Delhi High Court
Panasonic India Pvt. Ltd. vs National Radio Electronics & Ors. on 19 September, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA No. 252/2006
% 19th September, 2018
PANASONIC INDIA PVT. LTD.
..... Appellant
Through: Ms. Namita Sharma and Mr.
D.R.Bhatia, Advocates.
versus
NATIONAL RADIO ELECTRONICS & ORS.
..... Respondents
Through: None.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not?
VALMIKI J. MEHTA, J (ORAL)
1. This Regular First Appeal under Section 96 of the Code
of Civil Procedure, 1908 (CPC), is filed by the plaintiff in the suit
impugning the Judgment of the Trial Court dated 24.08.2005 by which
the trial court has decreed the suit for recovery, filed by the
appellant/plaintiff seeking recovery of a sum of Rs.3,24,655/-, only for
an amount of Rs. 34,419.95/-, and which is the amount of the last
invoice dated 30.10.2001 which was within limitation of three years of
the suit having been filed by the appellant/plaintiff on 27.10.2004.
2. The facts of the case are that the appellant/plaintiff
appointed the respondents/defendants as its dealers of electronic
goods. The respondent no.1/defendant no.1 is a partnership firm of
which respondent nos.2 and 3/defendant nos.2 and 3 are the partners.
The case of the appellant/plaintiff was that as per its books of account,
various amounts were due and the respondents/defendants on their
request were given a credit note for a sum of Rs.2,86,251/- towards
Local Advertisement Support and after such an amount was credited
in favour of the respondent/defendant on 14.08.2003, there remained a
balance of a sum of Rs.1,88,753/-, and this amount is claimed by the
appellant/plaintiff as principal amount, with interest at 24% being
claimed on the amount of Rs.1,35,902/-, and thereby totalling the suit
claim amount to Rs.3,24,655/-.
3. The respondents/defendants did not appear in the suit and
were proceeded exparte.
4. The appellant/plaintiff led evidence to prove its case by
proving the invoices exhibited as Ex.PW1/6 and Ex.PW1/7. As
already stated above the last invoice Ex.PW1/7 is dated 30.10.2001.
The statement of account was proved as Ex.PW1/8. Trial court
however has held that the statement of account is not an open mutual
and current account under Article 1 of the Limitation Act, 1963 and
therefore limitation will have to be seen bill wise. Since the suit was
filed on 27.10.2004 and only one invoice being Ex.PW1/7 dated
30.10.2001 was within three years of filing of the suit, therefore suit
was dismissed as barred by limitation for invoices prior to Ex.PW1/7
dated 30.10.2001 and decreed only for the invoice amount in
Ex.PW1/7. The relevant paras of the impugned judgment in this
regard are paras 3 to 5 and these paras read as under:-
"3. In ex-parte evidence, plaintiff has filed affidavit of Sh.
Roopesh Kumar Sharma, Asstt. Manager (Legal) of the plaintiff
company. He has proved in his affidavit authorization in his favour
as Ex.PW1/1, certificate of incorporation of the plaintiff company
as Ex.PW1/2, authorization in favour of Sh. Vinit Aggarwal, who
had instituted the present suit as Ex.PW1/3. Defendant No.1 is
deposed to be a partnership firm and defendant Nos. 2 and 3 are its
partners who approached the plaintiff in New Delhi and
represented that they were dealing in sale of electronic goods and
were interested in dealership of plaintiff‟s products for Kannur
District, Kerala, therefore, plaintiff appointed defendant No.1 as
one of its dealer for Kannur District, Kerala. Defendant No.1 is
deposed to have been purchasing the products from the plaintiff
from time to time against bills Ex.PW1/4 to Ex.PW1/6 and
payment made by the defendant were shown in statement of
account. It is deposed that last purchase was made by defendants
on 30.10.01 vide invoice Ex.PW1/7. However, it is deposed that
defendants had defaulted in making payment as per terms agreed
which they did not pay despite several requests. It is deposed that
plaintiff called upon the defendants to pay the outstanding amount
on receipt of which defendants approached the plaintiff for
settlement of outstanding amounts subject to issuance of credit note
in favour of defendants in the sum of Rs.2,86,251 towards local
Advertisement Support and same was duly credited by the plaintiff
on 14.8.03. It is deposed that as per books of account maintained
by the plaintiff a sum of Rs.1,88,753.20 is due and payable by the
defendants towards principal amount. Copy of statement of
account has been proved as Ex.PW1/8. It is deposed that plaintiff
is also entitled to interest @24% per annum (Rs.1,35,902.30 from
October 2001 till filing of the suit) inasmuch as defendant failed
and neglected to make payment of outstanding amount. In all
plaintiff has claimed Rs.3,24,655.50.
4. From perusal of the evidence as discussed above, it is clear
that earlier name of the plaintiff was M/s National Panasonic India
Pvt. Ltd. which has subsequently been changed to M/s Panasonic
India Pvt. Ltd vide certificate of incorporation Ex.PW1/2. It also
stands proved on record that Sh. Vinit Aggarwal was competent to
file the present suit as is clear from Ex.PW1/3. It also stands prove
on record that defendant No.1 is a partnership firm and defendant
Nos. 2 and 3 are its partners. It also stands proved on record that
defendants purchased goods from the plaintiff vide invoices
Ex.PW1/4 to 1/7. Ex.PW1/4 and Ex.PW1/5 are dated 30.9.01,
Ex.PW1/6 is date 24.10.01. According to the plaintiff, last purchse
was made on 30.10.01 vide Ex.PW1/7. It also stands proved on
record that defendants failed to pay the amount due towards them.
According to the plaintiff, it served a notice of demand on the
defendants on receipt of which defendants approached the plaintiff
for settlement subject to issuance of credit note in favour of
defendants for a sum of Rs.2,86,251/- which the plaintiff did. It is
deposed that according to books of accounts maintained by the
plaintiff a sum of Rs.1,88,753.20 is due and payable towards
principal. Plaintiff has also claimed interest @ 24% per annum
from the date of filing of suit. In all plaintiff has claimed a sum of
Rs.3,24,655.50.
5. Present suit has been filed on 27.10.04. It is not the case of
the plaintiff that account maintained by the plaintiff is mutual or
running account so as to enable the application of different rule of
calculating of period of limitation. In the present case, goods have
been supplied on invoice basis. First two invoices are dated
30.9.01. Third invoice is dated 24.10.01. Since suit has been filed
on 27.10.04, therefore, claims against invoices Ex.PW1/4 to
Ex.PW1/6 are time barred and only invoice which is within the
period of limitation is Ex.PW1/7 because goods were supplied on
30.10.01. Invoice Ex.PW1/7 is for a sum of Rs.34,419.95.
Plaintiff has also claimed interest @ 24% per annum. In my
considered opinion, rate of interest as claimed by the plaintiff is
quite exorbitant. However, it should taken note of that transaction
between the parties is commercial one and plaintiff is entitled to a
reasonable interest from the defendants. In my view award of
interest @ 10% per annum will meet the ends of justice. I am of
the view that plaintiff is entitled to recover interest @ 10% per
annum on the amount of Rs.34,419.95 from the date of invoice till
date of realisation."
5. Counsel for the appellant/plaintiff argues that the trial
court has erred in holding that the account was not an open mutual and
current account inasmuch as, the appellant/plaintiff in its plaint had
pleaded in paras 8 and 9 that the account maintained by the
appellant/plaintiff of the respondents/defendants was an open mutual
and current account. I however cannot agree with this because in
paras 8 and 9 of the plaint, there is no averment that the account
maintained between the parties is an open mutual and current account.
Paras 8 and 9 of the plaint which are relied upon on behalf of the
appellant/plaintiff read as under:-
"8. The last purchase made by the Defendants from the
Plaintiff was vide Invoice dated 30.10.2001 and the last „on
account‟ payment made by the Defendants was on 10th September,
2001.
9. That the Plaintiff has been maintaining books of accounts in
regular course of their business with respect to the bills raised upon
the Defendants and the „on account‟ payment received from them."
6. In my opinion, even if there was an averment in the plaint
that the account maintained by the appellant/plaintiff of the
respondents/defendants was an open mutual and current account, it has
still to be seen that whether in fact the account which is maintained by
the appellant/plaintiff of the respondents/defendants Ex.PW1/8 is an
open mutual and current account. In law, an account can be an open
mutual and current account under Article 1 of the Limitation Act only
if there are shifting balances or independent obligations. The aspect of
there existing shifting balances or independent obligations is sine qua
non 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. I have applied the ratios of both
these judgments in the recent judgment dated 25.7.2017 in RSA
No.85/2016 titled as ICICI Bank Ltd. Vs. Mohd. Zaheen and the
relevant paras of this judgment are paras 7 to 11 and these paras read
as under:-
"7. The facts of the case are that the appellant/plaintiff filed
the subject suit for recovery of Rs.2,57,601.67/- against the
respondent/defendant on account of the respondent/defendant having
availed the overdraft facility in the current account maintained by the
respondent/defendant with the appellant/plaintiff/bank. Admittedly, the
last entry in the overdraft account whereby overdraft facility was availed
was on 22.2.2011. Suit was filed on 29.8.2014 and hence the suit was
held to be time barred having been filed three years after 22.2.2011.
8. The issue argued on behalf of the appellant before this
Court, and as reflected from the order dated 22.3.2016 passed by the
learned Single Judge of this Court while issuing notice in this RSA was
that Article 1 of the Limitation Act, 1963 applies and limitation will be
counted from the close of the year in which the last item of transaction is
admitted or proved. It was accordingly argued that the courts below
have wrongly dismissed the suit as time barred by applying Articles 19
and 21 of the Schedule of the Limitation Act.
9. In my opinion to a simple overdraft account Article 1 of
the Limitation Act does not apply because in an overdraft account there
is no mutuality of transactions i.e there are transactions which only create
obligations on one side with the other entries being only towards
complete or partial discharge of such obligations. For Article 1 of the
Limitation Act to apply there has to be mutuality of obligations and not
one sided obligations. This has been held by the Supreme Court in the
judgment in the case of Hindustan Forest Company Vs. Lal Chand &
Others, AIR 1959 SC 1349, and relevant paras 7 to 10 of which
judgment read as under:-
"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)
10. Similar was the view of the Supreme Court in the case of
Kesharichand Jaisukhal Vs. Shillong Banking Corporation AIR 1965
SC 1711, where however in the facts of the case Article 1 of the
Limitation Act was held to apply on account of reciprocal obligations
existing because in the overdraft account there were also deposits which
were made by the customer and which thus created independent
obligations to repay the amount of cash deposits and also on account of
the cheques, hundis and drafts deposited for collection. The ratio in the
case of Hindustan Forest Company (supra) was however reiterated in
Shillong Banking Corporation's case (supra) that there is required
existence of mutual dealings between the parties. The relevant paras of
the judgment in the case of Shillong Banking Corporation (supra) are
paras 10 to 12, and these paras read as under:-
"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)
11. In the present case, it is seen that there is no mutuality of
obligations and transactions are one sided only being in the nature of
grant of overdraft by the appellant/plaintiff/bank to the
respondent/defendant and therefore any payment by the
respondent/defendant is only towards discharge of the obligation created
in favour of the appellant/plaintiff/bank. There are no transactions on
each side creating independent obligations because there is no obligation
of the appellant/bank towards the respondent/defendant. Therefore,
Article 1 of the Limitation Act cannot come to aid of the appellant/bank.
Suit, therefore, filed on 29.8.2014 was barred by limitation on account of
the last overdraft facility being availed on 22.2.2011 and on which date
will arise the balance due in the overdraft account in favour of the
appellant/bank and against the respondent/defendant."
7. On examination of the statement of account Ex.PW1/8, it
is seen that there is only one relationship between the parties, i.e. the
appellant/plaintiff as seller and the respondents/defendants as
suppliers/dealers, and there are therefore no independent obligations
because there is only one relationship. Statement of account
Ex.PW1/8 also does not show shifting balances of any existing credits
in favour of the appellant/plaintiff and sometimes debits against the
appellant/plaintiff on account of excess payments having been made
by the respondents/defendants to the appellant/plaintiff. Therefore,
once there are no shifting balances, the statement of accounts
Ex.PW1/8 cannot be said to be an open mutual and current account.
8. There is therefore no merit in the appeal. Dismissed.
SEPTEMBER 19, 2018/ib VALMIKI J. MEHTA, J
