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TMI Blog2011 (12) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied, a bill was raised for the value of the goods supplied and correspondingly a debit entry was made in the account of the appellant and as and when payment was received the same was credited by making a credit entry in the account. Last supply being effected on 3.9.1982, on the balance struck ₹ 19,42,982.26 was due and payable and that after legal notice was served ₹ 7,000/-were received and after giving credit thereof ₹ 19,35,982.26 remained outstanding. 3. In the written statement, relevant for the issue of limitation, was the plea taken that goods being supplied on credit, limitation would run for each supply and that the account between the parties was not a mutual account. Last supply being on 3.9.1982 as alleged in the plaint, it was pleaded that the suit would be barred by limitation qua all preceding bills, a plea which we note has not been urged in so many words, but is evidenced from an intelligent reading of the written statement. 4. The statement of account Ex. PW-1/59 to Ex. PW-1 / 70 would reveal that the bills Ex. PW-1/3 to Ex. PW-1 /58 have been reflected in the said statement of account and a corresponding debit entry is made in the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account is sufficient to take the case out of the statute. 8. The doctrine of implied acknowledgement in cases of accounts between non-merchants and the exception in the statute of limitation as regards actions on accounts between merchants were abolished in England, by Lord Tenterden's Act, 1828 and Mercantile Law Amendment Act, 1857 respectively. In 1859 the Legislature in India, however, enacted in Section 8 of the Limitation Act, 1859, the principle of Catling's case (supra), as between merchants and traders and provided that 'in suits for balances of accounts current between merchants and traders, who have had mutual dealings, the cause of action shall be deemed to have arisen at, and the period of limitation to be computed from, the close of year in the accounts of which there is the last time admitted or proved indicating the continuance of mutual dealings. Article 1 of the Schedule to the Limitation Act, 1963 corresponds to Section 8 of the Limitation Act, 1859 and reads as under: No. Description of Suit Period of Limitation Time From Which Period Begins to Run 1 For the balance due on a mutual, open and current account where there have been recipr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;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' con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended 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 supplied) 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 app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is to be inferred that it was contemplated by the parties, that, in the event of the dealing continuing, the several items should be included in the monthly, quarterly, or yearly bills, the result of such an arrangement, and the legal position of the parties, seems to be this -- upon the delivery and acceptance of the first parcel of goods, delivered on the 1st of January, an entire contract is created, and a complete cause of action accrues, the tradesman, being under no engagement to sell other goods, or to give credit beyond the price of the articles then delivered : when, on a subsequent day, other goods are delivered and accepted, a new contract arises, not simply a contract to pay for the goods then delivered, but a new entire contract by which the tradesman waives his existing right to payment of the goods delivered on the 1st of January, and the purchaser agrees to pay for both parcels as upon one entire sale... After the successive waiver and extinguishment of each preceding contract, the only subsisting contract and cause of action ex contractu will be the last. 21. The observations in the decision reported as (1856) 18 C.B. 325, Bonsey v. Woodsworth are also worthy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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