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Dau Dayal Vs. Pearey Lal and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Reported inAIR1928All236; 108Ind.Cas.694
AppellantDau Dayal
RespondentPearey Lal and ors.
Excerpt:
.....paid out from time to time their own moneys, either to complete a purchase or to meet an immediate liability of the defendants. the ginning and pressing charges, as well as the principal and interest were debited to the defendants and the sale proceeds of the cotton bales were credited into, the defendants' account, as against the advances made by the plaintiffs, the commission earned and other items. on the other hand, the defendants were liable to the plaintiffs to pay interest on any moneys advanced by the plaintiffs and to make good any loss which might take place, which was not covered by the deposit......commission agents and it was agreed that if and when occasion arose, the plaintiffs would advance money to defendants 1-5 in order that purchases might be effected. the plaintiffs were to get a certain rate of interest on the money they might advance, besides the commission and other incidental charges stipulated for. the transaction between the parties lasted from jait sambat 1976 (may-june 1919) for about a year. after crediting the amounts payable by the plaintiffs to the defendants, a sum of rs. 15,262-13-0 fell due as payable to the plaintiffs and defendant 6. the share of defendant 6 was th. he has not joined in the institution of the suit. the plaintiffs therefore claim rs. 11,400, being 3/4ths of the entire claim. defendant 5 alone contested the suit in the proper sense of the.....
Judgment:

Mukerji, J.

1. The appellant before this Court is one of the six defendants in the Court below. The plaintiffs' case was this. They, with defendant 6, Ram Gopal, constituted a firm of commission agents carrying on business under the name and style of Ram Gopal Pearey Lal, at Bareilly. Defendants 1 to 5 (the 5th being the appellant here) were a firm of dealers in grain under the name and style of Har Charan Lal Peare Lal. Before the defendant firm started business with the plaintiffs and Ram Gopal, there was a firm, Kanthi Ram Banwari Lal, owned by the first two defendants, who were residents of Budhaun. The firm of Kanthi Ram Banwari Lal employed the plaintiffs as commission agents. Later on, defendants 3 to 5 joined the aforesaid defendants 1 and 2 and constituted themselves into the firm of Har Charan Lal Peare Lal, as is stated above, in order to carry on business at Bareilly. The plaintiffs were employed as commission agents and it was agreed that if and when occasion arose, the plaintiffs would advance money to defendants 1-5 in order that purchases might be effected. The plaintiffs were to get a certain rate of interest on the money they might advance, besides the commission and other incidental charges stipulated for. The transaction between the parties lasted from Jait Sambat 1976 (May-June 1919) for about a year. After crediting the amounts payable by the plaintiffs to the defendants, a sum of Rs. 15,262-13-0 fell due as payable to the plaintiffs and defendant 6. The share of defendant 6 was th. He has not joined in the institution of the suit. The plaintiffs therefore claim Rs. 11,400, being 3/4ths of the entire claim. Defendant 5 alone contested the suit in the proper sense of the term. The other defendants appeared, filed written statements, but did not take any further interest in the defence. Two main defences were set up by the appellant (defendant 5). One was he was not a member of the firm Har Charan Lal Piare Lal and never employed the plaintiffs as his commission agents. His second plea was that the suit was barred by limitation. The learned Subordinate Judge has held that the appellant was a member of the defendant firm and the suit was not time barred. The two paints that have been urged before us are one, that the evidence does not prove that the appellant was a member of the defendant firm and that the suit is time barred. (The judgment then discussed the evidence on the first point and held as follows). We hold that Dau Dayal was a partner of the firm Har Charan Lal Piare Lal.

2. The question of limitation has presented some difficulty. The learned Subordinate Judge held, on the authority of a case of this Court reported as Sheo Pratap Singh v. Brij Kishore [1912] 15 I.C. 333, and another case from the, Madras High Court, Namberumal Chetty v. Kotayya [1913] 14 M.L.T. 498, that 'Art. 85, Schedule 1, Lim. Act applied and the suit was within time, having been instituted within three years of the date of the last item in the account. The starting paint of limitation under Article 85 is not the date of the last item, but is the date of the close of the year of the account. This, however, does not make any difference. If Article 85, Lim. Act, applies, the claim would be undoubtedly within time.

3. The contention of the learned Counsel for the appellant was that either Article 61 applied or Article 83. During the latter portion of the argument, the learned Counsel was more definite and argued that Article 83 was the more appropriate article. His contention was that every item of transaction must be taken independently and as soon as the plaintiffs had spent money, out of their own pocket, for any purchase made by them or on account of any incidental charges, for the defendants limitation began to start from the date of the advance, under the provision of Col. 3, Article 83. As regards the claim for commission, his contention was that it was payable on account of 'work done' and a suit should have been instituted within three years of the date of the earning of the commission. If these contentions be correct, there can be no doubt that the suit or a major portion of it would be time barred.

4. The course of the transaction between the parties appears to have been as follows. The defendants, as principals, provided to start with certain sums of money to serve as margin money or cover for the satisfaction of the plaintiffs. The plaintiffs were then asked to make certain purchases in the market. The plaintiffs made the purchase, spent for the purpose what money they had, belonging to the defendants, towards the payment of the price, if any had to be paid at once, and supplied the balance out of their own funds. The amount advanced by the defendants was credited to them in their account. The amount paid by the plaintiffs was debited to the defendants in the same account. The defendants were further debited with plaintiff's commission and incidental charges. Later on, the plaintiffs debited the defendants' account with interest for the money they had spent on behalf of defendants' account. The next transaction might be one of purchase or one of sale of the goods previously purchased. If it was a case of purchase, the same process of entry in the account book would be gone through as has been previously described. If, however, there was a transaction of sale of goods previously purchased under the orders of the defendants, the plaintiffs sold the goods, credited the defendants with the price fetched and debited them with the plaintiffs' commission and incidental charges. This sort of transactions continued for about a year. On these facts it has been contended for the plaintiffs that the contention of the learned Counsel for the appellant cannot succeed, but that the view taken by the learned Subordinate Judge, viz., Article 85, applied, was the right one.

5. It appears to us that the defendants' contention is correct. The counsel for the parties are agreed as to the meaning to be given to the word 'mutual' in Article 85, Lim. Act. They are agreed, and we agree with them, that, for the application of Article 85, there should be independent transactions between the parties. In other words, there should be two sets of transactions. In one set, one of the parties should hold the position of a creditor and the other a debtor, and in the other set, the position should be reversed. The true import of the words 'mutual, open and current account' has been discussed in great detail in the case of Ram Prasad v. Harbans Singh [1907] 6 C.L.J. 158. We entirely agree with the observations of the learned Judges in that case when they say:

Mutual accounts are such as consist of reciprocity of dealings between the parties and do not embrace those having items on one side only though made up of debits and credits.

6. The learned Judges further point out that, although a shifting balance, sometimes in favour of one side and some times in favour of the other, is a test of mutuality, its absence is not conclusive proof against mutuality As already stated, there is no difference in the contentions of the counsel for the parties as to what a mutual account is. The only question is whether, in their nature, the dealings between the parties had the character of mutuality. After careful deliberation, we have come to the conclusion that they had. Had there been no special agreement between the parties, the plaintiffs could, have refused to enter or to conclude any transaction which involved an expenditure of their own money. They did, however, agree to make advances' though the evidence does not disclose whether they put any limit on the amount of such advances, or left the extent of their financing of the defendants dependent on their own decision. They were at perfect liberty to make, or to refrain from making advances, but they did in fact continue to find money for the defendants during the short period of the agency, and they undoubtedly paid out from time to time their own moneys, either to complete a purchase or to meet an immediate liability of the defendants. As each instance occurred they could have demanded the money in advance, or recoupment, if they had already made the advance. The account between the parties showed, on the one side, advances made in accordance with the agreement together with interest, commission and minor incidental charges, and on the other side the receipts on the defendants' behalf. To the extent that the plaintiffs made advances, they were acting as bankers and the position was that of lender and borrower. To the extent of the receipts, the position was that of principal and agent, with a liability, as agent, to account. We think that the parties did stand to each other in a dual relationship, and that there was a mutuality of dealings, and Article 85 would be applicable.

7. This being the conclusion to which we arrive, on an examination of the principles and the statute law, we proceed to examine the authorities.

8. For the appellant the learned Counsel has cited, besides the case of Ram Prasad v. Harbans Singh [1907] 6 C.L.J. 158, already mentioned, the cases of Bank of Multan v. Kamla Prasad [1917] 39 All. 33, Velu Pillai v. Ghose Mohomed [1893] 17 Mad. 293 and Madhab Moti Ram v. Jairam Sakharam A.I.R. 1921 Bom. 451. The first two cases are not directly in point, though no doubt they serve to explain what is meant by mutuality of account. The third case, in our opinion, goes to support, in principle, the plaintiffs' case. In this last-mentioned case the plaintiff Jairam owned a ginning factory. He lent money to the defendants for buying cotton. The cotton, when purchased, was ginned and pressed by the plaintiff, who sold it on behalf of the defendants. The ginning and pressing charges, as well as the principal and interest were debited to the defendants and the sale proceeds of the cotton bales were credited into, the defendants' account, as against the advances made by the plaintiffs, the commission earned and other items. Under these circumstances, it was held, following the Privy Council case of Watson v. Aga Mehedee Sherazee [1874] 17 I.A. 346 that there was a mutuality of dealings, and Article 85 applied. It is very difficult to differentiate, in principle, between this case and the case before us. The fact that to start with, the defendants had put the plaintiffs in possession of such funds, will not make any difference in principle. It was agreed in the case before us, that it and when occasion arose, the plaintiffs would act as the defendant's banker by providing money. We have already made it clear that, when the defendants advanced the money, they really borrowed money, on defendants' behalf, from themselves, who were to be taken as acting at the time of lending the money as bankers and not as commission agents. In the Bombay case, the man who acted as agent of the plaintiff in pressing and selling cotton, also acted in a second capacity, viz., as that of a banker.

9. There are several decisions in which it has been held that where a man lends money in one capacity and in another capacity acts as an agent for the borrower and the two accounts are put together, there is a mutuality of dealing between the parties, although the money may have been lent for the express purpose of enabling the borrower to provide business as commission agents to the lender. Such a case was that of Ratan Chand v. Asa Singh. A.I.R. 1922 Lah. 188 decided by the Lahore High Court in a Letters Patent. Appeal. The plaintiffs in the case were money-lenders by profession and wore also commission agents. The defendants were a firm who dealt in grain. The defendants used to send to the plaintiffs as commission agents grain to be stocked and sold. The plaintiff besides doing this business of commission agents used to advance loans to the defendants, independently of the business of agency. It was held that Article 85 was applicable to the suit which was one to recover the balance, after adjusting the two accounts. The more fact that the plaintiffs were professional money-lenders and lent money to people other than those who dealt with themselves as commission agents, will not make any difference, in principle, between the case before the Lahore High Court and the one before us. As we have stated more than once, in so far as the plaintiffs agreed to lend money to the defendants for interest, they acted as the defendants' bankers. Whether they were also lending money to others or not is really immaterial. We have to look to the characters of the dealings and not to the professions of the parties.

10. In this Court, in the case of Sheo Pratap Singh v. Brij Kishore [1912] 15 I.C. 333 a similar question of limitation came up for decision. It was said that either Article 85 or Article 120, Lim. Act, applied. We have mentioned this case last, because no-pronounced opinion was expressed in the case and also because the case was decided on what were found to be the peculiar facts of the case. Article 61 which was sought to be applied by the learned Counsel for the appellants in the case, was not applied because of the said findings. But it is clear that their Lord ships (it was a decision by two learned Judges) made the following remarks:

There was an account between the parties extending over a number of years. The plaintiffs were always liable to account to the defendants for any profits that were made in the purchase and re-sale of grains and they were also liable to account for the deposit. On the other hand, the defendants were liable to the plaintiffs to pay interest on any moneys advanced by the plaintiffs and to make good any loss which might take place, which was not covered by the deposit. There was, therefore, a mutual, open and current account and there was a reciprocal demand between the parties.

11. With a slight alteration of language, we should be prepared to adopt the argument of the learned Judges as our own.

12. A consideration of the authorities, therefore, leads us to the same result as a consideration of the principle and the language of the statute.

13. We hold with the Court below that Article 85, Lim. Act, applies, but we differ from the Court below as to the date from which the limitation should start. According to Col. 3., Article 85, the limitation starts from the close of the year. In this case there is the evidence of the plaintiffs' munim that the year of the account closed with the Dewali festival, which in the year in question must have fallen some time in October 1920. The suit having been filed on 28th March 1923, was within time.

14. The result is that the appeal fails on both the points raised. It is hereby dismissed with costs.


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