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Dhanraj Mills Ltd. Vs. Laxmi Cotton Traders - Court Judgment

LegalCrystal Citation
SubjectContract;Limitation
CourtMumbai High Court
Decided On
Case NumberA.F.O.D. No. 688 of 1955
Judge
Reported in(1958)60BOMLR1295
ActsLimitation Act, 1908 - Schedule - Articles 62, 97, 115, 120 and 145
AppellantDhanraj Mills Ltd.
RespondentLaxmi Cotton Traders
Appellant AdvocateD.P. Madon, ;Z.N. Gamadia, Advs. and ;Payne and Co.
Respondent AdvocateS.M. Shah, Adv. and ;Kanga and Co.
Excerpt:
.....a division bench of the patna high court came to the conclusion hat when the employer takes a deposit of money from the employee for good conduct, the suit by the employee for the return of the depoit does not fall under article 145 and the reason given by the patna high court, which, with respect, is a very strong reason, is that there was no cause of action at the date of the deposit and the limitation act provides for time running only after cause of action had arisen nd onthat view they held article 145 inapplicable. what is suggested is that this is an article for money paid upon an existing consideration which afterwards fails, and what is urged is that the consideration under the contract failed when the plaintiff did not succeed in getting the quota from the government of..........only on a contingency. he was dealing with a case where a suit was filed to recover a sum of money deposited as security for proper performance of the duties of an office and from which the employer was entitled to deduct all sums not accounted for by the employee. with respect, it may be possible to take the view of a deposit made under those circumstances that it is an entrustment which would attract the application of article 145, but we are not concerned to decide that case, because we are not dealing with the case of a deposit made by an employee with his employer for the good conduct of the employee. (8) but even this view taken by the madras high court has not ben accepted by the patna high court (see ram ranbijay prasad v. mt. bachai kuari air 1939 pat 688. on precisely.....
Judgment:

Chagila, C.J.

(1) A very interesting question relating to the law of limitation arises on his appeal and the question becomes more interesting because it has not been decided definitely by any High Court whose decisions have been referred to at the bar and the question arises in this way. The respondents entered into a contract with the appellant-mills on the 5th of December, 1950. The contract was headed 'Provisional Sale Note' and under this contract the respondents agreed to buy from the appellants certain bales of cotton goods for February-March delivery against confirmed quota to be confirmed within 30 days, U. K. Mill delivery. On the next day, the respondents paid to the appellants a sum of Rs. 3,500 and the appellants passed a receipt in respect of this amunt stating that the amount was payment against fulfilling the contract. It appears that the respondents could not obtain the necessary quota for exporting the goods to the United Kingdom for which the goods were intended, and, therefore they did not carry out the terms of the contract. On the 19th of October. 1951, they wrote to the Mills that as there was no possibility of their getting quota for export of the piece-goods to the United Kingdom, they would thank the Mills to treat the contract as cancelled and refund the deposit of Rs. 3,500. As the Mills refused to return the deposit, the respondents filed a suit for the return of his deposit from which this appeal arises.

(2) The appellants' contention was that the plaintiffs' siot was barred by limitation and also on the merits that the contract entered into between the parties was not a provisional contract, that the plaintiffs had undertaken an obligation to purchase cotton goods from the Mills and having failed to do so, they were in default and therefore, were not entitled to the return of the deposit. On both the points, the learned Judge held against the defendants and passed a decree in favour of the plaintiffs and the question that has been argued before us is the question of limitation. The view taken by the learned Judge was that the case fell under the residuary Article 120. Now, it is clear that one should not have resort to Article 120 unless one is satisfied that no other article in the Limitation Act applies to the fact of a case. Article 120 by its very terms is a residuary article and only applies to a case when other articles have no application, and Mr. Shah for the plaintiffs before us hs argued on the basis that the article which applies to the facts of this case is Article 145 and the period of limitation is six years.

(3) Now, turning to that article, the description of th suit in respect of this article is 'against a depository or pawnee to recover meveable property deposited or pawned' and the time from which limitation begins to run is the date of the deposit or pawn. What is urged by Mr. Shah is that the case of every deposit falls under this article and inasmuch as the present suit is to recover a deposit made by the plaintiffs,the period of limitation must be governed by this article. Therefore, the question that we have to consider and decide is this; When a party has gven a deposit for the due performance of a contract and sues the other party to the contract to recover that deposit, does that case fall within the ambit of Art. 145?

(4) Now, before we turn to the authorities, let us look at the language of the aticle itself and also consider the place where it is put in the first Schedule to the Limitation Act. Now, the expression 'depository' must take colour from the expression that follows, viz. 'Pawnee'. In the case of a pawn, an article or a moveable property is entrusted to the pawnee as security for a debt. The property in the article or a moveable property is entrusted to the pawnee as secuirty for a debt. The property in the article or the goods continues to remain in the pawner. In our opinion, the deposit contemplated by Article 145 is a deposit which must as far as possible be approximated to a pawn. In other words, the deposit to which article 145 applies is only that deposit where there is an element of entrustment. whereas in the cae of a pawn, entrustment is as secuirty for a debt; in the case of a deposit it may be for safe custody; and no question of security or debt may arise; but still the dominating factor in that transaction is the elment of entrustment. It will be noticed that the earlier articles of the Limitation Act beginning somewhere about 51 deal with suits in respect of money claims and suits arising out of contractual obligations and then we come to various articles which deal with other subject matters. It the intention of the Legislature was to deal in Article 145 with return of deposits mae by a party to a contract for the performance of a contract, it is difficult to believe that the proper place of the article would be where it finds itself to be. There is another aspect also which must be considered on the interpretation of Article 145 and that is the time from which limitation begins to run. The time is the the date of the deposit or pawn. Now, in the case of a deposit made for the performance of a contract, the deposit does not become returnable until the happening of a certain contingency. In this case, according to the plaintiffs, the contingency was their not having been able to obtain the quota but till that contingency took place they had no right to the return of the deposit, but according to Mr. Shah if Article 45 were to apply to the facts of this case, limitation would begin to run not from the time when the contingency happened but from the date of the deposit itself. In other words, limitation would begin to runs from a point of time when the cause of action had not accrued to the depositor. Now, such a construction would totally be opposed to the principle underlying the Limitation Ac. The principle underling the Limitation Act is that limitation begins to run from a point of time when the cause of action has accrued to the party who files a suit to assert his right. It is imposible to believe that the Act would have made limitation to run although no cause of action had accrued to the party who brought a suit for the return of a deposit.

(5) But we are told by Mr. Shah that the matter is concluded by a decision of the Privy Council which has construed this Article. Now, turning to that decision of the Privy Council. which is Mahomed Habibul Haq v. Tikam Chand, : the Priv Council was dealing with the entrustment by a debtor of Government Promissory Notes to his creditor a security for the debt and it is on these facts that the Privy Council came to the conclusion that Article 145 was the relevant article which applied and the Privy Council points out at p. 112 that the Government Promissor Notes, although they were held by the creditor as security, continued to be the property of the debtor. The observation relied upon by Mr. Shah is the obmained with Tikam Chand, who is the creditor, as security or at any rate for safe custody and on either view not Article 49 but Article 145 is the relevant Article and the suit was well within time; and on these observations, an argument is founded that in every case where the deposit is for security or for safe custody it is Article 145 which is to be applied. Now, in our opinion, this is carrying the decision of the Privy Council far from its normal and natural ambit. As we have said before, the Privy Council was considering a fairly straight-forward case of Government Promissory Notes being deposited by a debtor with his creditor as security for the debt and with respect, there can be no doubt that under those circumstances obviously the Article that owuld be applicable is Article 145. It is stretching both the language of the judgment of their Lordships of the Privy Council and also stretching the ratio of the judgment to apply this case to an entirely different set of facts, which we have to consider, where the plaintiff have given a deposit not as security for a debt, not as safe custody but for the performance of a contract into which they have entered. An interesting question also arises which, in the view that we take, it is not necessary to decide, and that is whether looking to the language of Article 145, it was ever intended that it should apply to payment of money by one party to another. If the underlying idea of Art. 145 was that the depositor retains his ownership of the prperty which he has entrusted to the depositee, then the idea obviously, cannot apply to payment of money. But even if it does apply to money, the question will still arise whether it would not apply to money only in those cases where the right to that money continues in the depositor from the moment he deposits it right up to the time when he files the suit. It is precisely because there is that right in the depositor that the cause of action accrues to him from the very moment that he makes the deposit. These considerations cannot apply to a case where a deposit is made for the performance of a contract Now, take the present case where it cannot possibly be said that the plaintiff was entitled to the return of the deposit as soon as he made it. His right to the return of the deposit would only arise in the event of his not being able to perform his part of the contract by reason of te fact that he couldnot obtain the quota. It is only then that his right to the return of the deposit would arise.

(6) But, there is another important circumstance in this case, to which attention must be drawn; and that is the nature of a deposit when the deposit is made for the performance of a contract. We had occasio to consider this in Abdul Gtani and Co. v. Trustees of the Port of Bombay, : AIR1952Bom310 , and at p. 275 (of Bom LR): (at p. 311 of AIR) we relied on the observations of Lord Justice Fry in Howe v. Smith (1884) 27 Ch. D. 89 in order to point out the dual role that a deposit made for the performance of a contract plays; and the observations of Lord Justice Fry were these:

'It (that is a deposit for the performance of a contract) is not merely a part payment, but is then also an earnest to bind the bargain so entered into, and creates by the fear of its forfeiture a motive in the payer to perform the rest of the contract'.

If the deposit made by the plaintiffs was merely an earnest or merely a security for the performance of the contract, then there could have been some force in Mr. Shah's argument. It may then have been contended that the money was entrusted to the other party to the contract as security and if the contract was performed or if the contract could not be performed for no fault of the other side, that security was to be returned. But when the deposit takes on a different complexion when it is not merely a security but also a part payment, then the argument of Mr. Shah completely loses its validity. If these Rs. 3,500 paid by the plaintiffs were intended to be a part payment also under the contract - and that is undoubtedly so - then the Mills were entitled to retain this money as their own s part payment against the performance of the contract. If the contract was performed by the plaintiffs the defendants the defendants would have appropriated it against the price. If the plainiffs failed to perform the contract, they would have confiscated it treating it as earnest money. In the case of the third eventuality, which has happened in this case where according to the plaintiffs, the contract could nto be pefformed for no fault of theirs, an obligation would arise upon the Mills to return the deposit. But what we are emphasising is that it could not be said on the facts of this case and looking to the nature of the deposit that it was an entrustmjent by the plaintiffs to the defendants. It was not an entrustment as security for a debt, as it was in the Privy Council's case, nor is it an entrustment purely for safe custody.

(7) Mr. Shah relied on a judgment of a single Judge of the Madras High Court reported in : AIR1954Mad101 , Ahilyamba v. Subramania. The learned Judge himself points out the conflicting decisions which the Madras High Court has given on this question; and although learned Judge took the view that the case of deposit he was considering fell within the ambit of Article 145, it is to be noted that he was not dealing with a deposit paid for the performance of a contract and which was refundable only on a contingency. He was dealing with a case where a suit was filed to recover a sum of money deposited as security for proper performance of the duties of an office and from which the employer was entitled to deduct all sums not accounted for by the employee. With respect, it may be possible to take the view of a deposit made under those circumstances that it is an entrustment which would attract the application of Article 145, but we are not concerned to decide that case, because we are not dealing with the case of a deposit made by an employee with his employer for the good conduct of the employee.

(8) But even this view taken by the Madras High Court has not ben accepted by the Patna High Court (See Ram Ranbijay Prasad v. Mt. Bachai Kuari AIR 1939 Pat 688. On precisely similar facts, a Division Bench of the Patna High Court came to the conclusion hat when the employer takes a deposit of money from the employee for good conduct, the suit by the employee for the return of the depoit does not fall under Article 145 and the reason given by the Patna High court, which, with respect, is a very strong reason, is that there was no cause of action at the date of the deposit and the Limitation Act provides for time running only after cause of action had arisen nd onthat view they held Article 145 inapplicable.

(9) Mr. Shah has also relied on a judgment of the Calcutta High Court, which is Upendra Lal Mukhopadhya v. Collector of Rajshahye ILR 12 Cal 113. This was also a case where a deposit was made as security for the discharge of the plaintiff's duties as Manager of an estate under the Court of Wards; and Division Bench of the Calcutta High Court held that it might be that the case fell under Art. 145 but they di not decide in point, because according to he learned Judges the period of limitation applicable could not certainly be less than six years and, that, with very great respect is hardly a correct approach to the various Articles of he Limitation Act. If one starts with a preconceived notion that limitation for a particular case should not be less than a particular number of years, and then tries to find out which is the Article in the Limitation Act which prescribes the period, then one may not be able to put one's finger on the relevant Article. With respect, the correct approach before one turns to Article 120 is to find out whether there is any other Article in the Schedule which wouldapply to the facts of the case. But in any case, this is not a decision supporting Mr. Shah that Article 145 applies to the case of a deposit even when the deposit is made for the performance of a contract.

(10) There is also a decision of the Calcutta High Court, Hohuri Mahton v. Thakoor Nath Lukee ILR 5 Cal 830 which comes nearest to the facts of this case. In that case the plaintiff had deposited Rs. 395 with the defendant pending negotiations for the renewal of a lease upon the understanding that if the negotiation eventuated in the lease to the plaintiff being renewed, the sum of Rs. 395 should remain in the hands of the defendant and should be treated as part of the security to be given by the plaintiff for the due performance by him of the conditions of the new lease; but that if no new leaseshould be granted, the sum of Rs. 395 should be returned to the plaintiff.The negotiations eventually came to nothing and no new lease was granted to the plaintiff and the plaintiff filed a suit for the reutrn of the sum of Rs. 395; and a Division Bench of the Calcutta High Court held that the Article which would apply would be either Article 115 or Article 62. There was no suggestion that Article 145 would be applicable. Now, if Mr. Shah was right that every case of a deposit must fall under Article 145, then the Calcutta High Court would not have held that the case of this particular deposit, which, as we have already said, comes nearest to the facts of this case, did not fall under Article 145 but either under Article 115 or Article 62. In our opinion, therefore, a suit forthe return of a deposit made by the plaintiffs for the due performance of a contract, which deposit by its very nature was to serve both the purpse of a part payment and an earnest, does not fall under Article 145.

(11) We have now to consider which is te proper Article under which such a case would fall, because unless we can lay our finger on a specific article, we must uphold he view of learned Judge below that the residuary Article will apply.

(12) Now, Mr. Madon, learned Counsel for the appellants, has suggested three Articles for consideration, Article 62, Article 97 and Article 115. It is clear that if any one of thes articles applies, then the plaintiffs' suit would be beyond the period of limitation. It will, therefore, be sufficient for us to decide that the case of the plaintiffs must fall under any one of these three Articles. If that be so, it would pershaps be unnecessary to specify which of the three Articles would be the proper article. Now, turning to these three Articles, the first is Article 62 and it is for money payable by the defendant to the plaintiff for money received by the defendant for the plaintiff's use.' Now, this Article deals with a cause of action, which s familiar in English Law and it is known in English Law as a suit for money had and received. Now, it is clear that this cause of action is available to the plaintiff when there is no contractual obligation undertaken by the defendant and when the law implies a promise on the part of the defendant to pay the money . There is force in Mr. Madon's contention that when th period mentioned in the contract expired and when the defendant did not succeed in getting the quota, the Mills became liable to refund the deposit. The contrac itself does not contain any provision with regard to the obligation of the defendant to refund the amount, and, therefore, according to Mr. Madon, the law would impute a promise to the defendant Mills to repay this amount and it is on this imputed promise that the suit would be founded. If that be so, then it would be a case, which, in England will be described as a suit for money had and received. The other Article is Article 97. We find it rather difficult to accept Mr. Madon's contention that the case may fall under this Article. What is suggested is that this is an Article for money paid upon an existing consideration which afterwards fails, and what is urged is that the consideration under the contract failed when the plaintiff did not succeed in getting the quota from the Government of India. The third Article which seems to be the most appropriate is Article 115. That Article is for compensation for the breach of any contract, express or implied, not in writing registered and not herein specially provided for. Now, in this case, it is possible to take the view that there is an implied contract under which the defendants agreed to repay the deposit if the plantiffs could not perform their part of the contract for no fault of theirs and when the plaintiffs failed to get the quota, there was an obligation upon the defendants arising from this implied contract to repay the deposit, the plaintiffs are suing for compensation for breach of this implied contract. But as we have have sai before, as far as the defendant Mills are concerned and as far as the question of limitation is concerned, it is immaterial whether the case falls under Article 62. Article 97, or under Article, 115, because if it falls under any one of these Artiles, the plaintiffs suit must be held to be barred by the law of limitation. The result is that we must disagree with the view taken by the learned Judge below and hold that the plaintiffs' suit is barred by imitation.

(13) The result is that the appeal succeeds and the plaintiffs' suit will be dismissed with costs throughout.

(14) Appeal allowed.


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