Harjit Singh vs M/S Bharat Hotels Ltd. And Anr.
2017 Latest Caselaw 3759 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         RFA No. 666/2017

%                                                    31st July, 2017

HARJIT SINGH                                            ..... Appellant
                          Through:       Mr. Rajnish K. Gaind, Mr.
                                         Hemant Kaushik and Mr.
                                         Maninder Kaur, Advocates.
                          versus

M/S BHARAT HOTELS LTD. AND ANR.      ..... Respondents

Through: Ms. Purnima Maheshwari, Advocate.

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?        YES


VALMIKI J. MEHTA, J (ORAL)

CM No. 26877/2017 (Delay of 65 days in filing the appeal)

For the reasons stated in the application, delay in filing is

condoned.

CM stands disposed of.

CM No.26878/2017 (Exemption)

Exemption allowed subject to just exceptions.

CM stands disposed of.

RFA No. 666/2017 & CM No. 26876/2017 (U/o XLI R 27 CPC)

1. This Regular First Appeal under Section 96 of the Code

of Civil Procedure, 1908 (CPC) is filed by the appellant/plaintiff

impugning the judgment of the trial court dated 17.12.2016 dismissing

the suit filed by the appellant/plaintiff for recovery of Rs. 3,50,000/-.

The subject suit was filed by the appellant/plaintiff on account of

services rendered by the appellant/plaintiff as consolidators, customs

clearing and forwarding agents to the respondent/defendant.

2. The facts of the case are that the subject suit was filed by

the appellant/plaintiff claiming that they provided services of

consolidators, customs clearing and forwarding agents to the

respondent/defendant and that as per the statement of account

maintained in the regular course of business a sum of Rs.3,23,366/-

remained due and which since was not paid in spite of service of legal

notice dated 19.10.2004 the subject suit for recovery came to be filed.

3. The respondent/defendant filed its written statement and

pleaded that whatever bills the appellant/plaintiff had raised were duly

paid. Respondent/defendant also pleaded that appellant/plaintiff never

submitted the bills with any cover note. It was further pleaded by

respondent/defendant that stamp and signatures on the cover note of

the bills alleged to be delivered to the respondent/defendant and

alleged to contain endorsement of receipt of the employee of the

respondent/defendant are forged. The suit was also pleaded to be

barred by limitation inasmuch as it was pleaded that Article 1 of the

Limitation Act, 1963 will not apply but the suit will be governed by

Article 14 of the Limitation Act.

4. After issues were framed and parties led evidence, the

trial court passed the impugned judgment dismissing the suit by

holding that appellant/plaintiff has not even filed its statement of

account for proving that any amount was due from the respondent

no.1/defendant no.1. Trial court also held that the suit is barred by

limitation because suit is not governed by Article 1 of the Limitation

Act but is governed by Article 14 of the Limitation Act i.e there is no

open, mutual and current account and limitation arises on raising each

individual bill by the appellant/plaintiff.

5. Before this Court counsel for the appellant/plaintiff has

argued that because of negligence of the Advocate of the

appellant/plaintiff, the statement of account was not filed, and

therefore, such statement of account be allowed to be now filed by

allowing CM No. 26876/2017 filed by the appellant/plaintiff under

Order XLI Rule 27 CPC. Appellant/plaintiff by this application also

seeks to file copies of the income tax returns for the relevant year

showing the amount due to the appellant/plaintiff from the

respondent/defendant.

6. Though at this stage, an application under Order XLI

Rule 27 CPC cannot be allowed once parties had gone to the trial and

had complete opportunity to lead their evidences, however, in the

interest of justice, I have examined the relevancy of the statement of

account which is now sought to be filed in order to determine whether

the suit would come under Article 1 of the Limitation Act. If the suit

does not come under Article 1 of the Limitation Act then the only bill

which would remain to be due and payable, if Article 14 of the

Limitation Act applies, would be the bill dated 12.12.2001 for a sum

of Rs.22,835/- inasmuch as the subject suit was filed on 8.12.2004 and

hence any bill prior to 8.12.2001 would become barred by limitation

on application of Article 14 of the Limitation Act. In the opinion of

this Court in fact Article 14 of the Limitation Act does not apply and

what will actually apply is Article 113 of the Limitation Act being the

residuary article which provides for commencement of limitation

within three years of arising of cause of action.

7. The law with respect to the meaning of the expression

"open mutual and current account" of Article 1 of the Limitation Act

is now well settled. For Article 1 of the Limitation Act to apply the

account must be open i.e account must not be closed, it must be for

the current year and it should be mutual i.e there should be mutuality

of transactions in the sense of shifting balances or counter obligations

of each party against the other. That there has to be mutuality or

shifting balances or there must exist counter obligations of one party

against other is now clear in view of the judgments of the Supreme

Court in the cases of Hindustan Forest Company Vs. Lal Chand &

Others, AIR 1959 SC 1349 and Kesharichand Jaisukhal Vs. Shillong

Banking Corporation AIR 1965 SC 1711. The relevant paras of these

judgments read as under:-

Relevant paras of Hindustan Forest Company (supra)

"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, 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 amounts 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." (emphasis added)

Relevant paras of Shillong Banking Corporation (supra) "10. The next point in issue is whether the proceedings are governed by Art. 85 of the Indian Limitation Act, 1908, and if so, whether the suit is barred by limitation. The argument before us proceeded on the footing that an application under s. 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 s. 45(D). Now, Art. 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, 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."

These observations were followed and applied in Tea Financing Syndicate Ltd. v. Chandrakamal Bezbaruah and Monotosh K. Chatterjee v. Central Calcutta Bank Ltd., and the first mentioned Calcutta case was approved by this Court in Hindustan Forest Company v. Lal Chand, Holloway, Acting C.J. laid down the test of mutuality on a construction of s. 8 of Act XIV 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 Art. 87 of Act IX of 1871, Art. 85 of Act XV of 1877 and Art. 85 of the Act of 1908 adopts and emphasizes the test of mutuality laid down in the Madras case.

12. 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 s. 45(O) of the Banking Companies Act. The Courts below, therefore, rightly answered issue No. 1 in the negative." (underlining added)

8. This Court has to examine therefore from the statement of

account now sought to be relied upon and filed by the

appellant/plaintiff that whether there was mutuality during the relevant

and last current year 2001-2002. Along with the counsel for the

appellant/plaintiff, this Court has examined the statement of account

and it is found that there are no shifting balances or mutuality in the

accounting year 2001-2002, and that at all points of time the statement

of account relied upon by the appellant/plaintiff and now filed in this

Court only shows debit balance as against the respondent/defendant.

Therefore, since there are no shifting balances, and admittedly there

are no counter obligations in the sense that there was anything which

was sold and/or supplied by the respondent/defendant to the

appellant/plaintiff, then, Article 1 of the Limitation Act will not apply

because there is no mutuality in terms of the ratios of the judgments of

the Supreme Court in the cases of Hindustan Forest Company

(supra) and Shillong Banking Corporation (supra).

9. As already stated above, the account which is sought to

be relied has to be a current account, i.e it must have currency i.e it

must be of the relevant year on the basis of which amounts are

claimed from the defendant in the suit. Putting it in other words,

historical shifting of balances of prior years and which is not the

current year for which balances claimed are due, the historical years or

earlier years of dealing is not a current year and would not make the

account as mutual current account. Therefore, taking the fact that CM

No. 26876/2017 filed under Order XLI Rule 27 is allowed, even then

the account for the year 2001-2002 is not shown to be an open mutual

current account inasmuch as there are no shifting balances during the

last and relevant accounting year 2001-2002. Therefore, once Article 1

of the Limitation Act does not apply, the suit filed on 8.12.2014 is

clearly barred by limitation because the statement of account relied

upon for the year 2001-2002 is not an open, mutual and current

account.

10. That leaves us with a solitary bill dated 12.12.2001 for an

amount of Rs.22,835/-. This is Bill No. 3106. In view of the fact that

respondent/defendant has denied receiving of this bill, therefore the

appellant/plaintiff had to prove that this bill was actually delivered to

the respondent/defendant. Learned counsel for the appellant/plaintiff

except showing that this bill has been exhibited in the affidavit of

evidence, filed by the appellant/plaintiff could not show that the

affidavit of evidence refers to delivering of this bill by identifying of

signatures of any employee of the respondent/defendant on this bill,

and therefore it is not shown that this bill dated 12.12.2001 was ever

delivered to the respondent/defendant. Once that is so, even with

respect to this solitary bill the appellant/plaintiff cannot claim any

amount from the respondent/defendant.

11. In view of the above discussion, I do not find any merit in

the appeal, and the same is therefore dismissed, leaving the parties to

bear their own costs.

JULY 31, 2017/ib                            VALMIKI J. MEHTA, J