The Hindustan Forest Company Vs. Lal
Chand & Ors  INSC 103 (19 August 1959)
DAS, SUDHI RANJAN (CJ) DAS, S.K.
CITATION: 1959 AIR 1349 1960 SCR (1) 563
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.
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.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 161 of 1955.
Appeal from the judgment and decree dated 4th
Jeth 2011, of 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
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
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
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.
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 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 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.
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
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 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.