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Shivi Gowda and ors. Vs. Fernandes and ors. - Court Judgment

LegalCrystal Citation
SubjectLimitation
CourtChennai
Decided On
Judge
Reported in(1911)ILR34Mad513
AppellantShivi Gowda and ors.
RespondentFernandes and ors.
Cases ReferredChittar Mal v. Bihari Lal I.L.R.
Excerpt:
.....ram 606 where the dealings consisted of loans on both sides, and the parties were also partners in certain transactions the shares of profit and loss falling to each partner's share being debited and credited in the accounts, is clearly distinguishable on the facts. it is agreed that the same conditions applied to the numerous subsequent loans made by the plaintiffs to the defendants as well as to the sums disbursed by them for purchase of goods and other objects on the defendants' behalf. 14. the accounts show that] on the 5th may 1894 the balance due to the plaintiffs bad increased to rs. 15. the learned district judge sums up the business thus in terms which are in substantial accordance with the pleas of both sides, as well as with the accounts above summarised:.....1896 accounts were struck and the balance due to the plaintiffs was found to be rs. 5,500. the account, exhibit ii, was signed by the second defendant in token of liability. from this time forward, there are no further cash loans, and only a few disbursements on the defendants' account: but the small consignments of coffee received are insufficient to keep pace with the interest, and by the 30th november 1899 the defendants' debt had increased to rs. 7,587-9-9, the amount sued for.15. the learned district judge sums up the business thus in terms which are in substantial accordance with the pleas of both sides, as well as with the accounts above summarised:defendants have borrowed money from plaintiffs, they have obtained goods of various kinds through them, and they have made.....
Judgment:

Arnold White, C.J.

1. The main question raised in this appeal is whether the suit is for the balance due on a mutual, open and current account, where there have been reciprocal demands betwee the parties within the meaning of Article 85 of the second schedule to the Limitation Act. If so, the defendants' plea of limitation fails. If not, the plaintiffs are not entitled to recover in respect of items in the account prior in date to three years before the institution of the suit.

2. The District Judge held that Article 85 applied and the suit was not barred by limitation apparently on the ground that the accounts had been open and running for many years. He does not seem to have considered the question with reference to the words of the article 'Where there have been reciprocal demands between the parties.' The oral evidence affords little assistance as to the course of business between the parties and we have to rely in the main on the plaintiffs' accounts.

3. The plaintiffs are merchants and the defendants are coffee planters, and the plaintiffs' accounts show that, from the year 1893, the plaintiffs had been financing the defendants and the defendants had been sending consignments of coffee to the plaintiffs, In April 1893, a sum of Rs. 4,000 was advanced by the plaintiffs and the account for 1893-1894 (exhibit V) states that a document was executed for this amount. During 1893 further advances were made by the plaintiffs and sundry payments were made by them on the defendant's behalf. By January 1894 these advances and payments amounted to Rs. 10,700. In January 1894, a consignment of coffee was received by the plaintiffs from the defendants and other consignments were received later. These consignments were sold by the plaintiffs and the defendants were credited with the sale-proceeds with interest. A balance was struck in May 1894 the defendants being debited with interest on the moneys paid by the plaintiffs and also with what was termed commission.' This was not really commission but an amount calculated at Rs. 2 per candy, every Rs. 1,000 advanced being taken as the equivalent of 30 candies, in respect of advances made before' any coffee was received by the plaintiffs, and every Rs. 1,000 being taken as the equivalent of 10 candies in respect of advances made subsequently. The higher rate is described in paragraph A of the plaint as damages for the defendants' default in not supplying the full quantity of coffee, in other words for not keeping the plaintiffs fully secured in respect of advances made by them to the plaintiffs or on their behalf. The accounts for 1894--1895 (exhibit IV) and 1895-1896 (exhibit III) show that business was continued on the same lines. In June 1896, the defendants made a cash payment of Rs. 13,000 and the balance against them was reduced to Rs. 5,500 (exhibit II). In May 1897, the balance was Rs. 5,545 odd and on this the plaintiffs claimed to charge interest at 15 par cent. In November 1899, the balance shown in the plaintiffs' accounts (exhibit A) was Rs. 7,500 odd and this is the amount for which the suit was brought. I am of opinion that, having regard to the course of business so far as it can be ascertained from the plaintiffs' accounts, the relation between the defendants and the plaintiffs was not that of seller and buyer as regards the coffee consigned to the plaintiffs--nor that of principal and agent in respect of the coffee sold by the plaintiffs, sou Mussamut Phool Koomaru Bibee v. Woonkar Pershad Rustody (1867)7 W.R. 67--but that the contract between the parties was, as would seem to be suggested in paragraph 4 of the plaint and in the concluding portion of paragraph 6 of the learned Judge's judgment that the plaintiff's should finance the defendants, and that the defendants should keep the plaintiffs secured in respect of the advances made by the plaintiffs on their behalf by consigning to them coffee of a value equal to the amount of their indebtedness, the defendants being given credit for the proceeds of the coffee as and when sold by the plaintiffs and that if they failed to do this, they should make the further payment which is called commission but which is really a payment by way of damages.

4. I do not think it can be said that this is a case in which there are independent obligations on both sides; sea the observations in the judgment of Holloway, J., in Hirada Basappa v. Godigi Muddappa (1871) 6 M.H.C.R. 142. No doubt if at any time the sale-proceeds of the coffee had exceeded the amount of the defendants' indebtedness, the plaintiffs would have been accountable for the balance as money received for the use of the defendants, but this in my opinion does not in itself make the account mutual or give rise to reciprocal demands. I think the case fills within the principle of the decisions in Hargopal Premsukdas and another v. Abdul Khan Haji Muhammad (1872) 9 B.H.C.R. 429 (where certain jewels were sold by the plaintiffs on the defendants' behalf and the defendants credited with the proceeds), Velu Pillai v. Ghose Mahomed I.L.R. (1894) Mad. 293 and Ram Pershad v. Harbans Singh (1907) 6 Cri.L.J. 158. Ganeshv, Gyanu I.L.R. (1898) Ram 606 where the dealings consisted of loans on both sides, and the parties were also partners in certain transactions the shares of profit and loss falling to each partner's share being debited and credited in the accounts, is clearly distinguishable on the facts. I accept the general principles laid down in the American Cyclopaedia of Law and Procedure, vol, XXV, p, 1125, as applicable to the article in question under the Indian Limitation Act. 'As a general rule payments made on account by one party, and credited by the other, whether in money or goods, do not render the account mutual so as to defer the operation of the statute to the date of last item, etc.'

5. I am of opinion, though the matter is not free from difficulty, that the ease before us does not come within Article 85 of the second schedule to the Limitation Act, and that the plea of limitation must be upheld.

6. The plaintiffs are only entitled to recover in respect of transactions, which took place within three years prior to the institution of the suit and an account must be taken on this basis. Mr. K, Srinivasa Ayyangar intimated that if the plea of limitation was upheld, he would not press the point that the second defendant and defendants Nos. 3 to 8 did not form a joint family on the plea of discharge. The decree against the defendants Nos. 3 to 8 on the amount (if any) found to be due will be limited to the share of the family property.

7. The appeal is allowed with costs. In the Court below, the plaintiffs will have proportionate costs on the amount (if any) found due on the taking of the account,

Ayling, J.

8. In the ease out of which the present appeal arises the plaintiffs (respondents) sued to recover the balance due on a running account between themselves and the defendants (appellants) from the 24th April 1893 onwards and the chief contention raised by the latter in appeal is that the suit is time barred as regards all items arising before the 24th May 1897 three years prior to the filing of this suit. This contention, if established, reduces the plaintiff's claim to a comparatively insignificant amount.

9. On behalf of the respondents it is argued that the account is a mutual, open and current account with reciprocal demands between the parties, within the meaning of Article 85 of schedule II, Indian Limitation Act.

10. The question of limitation is embodied in issue No. 4 but the learned District Judge in dealing with it in paragraph 6 of his judgment has confined himself to considering whether the account is open and current (which he rightly decides to be the case): and has apparently left the question of mutuality and reciprocity of demand out of consideration.

11. The oral evidence is directed to other points, but from the plaintiffs' accounts (produced and marked as exhibits A and II to V) aided to some extent by the pleadings of the parties it is possible to determine the nature of the business,

12. The latter opens on the 24th April 1893 with a loan of Rs. 4,000 from the plaintiffs to the defendants on a bond. The latter is hot now in existence; but there seems to be no dispute that the conditions of the loan included interest at 12 per cent, per annum; and that repayment was to be effected by the defendant sending consignments of coffee' to the plaintiffs which the latter were to sell crediting the proceeds to the defendants' account, The plaintiffs were further entitled to make a further charge which is called 'commission.'

13. This charge is not really commission at all, but a special additional interest calculated on all sums advanced, the rate being three times as high on all sums advanced before the receipt of the first consignment of coffee for the year as on those advanced subsequently. It is agreed that the same conditions applied to the numerous subsequent loans made by the plaintiffs to the defendants as well as to the sums disbursed by them for purchase of goods and other objects on the defendants' behalf.

14. The accounts show that] on the 5th May 1894 the balance due to the plaintiffs bad increased to Rs. 8,050 for which another bond was executed. On the 30th May 1895 it had amounted to Rs. 15,581-4-3 and on the 15th May 1896 to Rs. 18,552-3-4. On the 5th June 1896 it was reduced by a cash payment of Rupees 13,000 (all the previous credits to the] defendants being the sale price of coffee received and sold): and on the 6th June 1896 accounts were struck and the balance due to the plaintiffs was found to be Rs. 5,500. The account, exhibit II, was signed by the second defendant in token of liability. From this time forward, there are no further cash loans, and only a few disbursements on the defendants' account: but the small consignments of coffee received are insufficient to keep pace with the interest, and by the 30th November 1899 the defendants' debt had increased to Rs. 7,587-9-9, the amount sued for.

15. The learned District Judge sums up the business thus in terms which are in substantial accordance with the pleas of both sides, as well as with the accounts above summarised:

Defendants Have borrowed money from plaintiffs, they have obtained goods of various kinds through them, and they have made payments from time to time by sending in coffee.

16. The question is whether this account is one falling under Article 85 above referred to: and it appears to me that it does not.

17. The oldest Madras case bearing on the point is Hirada Bassappa v. Gadiji Muddappa (1871) 6 M.H.C.R. 142 and followed in Velu Filial v. Ghose Mahomed I.L.R. (1894) Mad. 293. The principle laid down appears to be that the test of mutuality is not the existence of a 'shifting balance' which is important evidence of mutuality but not conclusive; but--to quota Holloway--' To be mutual there must be transactions on each side creating independent obligations on the other and not merely transactions, which create obligations on the one side, those on the other being merely complete or partial discharge of such obligations.' This feature, the existence of independent obligations, appears to me to be entirely wanting in the present case. A security of the accounts leaves no doubt that every consignment of coffee was made simply and solely on account of the antecedent loans and with a view to reduce the balance due thereunder. Net only was the balance never shifted to the defendants' credit, but there was never any approach to such a desirable state of affairs; apparently the balance against the defendants was never lower than the initial amount (Rs. 4,000) and the only substantial reduction was by the cash payment of Rs. 13,000 referred to above.

18. Applying the principle quoted above, I must hold that the account was not a mutual one with reciprocal demands.

19. Numerous rulings have been quoted by one side or the other; but none of them tend to really shake the above conclusion, That the fact that repayment was mostly by consignments of goods and not in cash makes no difference may be deduced from Hargopal Premsukdas v. Abdul Khan Haji Muhammad (1872) 9 B.H.C.R. 429 if authority were needed. The judgment in Ganesh v. Gyannu I.L.R. (1898) Bom. 606 is in complete accord with that in Velu Pillai v. Ghose Mahomed I.L.R. (1894) Mad. 29 and follows the same principle; and I can find nothing inconsistent therein with either Laljee Sahoo v. Roghoo Nundun Lall Sahoo I.L.R. (1881) Cal. 447 or in Chittar Mal v. Bihari Lal I.L.R. (1910) All. 11 the other cases quoted by the respondents' vakil.

20. The other points raised in appeal may be summarily dealt with. I agree with the District Judge in rejecting the plea of discharge and in holding that the defendants formed a joint family with the second defendant as its managing member.

21. On the other hand I can find nothing in exhibit J which would as contended by the respondents' vakil, render the debt personally binding on any but the second defendant.

22. I would amend the decree of the District Court, by reducing the defendants' liability to the items accruing after the 24th May 1897 and by limiting the liability of all the defendants other than the second defendant to their share of the joint family property. The plaintiffs should be allowed proportionate costs in the lower Court, defendants bearing their own and the appellants should recover their costs in this Court from respondents.


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