P L D 1959 (W. P.) Karachi 707
Before Qadeeruddin Ahmed, J
MESSRS Haji MUHAMMAD ISHAQ Haji DOST MUHAMMAD-Defendants
Suit No. 1251 of 1953, decided on 5th September 1959.
K. A. Ghani for Plaintiff.
Dingomal for Defendant.
Dates of hearing : 3rd, 6th March 1959 ; 19th, 20th May 1959 and 5th September 1959.
Mr. G. Raymond has filed this suit as the Receiver of the properties of the heirs of Usman Abdus Sattar Mullani deceased. He was appointed the Receiver in the guardianship proceedings in Miscellaneous Application No. 14 of 1953. He has brought this suit on the allegation that Usman transacted business with defendant No. 2 in 1949. The partners of the defendant-firm were friends of Usman. They had imported Russian matches in two consignments. The first consignment was of 1935 cases and the second consignment of 1008 cases. In September 1949, Usman agreed with one of the partners of the defendant-firm, namely, Gulzar that Usman would act as a commission agent on behalf of the defendant-firm with regard to 1935 cases. His duty was to retire the documents, clear the goods, store them and sell them. As a friend Usman paid on behalf of the defendants Rs. 1,35,000 on the 2nd of September 1949, to retire the documents. On the 25th of October 1949, it was agreed between the parties that Usman would purchase the 1935 cases at the rate of Rs. 5-4-0 per gross, and that the sale proceeds would be utilised to discharge the amount advanced by Usman and the expenses incurred by him in the discharge of his duties as a commission agent. It was known to- the parties that the goods were damaged and might also be short in quantity. It was, therefore, agreed that the value of the goods which were considered unsaleable by Usman and which were found short would be debited by him to the account of the defendants. In other words, there was to be no sale of the missing and the unsaleable goods. Similar arrangement was made with regard to the other consignment of 1008 cases. Usman was appointed commission agent on the 15th of December 1949, to clear the goods, store and sell them, and on 31st of December 1949 it was agreed that he would purchase them subject to the same conditions as stated above relating to the other consignment of 1935 cases. The price of the second consignment of 1008 cases was agreed to be Rs. 5 per gross.
2. Usman performed the duties of a commission agent to begin with, and after that, in pursuance of the agreements of sale appropriated the goods as their purchaser.
3. He maintained accounts of the transactions done by him. Exhibit 22/2 is the translation of the entries made in the ledger and relate to both the consignments. On the Debit side the entries show the payment of Rs. 1,35,000 to the defendants, and three items of expenditure incurred by Usman on behalf of the defendants in clearing the- goods, The first three entries relate to 1935 cases and the fourth relates to 1008 cases. The dates of the entries show that those transactions were made before the agreements of sale were made. The entries made on the credit side are made up of two items the first item is of the price of 1935 cases less the price of sixty gross matches which were found to be short at the rate of Rs. 5-4-0 per gross, and the second entry is of the price of 1008 cases at the rate of Rs. 5 per gross. It was later found that out of the second consignment 107 cases were completely damaged and unsaleable. Therefore, an entry was made separately in the Nound Book, a copy of which is Exh. 21/2. It shows that the price of 107 cases was debited to the account of the defendants. The amount debited was Rs. 16,050. A corresponding entry of this debit was made in the ledger. A copy of that entry is Exh. 23/2. This entry shows that the total amount originally shown in the ledger as due to Usman in Exh. 22 namely Rs. 24,557-14-0 was increased by Rs. 16,050 and the total amount that became due was Rs. 40,607-14-0. The plaintiff has brought this suit for the recovery of this amount.
4. The defendants have given a different version of the facts. According to them, there was no commission agency. The two consignments were sold out right for Rs. 1,35,000, but the condition was that “if any goods be found to be damaged, then the difference between the price paid by the deceased (Usman) and the market price thereof would be borne by the defendants.” They have denied that clearing and other charges were payable by them. They have also denied that there was any shortage in the quantity of the goods or that any damaged goods were found in the second consignment. In addition to these main pleas of fact, they have pleaded that the suit was barred by time.
5. On the pleadings of the parties, the following issues were struck : –
(1) Is the suit filed by the Receiver competent ?
(2) Is the suit as framed not maintainable ?
(3) Is the claim in suit time-barred ?
(4) Did the deceased Usman Abdul Sattar Mullani act in the transaction in dispute as commission agent of the defendants ? If so, what is its effect ?
(5) Was there a mutual, open and current account between the deceased and the defendants in respect of the transaction in dispute ?
(6) What amount is due from the defendants in respect of the transaction in dispute ?
(7) What was the nature of the dealing between the parties (Covers paragraphs 6 to 10 of Ws.)
6. The parties led oral evidence on the above issues and produced documents, but at the time of arguments the first two issues were given up by consent. Main arguments were advanced on the dispute relating to the incompetency of the suit as barred by time. Issues No. 3 and 5 embody the disputes raised by the parties on this question. These are the most important issues, and I think that the suit could have been disposed of by determin ing these issues as preliminary issues. I would take them up first.
7. Issues No. 3 and 5.-The plaintiff has alleged in para graph 13 of the plaint that the account was mutual, open and current, and that therefore, the suit was within time. The defendant has denied this allegation in paragraph 15 of the written statement. It is necessary to appreciate the nature of the transactions before applying the law of limitation to the facts.
8. Counsel for the defendants contended that accepting as correct for purposes of these issues, the allegations made by the plaintiff, the suit was still barred by time. His argument was that the account began as a simple commission agency account. If it had continued as such, there was no complication in it and that it could not be described as mutual, open and current. The agreements of sale superseded the previous arrangements and the result was simply that the amounts which had become due by reason of commission agency remained to be paid. Counsel for the plaintiff contended that the changes which occurred in the maintenance of the account by the sale of the goods to the commission agents themselves made the account mutual; open and current. His view was that commission agency was not determined, for if it had determined, the account would have been closed at the time of its determination and a new account would have been opened. This argument is not sound because the nature of the transactions should determine the method of account, and it is not correct that the party who maintains the account should have the choice of maintaining it in such manner as it may like, and then argue on the basis of its own method of accounting that the nature of transactions should be determined by that method of accounting. The commission agency ceased when the goods were sold although the payments made and expenses incurred remained to be satisfied and discharged. They could be paid and satisfied from the sale proceeds. The sales took place and the proceeds were shown in the account and could have discharged the liabilities shown on the Debit side, if there was no dispute relating to the shortage and unsaleability of some of the goods.
9. Counsel for the plaintiff contended that the sale was not of a simple nature, because the terms granted a right to the purchaser to recover back from the seller the price of those goods which were found short or unsaleable. The account accordingly showed that the entire price was paid first and then the price of the goods which were found short and unsaleable was recovered by debiting that amount to the account of the seller. This arrangement, counsel contended, proved mutual obligations and therefore the account was a mutual account. The argument, however, is not sound. No complication was created on account of the refund of the price of those goods which were found short because those goods which were not received by the purchaser were not the goods sold. To the extent of their price, the purchaser was not liable to make any payment. The same was true of the unsaleable goods. Exhibit 21/2 shows that Rs. 16,050 were deducted on account of the unsaleable goods and P. W. 1, Abdul Karim, has stated that 107 cases were thrown away as totally damaged. In other words this means that the purchaser was under no obligation to pay the price of those cases though their price bad to be paid tentatively in the first instance under the agreement. If it was so, then no material difference was made owing to this term part of the arrangement.
10. Counsel for the plaintiff attempted to draw a nice distinction here. He contended that the arrangement did not contemplate refund of a part of the price but meant an adjustment of liabilities. The right to adjust, according to counsel, arose by reason of a specific term of agreement, independently of the sale of goods, because the idea of such adjustment is not included in the meaning of the sale of goods. The distinction drawn by learned counsel hardly makes any difference. He referred to The Tea Financing Syndicate Limited v. Chandra Kamal Bez Barua (A I R 1931 Cal, 359) and to Note 4 of the Commentary on Article 85 of the Limitation Act in the A I R Manual of Unrepealed Central Acts, Vol. V, at page 5007, in support of his contention. The facts of the Calcutta case show that two independent transactions were found to exist-one was that an advance was made by the plaintiff to the defendant on the security of the crop of the tea estate for the year 1920, and the other was that the plaintiff was to act as a commission agent for the defendants for selling the defendants’ goods. The obligations arising from the two transactions were to be taken together and their consolidated result was to determine which of the two parties was liable to pay on the account. It was held that there were reciprocal demands and that the transactions did not merely amount to the creation of obligations on one side and their complete or partial discharge on the other side. Counsel argued that the facts of this case were similar to those of the Calcutta case because commission agency continued and the obligations which arose under it were to be consolidated with the obligations which arose from the contract of sale and that the result of the two independent obligations was to determine who was liable on the account. I have explained above that refund of price or deduction of money did not make the transactions reciprocal. Note 4 of the Commentary on Article 85 in the A I R Manual, Vol. V. reads as follows :-
“A lends money to B in one capacity and acts as his agent in another capacity, and two accounts are put together-A and B will have `reciprocal demands’ between them and suit on account would be governed by this Article.”
This proposition is not different from the view taken in the Calcutta case, but I do not see bow in the present case, inde pendent reciprocal demands can be said to have existed. The liabilities which arose from the relationship of principal and agent remained outstanding. They were to be met and discharged from the sale proceeds of the goods. This is not a case in which reciprocal claims can be said to have existed side by side.
11. I shall explain the relationship further, but should examine the provision of law first. The weakness of the argument advanced by counsel for the plaintiff would be seen more easily if the meaning of the word “mutual” as used in Article 85 of the Limitation Act is clearly understood. Article 85 of the Limitation Act is as follows :-
Description of suit
Time from which
begins to run.
85. For the balance
due on a mutual
open and current
there have been
between the parties.
The close of the run year
in which the last
proved is entered
in the account;
such year to be
computed as in the
The word “mutual” has been well explained in the case of Hirada Basappa v. Gadigi Muddappa (6 Mad. H C R 142) in the following words :-
“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.
Counsel for the defendants has also cited; Lakshmayya v. Jagannatham and others (I L R 10 Mad. 199) ; Shivi Gowda and others v. Fernandes and others (I L R 34 Mad. 513) and Phillips v. Phillips (68 E R 596). The Vice Chancellor (Sir G. J. Turner) has observed in the last mentioned case as follows :-
” ——– I understand a mutual account to mean, not merely where one of two parties has received money and paid it on account of the other, but where each of two parties has received and paid on the other’s account. I take the reason of that distinction to be that, in the case of proceedings at law, where each of two parties has received and paid on account of the other, what would be recovered would be the balance of the two accounts . . . . . “.
A distinction is drawn in the above observation between receipt and payment on account of the other and receipt and payment on each other’s account. If the parties reciprocally carry on independent transactions and the net result of a consolidated account of their transactions is found to be in favour of one or the other of them, then that is the result of mutual account. In this case the plaintiff paid Rs. 1,35,000 as a friend. That merely created a debt that was to be discharged. He was the debtor’s commission agent also and his charges and expenses swelled that debt. He then purchased the goods and was to repay himself from the sale proceeds to the extent of the sale price. These transactions represent three phases but there is no reciprocality in them. These facts do not attract the application of Article 85 of the Limitation Act. I hold that the suit is barred by time.
12. In view of the above decision, it is not necessary to decide the remaining issues.
13. The suit, is, therefore, dismissed. Counsel for the plaintiff has contended that costs should not be awarded to the defendants because the conduct of the defendants has been evasive and dilatory from the beginning and that these proceedings were the result of partner’s evasiveness. He has referred to Exh. 5 to 9, 11 and 12 and to my remarks on the demeanour of D. W. 2. Counsel for the defendants has contended on the other hand that the suit was filed with the knowledge that it was barred by time and that a chance was taken by the plaintiff merely by placing a dubious interpretation on the account that it was mutual, open and current. The plea of limitation being as good as any other plea, if the plaintiff failed on it, the defendants were entitled to costs. I think counsel for the defendants was right. The plaintiff is to pay costs of the suit to the defendants.
A. H. Suit dismissed.