Delhi High Court
Wings Pharmaceuticals (P) Ltd vs Praveen Bhasin on 30 September, 2016
$~3
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment dated 30thSeptember, 2016
+ CS(COMM) 1141/2016
WINGS PHARMACEUTICALS (P) LTD ..... Plaintiff
Through Mr. Rajeev Kumar, Advocate
versus
PRAVEEN BHASIN ..... Defendant
Through Mr. S.C. Singhal, Advocate
CORAM:
HON'BLE MR. JUSTICE G.S.SISTANI
G.S.SISTANI, J (ORAL)
IA.22205/2015 (IA. /2016) (under Order VI Rule 17 CPC by the
plaintiff)
1. This is an application under Order VI Rule 17 of the Code of Civil
Procedure filed by the plaintiff seeking amendment to the plaint.
Registry is directed to register this application in the year 2016 as the
suit has been registered as a Commercial Suit in 2016.
2. By this application under Order VI Rule 17 of the Code of Civil
Procedure (in short „CPC‟),the plaintiff wishes to amend paragraph 3
of the plaint by inserting the sentence:"Thusopen mutual current
account between the parties to the suit came into existence."Learned
counsel for the plaintiff/applicant submits that the necessity of filing
this application has arisen on account of the fact that the defendant has
made an application under Order VII Rule 11 CPC on 27.06.2015,
wherein the defendant has raised a technical objection that there are no
pleadings to the fact that the parties maintained an open mutual current
CS(COMM).1141/2016 Page 1 of 19
account and consequently, the suit is barred by limitation. Counsel
further submits that the defendant has also instituted a suit against the
plaintiff wherein the defendant himself has admitted that there was an
open mutual current account between the parties to the suit.
3. Mr. Singhal, learned counsel for the non-applicant, submits that the
present application is misconceived for the reason that the statement of
account which has been filed along with the suit does not show that the
parties maintained an open mutual current account. He submits that
even if the amendment is allowed, his objection with respect to the
nature of account be kept open.
4. I have heard the learned counsel for the parties.While allowing
amendment, this Court does not have to, at this stage, decide as to
whether an open mutual current account between the parties was
opened or not.Accordingly, the application is allowed. The objection
of Mr. Singhal is kept open. Let the amended plaint be taken on record.
5. The application stands disposed of.
IA.12641/2015 (IA. /2016)(Order VII Rule 11 CPC filed by the
defendant)
6. This is an application has been filed by the defendant seeking rejection
of the plaint under the provision of Order VII Rule 11 of the Code of
Civil Procedure.Registry is directed to register this application in the
year 2016 as the suit has been registered as a Commercial Suit in 2016.
7. By the present application the defendant prays for rejection of the plaint
on the ground that the same is barred by limitation.
8. Necessary facts to be noticed for disposal of the application are that the
plaintiff has filed the present suit for recovery in the sum of
Rs.96,89,850.24. As per the plaint, the plaintiff company had appointed
the defendant as its distributor to supply pharmaceuticals preparations
CS(COMM).1141/2016 Page 2 of 19
and products manufactured by the plaintiff companyinter alia to the
Health Department, Delhi Government and MCD. The plaintiff
company supplied its manufactured pharmaceutical products against
orders placed by the defendant and raised appropriate bills on the
agreed terms and conditions printed at the footnote of the invoices. It is
also the case of the plaintiff that the plaintiff company received „on
account‟ payments from time to time from the defendant for the
supplies made to him which were duly entered into the books of
accounts maintained in its regular course of business. All debit notes of
the defendant stand adjusted and accounted for in the books of account
of the plaintiff company and no debit note of the defendant is pending.
To this end, the plaintiff had sought amendment of the plaint and has
added the sentence that "Thus open mutual current account between the
parties to the suit came into existence."
9. Learned counsel for the plaintiff/ non-applicant submits that as per the
terms and conditions printed on the footnote of the invoices,in case the
defendant failed to pay the amount as per the invoice to the plaintiff
company within 21 days from the date of the receipt of the
pharmaceuticals products, the defendant was liable to pay interest @
18% per annum to the plaintiff company. The plaintiff thus claims
interest w.e.f. 01.04.2012 on the amount due. The plaintiff relies on the
statement of account, a copy whereof has been filed on record to show
that a sum of Rs.65,47,290.24is outstanding towards the principal
amount as on 31.03.2012 and a sum of Rs. 31,42,560/- has accrued as
interest thereon w.e.f. 01.04.2012 to November, 2014. Thus, the
plaintiff has claimed a total sum of Rs. 96,89,850.24.
10. As per the plaint, owing to the outstanding of Rs. 65,47,290.24 on
31.03.2011, the plaintiff had called upon the defendant to clear the
CS(COMM).1141/2016 Page 3 of 19
amount which the defendant agreed to clear and in discharge of its
partial liability, issued 18 cheques in favour of the plaintiff, details of
which are extracted as under:
S.No. Cheque No. Date Amount (in Rs.)
1. 591048 14.04.2011 1,95,275
2. 591042 18.04.2011 3,09,586
3. 591125 06.05.2011 4,18,120
4. 591126 16.05.2011 4,48,877
5. 591127 24.05.2011 4,43,299
6. 591135 29.05.2011 3,53,955
7. 591136 30.05.2011 3,26,130
8. 626105 16.08.2011 4,00,000
9. 626107 16.08.2011 43,048
10. 625970 16.08.2011 4,00,000
11. 625971 16.08.2011 4,00,000
12. 625972 16.08.2011 4,00,000
13. 626103 16.08.2011 4,00,000
14. 625968 16.08.2011 4,00,000
15. 625973 16.08.2011 4,00,000
16. 626104 16.08.2011 4,00,000
17. 625969 16.08.2011 4,00,000
18. 626106 16.08.2011 4,00,000
Total: 65,38,290
11. It is clear that the first cheque was dated 14.04.2011 and the last was
dated 16.08.2011. Admittedly, all the aforesaid cheques, when
presented, were returned by the banker of the defendant with the
CS(COMM).1141/2016 Page 4 of 19
remarks "payment stopped by drawer". The debit memos received by
the plaintiff are dated 24.08.2011. Accordingly, the plaintiff has also
instituted 18 criminal complaints against the defendant; and since the
amounts were not forthcoming, the present suit was filed.
12. Mr. Singhal, learned counsel for the applicant/ defendant submits that
on a bare perusal of the plaint would show that the plaint was verified
on 18.12.2014, the affidavit is of the same date, while the present suit
was filed on 23.12.2014. Mr. Singhal submits that further reading of
the plaint, more particularly para 6, would show that the first cheque
was dated 14.04.2011 and the last cheque was dated 16.08.2011 and
according to the plaint, all the cheques were dishonoured vide
memosdated 24.08.2011. Learned counsel submits that the cause of
action, if any in favour of the plaintiff, would arise on 24.08.2011and
the period of three years would come to an end on 23.08.2014; whereas
the plaintiff has claimed that the cause of action has arisen on
31.03.2012, which is the closing of the financial year. Mr. Singhal
submits that merely because the plaint has been amended and the
plaintiff has used the expression that the parties maintained an open
mutual current account,that by itself, would not extend the period of
limitation and would not allow the plaintiff to avail of Article 1 of the
Schedule to the Limitation Act for the reason that the statement of
account brought on record by the plaintiff itself does not reflect that
there was an open mutual current account between the parties as at no
point of time, the plaintiff owed any money to the defendant.
13. Per contra, the counsel for the plaintiff has stated that there was a open
mutual current account between the parties and he has also amended his
plaint to plead the same. He further submits that as there was a open
mutual current account between the parties, the suit will be governed
CS(COMM).1141/2016 Page 5 of 19
by Article 1 of the Schedule to the Limitation Act and accordingly, the
limitation period will begin to run from the closing of the financial
year, i.e. 31.03.2012.
14. I have heard the learned counsel for the parties. The basic facts in this
case are not in dispute. According to the plaint, the plaintiff has
supplied goods to the defendant for which invoices were issued. As per
the footnote of the invoices, the payments were to be made within 21
days from the date of the receipt of the invoices. As per the plaint, the
defendant had issued 18 cheques in favour of the plaintiff. The details
of the cheques have been extracted in paragraph 10 aforegoing. The
plaint also shows that all the cheques were returned unpaid on the
ground that paymenthas been stopped on 24.08.2011.
15. Order VII Rule 11 of CPC reads as under:
"11. Rejection of plaint.- The plaint shall be rejected in the
following cases:
(a) where it does not disclose a cause of action;
...
(d) where the suit appears from the statement in the plaint to
be barred by any law;"
16. In Arjan Singh v. Union of India, AIR 1987 Del 165 finding that the
stand taken by the plaintiff therein in the plaint would show that the suit
is within limitation and the question was linked with the merits of the
claim, it was held as under:
"12. This discussion was meant to show that this question of
limitation raised by reason of the statement in the written
statement is different from the limitation involved in rejecting
the plaint. If the plaint itself shows that the claim is barred by
time, then the plaint can be rejected. However, if the real
question of limitation is connected with the merits of the claim
in the suit then it has to be tried along with other issues. I
would accept this appeal only to the extent that the plaint
could not be rejected but, I direct that this issue of limitation
should be tried along with other issues in the suit because,
notwithstanding what is said above, the suit may still be
barred by time. The result would be that the suit will be
decided on merits and the issue of limitation will also be re-
decided, if necessary. I leave the parties to bear their own
costs."
(Emphasis Supplied)
17. The purpose of Order VII Rule 11 has been examined by the Supreme
Court in Sopan Sukhdeo Sable and Ors v. Asst. Charity
Commissioner and Ors., (2004) 3 SCC 137. In the said matter, the
plaint had been rejected owing to Section 80 of the Bombay Public
Trusts Act, 1950 as being suit covered under the said statute. The
Supreme Court had allowed the appeal by observing that the question
was in respect of continuance of tenancy and period of tenancy, which
were outside the ambit of the Public Trusts Act and accordingly, the
rejection of the plaint was not warranted. The relevant paragraphs of
the judgment read as under:
"17. Keeping in view the aforesaid principles, the reliefs
sought for in the suit as quoted supra have to be considered.
The real object of Order 7 Rule 11 of the Code is to keep out of
courts irresponsible law suits. Therefore, Order 10 of the Code
is a tool in the hands of the courts by resorting to which and
by a searching examination of the party, in case the court is
prima facie of the view that the suit is an abuse of the process
of the court, in the sense that it is a bogus and irresponsible
litigation, the jurisdiction under Order 7 Rule 11 of the Code
can be exercised.
...
20... Rule 11 of Order 7 lays down an independent remedy
made available to the defendant to challenge the
maintainability of the suit itself, irrespective of his right to
contest the same on merits. The law ostensibly does not
contemplate at any stage when the objections can be raised,
and also does not say in express terms about the filing of a
written statement. Instead, the word "shall" is used, clearly
implying thereby that it casts a duty on the court to perform its
obligations in rejecting the plaint when the same is hit by any
of the infirmities provided in the four clauses of Rule 11, even
without intervention of the defendant. In any event, rejection of
the plaint under Rule 11 does not preclude the plaintiffs from
presenting a fresh plaint in terms of Rule 13."
(Emphasis Supplied)
18. In N. V. Srinivasa Murthy and Ors. v. Mariyamma, (2005) 5 SCC
548, a sale deed had been executed in 1953by the late father of the
plaintiff therein allegedly to secure a loan of Rs. 2000; it was alleged
that the reconveyance deed was to be executed upon the repayment of
the loan. The loan was fully repaid in 1987 and a promise was made by
the defendant to reconvey the property. The suit was filed in 1996 on
the premise that the cause of action had arisen in 1994 when the
mutation was done in the name of the defendants. The Supreme Court
held that the plaint had been cleverly drafted in order to avoid
limitation as the cause of action can be said to have arisen in 1953 qua
the declaration of the sale deed as a loan agreement and in 1987 for
reconveyance of the property and accordingly, the suit was hopelessly
barred by limitation. The relevant paragraphs read as under:
"14. After examining the pleadings of the plaint as discussed
above, we are clearly of the opinion that by clever drafting of
the plaint the civil suit which is hopelessly barred for seeking
avoidance of registered sale deed of 5-5-1953, has been
instituted by taking recourse to orders passed in mutation
proceedings by the Revenue Courts.
15. Civil Suit No. 557 of 1990 was pending when the present
suit was filed. In the present suit, the relief indirectly claimed
is of declaring the sale deed of 5-5-1953 to be not really a sale
deed but a loan transaction. Relief of reconveyance of
property under alleged oral agreement on return of loan has
been deliberately omitted from the relief clause. In our view,
the present plaint is liable to rejection, if not on the ground
that it does not disclose "cause of action", on the ground that
from the averments in the plaint, the suit is apparently barred
by law within the meaning of clause (d) of Order 7 Rule 11 of
the Code of Civil Procedure.
16. The High Court does not seem to be right in rejecting the
plaint on the ground that it does not disclose any "cause of
action". In our view, the trial court was right in coming to the
conclusion that accepting all averments in the plaint, the suit
seems to be barred by limitation. On critical examination of
the plaint as discussed by us above, the suit seems to be clearly
barred on the facts stated in the plaint itself. The suit as
framed is prima facie barred by the law of limitation,
provisions of the Specific Relief Act as also under Order 2
Rule 2 of the Code of Civil Procedure."
(Emphasis Supplied)
19. Thereafter, the Supreme Court in Popat and Kotecha Property v. State
Bank of India Staff Assn., (2005) 7 SCC 510 held that the plaint
cannot be rejected when limitation is to be decided upon a question of
fact. The relevant portion reads as under:
"25. When the averments in the plaint are considered in the
background of the principles set out in Sopan Sukhdeo case
the inevitable conclusion is that the Division Bench was not
right in holding that Order 7 Rule 11 CPC was applicable to
the facts of the case. Diverse claims were made and the
Division Bench was wrong in proceeding with the assumption
that only the non-execution of lease deed was the basic issue.
Even if it is accepted that the other claims were relatable to it
they have independent existence. Whether the collection of
amounts by the respondent was for a period beyond 51 years
needs evidence to be adduced. It is not a case where the suit
from statement in the plaint can be said to be barred by law.
The statement in the plaint without addition or subtraction
must show that it is barred by any law to attract application of
Order 7 Rule 11. This is not so in the present case."
(Emphasis Supplied)
20. In Hardesh Ores (P) Ltd. v. Hede and Company, (2007) 5 SCC 614,
where the plaintiff/ appellant therein had sought to re-agitate a stale
claim of specific performance of a renewal clause in a agreement by
camouflaging it as a suit for injunction; the Supreme Court, upholding
the rejection of plaint by the high court and trial court, held as under:
"25. The language of Order VII Rule 11 CPC is quite clear
and unambiguous. The plaint can be rejected on the ground of
limitation only where the suit appears from the statement in
the plaint to be barred by any law. Mr. Nariman did not
dispute that "law" within the meaning of Clause (d) of Order
VII Rule 11 must include the law of limitation as well. It is well
settled that whether a plaint discloses a cause of action is
essentially a question of fact, but whether it does or does not
must be found out from reading the plaint itself. For the said
purpose the averments made in the plaint in their entirety must
be held to be correct. The test is whether the averments made
in the plaint if taken to be correct in their entirety a decree
would be passed. The averments made in the plaint as a whole
have to be seen to find out whether Clause (d) of Rule 11 of
Order VII is applicable. It is not permissible to cull out a
sentence or a passage and to read it out of the context in
isolation. Although it is the substance and not merely the form
that has to be looked into, the pleading has to be construed as
it stands without addition or subtraction of words or change of
its apparent grammatical sense. As observed earlier, the
language of Clause (d) is quite clear but if any authority is
required, one may usefully refer to the judgments of this Court
in Liverpool and London S.P. and I Association Ltd. v. M.V.
Sea Success I and Anr. and Popat and Kotecha Property v.
State Bank of India Staff Association.
...
33. The respondent sought rejection of the plaint by filing
application under Order 7 Rule 11 CPC contending that the
suit was barred by limitation on the face of it. It was contended
before the High Court as also before us that the plaint has
been cleverly drafted to give it the appearance of a simple suit
for injunction to enforce the terms of clauses 15 and 20 of the
agreement which incorporated negative covenants prohibiting
mining operation by anyone else except the appellant Hardesh,
or without its permission. It was submitted before us that the
law is well settled that the dexterity of the draftsman whereby
the real cause of action is camouflaged in a plaint cleverly
drafted cannot defeat the right of the defendant to get the suit
dismissed on the ground of limitation if on the facts, as stated
in the plaint, the suit is shown to be barred by limitation..."
(Emphasis Supplied)
21. To ascertain whether the suit is barred by limitation and the plaint
deserves to be rejected under Order VII Rule 11, the courts must have a
holistic reading of the plaint and the documents filed along with the
same. The averments made in the plaint are to be taken to be true in
their entirety. At the same time ensuring that the plaint must be
meaningful and not a formal reading in order to ascertain as to a proper
cause of action has been set out and it is not a case of clever drafting to
get out of Order VII Rule 11.
22. A complete reading of the plaint would show that for the goods
supplied 18 cheques were issued by the defendant in favour of the
plaintiff, the details of which are given in paragraph 10 aforegoing.
The first cheque is dated 18.04.2011 and the last cheque is dated
16.08.2011. The aforesaid cheques when presented were dishonoured
by the bankers of the defendant with the remarks „payments stopped by
drawer‟. Para 7 of the plaint shows that the cheques were returned
unpaid by debit memos dated 24.08.2011. Upon return of the aforesaid
cheques, the plaintiff issued demand notices and has filed complaint
under Section 138 of the Negotiable Instruments Act. The counsel for
the defendant has submitted that the period of limitation would begin at
best from 24.08.2011 when the cheques were returned unpaid by the
debit memos. The plaintiff has made a specific averment that the cause
of action lastly arose on 31.03.2012, the closing date of the financial
year in which the last transaction took place. The plaint has been
amended and by the amendment, the plaintiff has stated that there was
an open mutual current account between the parties to the suit. The
learned counsel for the plaintiff has submitted that the suit is well
within the period of limitation.
23. Applying the law to the facts of the present case, the amended plaint
would show that the counsel for the plaintiff has contended that the
parties had an open mutual current account and accordingly, the period
of limitation shall begin from the c lose of the financial year, i.e.
31.03.2012 as per Article 1 of the Schedule to the Limitation Act and
hence, the suit having been filed on 23.12.2014 is within the period of
limitation. On the contrary, the counsel for the applicant/ defendant has
submitted that the plaint should be read in its entirety and it is based
upon the cheques issued by the defendant. He further submits that the
cause of action can at best be said to have arisen on 24.08.2011, i.e. the
date the cheques were returned unpaid and accordingly, the suit is
barred by limitation. Mr. Singhal has also contended that the parties do
not maintain an open mutual running account, which is evident upon
perusal of the statement of account itself.
24. The only question which arises for consideration is as to whether the
parties were maintaining an open mutual running current account? In
Bharath Skins Corporation v. Taneja Skins Company Pvt. Ltd.,186
(2012) DLT 290 (DB)it was held as under:
"10. In order to find an answer to the question: Whether
Article 1 of the Schedule to the Limitation Act, 1963 applies to
the present case, it is first required to be seen: Whether the
account between the parties was a mutual account as
envisaged in Article 1 of the Schedule to the Limitation Act,
1963, it not being in dispute that the account was current and
open.
11. In the decision reported as AIR 1965 SC 1711,
Kesharichand Jaisukhlal v. The Shillong Banking
Corporation, the Supreme Court defined the scope of the
expression 'mutual' occurring in Article 85 of the Schedule to
the Indian Limitation Act, 1908 (precursor to Article 1 of the
Schedule to the Limitation Act, 1963) in the following terms:
The next point in issue is whether the proceedings are
governed by Article 85 of the Indian Limitation Act,
1908, and if so, whether the suit is bared by
limitation. The argument before us proceeded on the
footing that an application under Section 45(D) of the
Banking Companies Act is governed by the Indian
Limitation Act, and we must decide this case on that
footing. But we express no opinion one way or the
other on the question of the applicability of the Indian
Limitation Act to an application under Section 45(D).
Now, Article 85 of the Indian Limitation Act, 1908
provides that the period of limitation for the balance
due on a mutual, open and current account, where
there have been reciprocal demands between the
parties is three years from the close of the year in
which the last item admitted or proved is entered in
the account such year to be computed as in the
account. It is not disputed that the account between
the parties was at all times an open and current one.
The dispute is whether it was mutual during the
relevant period.
11. Now in the leading case of Hirada Basappa v. Gadigi
Muddappa, (1871) VI Mad H C R 142, 144]. Holloway,
Acting C.J. observed:
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 discharges of such obligations.'
12. These observations were followed and applied in Tea
Financing Syndicate Ltd. v. Chandrakamal Bezbaruah,
I.L.R. [1931] 58 Cal. 642 and Monotosh K. Chatterjee v.
Central Calcutta Bank Ltd., [1953] 91 C.L.J. 16, and the
first mentioned Calcutta case was approved by this Court in
Hindustan Forest Company v. Lal Chand, (1960) 1 SCR
563. Holloway, Acting C.J. laid down the test of mutuality
on a construction of Section 8 of Act 14 of 1859, though that
Section did not contain the words "where there have been
reciprocal demands, between the parties". The addition of
those words in the corresponding Article 87 of Act 9 of
1871, Article 85 of Act 15 of 1877 and Article 85 of the Act
of 1908 adopts and emphasises the test of mutuality laid
down in the Madras case.
13. In the instant case, there were mutual dealings between
the parties. The respondent Bank gave loans on overdrafts,
and the appellant made deposits. The loans by the
respondent created obligations on the appellant to repay
them. The respondent was under independent obligations to
repay the amount of the cash deposits and to account for the
cheques, hundis and drafts deposited for collection. There
were thus transactions on each side creating independent
obligations on the other, and both sets of transactions were
entered in the same account. The deposits made by the
appellant were not merely complete or partial discharges of
its obligations to the respondent. There were shifting
balances on many occasions the balance was in favour of
the appellant and on many other occasions, the balance was
in favour of the respondent. There were reciprocal demands
between the parties, and the account was mutual. This
mutual account was fairly active up to June 25, 1947. It is
not shown that the account ceased to be mutual thereafter.
The parties contemplated the possibility of mutual dealings
in future. The mutual account continued until December 29,
1950 when the last entry in the account was made. It is
conceded on behalf of the appellant that if the account was
mutual and continued to be so until December 29, 1950, the
suit is not barred by limitation, having regard to Section
45(o) of the Banking Companies Act. The Courts below,
therefore, rightly answered issue No. 1 in the negative.
(Emphasis supplied)
12. From the aforesaid observations, it can be deduced that
for the creation of an open, current and mutual account, there
must be an intention between the parties, either express or
implied, which may be deducible from the course of dealings
to have mutual dealings, creating reciprocal obligations,
independent of each other. A 'demand' in relation to a matter
of account means a 'claim for money', arising out of a
'contractual business relationship' between the parties. Where
the dealings between the parties disclose a 'single' contractual
relationship, there will be demands only in favour of one
party. For instance, where the relationship between 'A' and 'B'
is that of lender and borrower respectively, 'A' will have a
'demand' against 'B' in respect of every item of loan advanced.
But 'B' can have no demand against 'A'. Where the dealings
between the parties disclose 'two' contractual relationships,
there will arise demands in favour of each side against the
other. For instance, where 'A' advances money to 'B' from time
to time as loan, and 'B' engages 'A' as his agent for the sale of
goods sent by 'B', there are two contractual relationships
between the parties: one, that of lender and borrower and the
other, that of principal and agent. 'A' as creditor may have
several demands against 'B' who as principal may have,
independently, several demands against 'A'. The real test,
therefore, to see whether there have been reciprocal demands
in any particular case is to see: Whether there is a 'dual
contractual relationship' between the parties.
13. Where 'A' sells goods to 'B' from time-to-time and 'B'
makes payments towards the price from time-to-time, there is
only a 'single' contractual relationship, namely that of buyer
and seller, between the parties. 'A' has demands against 'B' for
items sold, but 'B' can have no 'demands' against ' A'. Such
case is not one of reciprocal demands and thus Article 85 of
the Schedule to the Indian Limitation Act, 1908 corresponding
to Article 1 of the Schedule to the Limitation Act, 1963 will not
apply to suits on such accounts. We are fortified in our view by
the following observations made by the Supreme Court in the
decision reported as AIR 1959 SC 1349, Hindustan Forest
Company v. Lal Chand:
The learned Judge of the High Court who heard the suit
held that Art. 115 had no application and dismissed the suit
as barred by limitation. The sellers went up in appeal which
was heard by two other learned Judges of the High Court.
The learned Judges of the appellate Bench of the High
Court held that Art. 115 of the Jammu & Kashmir
Limitation Act applied and the suit was not barred. They
thereupon allowed the appeal and passed a decree in favour
of 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 same terms as Art. 85 of the Indian
Limitation Act except as to the period of limitation, is set
out below:
6. If the article applied the suit would be clearly within time
as the last item found to have been entered in the account
was on June 23, 1947. The only question argued at the Bar
is whether the account between the parties was mutual.
7. The question what is a mutual account, has been
considered by the Courts frequently and the test to
determine it is well settled. The case of the Tea Financing
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 loans to the proprietor of a tea
estate and the proprietor had been sending tea to the
company for sale and realisation of the price. In a suit
brought by the company against the proprietor of the tea
estate for recovery of the balance of the advances made
after giving credit for the price realised from the sale of tea,
the question arose as to whether the case was one of
reciprocal demands resulting in the account between the
parties being mutual so as to be governed by Art. 85 of the
Indian Limitation Act. Rankin, C.J , laid down at p. 668 the
test to be applied for deciding the question in these words:
There can, I think, be no doubt that the requirement
of reciprocal demands involves, as all the Indian
cases have decided following Halloway, A.C.J ,
transactions on each side creating independent
obligations on the other and not merely transactions
which create obligations on one side, those on the
other being merely complete or partial discharges of
such obligations. It is further clear that goods as well
as money may be sent by way of payment. We have
therefore to see whether under the deed the tea, sent
by the defendant to the plaintiff for sale, was sent
merely by way of discharge of the defendant's debt or
whether it was sent in the course of dealings designed
to create a credit to the defendant as the owner of the
tea sold, which credit when brought into the account
would operate by way of set-off to reduce the
defendant's liability.'
8. The observation of Rankin, C.J , has never been dissented
from in our Courts and we think it lays down the law
correctly. The learned Judges of the appellate Bench of the
High Court also appear to have applied the same test as
that laid down by Rankin, C.J. They however came to the
conclusion that the account between the parties was mutual
for the following reasons:
The point then reduces itself to the fact that the
defendant company had advanced a certain amount
of money to the plaintiffs for the supply of grains.
This excludes the question of monthly payments being
made to the plaintiffs. The plaintiffs having received a
certain amount of money, they became debtors to the
defendant company to this extent, and when the
supplies exceeded Rs. 13,000 the defendant company
became debtors to the plaintiff and later on when
again the plaintiff's supplies exceeded the amount
paid to them, the defendants again became the
debtors. This would show that there were reciprocity
of dealings and transactions on each side creating
independent obligations on the other.'
9. The reasoning is clearly erroneous. On the facts stated by
the learned Judges there was no reciprocity of dealings
there were no independent obligations.What in fact had
happened was that the sellers had undertaken to make
delivery of goods and the buyer had agreed to pay for them
and had in part made the payment in advance. There can be
no question that in so far as the payments had been made
after the goods had been delivered, they had been made
towards the price due. Such payments were in discharge of
the obligation created in the buyer by the deliveries made to
it to pay the price of the goods delivered and did not create
any obligation on the sellers in favour of the buyer. The
learned Judges do not appear to have taken a contrary view
of the result of these payments.
10. The learned Judges however held that the payment of
Rs. 13,000 by the buyer in advance before delivery had
started, made the sellers the debtor of the 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 were reciprocal demands and that the
transactions had created independent obligations on each
of the parties. This view is unfounded. The sum of Rs.
13,000 had been paid as and by way of advance payment of
price of goods to be delivered. 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
for them. It did not itself create any obligation on the sellers
in favour of the buyer it was not intended to be and did not
amount to an independent transaction detached from the
rest of the contract. The sellers were under an obligation to
deliver the goods but that obligation arose from the
contract and not from the payment of the advance alone. If
the sellers had failed to deliver goods, they would have been
liable to refund the monies advanced on account of the
price and might also have been liable in damages but such
liability would then have arisen from the contract and not
from the fact of the advances having been made. Apart from
such failure, the buyer could not recover the monies paid in
advance. No question has, however, been raised as to any
default on the part of the sellers to deliver goods. This case
therefore involved no reciprocity of demands. Article 115 of
the Jammu and Kashmir Limitation Act cannot be applied
to the suit.
14. In view of the above discussion, since the dealings between
the parties disclose a single contractual relationship i.e. of
buyer and seller between them, the account between them
cannot be termed as a 'mutual' account. As a necessary
corollary, Article 1 of the Schedule to the Limitation Act, 1963
has no application in the present case.
(Emphasis Supplied)
25. In the present case as well, the statement of account cannot be said to
be an „open mutual running current account‟ as the relationship is
singular, i.e that of buyer and seller. The statement shows the account
of the defendant being credited upon sales of pharmaceutical products
and the defendant occasionally paying the same. Upon being shown
the statement of account placed on record by the plaintiff, the counsel
for the plaintiff very fairly agrees that, in fact, the account placed on
record does not reflect that it was an open mutual current account.In my
view, merely by stating that it was an open mutual current account
would not bring the suit within the parameters of Article 1 of the
Schedule to the Limitation Act.
26. Therefore, as per the plaintiffs own stand the limitation period in the
present case would commence from the date of the dishonour of the
cheques, i.e. 24.08.201. To avoid the bar of limitation, the plaintiff has
sought to base the claim on a „open mutual running current account‟.
From the aforegoing, it is clear that the account maintained between the
parties was not a „open mutual running current account‟ to bring it
under the purview of Article 1 of the Schedule to Limitation Act; as a
necessary consequence the suit continues to be based on the invoices
and the cheques and therefore, has been filed beyond the period of
limitation.
27. Accordingly, the application is allowed. The plaint of the plaintiff is
rejected on the ground of limitation.
G.S.SISTANI, J
SEPTEMBER30, 2016
//pst
