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A.M. Shaik Ali v/s D.S. & A. Co., Employees Stores and Others.

    S.A. No. 264 of 87

    Decided On, 12 June 1991

    At, High Court of Andhra Pradesh at Hyderabad

    By, THE HONORABLE JUSTICE: I. PANDURANGA RAO
    By, J.

    For Petitioner: Koka Raghava Rao, Advocate And For Respondents: P.R. Prasad, Advocate



Judgment Text


1. This is a plaintiff's appeal against the reversing judgment in a suit. for recovery of money due under khatha dealings for an amount of Rs. 5,983-93. The Plaintiff's case is that he was carrying on business in cloth at Kakinada; that the first defendant stores having opened a khatha with the plaintiff, has been receiving supply of stocks on credit basis; that at times the first defendant was also returning unsold cloth for which credit was being given in the first defendant's khatha; that no payment was made subsequent to 22-1-197.3 and hence the suit was filed after issuing the original of Ex. A 108 notice demanding recovery of the amount. The defence of the first defendant is that it has never opened a khata with the plaintiff that no request was made by the first defendant at any time for opening a khatha with the plaintiff; that only the persons who are authorised under the resolution of the first defendant are entitled to make such purchases; that the purchases made by the employees are not binding on the first defendant; that the account books maintained by the plaintiff are not correct; that the first defendant is not liable to pay interest and that the suit is barred by limitation.

2. The second defendant almost supported the plaintiff's case by pleading that the two bills dated 26-5-72 were signed by him in the presence of the Manager of the stores and Sri MV Raghava Chary who was nominated by the General Manager; that he (the second defendant) did not purchase the said stocks covered by the above two bills for his personal use and that he is not personally liable to pay the amount covered by the two bills.

3. The trial court held that the Honorary Secretary of the first defendant viz, the second defendant was competent by way of convention and practice to purchase the cloth from the plaintiff's shop on behalf of the first defendant on credit; that the plaintiff was not informed of any resolution authorising any particular officer to make purchases on its behalf and that the first defendant is estopped from resisting the payment. The trial court also negatived the plea of limitation holding that article 1 of the Limitation Act applies to the facts of this case but not Article 14 of the said Act.

4. Challenging the decree of the trial court, the first defendant preferred an appeal to the 1st Additional Subordinate Judge, Kakinada who has reversed the findings of the trial court and has set aside the judgment and decree of the trial court. On the question of limitation the learned Subordinate Judge held that unless it is established that during the dealings one party has become a creditor to the other and that at another time the other party who was a creditor has become a debtor to the other, which brings out the essence of mutuality in the accounts, it ceases to be a mutual, open and current account and hence Article 1 of the Limitation Act has no application. The learned Subordinate Judge held that the suit having been filed beyond three years from the date of Exs. A-101 and A-102 bills, is barred by limitation under Article 14 of the Limitation Act.

5. Aggrieved by the said decision the plaintiff has preferred the above second appeal.

6. The defendants having received notices on 12-9-88 have not appeared in person or by an advocate and therefore, after hearing the arguments of the appellant's counsel a judgment was pronounced on 7-11-88 allowing the Second Appeal with costs. Subsequently, the first defendant filed CMP No. 805 of 90 to set aside the judgment and decree passed in the second appeal alleging that the vakalat sent by the first defendant to its counsel was not received. That petition having been allowed, the judgment dated 7-11-88 was set aside and arguments of both the learned counsel are heard.

7. The learned counsel for the appellant argued that the lower appellate court has committed an error in placing reliance upon Ex. B. 78 resolution dated 13-12-55 which was passed long before the khatha was opened by the first defendant with the plaintiff; that there is no evidence that the contents of the said resolution were informed at any time to the plaintiff; that Exs. A. 1 to A. 5 ledgers establish that there is a khatha of the first defendant in the account books of the plaintiff; that the second defendant has proved that he made purchases covered by Exs. A. 101 and A. 102 bills on behalf of the first defendant stores and that the lower appellate court having misread the evidence and having misinterpreted the accounts, came to an erroneous conclusion that Article 1 of the Limitation Act does not apply to the facts of this case.

8. The learned counsel for the first respondent, on the other hand, argued that several employees of the first defendant were authorised to receive the stock on behalf of the first defendant; that the second defendant was not so authorised; that the second defendant was only a Honorary Secretary of the first defendant during the relevant time that the transactions covered by Exs. A-101 and A-102 bills were not entered in the accounts of the first defendant Society and that the suit khatha is not a mutual, open and current account so as to make Article 1 of the Limitation Act applicable.

9. The plaintiff, who examined himself as PW 1 has proved the suit khatha opened by the first defendant stores and deposed that the goods were sold on credit; that some of the goods were returned by the first defendant which were credited in the khatha; that the jeep driver of Deccan Sugars and Abkari Co., used to come and purchase the cloth; that on behalf of the first defendant somebody used to come to him and purchase the goods; that some of the bills were signed by Sri A.V.R. Sarma and some of the bills were signed by Sri C. Subrahmanyam; that some of the credit bills were not signed by anybody and that there was never any dispute about the bills for want of signatures. During his evidence, he mentioned the names of some of the employees whole signatures he could identify and stated that some other bills were signed by persons whose signatures he could not identify. He further deposed that on 26-.1-1972, the second defendant and Sri A.V.R. Sharma came to his shop; that the second defendant took the cloth for the stores but not for his personal use and that on that day (26-5-1972), Sri A.V.R. Sarma purchased cloth under Ex. A-111 for his personal use. Various bills about which the plaintiff has deposed which were signed by Sri A.V.R. Sarma, the jeep driver, the second defendant and other persons of whom the plaintiff could identify some and could not identify the others were not dispute by the first defendant. The dispute is centred round the two bills covered by Exs. A-101 and A-102.

10. The statement of the plaintiff that the second defendant has made purchases under Exs. A-101 and A-102 on behalf of the first defendant is corroborated by the evidence of the second defendant who examined himself as DW 1. DW 1 deposed that apart from the employees of the first defendant, Sri Raghava Chary, Sri A.V.R. Sarma, the jeep drive and the salesman working under Sri A.V.R. Sarma were all present at the time of the purchase; that the cloth was purchased for the first defendant under Exs. A-101 and A-102 bills but not for his personal use; that he (DW 1) signed on the above two bills as one of them had to sign on behalf of the stores and that the cloth was taken and kept in the first defendant stores by the Manager. Sri Raghava Chary to whom reference was made by DW 1 in his evidence was the purchasing officer as on 26-5-1972. The evidence of DW 1 is not contradicted by examining either Sri N.V. Raghava Chary or Sri A.V.R. Sarma or the jeep driver or the salesman working under Sri AVR. Sarma.

11. DW 2 who is one of the members of the Managing Committee of the first defendant stores was examined to prove that there is Ex. B-74 resolution dated; 16-10-1954 to the effect that the purchasing officer, the Secretary and Stores Manager are together concerned with the purchase of the cloth and that there is another resolution, Ex. B-78 passed on 13-12-1955. After speaking to the procedure that was being followed by the first defendant stores with regard to the credit purchases made by it, DW 2 deposed that the goods covered by Exs. A-101 and A-102 have not reached the first defendant stores. During the course of cross-examination. DW 2 tried to depose that the where abouts of Sri A.V.R. Sarma were not known. He however admitted that he did not supervise the stocks to verify whether the stocks covered by Exs. A-101 and A-102 bills were brought to the stores. It is elicited from DW 2 that Sri N.V. Raghava Chary, Pothula Peddaiah and the driver are working for the Company. But no explanation is offered as to why they were not examined to controvert the evidence of DW 1. There is no positive evidence to show that Exs. B-77 and B-78 resolutions were communicated to the plaintiff at any time. It is not even suggested to PW 1 while he was in the witness box that he was aware of Exs. B-77 and B-78 resolutions. On the other hand, the conduct of the parties shows that the said resolutions were not given effect to and that the first defendant was purchasing cloth on credit under bills signed not only by Sri A.V.R. Sarma, and Sri N.V. Raghava Chary but also by Pothula Peddaiah, the driver and some other persons. It is significant to note that there were various instances where the plaintiff supplied cloth on credit even without obtained signatures on the counterfoils of the bills. But the first defendant did not dispute their correctness. Under these circumstances, 1 fall to see how the first defendant cannot be bound by the goods supplied to the second defendant who was admittedly the Honorary Secretary of the first defendant stores at the relevant time, especially when he signed on behalf of the first defendant on Exs. A-101 and A-102 bills In the presence of Sri N.V. Raghava Chary, Sri A.V.R. Sarma, the Jeep Driver and the salesman working under Sri A.V.R. Sarma. As I observed already, the statement of the second defendant that the purchases made be him under Bxs. A-101 and A-102 bills were on behalf of the first defendant but not for his personal benefit stands uncontroverted.

12. The next and most important question that remains for consideration is;

"Whether the suit is barred by limitation."
13. The reason given by the lower appellate court for holding that the suit transaction is not mutual, open and a current account is that it is not established that during the dealings, one party has become creditor to the other and at another time, the other party who was a creditor has become a debtor to the other which brings out the essence of mutuality in the accounts. That observation of the learned appellate Judge is falsified by the evidence of PW 1 and the documentary evidence produced by him. The evidence of PW 1 shows that by the end of the years 1969-70 and 1971-72, the plaintiff was due to the first defendant whereas, by the end of the years 1967-68, 1970-71 and 1972-73, the first defendant was due Rs. 1,078-63. Rs. 11,833-46 and Rs. 5,983-33 respectively to the plaintiff. The evidence of PW 1 is supported by Exs. A1 to A5 ledgers. Thus the reciprocity of demands is established both by oral and documentary evidence. There is neither plea nor proof that the balance was struck at any time and the amount was settled. If so as held in Narayana Murthy Vs. Pitta Venkamma 1963 (2) An.W.R. 108, the suit transaction is an account which has not been closed by settlement, and being an unsettled account where the parties contemplate the continuance of future dealings between them, it is a running, unsettled and an unclosed account and hence it is an open and current account. The Supreme Court held in Hindustan Porest Co. Vs. Lal Chand AIR 1959 SC 1349, 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 discharge of such obligations. This test of reciprocal demands is satisfied by the evidence of PW 1 referred to above, which shows that in certain years the plaintiff was due to the first defendant whereas in some other years the first defendant was due money to the plaintiff. Thus, there were reciprocal demands bringing the suit transaction within the scope of Art. 1 of the Limitation Act. To the same effect is the decision of the Madras High Court in Baju & Ors. Vs. L. Kumaramuthu AIR 1975 Madras 1 where in it is held that unless it is established that during the dealings one party has become a creditor to the other and at another time the other party who was a creditor has become a debtor to the other which brings out the essence of mutuality in the account it ceases to be a mutual open and current account. The evidence of PW 1 referred to above satisfies tin's test to mutuality in the accounts bringing the suit transaction within the scope of "mutual, open and current account". As laid down in L. Kesava Chettiar Vs. M.M. Ramanatha AIR 1959 Madras 470 shifting balance is a test of mutuality.

14. From the evidence of PW 1, which is not challenged in the cross-examination, it is established that there is mutuality and reciprocity of demands. The balance also has not been struck. The existence of a running or continuity of account between the parties coupled with the reciprocity of demands with shifting balances clearly establishes that the suit transaction is a mutual, open and current account. Hence, Art. 1 of the Limitation Act applies to the facts of this case but not Art. 14 of the said Act and the limitation starts from the close of the year in which the last item proved is entered in the account. Th

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e last transaction as evidenced by the accounts being 22-1-73, the suit filed on 17-11-75 is well within the period of limitation. 15. The learned counsel for the first respondent commented that there is no plea in the plaint that the suit transaction i.e. mutual, open and current account and as such the suit is within limitation, It is the duty of the parties to state only the facts on which they rely for their claim and it is for the court to declare the law arising out of those facts. As held by the Bombay High Court in Maharashtra State Electricity Board Vs. Madhu Sudhan Das & Bros. AIR 1966 Bombay 140 the law need not be pleaded and it the duty of the court to apply the law to the facts proved and found. Therefore the absence of plea in the plaint that the suit transaction constitutes a mutual Open and current account and as such Article of the Limitation Act is applicable cannot be taken as aground to non-suit the plaintiff. Whether there is mutuality and reciprocity of demands is a legal inference to be drawn from the facts by looking into the accounts, and they need not he pleaded. 16. From the above discussion, I set aside the finding of the learned 1st Additional Subordinate Judge that the suit is barred by limitation. In the result, the second appeal is allowed with costs setting aside the judgment and decree in AS No. 101 of 1979 on the file of the court of the 1st Additional Sub-ordinate Judge, Kaki-nada and confirming the judgment and decree of the trial court in O.S. No. 998 of 1975.
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