current means a running account, that is an account which is continued and not stopped or closed. If the account is running, that is to say, if it is unclosed, then it is open and current. It is open either because the balance remains to be drawn or struck, or because it is to be carried forward because of some contemplated future dealings between the parties. If the account is not closed by settlement or otherwise, it is open. Of course mere cessation of the dealings between the parties does not mean that the account is closed. The real question in each case would be what is the intention of the parties, and that must be inferred from the surrounding circumstances. Suppose there is a mutual, open and current account between the parties and the dealings close in July and the plaintiffs draw a balance against the defendants and then demand the sum from them intimating that no further dealings will take place between them, I am unable to see how it can be said that after July the account still remained a mutual, open and current account and continued to bear that character right up to the end of the year. There is nothing in law which prevents a party from saying to the other 'I am closing your account today. This is what is due to you. I shall have nothing to do with you in future.' It is difficult to see how it can be contended after this that the account still remained open and current. On the other hand in the illustration which I have taken if the transactions between the parties come to an end in July but nothing further happens and at the end of the year the balance is brought down, it is quite clear that the account would be mutual, open and current and limitation would run from the end of the year even though the last item was entered in the month of July, Similarly, if at the end of the year the balance is carried forward, say to the next year, in my opinion there would be nothing to prevent a party from saying that the account was kept open and so on. The real principle, in my opinion, is, as stated by Wood, 4th Edn., p. 1427 :-

The theory upon which the doctrine as to mutual accounts rests is that there is a mutual understanding between the parties, either express or implied, that they will continue to credit each other until one signifies a contrary intention, when the balance being ascertained, becomes due and payable.

Applying these principles what is the position Undoubtedly the account in this case was originally mutual, open and current up to the end of July. But the question would be was it open and current after July so as to enable the plaintiffs to say that time in this case should run from the close of the year, that is from October Now the evidence in the case is so clear on the subject that I have no doubt about the conclusion to which I can come upon it. As I have stated the defendants sent in the accounts in the month of July. Admittedly no transaction took place after the April vaida. The effect of the correspondence is to show that both the parties mutually were desirous of terminating their business relationship. The defendants actually entered a hawala, that is to say, made a payment to the plaintiffs by crediting the sum due to the firm of Maheshdas and debited the amount to the plaintiffs in their own account with them. The hawala was objected to by the plaintiffs and on that objection the defendants stated that they would cancel the hawala and pay the balance directly to the plaintiffs. It is difficult to see on these facts how the account can be stated to have remained open even up to the end of the year. It is said that the plaintiffs did not accept the balance drawn by the defendants as being correct and that they did not sign any statement of account, and therefore the account was not a stated account. It is further stated that unless an account is stated, that is to say, stated in the same way as, for instance, Article 64 requires, the account cannot be said to have been closed. I am unable to accept this argument. I think, as I have stated, the real question is the intention of the parties, I am unable to see there is anything in law which would prevent a man from saying : 'From today I shall not have any business dealing with you. I have made up my account which according to mo is correct, and if you do not accept it, do what you like.' If a man says that clearly and nothing further happens, in my opinion the account must he said to have been closed whether the other party accepts the correctness of the account or not.

22. Then it is said that the account in this case in fact remained open because there were three items which were subsequently either admitted by the defendants or entered in the account books. The evidence with regard to these three items is to this effect. The items are Rs. 209 and Rs. 750 and interest claimed by the defendants on their side of the account. As to the item of Rs. 209 the position is that this sum became due to the plaintiffs in December 1921 as the result of an earlier clearing. It was properly credited in the ledger of the defendants but in the statement of account sent to the plaintiffs by some oversight the item was omitted. The mistake was due to the fact that there was a similar omission in the entries in the Bethi Khata Vahi from which the Ankda sent to the plaintiffs was prepared, and accordingly, credit was given to the plaintiffs at the end of the year. The item of Rs. 750 represents the dividends collected in February 1922 by the defendants on behalf of the plaintiffs. There is no evidence to show that the defendants were employed as agents for this purpose, but apparently they collected the dividends for the plaintiffs in February 1922. This item also was not mentioned in the Ankda sent to the plaintiffs and that was due to an oversight, but it was credited in the ledger at the end of the year as having been recovered by the defendants in February 1922. Then in the Ankda sent to the plaintiffs the defendants forgot to charge interest in their favour, and that omission was subsequently repaired. It, however, appears that in fact all these three items were mentioned in what is called a memorandum at the end of the cash book. The point to note is that all the items are in respect of matters prior to July 1922. The subsequent addition of these three items in the ledger cannot, in my opinion, make any difference in the position and cannot detract from the positive evidence of the account being closed and the dealings having come to an end in July 1922. The test is not whether the account which has been sent to the plaintiffs is correct or not, but the test is whether one party closes the account to the knowledge of the other. It is only when, after the balance is struck, fresh dealings take place between the parties, e.g., fresh sum is received or advanced and entered into the account, that it may be said that the account is continued. As a matter of fact these items were brought to account in the cash book and admittedly no fresh dealings took place between the parties after that date.

23. Mr. Setalvad next argued that the last item in the account was entered in July 1922 and therefore, assuming that the account was closed, still time would begin to run under Article 85 from the close of the year which in this case was October 1922, accounts being kept in accordance with the Indian calendar. Article 85 states :- 'For the balance due on a mutual, open and current account' etc. From the wording of the Article it is clear that if an account is mutual in any part of the current year, it must retain that character till the end of the year. It cannot retain that character till the end of the year if at any time during the year the account is closed, much less when the suit is brought. Now it is in the suit that the plaintiff has to show that he is seeking to recover the balance due on a mutual, open and current account, It must follow, therefore, that if the account in question was closed prior to the suit, the suit cannot be said to be for the balance of an open and. current account. In order to bring the case under Article 85, it is, in my opinion, necessary for the plaintiff to show that he is suing for the balance due on a mutual and open account. If at the time the suit was brought the account was closed, then I think the Article would not apply. In other words the account must be open down to the suit. A similar view has been taken by the Lahore High Court in Firm Gurdas Ram-Kotu Ram v. Bhagwan Das (1922) 68 I.C. 815

24. The next question is whether Article 89 is applicable. In my opinion it is. The Article applies, as the authorities show, to a suit by a principle against his agent for an account and for any money that may be found due on the taking of such account. The starting point of limitation is (1) when the account is demanded and refused, or (2) when the agency terminates. But whatever starting point is taken in this case, in my opinion, the suit is barrred under the Article. The correspondence to which I have referred clearly shows that a detailed statement of account was demanded by the plaintiffs but refused by the defendants who said that the statement they sent was correct and in effect declined to send any further statement. Mr. Setalvad refers to one or two decided cases in which it seems it was held that the refusal to render an account within the meaning of the third column of Article 89 must be express, With all respect I differ from this view. In my opinion whether an account was demanded and refused or not must depend upon the circumstances of each case, and I see no reason why a refusal may not be inferred or implied from the facts of the case. But there can be no answer to the argument that the agency in this case terminated in July 1922, and that being the case, the suit was clearly barred under Article 89 of the Indian Limitation Act, 1908.

25. In the result I agree that the appeal must be allowed and the suit dismissed with costs.


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