J 2013 SCC OnLine Del 3629

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Page 1 Wednesday, February 01, 2023

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CS (OS) 2542/1997
Ashok Parshad v. Mahalaxmi Sugar Mills Co. Ltd.
2013 SCC OnLine Del 3629
(BEFORE M.L. MEHTA, J.)
Ashok Parshad .…. Plaintiff

Mr. Satya Prakash Gupta, Adv.
v.
M/s. Mahalaxmi Sugar Mills Co. Ltd. .…. Defendant
Mr. S.N. Kumar, Sr. Adv. with Mr. K.B. Soni, Adv.
CS (OS) 2542/1997
Decided on September 13, 2013
M.L. MEHTA, J.
1. The plaintiff has filed the present suit against the defendant for recovery of Rs.
2738253.95/-.
2. The facts presented are that the defendant has been purchasing from the plaintiff
various items of chemicals from time to time starting from 14.05.1982 to 31.03.1997.
The plaintiff had maintained a Running Account of the defendant in its books of
accounts and the purchases so made by the defendant from the plaintiff were duly and
regularly debited to the said account. Similarly, the payments received from the
defendant from time to time were duly and regularly credited to the said account. It is
the plaintiff's case that all the supplies were made to the defendant on the orders
received and accepted at Delhi and the goods were sent from the plaintiff's place to
the transport carriers place for delivery to the defendant on payment of freight. It is
his case that the defendant accepted the delivery of all the supplies and sent the
required sales tax Forms ‘C’ for all these supplies. The plaintiff has given the details of
the supplies made to the defendant from 01.04.1982 to 31.03.1997, furnishing the
details of the bills' dates and the amounts. Likewise, the details of the amounts
remitted by the defendant from time to time, have also been given. As per the details,
the last supply was made vide bill No. 10953 dated 12.02.1993 of goods worth Rs.
50130.20/- and the last amount remitted by the defendant was by way of a cheque
amounting Rs. 50,000/- dated 11.07.1996. The plaintiff submits that a sum of Rs.
10,90,052.57/- as the principal remains outstanding against the defendant. It is also
the plaintiff's case that interest @ 23% p.a. was payable by the defendant on each
delivery in the event of the payment being not made within seven days. This was
stated to be specifically mentioned on the bills that interest at this rate will be charged
if the payment was not made within seven days. The plaintiff has claimed interest
totaling Rs. 1648201.38, giving the details from the year 1983 to 31.10.1997. In this
way, the plaintiff has claimed a total of Rs. 1090052.57/- towards principal and Rs.
1648201.38 towards interest.
3. The defendant contested the suit alleging that each supply made by the plaintiff
was an independent contract and was paid for separately. The defendant specifically
referred to the bills dated 24.01.1984 (of Rs. 3560.30) and 6.11.1984 (of Rs.
8139.06) to contend that the payments were made of these exact amounts and so,
the plaintiff's assertion that these were on account, is incorrect. The defendant
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submits that the suit is hopelessly barred by time as the account maintained was
mutual and reciprocal and not running. It is also the defendant's case that the orders
were placed from Iqbalpur and the delivery of the goods were also received there, and
thus, the Delhi Court has no territorial jurisdiction in the matter. While not denying
that the payments as mentioned in Paras 16 to 18 of the plaint were made vide
cheques starting from 20.01.1995 to 11.01.1996, the defendant pleads that these
cheques were not issued by it from Iqbalpur. The defendant also denies its liability of
payment of interest and submits that the plaintiff has not shown in the last sixteen
years a single debit voucher claiming interest. It is also the case of the defendant in
this regard that the conduct of the plaintiff clearly shows that there was neither any
agreement nor any claim regarding payment of interest.
4. On the pleadings of the parties, the following issues were framed for trial on
29.07.2002:
1. Whether this court is entitled to deal with the subject matter of the suit?
2. Whether the suit is barred by time?
3. To what amount, if any, the plaintiff is entitled on account of number?
4. To what interest whether the plaintiff is entitled to interest, if so, at what rate?
5. Relief.
5. The plaintiff examined himself as PW1 and his Accountant Satya Narayan Goel as
PW2. The defendant examined its Purchase Officer Mr. Rajineder Kumar Kapila as
DW1.
6. The issue-wise findings are as follows:-
ISSUE NO. 1
7. There is no dispute that the goods were supplied by the plaintiff to the defendant
from time to time on the specific orders of the defendant. There is also no dispute that
the orders were received by the plaintiff at Delhi and the goods were supplied from
Delhi to the defendant through the transport carriers. The submission of the defendant
that since the communication of the acceptance of the order was received at Iqbalpur,
the court at Iqbalpur has the jurisdiction and not Delhi, is entirely erroneous. The
acceptance of the order at Delhi and the delivery of goods at Delhi to the transport
carriers for onward delivery to the consignee i.e. the defendant, would bring into the
formation of the contract at Delhi. The delivery to the transport carriers was to be
taken as delivery to the consignee as per Section 39 of the Sale of Goods Act, 1930.
8. PW2 stated and maintained that order of the defendant used to come from its Delhi
office and that the documents with regard to the delivery also used to be sent directly
to the defendant at Delhi office, and some time through the bank. It is seen from the
bills proved on record that all the communications between the parties were to be
settled at Delhi and the transactions were subject to Delhi jurisdiction. From all this,
there does not remain any doubt that this court has the jurisdiction to entertain the
present suit. The issue is accordingly decided in favour of the plaintiff.
ISSUE NO. 2
9. The submission of the learned senior counsel for the defendant is that the account
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that was maintained by the plaintiff was not a Running Account, but a Mutual,
Reciprocal and Current Account and since the payments were made by the defendant
of specific amounts or towards separate bills, the claims of the bills are time barred. In
other words, the submission is that it is Article 1 of the Limitation Act, which governs
the field and as the last delivery was made on 12.02.1993, the suit filed in December
1997 is barred by limitation. As against this, the submission of the learned counsel of
the plaintiff is that the plaintiff was maintaining a Running Account of the defendant in
its books of accounts, which were regularly maintained in the ordinary course of
business and that the payments made by the defendant from time to time were
appropriated by the plaintiff towards the total outstanding amount against it in the
account. Having heard the learned counsel on this point, there does not appear to be
any dispute with regard to the proposition that if the plaintiff was maintaining a
Running Account, then, in that case, it was Article 14 of the Limitation Act that would
be applicable and not Article 1 of the Limitation Act. Before proceeding further, it may
be relevant to reproduce these Articles, which read as under:
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
reciprocal demands between the parties
Three years 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.
14. For the rice of goods sold and delivered where no fixed period of credit is agreed
upon.
Three years The date of the delivery of the goods.
10. A bare reading of the aforesaid Articles set out in the Schedule to the Limitation
Act shows that Article 1 relates to suits in respect of balance due on a Mutual, Open
and Current Account where there have been reciprocal demands between the parties.
The period of limitation prescribed by this Article is three years from the close of the
year in which the last item admitted or proved is entered in the account and such year
is to be computed as in the account. In other words, if the statement of account
between the parties is to be regarded as a Mutual, Open and Current Account, then
the period of limitation of three years would begin from the close of the year in which
the last item admitted or proved is entered in the account.
11. The question what is Mutual or Reciprocal Account has been considered by the
courts frequently and the test to be determined is well-settled. Article 85 of the Indian
Limitation Act, 1908, which is in the same term as Article 1 of the Indian Limitation
Act except as to the period of limitation, was interpreted by Rankin C.J. in Tea
Financing Syndicate Ltd. v. Chandrakamal, AIR 1931 Cal 359. The observations of
Rankin C.J. have never been dissented from in our courts and the same has been
endorsed by the Supreme Court in various cases. Reference can be made to Hindustan
Forest Company v. Lal Chand, AIR 1959 Supreme Court 1349. The test that was laid
by Rankin C.J. for determining whether an account is mutual and reciprocal or not,
was reiterated by the Supreme Court in the aforesaid case of Hindustan Forest Co.,
observing that “the requirement of reciprocal demands involves 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
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discharges of such obligations.
12. The Supreme Court in the case of Kesharichand Jaisukhlal v. Shillong Banking
Corporation Ltd., (1965) 3 SCR 110, after referring to the lead case on Mutual Account
titled Hirada Basappa v. Gadigi Muddappa, (1871) VI MHCR 142 observed as under:
“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”.
13. A Division Bench of this Court in the case of Manish Garg v. East India Udyog Ltd.,
2001 III AD (Del.) 493, after referring to the judgment of the Supreme Court in
Kesharichand Jaisukhlal's case (supra) and the case of Hindustan Forest Co. (supra),
held as follows:
“8. Thus for an account properly to be called Mutual Account there must be mutual
dealing in the sense that both the parties come under liability under each other. In
this case, this ingredient is not satisfied. It was simply a case of debtor and creditor
only and not a case of mutual obligations which will in the ordinary way result in
enforceable liabilities on each side. Mutual Account is when each has a demand or
right of action against the other”.
14. Thus, from the above judicial pronouncements, it comes out to be that the
distinctive features of Mutual or Reciprocal Account are that there should be two sets
of independent transactions between the parties and in one transaction, one of the
party should be debtor and the other creditor, whereas, in the other transaction, the
party should occupy the reverse position. Beside that, the dealings should be
independent of deviations on both sides and not merely transactions which create
obligations on one side. In Raghunath Shaw v. Kanai Lal Das, AIR 1962 Cal. 97, the
Calcutta High Court held that “where goods were supplied from time to time by the
plaintiff to the defendant and there was no fixed period of credit agreed upon, the fact
that there was part payment by the defendant towards the unpaid price will not make
the account mutual and the suit would be governed by this Article only.”
15. In this view of the matter, it comes to be that if it is not a Mutual or Reciprocal
Account as is contemplated in Article 1 of the Limitation Act, but, is a Running
Account as prescribed in Article 14, in that event, the limitation would not end with
the supply, but it would keep on being extended when the last payment is made.
Though, where the goods were delivered to the defendant from time to time on
account, the starting point of limitation in respect of each item of account as per
Article 14 is to be the date of delivery of goods under that item of account, and the
last date of delivery cannot be taken to be the date of delivery on earlier occasions,
but the cause of action for all the items delivered is single down to the date of last
delivery.
16. In Kedarnath v. Denobandhu Saha, AIR 1916 Cal. 580, Jenkins C.J. quoted with
approval the following passage from the decision in Bonsey v. Wordsworth, (1856) 18
CB 325:
“Where a tradesman has a bill against a party for any amount in which the items are
so connected together that it appears that the dealing is not intended to terminate
with one contract, but to be continuous, so that one item, if not paid, shall be united
with another, and form one continuous demand the whole together forms but one
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cause of action and cannot be divided”.
17. This was followed by the Rajasthan High Court in Chandra Nath v. Pahlad Narain,
AIR 1961 Rajasthan 154 (V 48 C 43), wherein it was observed as under:
“9. With all respect, I fail to understand why the plaintiff cannot appropriate a
payment towards all the items outstanding on a particular date. Section 60 of the
Contract Act provides that “where the debtor has omitted to intimate and there are no
other circumstances indicating to which debt the payment is to be applied, the
creditor may apply it at his discretion to any lawful debt actually due and payable to
him from the debtor, whether its recovery is or is not barred by law in force for the
time being as to the limitation of suits. This right the creditor may exercise until the
very last moment and need not declare his intention in express terms— see Cory Bros.
and Co. v. Owners of the “Mecca”, 1897 AC 286 at p. 289”.
18. In the above case, the reliance was also placed upon the earlier decision of Nagpur
High Court in Sukhdeo Prasad Baldeo Prashad v. J. Michael, AIR 1938 Nag 266,
wherein it was held as under:
“If more debts than one are due and a payment is made which is not specifically
appropriated, it is a question of fact in respect of which debt the payment was made.
This appropriation need not be proved by any express declaration of the debtor at the
time of the payment, but any expression used by him either before or after that time,
or any other circumstances from which it may he inferred that the payment was
intended to be appropriated to any particular debt or debts or was made on account of
all the debts collectively will be sufficient for the purpose. If the evidence shows that
the payment was made on account of all, it will prevent any of the debts being barred
by statute.”
19. Section 19 of the Limitation Act, 1963 specifically provides that once the payment
is made towards the part of the total debt due, a fresh period of limitation starts on
such payment. This extension of limitation arises from the factum of the payment
towards the debt due and not how the creditor appropriates the same. It is under this
provision that the period of limitation gets extended when the demand is made
towards a debt and as seen above, the creditor is within its rights to appropriate the
payments as towards the entire outstanding, unless there was an expressed
agreement or intention of the debtor to adjust such payments towards specific debt.
20. Now, reverting back to the facts, it is seen that except two specific payments of
small amounts all other on account payments were made by the defendant from time
to time. All these payments were made by the defendant not with the delivery of the
goods vide specific bills, but, as per its own convenience. Though, the payments were
required to be made by the defendant within seven days of delivery as per the terms
stipulated in the bills, but, the same having not been adhered to by the defendant and
there being no other agreement of fixed period of credit, the part payments were
made by the defendants towards the unpaid amounts. These by any means, cannot
make the account mutual or reciprocal. The dealings between the parties continued
and did not terminate with one supply and thus, the deliveries got united with one
another and formed one continuous demand which kept on being carried forward from
year to year till the last supply was made. Thus, it all formed one cause of action and
could not be divided. The nature of transactions as well as the payments made and the
conduct of the defendant would evidence that the payments were made on account of
outstanding amounts of deliveries and if that was so, the last payment was to be
taken as the date for calculation of limitation as per Article 14 read with Section 19 of
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the Limitation Act. In this view of the matter the conclusion comes out to be that the
period of limitation commenced from 11th July, 1996 when the last payment of Rs.
50,000/- was made, and it expired on 10.07.1999. The suit having been filed in
December, 1997, was well within time of limitation. The issue is decided accordingly.
Issue No. 3
21. The plaintiff as also his witness PW-2 stated and maintained that the plaintiff was
maintaining running account of the defendant in the books of accounts maintained in
the ordinary course of business. The plaintiff has also given bill-wise details of the
deliveries made to the defendant. It has been stated that C-Forms were also issued by
the defendant in respect of those deliveries. All these have remained uncontroverted
on the part of the defendant.
22. The defendant has not led any evidence in rebuttal. The defendant has also not
denied the payments made by it to the plaintiff by way of cheques, the details of
which have been given by the plaintiff in the plaint. The only plea that was taken
throughout was that the payments were made against specific deliveries and thus, the
suit was barred by limitation. This aspect has already been dealt with above against
the defendant. Thus, there is no reason to disbelieve the statements of PW-1 and PW-
2 as also the bills as well as C-Forms proved on record. The conclusion comes out to
be that the books of accounts were maintained by the plaintiff in ordinary course of
business and a sum of Rs. 10,90,052.57/- was due from the defendant as towards the
principal against the deliveries of the goods made by the plaintiff. The issue is decided
accordingly.
Issue No. 4.
23. The plaintiff's case is that as per the terms stipulated on the bills, the interest @
23% per annum was chargeable after seven days of the delivery of the goods. This
was not specifically denied by the defendant. The defendant, however, submitted that
there was no specific agreement as regard to the interest, nor there was any intention
of the plaintiff to charge such interest. It is submitted that the plaintiff has not shown
any amount of interest debited in the defendant's accounts for all these years and that
would substantiate that the plaintiff never intended to charge any interest.
24. In view of the above specific stipulation regarding interest to be charged @ 23 per
cent per annum after seven days of the delivery, the oral evidence of the Accounts
Officer of the defendant would not be relevant or reliable, more so, when the
testimonies of PWs-1 and 2 as regard to interest, remained un-assailed. The fact that
there was no specific voucher issued with regard to interest or any debit entry made
as regard to interest in the running account of the defendant, that was again no
ground to assume that the interest clause stipulated in the bills was waived or that the
plaintiff had agreed not to charge the interest.
25. Thus, from all this, it is held that the plaintiff is entitled to charge interest @ 23
per cent per annum. But, however, since the plaintiff has claimed interest @18% per
annum, he is entitled to this interest from the defendant on principal amount. The
plaintiff has calculated the interest at this rate and the correctness of which has not
been dislodged by the defendant. As a consequence thereto, it must be held that the
plaintiff is entitled to interest @ 18% per annum. The issue is decided accordingly.
Relief
23. In view of above findings, the suit is decreed for a sum of Rs. 27,38,253.95 with
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interest @ 18% per annum on the principal amount of Rs. 10,90,052.00 from the date
of filing of the suit till the date of payment. The decree be drawn accordingly. No order
as to costs.
———
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SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.

Page 1 Wednesday, February 01, 2023

Ashok Parshad v. Mahalaxmi Sugar Mills Co. Ltd.

2013 SCC OnLine Del 3629

(BEFORE M.L. MEHTA, J.)

Ashok Parshad .…. Plaintiff

2. Whether the suit is barred by time?

3. To what amount, if any, the plaintiff is entitled on account of number?

6. The issue-wise findings are as follows:-

Description of suit Period of Limitation

Time from which period begins to run

Three years The date of the delivery of the goods.

discharges of such obligations.

“To be mutual there must be transactions on each side creating independent

cause of action and cannot be divided”.

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