1. This appeal arises out of suit filed in the High Court of Jammu andKashmir for recovery of price of goods sold and delivered. The only pointinvolved in it is whether the suit was governed by art. 115 of the Jammu andKashmir Limitation Act. The courts below held, and this has not been disputedin this appeal, that if that article did not apply, the suit would fail on theground of limitation.
2. Sometime in November 1946, the parties entered into an agreement inwriting for the supply by the sellers, the respondents, to the buyer, theappellant, of 5,000 maunds of maize 500 maunds of wheat and 100 maunds of Dalat the rates and times specified. The agreement stated that on the date it hadbeen made the buyer had paid to the sellers Rs. 3,000 and had agreed to paya further sum of Rs. 10,000 within ten or twelve days as advance and thebalance due for the price of goods delivered, after the expiry of every month.It is admitted that the said sum of Rs. 10,000 was latter paid by the buyer tothe sellers.
3. Various quantities of goods were thereafter delivered by the sellers tothe buyer and though such deliveries had not been made strictly at the timesspecified in the contract, they had been accepted by the buyer. The buyer inits turn made various payments towards the price of the goods delivered but notmonths by month and had not further paid it in full. The last delivery of goodswas made on June 23, 1947, and the suit was brought on October 10, 1950, forthe balance of the price due.
4. The learned Judge of the High Court who learned the suit held that art.115 had no application and dismissed the suit as barred by limitation. Thesellers went up in appeal which was heard by two other learned Judges of theHigh Court. The learned Judges of the appellate bench of the High Court heldthat art. 115 of the Jammu & Kashmir Limitation Act applied and the suitwas not barred. They thereupon allowed the appeal and passed a decree in favourof the sellers. The buyer has now come up in appeal to this Court.
5. Article 115 of the Jammu and Kashmir Limitation Act which is in the sameterms as art. 85 of the Indian Limitation Act except as to the period oflimitation, is set out below :
Description of suit Period of Time from which
Limitation period begins to run
For the balance due on a Six years. The close of the year in
mutual, open and current which the last item
account, where there have admitted or proved is
been reciprocal demands entered in the account;
between the parties. such year to be
as in the account.
6. If the article applied the suit would be clearly within time as the lastitem found to have been entered in the account was on June 23, 1947. The onlyquestion argued at the bar is whether the account between the parties wasmutual.
7. The question what is a mutual account, has been considered by the courtsfrequently and the test to determine it is well settled. The case of the TeaFinancing Syndicate Ltd. v. Chandrakamal Bezbaruah I.L.R (1930) Cal. 649,may be referred to. There a company had been advancing monies by way of loansto the proprietor of a tea estate and the proprietor had been sending tea tothe company for sale and realisation of the price. In a suit brought by thecompany against the proprietor of the tea estate for recovery of the balance ofthe advances made after giving credit for the price realised from the sale oftea, the question arose as to whether the case was one of reciprocal demandsresulting in the account between the parties being mutual so as to be governedby art. 85 of the Indian Limitation Act. Rankin, C.J., laid down at p. 668 thetest to be applied for deciding the question in these words :
'There can, I think, be no doubt that therequirement of reciprocal demands involves, as all the Indian cases havedecided following Halloway, A.C.J., transactions on each side creatingindependent obligations on the other and not merely transactions which createobligations on one side, those on the other being merely complete or partialdischarges of such obligations. It is further clear that goods as well as moneymay be sent by way of payment. We have therefore to see whether under the deedthe tea, sent by the defendant to the plaintiff for sale, was sent merely byway of discharge of the defendant's debt or whether it was sent in the courseof dealings designed to create a credit to the defendant as the owner of thetea sold, which credit when brought into the account would operate by way ofset-off to reduce the defendant's liability.'
8. The observation of Rankin, C.J., has never been dissented from in ourcourts and we think it lays down the law correctly. The learned Judges of theappellate bench of the High Court also appear to have applied the same test asthat laid down by Rankin, C.J. They however came to the conclusion that theaccount between the parties was mutual for the following reasons :
'The point then reduces itself to the fact that thedefendant company had advanced a certain amounts of money to the plaintiffs forthe supply of grains. This excludes the question of monthly payments being madeto the plaintiffs. The plaintiffs having received a certain amount of money,they became debtors to the defendant company to this extent, and when thesupplies exceeded Rs. 13,000 the defendant company became debtors to theplaintiff and later on when again the plaintiff's supplies exceeded the amountpaid to them, the defendants again became the debtors. This would show thatthere were reciprocity of dealings and transactions on each side creating independentobligations on the other.'
9. The reasoning is clearly erroneous. On the facts stated by the learnedJudges there was no reciprocity of dealings; there were no independentobligations. What in fact had happened was that the sellers had undertaken tomake delivery of goods and the buyer had agreed to pay for them and had in partmade the payment in advance. There can be no question that in so far as thepayments had been made after the goods had been delivered, they had been madetowards the price due. Such payments were in discharge of the obligationcreated in the buyer by the deliveries made to it to pay the price of the goodsdelivered and did not create any obligation on the sellers in favour of thebuyer. The learned Judges do not appear to have taken a contrary view of theresult of these payments.
10. The learned Judges however held that the payment of Rs. 13,000 by thebuyer in advance before delivery had started, made the sellers the debtor ofthe buyer and had created an obligation on the sellers in favour of the buyer.This apparently was the reason which led them to the view that there werereciprocal demands and that the transactions had created independentobligations on each of the parties. This view is unfounded. The sum of Rs. 13,000had been paid as and by way of advance payment of price of goods to bedelivered. It was paid in discharge of obligations to arise under the contract.It was paid under the terms of the contract which was to buy goods and pay forthem. It did not itself create any obligation on the sellers in favour of thebuyer; it was not intended to be and did not amount to an independenttransaction detached from the rest of the contract. The sellers were under anobligation to deliver the goods but that obligation arose from the contract andnot from the payment of the advance alone. If the sellers had failed to delivergoods, they would have been liable to refund the monies advanced on account ofthe price and might also have been liable in damages but such liability wouldthen have arisen from the contract and not from the fact of the advances havingbeen made. Apart from such failure, the buyer could not recover the monies paidin advance. No question has, however been raised as to any default on the partof the sellers to deliver goods. This case therefore involved no reciprocity ofdemands. Article 115 of the Jammu and Kashmir Limitation Act cannot be appliedto the suit.
11. The learned Judges appear also to have taken the view that since thegoods were not delivered at the times fixed in the contract, and the prices duewere not paid at the end of the months, the parties clearly indicated theirintention not to abide by the contract. We are unable to agree with this view.Such conduct only indicated that the parties had extended the time fixed underthe contract for delivery of the goods and payment of price, leaving thecontract otherwise unaffected.
12. The learned Judges also observed that the contract did not provide howthe amount advanced was to be adjusted. But it seems clear that when thecontract provided that the advances was towards the price to become due, as thelearned Judges themselves held, it followed by necessary implication that theadvance had to be adjusted against the price when to became due. So there was aprovision in the contract for adjusting the advance.
13. We think it fit also to observe that it is somewhat curious that anyquestion as to the application of art. 115 was allowed to be raised. Theapplicability of that article depends on special facts. No such facts appear inthe plaint. There is no hint there that the account was mutual. We feel surethat if the attention of the learned Judges of the High Court had been drawn tothis aspect of the matter, they would not have permitted any question as toart. 115 being raised, and the parties would have saved considerable coststhereby.
14. We therefore come to the conclusion that the appeal must be allowed. Thejudgment and order of the learned Judges of the appellate bench of the HighCourt are set aside and those of the learned single Judge of the High Court arerestored. The appellant will be entitled to the costs in this Court and of thehearing of the appeal before the High Court.
15. Appeal allowed.