Tinna Overseas Limited vs Krm International Ltd. & Another
2010 Latest Caselaw 2808 Del

                                       REPORTED
*    IN THE HIGH COURT OF DELHI AT NEW DELHI

%                           DATE OF RESERVE: April 26, 2010

                            DATE OF DECISION: May 28 , 2010


+            RFA 365/2007 & CM 18764/2009


      Tinna Overseas Limited                        ..... Appellant
                       Through: Mr.M.Dutta, Advocate

                   versus

      KRM International Ltd. & Anr.             ..... Respondents
                       Through: Mr.M.R.Chawla, Advocate


CORAM:
HON'BLE MS. JUSTICE REVA KHETRAPAL

1. Whether reporters of local papers may be allowed
   to see the judgment?

2. To be referred to the Reporter or not?

3. Whether judgment should be reported in Digest?


: REVA KHETRAPAL, J.

1. This appeal is directed against the judgment dated 13.02.2007

whereby the suit of the plaintiff (the appellant herein) for recovery of

Rs.6,96,062/- along with interest was dismissed by the learned

Additional District Judge.

2. The facts of the case, as alleged in the plaint, are as follows:-

The plaintiff had placed orders on the defendant No.1 for the purchase

of 12,000 sq.ft. of Cow Softy Finished Leather. The quantity of goods

was subsequently increased to 24,000 sq.ft. of the said leather. It was

agreed between the parties that the plaintiff will obtain a Letter of Credit

in favour of the defendant No.1 (the respondent No.1 herein) for the

payment of the goods to be supplied by the defendant No.1. The goods

were to be supplied by the defendant No.1 as per the specifications of

the plaintiff and the payment was to be obtained by the defendant No.1

by invoking the said Letter of Credit, the invocation being

commensurate to the value of the goods supplied by the defendant No.1,

after adjusting all rejections and goods returned by the plaintiff to the

defendant No.1.

3. On 07.07.2000, at the instance of the plaintiff, the defendant No.2-

Bank issued a Letter of Credit in favour of the defendant No.1 of the

value of Rs.9,36,600/- for the supply of 12,000 sq.ft. of leather. By an

amendment dated 15.07.2000 to the same, the value of the said Letter of

Credit was enhanced to Rs.18,73,200 for the supply of 24,000 sq.ft. of

leather. Among other documents, the defendant No.1, for the

negotiation of the said Letter of Credit was required to annex a

Certificate of Quality Specification issued by the plaintiff or its

representatives. The said Certificate of Quality Specification was

required to ensure that the goods supplied by the defendant No.1 were as

per the ordered specifications. Payment was to be released to the

defendant No.1 only on certification by the plaintiff that the goods were

as per the specifications. Thus according to the plaintiff, there was no

obligation under the said Letter of Credit to make payment for any sub-

standard goods, which were not as per the specifications.

4. It is further alleged in the plaint that the defendant No.1 supplied

the goods to the plaintiff through various invoices from 08.07.2000 till

20.07.2000, some of which were returned to the defendant No.1 not

being entirely as per the specifications of the plaintiff. The plaintiff

intimated the defendant No.1 about the defects in the goods supplied by

the defendant No.1 and returned by the plaintiff. The total value of the

goods returned by the plaintiff is alleged to be Rs.4,51,988/- only.

Consequent to the return of the said goods, it is alleged in the plaint that

the defendant No.1 issued credit notes to the plaintiff for the value of the

returned goods. The details of the credit notes issued by the defendant

No.1 to the plaintiff are set out in the plaint. It is the plaintff‟s case that

the credit notes having been issued by the defendant No.1 to the

plaintiff, the payment of the aforesaid sum of money could not be taken

by the defendant No.1 by invoking the Letter of Credit, which was a

conditional one.

5. By its letter dated 13.10.2000, the plaintiff intimated the defendant

No.2 about the return of the goods supplied by the defendant No.1 and

informed the defendant No.2 that the defendant No.1 had issued credit

notes in the sum of Rs.4,51,988/- in favour of the plaintiff. The

defendant No.2 was requested by the plaintiff not to make payment in

respect of the aforesaid goods to the defendant No.1 for which credit

notes were issued by the said defendant and that the balance amount of

Rs.1,97,609/- in all after adjustment of credit notes be paid to the

defendant No.1 under the aforesaid Letter of Credit. Initially, the

defendant No.2-Bank did not remit the payment of the sum of

Rs.6,49,597/- under the Letter of Credit to the defendant No.1. But

subsequently, the defendant No.2 Bank intimated the plaintiff that it was

under a legal obligation to make payment as the amount was being

demanded by the bankers of the defendant No.1.

6. Thereupon the plaintiff requested the defendant No.1 not to press

for the release of money under the Letter of Credit to the extent of the

value of the credit notes, but the defendant No.1 was unyielding.

Consequently, the plaintiff, in order to restrain the defendant No.1

from encashing the amount under the Letter of Credit filed a suit for

injunction, being Suit No.2374/00 titled "M/s Tinna Oversees Limited

Vs. K.R.M. International & Another". In the said suit, this Court passed

an ex-parte ad-interim injunction in favour of the plaintiff and against

the defendant. Upon receipt of notice from this Court in the said suit,

the defendant No.2 took the stand that it had made the payment to the

defendant No.1 by a demand draft dated 20.10.2000, which was sent to

the bankers of the defendant No.1 on 22.10.2000, and that the payment

against the said demand draft had been realised by the bankers of the

defendant No.1 on 30.10.2000.

7. It is the case of the plaintiff that it was only upon the filing of the

written statement by the defendants that the plaintiff for the first time

came to know that the defendant No.1 had realised the entire amount

including the amount of Rs.4,51,988/-, thereby unjustly enriching itself.

In view of the deliberate and wilful violation of the injunction order of

the High Court, the plaintiff initiated proceedings against the defendants

by filing an application under Order XXXIX Rule 2A of the Code of

Civil Procedure. However, in order to avoid any technical objection

later, the plaintiff filed the present suit seeking recovery of the sum of

Rs.4,51,988/-, which, according to the plaintiff, the defendant No.1 is

liable to pay back to the plaintiff with interest @ 18% p.a. from

30.10.2000, i.e., the date when the defendant No.1 actually realised the

said sum of money by illegally invoking the Letter of Credit till the

date of actual payment of the aforesaid sum to the plaintiff. The total

liability of the defendants on account of interest is alleged to be in the

sum of Rs.2,44,074/ -. Thus, the defendants are stated to be liable to

pay to the plaintiff a sum of Rs.6,96,062/- along with pendente lite

and future interest @ 18% p.a., till the date of actual realisation of the

aforesaid amount.

8. Both the defendant No.1 and the defendant No.2 contested the suit

by filing their respective written statements. Apart from raising

preliminary objections to the maintainability of the suit, the defendant

No.1 disputed the fact that the goods supplied were returned by the

plaintiff to the defendant No.1. The defendant No.2 in its written

statement submitted that it was under a legal obligation to honour its

commitment by making the payment under the Letter of Credit, which it

had done. It was also submitted by the defendant No.2 that it was not

concerned in any manner with any dispute between the seller and the

purchaser.

9. On the pleadings of the parties, the following issues were framed

by the learned trial court:-

(1) Whether the suit is barred by limitation? OPD 1 & 2

(2) Whether the suit of the plaintiff is barred under Order 2 Rule 2 CPC?

(3) Whether plaint is signed and verified by a duly authorised person? OPD-1

(4) To what amount, if any, is the plaintiff entitled to recover from the defendants? OPP

(5) Relief.

10. The learned Additional District Judge rendered his findings on

issue No.1 alone, holding the suit to be time barred, having been filed

beyond the period of three years and, accordingly dismissed the suit on

that ground alone. Aggrieved by the said findings, the present appeal

has been preferred by the plaintiff-appellant contending that the suit was

filed well within the period of limitation, and the impugned judgment is

liable to be set aside by this Court.

11. The counsel for the parties Mr.M.Dutta, Advocate on behalf of

the appellant, and Mr.M.R.Chawla, Advocate on behalf of the

respondents have been heard and the records perused. In order to

appreciate the rival contentions of the parties, it would be appropriate to

reproduce paragraph-28 of the plaint pertaining to the cause of action,

which reads as under:-

"28. That the cause of action to file the present suit has accrued to the plaintiff when portion of the goods were

returned by the plaintiff to the defendant no.1. It further arose on 6/10/2000 when the letter of credit matured for payment. It further arose on 10/10/2000 when the credit notes were issued by the defendant no.1. The cause of action further arose on 18/10/2000 when the entire payment under the letter of credit became due on 18/10/2000 and the defendant No.2 expressed its inability to withhold payment under the same. The cause of action arose on 22/10/2000 when the defendant no.2 dispatched the demand draft to the banker of the defendant no.1. It also arose on 27/10/2000 when the said demand drafts were presented by the banker of the defendant for payment. The cause of action lastly arose on 30/10/2000 when the payment was released by the defendant No.2 in favour of the defendant No.1. The suit is within the period of limitation. There is no other impediment for which the present suit cannot be maintained or tried and disposed off by this Hon'ble Court."

12. It is the contention of Mr.M.Dutta, the learned counsel for

the appellant that the starting point of limitation will be from

30.10.2000 when the payment was released by the defendant No.2

in favour of the defendant No.1, as alleged in paragraph-28 of the

plaint. The learned counsel for the appellant pressed into service

the provisions of Article 24 of the Limitation Act, 1963 in support

of his aforesaid contention, which for the sake of convenience is

reproduced hereunder:-

      Description          Period of        Time from
      of suit              limitation       which
                                            period
                                            begins to
                                            run
      24. For              Three            When the
      money                years            money is
      payable by                            received.
      the defendant
      to the
      plaintiff for
      money



       received by
      the
      defendant,
      for the
      plaintiff‟s use

13. Reliance was also placed by Mr.Dutta upon the judgments

rendered in the following cases in support of his contention that

Article 24 of the Limitation Act was applicable to the present case:-

(i) Ranendra Narayan Sinha and Others Vs. State of

West Bengal, 1970 (3) SCC 109.

In this case the plaintiff was claiming in the suit filed by

him the amount of revenue recovered in excess of the

amount due from him and he claimed declaration that the

revenue stood abated. The High Court was of the view that

the claim made by the plaintiff was barred by the law of

limitation. Setting aside the judgment of the High Court

and affirming the judgment of the trial court, the Supreme

Court held that the right to collect the revenue, which is not

due cannot be acquired by prescription, and if the plaintiff

had been compelled to pay sums of money which he was

not liable to pay, the claim could properly be made within

three years from the date on which the payment was made.

(ii) State of Haryana Vs. Bharat Steel Tubes Limited,

AIR 1996 Delhi 198

In this case the Delhi High Court ruled that in a suit for

recovery of money, in which the plaintiff was demanding

the refund of money paid by the plaintiff to the defendant,

the time will run from the date the defendant‟s refusal to

pay the amount came to the knowledge of the plaintiff.

(iii) The T.S.H.W.Co-operative Society Ltd. Vs.

S.Sundaram Mudaliar, AIR 1957 Travancore-

Cochin 61

The Division Bench of the Travancore-Cochin High

Court, while delienating on the scope of Article 62 of the

Limitation Act, 1908 (equivalent to Article 24 of the

Limitation Act, 1963) held that where a suit is brought for

realisation of excess amount illegally exacted by the

defendant from the plaintiff by way of freight for the supply

of yarn, it is Article 62 that will apply to the suit, and that

the expression "money received by the defendant for the

plaintiff‟s use" used in Article 62 is used in the sense in

which it was used in English Common Law as a count of

action. In that sense, the article will apply to all cases in

which "the defendant has received money which in justice

and equity belongs to the plaintiff under circumstances

which in law render the receipt of it a receipt by the

defendant for the use of the plaintiff." In that case it will

apply to suits "for money got through imposition (express

or implied) or extortion or oppression or an undue

advantage taken of the plaintiff‟s situation", and to cases in

which "money is paid by the plaintiff in discharge of a

demand illegally made under colour of an office.

(iv) Kasturchand Okaji Marwadi Vs. Hari Govind Wagle,

AIR 1934 Bombay 491

The Bombay High Court in this case held that Article

62 applies to suits for money payable by the defendant to

the plaintiff for money received by the defendant for the

plaintiff‟s use, and approved the dicta laid down by the

Calcutta High Court in Mahomed Wahib Vs. Mahomed

Ameer, (1905) 32 Calcutta 527 and the remaks of

Mookerjee, J. (p-533) :

"It seems to me to be clear, as pointed out by Markby, J., in 2 Cal.303 (2) that the Article (Art.

62), when it speaks of a suit for money received by the defendant for the plaintiff‟s use, points to the well-known English action in that form; consequently the Article ought to apply wherever the defendant has received money which in justice and equity belongs to the plaintiff under circumstances which in law render the receipt of it a receipt by the defendant to the use of the plaintiff. As pointed out by Lord Mansfield, C.J., in 2 Burr 1005(3) this form of action lies for money paid by mistake, or upon a consideration, which happens to fail, or for money got through imposition (express or implied) or extortion or oppression or an undue advantage taken of the plaintiff‟s situation contrary to laws made for the protection of persons under those circumstances; in other words, this form of action would be maintainable in cases in which the defendant at the time of receipt, in fact or by presumption or fiction of law receives the money to the use of the plaintiffs."

(v) Hanutaram Vs. Kumbharam and Others, AIR 1971

Rajasthan 283

The Rajasthan High Court relying upon the judgment

rendered in T.S.H.W. Co-operative Society's case by the

High Court of Travancore-Cochin (supra) and its earlier

judgment in Jain Brothers and Co.Bundi Vs. State of

Rajasthan reported in ILR (1963) 13 Rajasthan

1063=AIR 1964 Rajasthan 17, held that Article 62 governs

suits for money had and received not only where the

defendant may have actually received money for the use of

the plaintiff as his agent or in a like capacity, but it also

governs suits for money whereof it can be rightly postulated

that the defendant has received money which he had no

right to receive and the receipt whereof by the defendant

therefore amounts in law or by a legal fiction to a receipt by

him for the plaintiff‟s use.

(vi) Union of India Vs. Hem Chandra, AIR 1970

Allahabad 228

In this case, the Allahabad High Court while laying down

the principles for interpretation of the Articles of the

Limitation Act, held as follows:-

"In interpreting the Articles of the Limitation Act certain well-established principles have to be borne in mine, e.g., (i) an interpretation which is

penal should be avoided; (ii)if possible, the interpretation which does not bar the suit should be preferred to the one which bars the suit; (iii)if there is a specific Article applicable to the facts of the case, the residuary Article should not be applied; and (iv)all the columns of the Article should be construed. That these principles are well established would be evident from the following cases:

(1)Makhan Lal Rai Pramanik v.Pramath Nath Basu (AIR 1953 Cal. 50):

(2) K.S.Rama Swami Ayyar v. S.V.Krishnier (AIR 1957 Mad. 431)."

14. Mr.Kulwant Rai Chawla, the learned counsel for the

respondents, sought to distinguish the aforesaid judgments on the

ground that the said judgments dealt with cases where the money

had been paid by mistake or cases where there was extortion,

coercion, etc. For the provisions of Article 24 of the Limitation Act

to apply, he contended, there should be money lawfully due and

payable to the plaintiff by the defendant. The learned counsel

further contended that the instant case is not covered by Article 24

of the Limitation Act, in that it is based entirely on the Credit Notes

dated 10.10.2000 and accordingly, is barred by limitation by a

period of 11 days (the suit having been filed on 22.10.2000 as held

by the learned trial court and not on 19/20.10.2003 as alleged by the

plaintiff). His further contention is that Section 72 of the Contract

Act and Article 24 of the Limitation Act must be read together and

read in this manner, it is Article 113 of the Limitation Act, 1963,

which will apply to the instant case. For the sake of convenience,

the said Article is reproduced hereunder:

      Description           Period of         Time from
      of suit               limitation        which
                                              period
                                              begins to
                                              run
      113.Any suit          Three             When the
      for which no          years             right to sue
      period of                               accrues.
      limitation is
      provided
      elsewhere in
      this
      Schedule.

15. In the alternative, Mr.Chawla contended that the cause of action in

the instant case arose on 06.10.2000 when the goods were returned, it

further arose on 10.10.2000 when the Credit Notes were issued by the

defendant in favour of the plaintiff and finally, on 18.10.2000 when the

entire payment became due under the Letter of Credit. Thus calculated,

according to him, the last date of limitation would be 19.10.2003, i.e.,

three years after the payment became due under the Letter of Credit on

18.10.2000, whereafter there was no further accrual of the cause of

action as the defendant No.2-Bank was under a legal obligation to make

payment to the defendant No.1 under the Letter of Credit, for the goods

supplied by the defendant No.1 to the plaintiff.

16. Reliance was placed by Mr.Chawla on the judgments of the

Supreme Court reported in AIR 1965 SC 1773, A.Venkata Subbarao &

Others Vs. The State of Andhra Pradesh; AIR 1970 SC 898,

M/s.Tilokchand Motichand and Others Vs. H.B.Munshi,

Commissioner of Sales Tax, Bombay and Another, AIR 1970 SC 898

and (2008) 13 SCC 485, Krishna Gopal Kakani Vs. Bank of Baroda.

17. In the case of Venkata Subbarao & Others (supra), the questions

for consideration of the Supreme Court were:

(1) Does Article 62 embody the essential elements of the action

known in English Law and pleading as the "action for

money had and received to the plaintiff‟s use?"

(2) Does the fact that at the moment of receipt the defendant

intended to receive the money for his own benefit and not

for the use of the plaintiff render the Article inapplicable?

After considering the matter at some length, it was held by the

Supreme Court that in order to attract Article 62, it is not necessary that

at the moment of the receipt of money, the defendant should have

actually intended to receive it for the use of the plaintiff and that it was

sufficient if the receipt was in such circumstances that the law would

impute to him an obligation to retain it for the use of the plaintiff and

refund to him when demanded. The Supreme Court further held that

Article 62 most nearly approaches the formula of „money had and

received by the defendant for the plaintiff‟s use‟, if read as a description

and apart from the technical qualifications imported in English Law and

Procedure. However, if the right to refund does not arise immediately

by the defendant, but arises by reasons of facts transpiring subsequently,

Article 62 cannot apply, for it proceeds on the basis that the plaintiff has

a cause of action for instituting the suit at the very moment of the

receipt. The learned counsel for the respondents was not able to

demonstrate how the aforesaid dicta laid down by the Supreme Court

was of any avail to the respondents.

18. Reliance is next placed on the Supreme Court judgment in the

case of M/s.Tilokchand Motichand and Others (supra) to contend that a

claim for money paid under coercion is covered by Article 113 of the

Limitation Act, 1963. A close reading of the decision rendered by the

Supreme Court, however, shows that this view was expressed by only

one of the five Judges of the Supreme Court who rendered the aforesaid

judgment (Mitter, J.) on the premise that the facts negatived any claim of

payment under a mistake of law and were only consistent with the claim

for money paid under coercion. The majority view (including that of

Mitter, J.) was that there was no question in the said case of a mistake of

law entitling the petitioner to invoke the analogy of the Article in the

Limitation Act. A dissenting view was expressed by two of the Judges

(Sikri, J. and Hegde, J.), who held the view that the petitioner acted

under a mistake of law and that there was no delay on his part in coming

to the Court. The aforesaid observations were made on a petiton filed

under Article 32 of the Constitution and it is not discernable as to how

the decision rendered thereon is of any assistance to the respondent.

19. Reliance placed upon the recent decision rendered by the Supreme

Court in Krishna Gopal Kakan's case (supra) by the learned counsel for

the respondents is also, in my view, wholly misplaced, as the Supreme

Court in the said case was dealing with a case for settlement of accounts

in which the applicability of the provisions of Section 3 and Article 113

of the Limitation Act were considered by the Court in the context of the

recovery of surplus auction-sale proceeds of an import consignment

jointly held by the appellant and the respondent. This judgment, in my

view, is wholly inapplicable to the facts of the instant case.

20. In the instant case, in my considered opinion, even assuing the suit

to have been filed on 22.10.2003, as held by the learned trial court, it

cannot be held to be barred on the ground of limitation. It has been

specifically averred in the plaint that the cause of action lastly arose on

30.10.2000 when the payment was released by the respondent No.2 in

favour of the respondent No.1. There is no denial from the side of the

respondents that the payment was received by the respondent No.1 on

30.10.2000 and as a matter of fact, there is on record the statement of

Mr.C.P.B.Nair, Chief Manager, Syndicate Bank, Mayapuri Branch

recorded in Suit No.2374/2000 to the effect that :

"The payment was made to Canara Bank by Syndicate Bank on 30.10.2000 in clearing".

If that be so, then according to the respondent No.2 Bank itself,

the payment was made to the respondent No.1 not before 30.10.2000.

As such, the suit filed by the plaintiff-appellant on 22.10.2003 was

clearly within the period of limitation prescribed by Article 24 of the

Limitation Act, 1963.

21. Even assuming for the sake of arguments that Article 113 of the

Limitation Act is the governing Article in the instant case, under that

Article limitation prescribed is three years from the time when the right

to sue accrues. The payment having been made by the defendant No.2 to

the bankers of the defendant No.1 on 30.10.2000, certainly the right to

sue accrued to the plaintiff-appellant on the aforesaid date. Thus, in any

view of the matter, the suit filed by the plaintiff is within the period of

limitation.

22. There is yet another aspect of the matter. The courts have

consistently taken the view that in giving effect to a Statute of

Limitation, if two Articles limiting the period for bringing a suit are wide

enough to encompass the same cause of action, the Article which keeps

alive rather than that which bars the right to sue, ought to be preferred on

the ground of equitable considerations. All the more so, when both the

Articles can be said to be applicable and neither one of them can be said

to be more specifically applicable than the other. This is without

prejudice to the contention of the appellant, in the instant case, which

has been upheld by this Court, that Article 24 of the Limitation Act is

most certainly applicable to the case at hand and the present suit falls

within the ambit of Article 24 and the residuary Article 113 cannot,

therefore, be applied.

23. In view of the aforesaid, the appeal succeeds. The impugned

judgment and order of the learned trial court is set aside and the suit is

remanded to the learned trial court for deciding the remaining issues in

accordance with the law.

RFA No.365/2007 and CM No.18764/2009 stand disposed of

accordingly.

REVA KHETRAPAL (JUDGE) May 28 , 2010 aks