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Ganesh Prasad Bhurelal and ors. Vs. Dulichand Girdharilal - Court Judgment

LegalCrystal Citation
SubjectCommercial;Limitation
CourtMadhya Pradesh High Court
Decided On
Case NumberCivil Revn. No. 8 of 1960
Judge
Reported inAIR1961MP99
ActsLimitation Act, 1908 - Schedule - Articles 83 and 85
AppellantGanesh Prasad Bhurelal and ors.
RespondentDulichand Girdharilal
Appellant AdvocateV.S. Pandit, Adv.
Respondent AdvocateS.C. Jain, Adv.
DispositionRevision allowed
Cases ReferredIn Mansaram and Sons v. Hiralal Sanon
Excerpt:
- - 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. the transactions were clearly one way, the position of the defendant being that of a debtor and the position of the bank being that of a creditor......such, the learned judge was of opinion that the obligation, if any, was one way and there were no mutual dealings. the liability of the defendant was there, but, the question of liability of the plaintiff never arose. the learned judge relied on the observations in union bank ltd. v. raghavan nair, air 1959 kerala 204 and hazarilal v. hariram, air 1959 raj 153(2). in that view the learned judge held that article 85 of the limitation act was not applicable to the present case.5. the learned counsel for the applicant urged that for the purpose of applicability of article 85 or the limitation act, it is not necessary that the parties should have mutual transactions of sale and purchase. but what was necessary was the mutuality in respect of accounting. it was pointed out that even if the.....
Judgment:
ORDER

P.K. Tare, J.

1. This revision under Section 25 of the Provincial Small Cause Courts Act is by the plaintiff against the decree, dated, 25-11-1959, passed by Shri S. P. Hakim, First Additional District Judge, Jabalpur, empowered under Section 9 of the M. P. Courts Act, 1958, in the Civil Suit No. 630 of 1959.

2. The applicant filed a suit against the non-applicant for recovery of Rs. 843/-, alleging that the applicant was to purchase grain for the non-applicant and to sell the same as an adtiya. The applicant accordingly purchased some grain and sold it and made entries in the account books. According to the applicant the accounts were open, mutual and current. On the basis of the said accounts, an amount of Rs. 843/- was due. The cause of action was said to have occurred on the Dewali of the years 1953-54 and 1955-56. The suit was filed on 3-10-1958.

3. The non-applicant's defence was that the claim was barred by time, as there was no open, mutual and current account. The suit was, therefore, barred under Article 83 of the Limitation Act.

4. The learned Small Cause Judge found that the plaintiff had purchased 100 bags of teora dal and 100 bags of gram dal from the defendant. As such, the plaintiff was the commission agent. The defendant had deposited Rs. 843/- as margin money. As such, the learned Judge was of opinion that the obligation, if any, was one way and there were no mutual dealings. The liability of the defendant was there, but, the question of liability of the plaintiff never arose. The learned Judge relied on the observations in Union Bank Ltd. v. Raghavan Nair, AIR 1959 Kerala 204 and Hazarilal v. Hariram, AIR 1959 Raj 153(2). In that view the learned Judge held that Article 85 of the Limitation Act was not applicable to the present case.

5. The learned counsel for the applicant urged that for the purpose of applicability of Article 85 or the Limitation Act, it is not necessary that the parties should have mutual transactions of sale and purchase. But what was necessary was the mutuality in respect of accounting. It was pointed out that even if the plaintiff's liability be in two capacities, one as a commission agent for purchase of the grain on behalf of the defendant, and, secondly, 33 a commission agent for sale of the grain on behalf of the defendant, the accounts became open, current and mutual, as the defendant's liability or the plaintiff's liability could not be determined unless the accounts were gone into and settled. It was argued that although the transactions may have been one way, the liability was both ways in view of the dual capacity o the plaintiff.

6. In Madhav Motiram v. Jairam Sakharam, AIR 1921 Bom 451, the tests indicated by a Division Bench of Macleod, C. J. and Shah, J. for the applicability of Article 85 of the Limitation Act were stated in the following words :

'That section differs very slightly from Article 85 of the present Limitation Act, and the test appears to me to be whether the dealings are mutual, that is to say, entered in an account consisting of mutual items of debit and credit, and not whether they might give rise to independent obligations or reciprocal demands, or whether, the balance might shift from one side to the other. Evidently Article 85 contemplates mutual dealings, and it was intended that if there was a continuous account of mutual dealings, then for the purposes of a suit the period of limitation should be computed from the close of the year in which the last item admitted or proved was entered in the account.'

7. A Division Bench of the Allahabad High Court consisting of Sir Grimwood Mears, Knight, C. J. and Mukerji, J. in Dau Dayal v. Piarilal, ILR 50 All 645 : (AIR 1928 All 236), indicated the test for applicability of Article 85 of the Limitation Act as follows :

'It appears to us that the plaintiffs' contention is correct. The counsel for the parties are agreed as to the meaning to be given to the word 'mutual' in Article 85 of the Indian Limitation 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 Pershad v. Harbans Singh, 6 Cal LJ 158. We entirely agree with the observation 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'. The learned Judges further point out that although a shifting balance, sometimes in favour of one side and sometimes 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. Hadthere been no special agreement between the parties the plaintiffs could not 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 backers 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.'

8. In Mansaram and Sons v. Hiralal Sanon, ILR (1940) All 147: (AIR 1940 All 209), Rachhpal Singh, J, observed that what was necessary for a mutual, current and open account was not a large number of transactions between the parties, but that there should be two sets of transactions between the parties on account of which the liability of each party would vary, making the account a current, open and mutual one.

9. A Division Bench of this Court in Mt. Tapibai, v. Shankarlal, ILR (1941) Nag 222: (AIR 1939 Nag 113, laid down the test for the applicability of Article 85 of the Limitation Act by stating that mutual accounts within the meaning of Article 85 of the Indian Limitation Act would be such as arise where there is reciprocity of dealings between the parties and do not embrace those having items on one side only, though made up of debits and credits. In the opinion of the learned Judges the absence of a shifting balance would not be fatal to the conception of mutuality. Further, it was observed that for the purpose of reciprocal demands within the meaning of the said Article, it was not necessary for either of the parties to have made an actual demand.

But the dealings must be of such a nature that they might give a right to either party to reciprocal demands. In the opinion of the learned Judges, the mutuality of an account would result from the reciprocal claims springing out of the transactions which once made the account mutual. If once the accounts were mutual, any subsequent unilateral dealings would not cease to make them mutual, unless the accounts were closed and a new account in the nature of a unilateral account were opened.

10. From the above observations, it would be clear that for the purpose of reciprocity, it is not necessary that there should be identical transactionsbetween the parties inter se. What is required is reciprocity of dealings and the reciprocity can arise even if a person acts in two capacities, one a creditor and the other an agent and liabilities between the parties arise due to the different capacities in which they act.

11. In AIR 1959 Kerala 204 (supra) a Division Bench of the Kerala High Court dissented from the view of Rachhpal Singh, J. in ILR (1940) All 147: (AIR 1940 All 209) (supra) and held that the distinguishing characteristics of a mutual account would be (1) 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) should disclose independent obligations on both sides and not merely obligations on one side, the acts done by the other being merely discharge of such obligations and (3) each party must be able to say to the other 'I have account against you'.

In the case for consideration before the learned Judges, the plaintiff Bank had agreed to allow the defendant over draft to the extent of a certain amount. The defendant, if he overdrew the amount, was to repay the same at the end of each week. Although on some occasions there used to be a small credit in favour of the defendant, that was not due to any amounts deposited by him but because of his remitting from time to time amounts more or less to cover what was due to the plaintiff in the absence of information as to the exact amount due. It was for that reason that the learned Judges were of opinion that Article 85 of the Limitation Act was inapplicable.

The transactions were clearly one way, the position of the defendant being that of a debtor and the position of the Bank being that of a creditor. Merely debit and credit entries in the capacity of a creditor and a debtor without the position being reversed on account of a different relationship would, no doubt, take the case beyond the purview of Article 85 of the Limitation Act. As such the said case is distinguishable on facts, inasmuch as, the relationship between the parties was one and there was no dual relationship at any time. Under the circumstances I would agree with the learned Judges that Article 85 of the Limitation Act would be inapplicable to such a case.

12. In the other case relied on by the learned Small Cause Judge, namely, AIR 1959 Raj 153 (2), Sharma, J. held that Article 85 of the Limitation Act would apply to the suit of an agent against the principal for recovery of money spent for the principal. In that case also the parties had no two different capacities, and, therefore, the learned Judge was of opinion that it would be Article 83, and not 85, which would apply to such a suit. It is, therefore, clear that the cases relied on by the learned Small Cause Judge are distinguishable on facts, wherein there was no dual capacity between the parties.

13. But, so far as the present case is concerned, the dual capacity of the parties arose on account of the different relationship. In one capacity, the applicant firm was to act as an agent for purchases on behalf of the defendant. In that capacity, the plaintiff spent its own money in the nature of an advanceto the defendant. In the other capacity, the plaintiff was to sell the grain on behalf of the defendant. The amount received by the plaintiff towards such sale would make the plaintiff a trustee for the defendant regarding that amount.

The final liability between the parties could not be settled, unless an account was gone into, taking into consideration the assets and liabilities of the parties in the two, altogether different, capacities. Therefore, there can be no doubt that the account between the parties was open, mutual and current account. From that point of view, the conclusion of the learned Small Cause Judge that Article 85 of the Limitation Act was inapplicable cannot be supported in view of the cases referred to above. The cases relied on by the learned Judge were inappropriate and distinguishable on facts. Therefore, the decree of dismissal passed by the learned Judge cannot be sustained.

14. As a result, this revision succeeds and is allowed. The claim of the plaintiff-applicant for Rs. 843/- is decreed with costs in both the Courts. Counsel's fee Rs. 50/-, if certified.


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