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Ran Bahadur Singh Vs. Hanuwant Singh - Court Judgment

LegalCrystal Citation
SubjectCommercial;Limitation
CourtRajasthan High Court
Decided On
Case NumberFirst Appeal Nos. 38 and 45 of 1954
Judge
Reported inAIR1957Raj29
ActsLimitation Act, 1908 - Schedule - Article 64; Contract Act, 1872 - Sections 25
AppellantRan Bahadur Singh
RespondentHanuwant Singh
Appellant Advocate Thanchand, Adv.
Respondent Advocate Roshanlal, Adv.
Cases ReferredIn Maneklal Mansukhbhai v. Jwaladutt Pilani
Excerpt:
.....took objection as being entered fraudulently or through mistake. perhaps the term reopening of the account stated on the ground of complete failure of consideration is not quite correct; but if the person who is sued is not the person who signed the account, we fail to see why he cannot raise the question that there never were any transactions which could have given rise to the account stated. in the present case, this is precisely what the defendant appellant has done. the defendant's case is there never were any transactions between his father and the plaintiff, and that the plaintiff was never in a position to advance any large sums of money to anybody, and that his father signed the account stated in order to do him down as there was bad blood between them. all that was urged was..........singh. the case of the plaintiff was that there were money dealings between him & maharaj bijai singh, father of the defendants. on 30-9-1945, maharaj bijai singh after checking the accounts, struck a balance amounting to rs. 41,188-3-6 and 6 mohars as due to the plaintiff, and made an entry in his own hand to that effect and signed the plaintiff's bahee.interest was settled at 6 per cent, this suit was brought for principal and interest plus the price of 6 mohars, amounting in all to rs. 56,601-14-6. by the time, the suit was brought maharaj bijai singh was dead, and therefore his sons were sued on the basis of the account stated, and a decree for rs. 55,968-14-6 and 6 mohars or their price which was fixed at rs. 633/- was prayed for.3. the suit was resisted by maharaj ran bahadur.....
Judgment:

Wanchoo, C.J.

1. These are two connected appeals from the same judgment of the District Judge, jodhpur, in a suit for money. Appeal No. 38 has been filed by maharaj Ram Bahadur Singh against Rao Raja Hanuwant Singh, while appeal No. 45 is a cross-appeal by Rao Raja Hanuwant Singh against Maharaj Ran Bahadur Singh. We shall deal with them together as they arise from the same judgment.

2. The suit, out of which these appeals have arisen, was filed by Rao Raja Hanuwant Singh against Maharaj Ran Bahadur Singh, and hisbrother Maharaj Laxman Singh. The case of the plaintiff was that there were money dealings between him & Maharaj Bijai Singh, father of the defendants. On 30-9-1945, Maharaj Bijai Singh after checking the accounts, struck a balance amounting to Rs. 41,188-3-6 and 6 mohars as due to the plaintiff, and made an entry in his own hand to that effect and signed the plaintiff's Bahee.

Interest was settled at 6 per cent, This suit was brought for principal and interest plus the price of 6 mohars, amounting in all to Rs. 56,601-14-6. By the time, the suit was brought Maharaj Bijai Singh was dead, and therefore his sons were sued on the basis of the account stated, and a decree for Rs. 55,968-14-6 and 6 mohars or their price which was fixed at Rs. 633/- was prayed for.

3. The suit was resisted by Maharaj Ran Bahadur Singh. His case was that there were never any money dealings between the plaintiff and his father, and that the plaintiff was never in a position to advance such large amounts to his father. On the other hand, it was said that the plaintiff and his entire family were being supported by his father for the last 30 or 40 years, and under such circumstances there was no question of any money dealings between the plaintiff and his father. Besides this, it was said that the documents, on which the plaintiff relied, had not been signed by Maharaj Bijai Singh, and that in any case they were mere acknowledgments, and therefore could not be the basis of the suit, and that the suit was barred by limitation.

4. Maharaj Laxman Singh filed a separate written statement in which he practically admitted the claim of the plaintiff. He, however, saidi that he was only given a maintenance allowance, and therefore the money borrowed by his father could not be realized from him.

5. The following five issues were framed on the pleas raised by the defendants, namely:

(1) Whether the deceased Maharaj BijaiSingh put his signatures on Exs. P1 andP2?

(2) Whether Exs. P1 and P2 were withoutconsideration?

(3) Whether Exs. P1 and P2 were mere acknowledgments, and therefore the suit was not maintainable on such documents?

(4) Whether the suit was time-barred?

(5) Whether defendant No. 2 was not liable to answer the plaintiff's claim?

6. At a later stage, the trial court struck out Issue No (2). Issues 1, 3 and 4 were decided against the defendants. A decree was Passed against Maharaj Ran Bahadur Singh only as It was held that Maharaj Laxman Singh was not liable. Appeal No. 38 is by Maharaj Ran Bahadur Singh. It assails the entire decree passed by the Court below against him. Appeal no. 45 is by the plaintiff, and is directed only against the refusal of the court below to allow pendente lite and future interest.

7. Learned counsel for the appellant has confined his argument in the first instance to the question whether issue no. 2 was rightly struck off by the trial court. He contends that the trial court was not right in striking off that issue, and the result has been that evidence has not been admitted on that issue as it should have been. The order striking off the issue was passed on 30-1-1953.

The court held that as the plaintiff's claim was based on accounts stated, and as the defendant nowhere alleged fraud or mistake the accounts could not be reopened, and the question of consideration could not b'e agitated. It, therefore, held that issue No. (2) was redundant and Struck it off, and ordered that evidence on other Issues should proceed.

8. The question that falls for consideration therefore is whether,, assuming this is a case of accounts stated, the lower court was right in striking out issue No. 2 relating to consideration. The lower court in this connection relied on Bajranglal v. Anandilal Ramchandra, AIR 1944 Nag 124 (A). That was a case based on accounts stated. The trial court held that the defendant was entitled to have the account reopened as there were certain errors in the same.

The Lower Appellate Court, however, held that the accounts could not be reopened generally, but only with respect to specific items which might be challenged. It was in that connection that the Nagpur High Court held that if a party wished to reopen a settled account, he had to Specify clearly the grounds on which he claimed permission tp reop'en the accounts, and the items to which he took objection as being entered fraudulently or through mistake.

He had then to prove that those items had been entered fraudulently or through mistake. Errors had to be properly alleged and proved, and as nothing of that kind had been done in that case, the High Court refused to allow the reopening of the accounts.

9. Before we say anything as to the decision in this Nagpur case (A) we propose to examine the question as to what account-stated is and how far it can be challenged.

10. The leading case on the point is Eishnu Chand v. Girdhari Lal, AIR 1934 PC 147 (B). In that case, their Lordships pointed out that there were two kinds of accounts stated. The first kind constitutes a mere acknowledgment of a debt, while the second kind was an account containing items both on credit & debit sides, and the figures and a balance struck. It was the second kind of accounts stated which was the real account stated, and with respect to this their Lordships observed as follows at p. 151-

'Indeed, the essence of an account stated is not the character of the items on one side or the other, but the fact that there are cross items of account and that the parties mutually agree the several amounts of each and, by treating the items so agreed on the one side as discharging the items on the other side pro tanto, go on to agree that the balance only is payable. Such a transaction is in truth bilateral, and creates a new debt and a new cause of action.

There are mutual promises, the one side agreeing to accept the amount of the balance of the debt as true (because there must In such cases be, at least in tile end a creditor to whom the balance is due) and to pay it, the other side agreeing the entire debt as at a certain figure and then agreeing that it has been discharged to such and such an extent, so that there will be complete satisfaction on payment of the agreed balance.

Hence, there is mutual consideration to support the promises on either side and to constitute the new cause of action. The account stated ia accordingly binding, save that it may be reopen, ed on any ground -- for instance, fraud or mistake -- which would justify setting aside any other argument.'

11. In this passage their Lordships explained what a real account stated is and have alsomentioned that it can be reopened, and it is this last observation about the reopening of the accounts which falls for consideration in this appeal. Their Lordships have said that the account stated is binding except that it may be reopened on any ground which would justify setting side any other agreement. In parenthesis they have given two grounds as instance, namely fraud or mistake.

But, in our opinion, it does not follow from the fact that these two instances have been given that on no other ground can an account stated be reopened. The observations of their Lordships is that it may be reopened on any ground which would justify setting aside any other agreement Now under Section 25 of the Contract Act, an agreement made without consideration is void except under certain circumstances which do not arise in this case.

Therefore want of consideration is a ground on which an agreement can be avoided. An account stated is no more than an agreement, for there are mutual promises, the one side agreeing to accept the amount of the balance of the debt as true and to pay it, the other side agreeing the entire debt as at a certain figure and then agreeing that it has been discharged to such and such extent. Perhaps the term reopening of the account stated on the ground of complete failure of consideration is not quite correct; but there can, in our opinion, be no doubt that it is open to a defendant to say that the account stated was completely without consideration, and therefore void, and no decree could be passed on the basis of it.

Such a case is different from the case of reopening of accounts on the ground of fraud or mistake. Where accounts are reopened on the ground of fraud or mistake, it is not the case of the parties that there was a complete absence of consideration. In such a case, it is generally admitted that there were transactions between the parties, and it is only the particular items in the accounts which are challenged. So a case of complete absence of consideration for an account stated stands, in our opinion, on a different footing altogether.

Where a plea of complete absence of consideration is taken, as in this case, the party raising that plea will not be entitled to show that such and such item in the account is incorrect or was entered due to fraud. But he can show that there never were any transactions which could give rise to an account stated. It would perhaps be impossible for the person signing the account stated to say that there were never any transactions at all unless he alleges fraud.

But if the person who is sued is not the person who signed the account, we fail to see why he cannot raise the question that there never were any transactions which could have given rise to the account stated. In the present case, this is Precisely what the defendant appellant has done. He was not the person who signed the account stated. His father did it. The defendant's case is there never were any transactions between his father and the plaintiff, and that the plaintiff was never in a position to advance any large sums of money to anybody, and that his father signed the account stated in order to do him down as there was bad blood between them.

Whether the appellant succeeds in proving this or not is a different matter. But we are of opinion that he cannot be shut out from raising this plea which he can under Section 25 of the Contract Act, simply because the document, on which thesuit is based, is an account stated. As we have said already, it is no more than an agreement, and is open to all the attacks to which an agreement is open. This also can, in our opinion, be inferred from the words of their Lordships of the Privy Council in connection with the reopening or the accounts.

We cannot but repeat that in such a case to will not be open to the defendant appellant to prove that a particular item in the accounts wag not advanced or was wrongly entered. All that he will be entitled to prove is that there were no dealings at all between his father and the plaintiff, and that the plaintiff was never in a position to advance any considerable sum of money to anybody. If he is able to establish this, there will be complete want of consideration to support the account stated, and the agreement would then become void under Section 25 of the Contract Act.

12. Let us now look to certain cases cited at the bar in this connection. We have already referred to Bajranglal's case (A). In that case, there was no denial that there were transactions between the parties. All that was urged was that certain items in the accounts were wrong, and it was in that connection that the Nagpur High Court laid down that if a party wished to reopen a settled account, he was to specify clearly the grounds on which he claimed permission to reopen, and the items to which he took objection as being entered fraudulently or through mistake.

13. In Williamson v. Barbour, (1877) 9 Ch. D. 529 (C), it was held that where accounts contained errors of considerable extent both in number and amount whether caused by mistake or fraud, the court would order such accounts, though extending over to a long period of years, to be opened. That was also a case where the transactions between the parties were admitted and only certain items were being challenged.

14. In Ram Rekha v. Ram Sunder Dube, AIR 1925 All 295(2)(D), the principles in William-son's case (C) were applied. That was also a case where the items were disputed.

15. In T. A. Hurst v. Shyamsundarlal Khandelwal AIR 1934 Cal 441 (E), it was held that fraud was a ground for reopening the accounts stated. That case also is of the same type as other cases referred to above.

16. In Maneklal Mansukhbhai v. Jwaladutt Pilani, AIR 1947 Bom 135 (F), it was held by the Bombay High Court that the grounds on which settled accounts could be reopened were fraud or mistake. In that case also the transactions between the parties were not denied, but only certain items were challenged.

17. A review of these cases, therefore, shows that they refer to cases where the transactions are not denied, and it is only the particular items which are challenged on one ground or the other. In such a case, of course, the ground has to be specified and it is only then that the court can allow evidence to be led.

The present case, however, is of a different kind altogether. No particular item is being challenged here. What is challenged is that there were no transactions at all between the plaintiff and the appellant's father, and that the plaintiff was never in a position to advance large sums of money, and that there is a complete want of consideration in support of the account stated. We are of opinion that such a defence cannot be shut out even where a suit is brought on an account stated.

18. In Halsbury's Laws of England, III Edition, Vol. 8, paragraph 443, page 255, it is stated that'in order to maintain an action on an account stated there must be a debt due to the plaintiff. Thus, an I. O. U. is prima facie evidence to support an account stated, but if it is proved that no debt is due the action cannot be maintained'. This can only mean that if a defendant is able to prove a complete want of consideration as distinct from challenging, a particular item after admission of transactions between toe Parties, such a defence can be raised.

19. In Chitty on Contract, 20th Edition, p. 118, it is said 'that where a contract from its nature can give rise to no valid claim, no claim upon it can be used to found an action upon an account stated'. nOW under Section 25 of the Contract Act an agreement without consideration is void. As such the defence of complete want of consideration can certainly be raised where the suit is based on an account stated. In the Present case, the defendant has raised the defence of complete want of consideration, and that defence cannot, in our opinion, be shut out simply because the suit is based on an account stated.

20. We are, therefore, of opinion that issue No. 2 was wrongly cut out by the court below. We, therefore, restore that issue which runs as follews: 'Whether Exs. P1 and P2 were without consideration?' The court will take evidence on that issue. We should like to make it clear that the evidence that will b'e given will not relate to any particular items, but to show that there were no dealings whatsoever between the parties, and that the plaintiff was never in a position to advance any large sums of money, and that the father of the appellant had reasons to sign such an account stated in order to do down the appellant. But no evidence will be admitted to prove that a particular item in the accounts was incorrectly entered.

21. We, therefore, frame an issue relating to consideration as follows: 'Whether Exs. P1 and P2 were without consideration?', and refer it to the District Judge, Jodhpur, to decide it after taking additional evidence, and to return the evidence to this Court together with his finding thereon, and the reasons therefor within three months. The parties will be given notice when the evidence and the findings are received in this Court, and shall be at liberty within 10 days of the receipt of notice by them to file any objection to the finding. Both the appeals shall be fixed for hearing thereafter.


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