Skip to content


Bitla Rajalingam and Sons and anr. Vs. C.P.V. Kotiah Chetti and Co. and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Case NumberAppeal No. 338 of 1958
Judge
Reported inAIR1962Mad301
ActsLimitation Act - Schedule - Articles 64 and 85; Code of Civil Procedure (CPC), 1908 - Sections 34
AppellantBitla Rajalingam and Sons and anr.
RespondentC.P.V. Kotiah Chetti and Co. and ors.
Cases Referred and Milkhi Ram Hem Raj v. Rupchand Lachmandas
Excerpt:
.....if article 85 applied - there was no settlement of account - account of agency continued to be open and current upto date of plaint - appellants liable to make payments to respondent as per contract. - - thirdly, in no letter subsequent to december 1951 which passed between the parties is there any reference to any settlement of account in december 1951. we are therefore satisfied that the learned judge in the court below was wrong in accepting the plaintiffs' version about any settlement of dispute on or about 31st december 1951 and the consequent reduction of liability of the defendants by rs. 10000. as a matter of fact we are satisfied that the account between the parties was not settled on 31-12-1951. in this view it may not be necessary for us to consider the other argument..........to march 1953. the account between the parties was described in the plaint as a mutual, open and current account, and the last dealing is said to have taken place on 9-3-1953. the account year between the parties was the calendar year and hence it was alleged in the plaint that the suit was not barred by limitation since it was brought within three years from 31-12-1953, the end of the calendar year in which the last transaction took place.the appellants raised a number of defences but the main defence was one of limitation. there was no denial in the written statement that the account between the parties was a mutual, open and current account. the plea of limitation was based upon the allegation that the last transaction between the parties which took place on 9-3-1953 was as sale.....
Judgment:

Ganapatia Pillai, J.

(1) The defendants are the appellants. The respondents, a partnership firm in the City of Madras doing business as commission agents brought the suit, out of which this appeal arises, for recovery of sum of Rs. 11000 odd as balanced due on dealings. It was alleged in the plaint that the appellants (defendants) were upcountry merchants who were consigning their goods to the City of Madras for being sold by the respondents, and such dealings were carried on during the period January 1950 to March 1953. The account between the parties was described in the plaint as a mutual, open and current account, and the last dealing is said to have taken place on 9-3-1953. The account year between the parties was the calendar year and hence it was alleged in the plaint that the suit was not barred by limitation since it was brought within three years from 31-12-1953, the end of the calendar year in which the last transaction took place.

The appellants raised a number of defences but the main defence was one of limitation. There was no denial in the written statement that the account between the parties was a mutual, open and current account. The plea of limitation was based upon the allegation that the last transaction between the parties which took place on 9-3-1953 was as sale conducted by the receiver appointed in a suit by one of the partners of the plaintiff firm for dissolution of the partnership and consequently the sale transaction which took place on 9-3-1953 could not be relied on as an item which could properly be debited against the defendants. The learned Judge in the court below overruled this objection and granted a decree for a sum which was slightly less than the sum decreed was caused by disallowed compound interest and allowing simple interest at 12 per cent per annum.

(2) Mr. Subramaniam for the appellants confined his arguments to two points, though a number of grounds have been taken in the memorandum of appeal. The first is that the decree of the lower court allowing interest at 12 per cent per annum on the sum found due from the date of plaint till the date of payment was opposed to law in that the lower court had no jurisdiction to award interest at more than 6 per cent after the date of the decree. It is true that the Civil procedure Code gives discretion to the trial court in the matter of interest for the period from the date of plaint till the date of decree. Section 34 C.P.C., permits the civil court to award interest on the principal sum adjudged, from the date of suit to the date of the decree at such rate as the court deems reasonable. By an amendment of S. 34 the discretion of the court to grant interests at any reasonable rate for the period subsequent to the date of the decree was limited to six per cent by the Central Act 66 of 1956. The decree in this case was granted by the learned Judge in the City Civil Court on 28-2-1958. He was therefore bound to provide interest after the date of the decree only at six per cent. The award of interest at 12 per cent, after the date of the decree is therefore illegal and the decree will be modified by providing interest at six per cent from the date of the decree. For the interim period during the pendency of the suit. Mr. Subramanian urged that interest should also be allowed at six per cent.

We find that in the account maintained by the plaintiffs interest has been charged from year to year at 12 per cent and no objection seems to have been taken by the defendants to this rate of interest. We do not therefore feel compelled to interfere with the decree of the learned Judge with regard to the rate of interest for the period during which the suit was pending.

(3) The next question is the argument about limitation. Mr. Subramaniam conceded that there was no allegation in the written statement denying the character of the account between the parties as a mutual, open, and current account. But he relied upon the finding of the learned Judge in the court below as to the settlement of account on 31st December 1951 and contended that on this finding the account ceased to be open and current account after that date. This argument does not seem to have been addressed to the lower court. Yet we permitted him to raise it as it is a question of law. On 31st December 1951 a credit entry in favour of the defendants is made in the account books of the plaintiffs for the sum or Rs. 10,000. This sum is said to represent the difference in interest, godown rent and commission credited. The case of the plaintiffs was that on these three items the defendants took exception to the debt is already made against them, and consequently the parties came together on 31-12-1951 or sometime before that and the difference was settled by mutual discussion and debits were corrected by applying the agreed rates and consequently the excess debit of Rs. 10,000 was wiped out by making a credit entry for that sum. The defendants denied this settlement, both by their pleading and in their evidence.

We do not find any material for the conclusion of the learned Judge that there was such a settlement. The details of the rates objected to by the defendants in regard to these three matters, interest, godown rent and commission are not given by the witnesses. Nor us there any correspondence immediately before December 1951 showing a dispute between the parties which necessitated a personal meeting, discussion and settlement. On the other hand what appears reasonable to us is the version of the second defendant as D.W. 1 that this entry was made suo motu by the plaintiffs themselves in order to reduce their liability for income-tax, finding that a very large debit against the defendants which may not be recoverable would only add to their own tax liability.

We are struck by the truth of this version for the following reasons. Firstly, the parties being at different places, any dispute between them about these matters must have been evidenced by some correspondence and there is no such correspondence on the topic. Secondly, if the plaintiffs had agreed to reduce either the rate of commission or the godown rent or interest, certainly any such settlement which fixed the amount due to the plaintiffs by the defendants would have been vouched by the obtaining of the defendant's signature in the account books of the plaintiffs. Thirdly, in no letter subsequent to December 1951 which passed between the parties is there any reference to any settlement of account in December 1951. We are therefore satisfied that the learned Judge in the court below was wrong in accepting the plaintiffs' version about any settlement of dispute on or about 31st December 1951 and the consequent reduction of liability of the defendants by Rs. 10000. As a matter of fact we are satisfied that the account between the parties was not settled on 31-12-1951. In this view it may not be necessary for us to consider the other argument addressed by Mr. Subramaniam because if actually there was no settlement of account between the parties at any time during the period of dealings, the account will continue to remain open and current having regard to the fact that there was no denial in the written statement as to the character of the account, namely, that it was mutual, open and current.

(4) However we have to notice the argument of Mr. Subramaniam that the transaction which took place on 9-3-1953 by sale of 95 bags of chillis belonging to the defendants by the receiver appointed by this court in C. S. 158 of 1952 was really not transaction between the parties which should be taken as an entry in the mutual account. Mr. Subramaniam argues that after the suit for dissolution of partnership was filed by a partner the receiver appointed by the court to carry on the business pending the suit could not be deemed to have carried on the business and any transaction entered into by the receiver should not be viewed as a business transaction of the partnership. In our opinion this argument cannot be accepted because by the preliminary decree passed in the case the partnership was declared to be dissolved only on the date of the preliminary decree, i.e., 9th April 1954. The receiver was in charge of the business admittedly till April 1954 when the preliminary decree was passed. Till then the receiver was carrying on business under the orders of the court. Could it be said under the circumstances that the carrying on of business by the receiver pending the suit for dissolution of partnership was not carrying on of the business of the partnership.

Mr. Subramaniam contended that the receiver was only charged with the duty of carrying on of business for the purpose of winding it up and consequently any transaction entered into by the receiver should not be viewed as a transaction of the partnership. We do not agree. Till a decree of court fixed the date of dissolution, the business of the partnership continues. It may be that the receiver appointed by the court may be under the control of the court in the matter of the carrying on of business. It may also be that he may be directed not to carryon a particular business activity but to continue himself to another business activity of the partnership. A customer of the partnership which is the subject of a suit for dissolution is entitled to deal with a receiver as though he represented the partnership. Any act of the receiver in dealing with such a customer must in law be deemed to be an act of the partnership itself. Otherwise the very object of appointing a receiver would be defeated and rights of third parties dealing with the partnership will be jeopardised. On that principle we overrule Mr. Subramaniam's argument and hold that the transaction of sale of the defendants' chillies by the receiver must be treated as a transaction of the partnership which gave rise to all liabilities and rights which a normal business activity of a partnership would entail.

(5) We may also support our conclusion upon another ground. The relationship between the parties in this case is not one of principal and agent. As soon as the suit was filed and receiver was appointed, the receiver had sent out notices to the various customers informing them of his appointment and calling upon them to pay the amounts due. The defendants were therefore aware of the appointment of the receiver and yet they did not terminate the agency of the plaintiffs by informing the receiver that they did not desire him to do any act in the business of the agency of the plaintiff firm. In the absence of any such termination of agency between the parties, the plaintiff firm was at liberty to sell the goods of the defendants on their hands for the purpose of carrying on the business activities of the partnership and incidentally to reduce the liability of the defendants to them. The transactions which took place on 9-3-1953 though a transaction put through by the receiver is, in our opinion, on a par with a transaction which the partners themselves could have undertaken. The year of account between the parties is the calendar year. If Art, 85 of the Limitation Act applies to the case, the starting point of limitation for a suit for balance due on mutual, open and current account is the end of the year in which the last transaction takes place. In this view the suit was brought within three years of the period of limitation if Art. 85 applied.

(6) It may not be necessary to deal with an other argument addressed by Mr. Subramaniam on this topic. Yet for the sake of completeness we would refer to it. He contended that if the settlement of account which took place on 31-12-1951 is believed as the lower court believed it, the account ceased to be open and current from that date. According to his argument as we understood it what amounted to a settlement of account was merely a unilateral entry in the account book of one party striking the balance due and arriving at the liability of one party to the other. As we understand the term that would not amount to a settled account. Settlement of account in law is really the result of a bilateral agreement. Both parties to the account must come together look into the debits and credits, decide upon any disputed claims and agree upon striking the balance. If such a balance is struck the account becomes a settled account which gives a cause of action as though it were a contract itself.

The point for our consideration is what would be the effect of such a settled account. It is true the account then becomes closed. Even though before the settlement it was mutual, after such settlement it ceased to be an open and current account. It is well established that Art. 85 of the Limitation Act could be attracted only to an account which continues to be open and current down to the date of the plaint. If the account was closed on any prior date, whatever other article of limitation may apply to the case, Art. 85 would not apply. Mr. Subramaniam relied upon two decisions, one of the Bombay High Court and the other of the Lahore High Court in support of his contention, Karsondas Dhunjiboy v. Surajbhan Ramrijpal, : AIR1933Bom450 and Milkhi Ram Hem Raj v. Rupchand Lachmandas, 131 Ind Cas 292 : AIR 1931 Lah 233. In 131 Ind Cas 292: AIR 1931 Lah 233 there were dealings between the two parties one of them being a commission agent and the other being a merchant supplying goods for sale. On a particular date the balance was struck and for the balance so struck the party liable to pay the amount agreed to pay interest at a certain rate. On these facts the Bench of the Lahore High Court ruled that on the date when the balance was struck the account became an account stated within the meaning of Art. 64 of the Limitation Act, and ceased to be a mutual, open and current account. On the facts of that case the conclusion that the account ceased to be mutual, open and current account is unexceptionable. But the facts before us are entirely different. The principle stressed by Shadi Lal C. J., in that decision was that the settlement which resulted in a current account being converted into a stated account itself gave rise to a fresh cause of action. The element is absent in this case. That decision therefore does not apply here.

(7) In ILR 58 Bom 200 : AIR 193 Bom 450 the question arose whether the particular dealing between the two merchants, one an upcountry merchant in Delhi and the other a commissioner agent in Bombay was a mutual, open and current account. The real test was propounded by the Bombay High Court thus :

'The real question in each case would be what is the intention of the parties and that must be inferred from the surrounding circumstances.'

Rangnekar J., explains this test in the following passage :

'.....Whether an account is mutual, open and current so as to attract the application of Art. 85 is a pure question of fact and must depend upon the nature of the dealings between the parties, nature of the entries and other relevant circumstances. In order that an account should be mutual there must be dealings between the parties and such dealings must be capable of giving rise to independent obligations on each side of the account at any given period or stage. One test commonly applied is the possibility of shifting balances sometimes in favour of one party and sometimes in favour of the other. But as observed in several reported decisions that test is not decisive or conclusive of the matter. The test is whether the dealings between the parties are of such a nature that the balance might so shift. An account current means a running account, that is an account which is continued and not stopped or closed. If the account is running, that is to say, if it is unclosed, then it is open and current. It is open either because the balance remains to be drawn or struck, or because it is to be carried forward because of some contemplated future dealing between the parties. If the account is not closed by settlement or otherwise, it is open. Of course mere cessation of the dealings between the parties does not mean that the account is closed. The real question in each case would be what is the intention of the parties, and that must be inferred from the surrounding circumstances.'

(8) We are in respectful agreement with the observations contained in this passage and applying the tests laid down there we would make the following comment. The dealings between the parties here did not come to an end on 31-3-1951, because the goods of the defendants continued to remain with the plaintiffs after that date to enable the receiver to dispose of them in March 1953. The defendants never expressed any intention to sever the business dealings even after the suit was filed for dissolution of the partnership by one of the partners. Nor did the defendants give intimation to the receiver to close the account and not to deal with their goods at any time thereafter even after the receiver sent a letter to the defendants calling their attention to the balance due by them to the partnership and demanding payment of that balance. The striking of the balance the account on 31-3-1951 has been already designated by us a unilateral transaction. It was not done after reference to the defendants or with their consent or consultation. That would not amount to closing of the business or the settling of the account between the parties. Settling of account is a technical term of art which should not be confused with mere adding up of entries on each side and arriving at the balance deducting the total on the one side from the total on the other side. It really means coming together of two parties, verification of the debits and entries and the mutual adjustment of any rival claims or objections and the consequent agreement upon the balanced due. That alone in law would amount to a settlement of account between the parties.

We hold that there is no such settlement of account in this case and consequently the account continued to be mutual, open and current right upto the date of the plaint. The finding the learned judge in the court below that the suit was not barred by limitation is therefore correct though we have based our conclusion on different reasons. The appeal is therefore party allowed and the decree of the lower court will be modified with reference to our finding as to the award of interest after the date of the decree. In other respects the appeal fails. There will be no order as to costs in this appeal.

(9) Ordered accordingly.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //