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PETITIONER: THE HINDUSTAN FOREST COMPANY

       Vs.

RESPONDENT: LAL CHAND AND OTHERS

DATE OF JUDGMENT: 19/08/1959

BENCH: SARKAR, A.K. BENCH: SARKAR, A.K. DAS, SUDHI RANJAN (CJ) DAS, S.K. WANCHOO, K.N. HIDAYATULLAH, M.

CITATION:  1959 AIR 1349            1960 SCR  (1) 563

ACT:        Limitation-Mutual  account--Reciprocal demands-Contract  for        supply  of  goods-Delivery of goods  and  payments,  whether        independent  obligations-Jammu and Kashmir  Limitation  Act,        1995  (Jammu  and  Kashmir  IX  of  1995),  art.  115-Indian        Limitation Act, 1908 (9 of 1908), art. 85.

HEADNOTE: Under  a contract for the sale of goods, the buyer  paid  an advance amount towards the price of the goods to be supplied and various quantities of goods were thereafter delivered by the sellers.  The buyer from time to time made various other payments towards the price of the goods after they had  been delivered.  The last delivery of goods was made on June  23, 1947,  and the suit was brought on October 10, 1950, by  the sellers  for  the  balance  of  the  price  due  for   goods delivered.   The  sellers pleaded that the suit  was  within time  and  relied  on  art. 115 Of  the  Jammu  and  Kashmir Limitation Act under which the period of limitation was  six years for a suit " for the balance due on a mutual, open and current  account, where there have been  reciprocal  demands between the parties. 564 Held, that art. 115 was not applicable to the case as  there was  no  mutual account based on  reciprocal  demands.   The payment made by the buyer after deliveries had been given to it were in discharge of the obligations to pay the price due on  account of these deliveries; the amount paid in  advance was  paid under the contract in discharge of obligations  to arise  ;  none  of  such  payments  created  an  independent obligation in the sellers towards the buyer. Tea  Financing  Syndicate Ltd.  v.  Chandrakamal  Bazbaruah, (1930) I.L.R. 58 Cal. 649, approved.

JUDGMENT:        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 161 of 1955.        Appeal from the judgment and decree dated 4th Jeth 2011,  of

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      the  Jammu and Kashmir High Court in Appeal No. 1  of  2009,        arising  out of the judgment and decree dated the  2nd  Magh        2008,  of  the said High Court in original suit  No.  40  of        2007.        S.K.  Kapur and N. H. Hingorani, for the appellant.  Bhawani        Lal and K. P. Gupta, for the respondents. 1959.  August  19.        The Judgment of the Court was delivered by        SARKAR J.-This appeal arises out of a suit filed in the High        Court  of Jammu and Kashmir for recovery of price  of  goods        sold  and  delivered.   The only point  involved  in  it  is        whether  the suit was governed by art. 115 of the Jammu  and        Kashmir  Limitation  Act.  The courts below have  held,  and        this  has  not been disputed in this appeal,  that  if  that        article did not apply, the suit would fail on the ground  of        limitation.        Sometime  in  November  1946, the parties  entered  into  an        agreement  in  writing for the supply by  the  sellers,  the        respondents, to the buyer, the appellant, of 5,000 maunds of        maize,  500  maunds of wheat and 100 maunds of  Dal  at  the        rates and times specified.  The agreement stated that on the        date it had been made the buyer had paid to the sellers  Rs.        3,000  and  had agreed to pay a further sum  of  Rs.  10,000        within ten or twelve days as advance and the balance due for        the  price  of goods delivered, after the  expiry  of  every        month.   It is admitted that the said sum of Rs. 10,000  was        later paid by the buyer to the sellers.        565        Various quantities of goods were thereafter delivered by the        sellers to the buyer and though such deliveries had not been        made  strictly at the times specified in the contract,  they        had been accepted by the buyer.  The buyer in its turn  made        various  payments towards the price of the  goods  delivered        but not month by month and had not further paid it in  full.        The  last delivery of goods was made on June 23,  1947,  and        the suit was brought on October 10, 1950, for the balance of        the price due.        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.        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:        -----------------------------------------------------------        Description of suit   Period of Limitation   Time from which                                                       period                                                       begins to run        ------------------------------------------------------------        For the balance due    Six years           The close of the        on a mutual open and                       which the last        current account, wh-                       item admitted or        ere there have been                        proved is entered        reciprocal demands                         in the account;        between the parties                        such year to be                                                   computed as in                                                   the account.        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.

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      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 (1) may be referred to.  There  a        company had been        (1)  (1930) I.L.R. 58 Cal, 649.        72        566        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."        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        567        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."        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

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      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.        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 transac-        568        tion  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.        The  learned Judges appear also to have taken the view  that        since the goods were not delivered at the times fixed in the        contract, and the prices due were not paid at the end of the        months, the parties clearly indicated their intention not to        abide  by  the contract.  We are unable to agree  with  this        view.   Such  conduct only indicated that  the  parties  had        extended  the time fixed under the contract for delivery  of        the  goods  and  payment  of  price,  leaving  the  contract        otherwise unaffected.        The  learned Judges also observed that the contract did  not        provide how the  amount advanced was to be adjusted.  But it        seems clear that when the contract provided that the advance        was  towards the price to become due, as the learned  Judges        themselves  held, it followed by necessary implication  that        the  advance  had to be adjusted against the price  when  it        became  due.  So there was a provision in the  contract  for        adjusting the advance.        We think it fit also to observe that it is somewhat  curious        that  any  question as to the application of  art.  115  was        allowed  to  be raised.  The applicability of  that  article        depends  on  special  facts.  No such facts  appear  in  the        -plaint.   There  is  no hint there  that  the  account  was        mutual.   We feel sure that if the attention of the  learned        Judges of the High Court had been                  569        drawn  to  this aspect of the matter, they  would  not  have        permitted any question as to art. 115 being raised, and  the        parties would have saved considerable costs thereby.        We therefore come to the conclusion that the appeal must  be        allowed.  The judgment and I order of the learned Judges  of

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      the  appellate  bench of the High Court are  set  aside  and        those  of  the learned Single Judge of the  High  Court  are        restored.   The appellant will be entitled to the  costs  in        this Court and of the hearing of the appeal before the  High        Court.                                     Appeal allowed.