G. Gopal Chettiar vs V.V. Shanmuga Nadar and Bros.

Anantanarayanan, C.J.—The essential facts of this appeal, from the judgment and decree of Kunhamed Kutti J. in C. S. 77 of 1960 before

the learned Judge, may be briefly set forth as follows : V. V. Shanmugha Nadar and Bros (plaintiffs) sued the defendant Gopal Chettiar, who is the

appellant, in respect of dealings said to be due upon certain accounts relating to the business of the defendant at Pollachi, Coimbatore and

Kumbakonaom. According to the case in the plaint, in respect of orders placed by the defendant with the plaintiffs, for purchase and supply of

goods, the plaintiffs advanced moneys and were entitled to repayment of the moneys with interest. The dealings took place between 26th August

1953 and 15th March 1959, on the basis of a mutual, open and current account, according to particulars furnished along with the plaint. Very

briefly stated, the defendant put forward, as his main plea, a plea of limitation. According to him, the dealings were not on the basis of a mutual,

open and current account, and, many of the transactions were thus time barred, particularly in relation to the Coimbatore account. The plaintiffs

were not entitled to make appropriations of payments in the manner that they had done, nor were they entitled to charge interest on outstanding

advances. Of the issues framed in the suit, the main issues that concern us are.

Whether there was a mutual open and current account between the parties?

Whether the suit was in time, and

Whether there was a contract to pay interest at certain rate ?

In view of the order that we propose to make in this appeal, remanding the suit for further and full determination in the light of our observations,

since it appears beyond controversy, in our view, that certain vital aspects have not been tried out at all, we think that we should not proceed into

the merits in any great detail. But indisputably, we feel constrained to record our reasons why we consider this remand of the case for further trial

essential in the interest of justice. Our observations must not be regarded as any pre-judgment of the merits, since the suit is new going to have a

more extensive and adequate trial, covering all issues in controversy between the parties, and, all vital aspects of such issues.

Firstly, the very procedure of trial in the suit has inevitably given rise to some difficulty. What, of course, cannot be a matter for which the

learned Judge could be regarded as responsible, in any view. The plaintiffs adopted the somewhat curious procedure of producing all their books

of accounts, but actually not marking these goof''s evidence, on the contrary, schedule of entries, which is Ex. D. 1, and which, in fact, forms the

main document in the case, was extracted from the plaint schedule, and marked by the defendant. It must immediately be conceded the defendant

(appellant) far from objecting to this course, of this failure to exhibit the original account books, based his defence upon Ex. B. 1 itself, with the

result that neither the Court nor the party had the advantage of a scrutiny of the original accounts, ledgers and cash books. In our view, that has

handicapped the trial, in the sense that it has been possible to focus attention on certain vital aspects of the controversy between the parties.

Another lacuna or defect in the trial has been that the oral evidence in the entire trial consists exclusively of the testimony of Dorai Pandian (P. W.

1), a partner of the plaintiff firm. The defendant did not get into the box, and did not throw light, by means of testimony, upon the defences that he

sought to raise in contesting this suit. Further, as we shall presently show, certain vital aspect of the material impinging on the main plea of limitation

have not been brought forward and elucidated at all during the trial, or, apparently even during the arguments before the learned Judge.

As the plaint was filed, it sought to do this: there were dealings between the parties relating to three places or branches, of the defendant, viz.,

Coimbatore, Kumbakonarn and Pollachi of which it is conceded by Sri Tbiruvenkatachari for the defendant (appellant) that the accounts relating to

the Pollachi branch do form an open, mutual and current account, within the meaning of Art. 85 of the original Limitation Act, row Art. 1 of the

Schedule to Act XXXVI of 1963. But with regard to the other two branches, and the Coimbatore branch in particular, the appellant strenuously

contended that there were no open, mutual and current accounts. The further plea was that there was a distinct jural relationship between the

parties, in respect of the accounts of each branch. They were separable and should be regarded separately. But admittedly, when the plaint was

filed, the plaintiffs brought forward the account of the Pollachi branch into the schedule, thereby converting the accounts of the Coimbatore and

Kumbakonam branches into a consolidated credit account in favour of the plaintiffs. One important argument of Sri Thiruvenkatachari for the

defendant (appellant) is that this is not justified, and that this pressing into service of the account of the Pollachi branch, on the very eve of the suit,

was merely to create a semblance of an open, mutual and current account, which was not actually the same with regard to the Coimbatore and

Kumbakonarn branch accounts. In other words, and now stressing the Coimbatore account in particular, many items would be time barred,

according to the appellant, but for this expedient.

It thus became essential to consider whether the three accounts could be consolidated in that manner, as the plaintiffs did, or whether each

account should be regarded separately, as furnishing a distinct jural basis of obligation between the parties. On this, we find that there was not even

a clear and distinct issue, nor can we find any discussion of this aspect, as such, in the judgment of the learned Judge. Apparently, in the manner in

which the suit was presented, tried and argued, this essential aspect was lost sight of. We must, therefore direct that this should be framed as a

separate issue, and tried out new, both parties being at liberty to adduce oral and documentary evidence on this aspect.

Another vital aspect, concerning which, again, there is difficulty, in the finding of the learned Judge (page 17 of the printed papers) that the

account was open, mutual and current because "" the plaintiffs had sold the defendants'' goods on commission basis, and credited him with the sale

proceeds of such goods."" Indisputably, if there were such mutual obligations, the account would be open, mutual and current. But Sri

Thiruvenkatachari contends that, apart from the Pollachi branch, this observation of the learned Judge is factually incorrect, if it is intended to apply

to the Coimbatore and Kumbakonam accounts. This again is a matter on which evidence is essential, and it is equally essential that the original

accounts should be produced and marked for this purpose. The truncated schedule marked as Ex. D-1 cannot at all suffice for this purpose.

Concerning the legal elements of an open, mutual and current account, the matter is now well-settled, in view of two recent decisions of the

Supreme Court, and we think it is sufficient to refer to them. The first of these decisions is Commissioner of Income Tax, Bombay Vs. Ahmedbhai

Umarbhai and Co., Bombay, , and it refers to the prior case law including Sha Tinnaing Syndicate Ltd., v. Chandrammal 58 Cal. 640. That

Calcutta decision, the judgment wherein was delivered by Rankin, C. J. refers to two precedents. The first of these is Hirdah v. Gigdi 1861 6

M.H.C.R. 142, where Holloway Ag. C.J. probably laid down the earliest formulation of the canon on the subject. The learned Judge said that, for

the purpose of such an account.

there must be 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.

Unteon v. Aga Mohadeen Sharesee 1874 1 I.A. 346, may also be instanced as another application of the principle to the given facts. In

referring to the judgment of Rankin C. J. their Lordships of the Supreme Court observed that this canon has not been subsequently departed from

and that though it is a question of fact in each case whether the account is open, mutual and current, the account must fulfill the requirements of

reciprocal demands involving 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. In other words, reciprocity of dealings is

essential and the decision in Kesharichand v. Banking Corporation AIR 1965 S.C. 1711, may be taken as another instance of the application of

the same principle to the given facts.

In the present case, we have been taken in great detail through the data available as Ex. B. 1. Sri Thiruvenkatachari strenuously contended that

these do not evidence reciprocal demands and obligations of the character specified in the precedents; on the contrary, those are purely unilateral

transactions, the demand in every case relating to a specific item of account, which is met by a Hundi which has been honoured by the defendant

(appellant). As we stated earlier, there is an admission that there are reciprocal demands and obligations in the Pollachi account, but it is strongly

denied that the Coimbatore and Kumbakonam accounts fulfil the criterion. On this aspect, the learned Judge seems to have been somewhat misled,

because of two considerations. Firstly, he thought that there were entries with regard to sales by plaintiffs of defendant''s goods, on a commission

basis, for which the plaintiffs had credited the defendant (appellant) in respect of the sale proceeds. We have already quoted this extract from the

judgment, and according to learned counsel for the appellant, that applies strictly and exclusively to the Pollachi account, and not to the other

accounts. Secondly, in considering the matter of the alleged implied appropriations, urged on behalf of the appellant, with reference to the

principles of Ss. 59, 60 and 61 of the Contract Act, the learned Judge, again seems to have thought that the accounts were open, mutual and

current because the Pollachi account was merged with the other two accounts, and hence, that the question of any implied appropriations did not

at all arise. As we pointed out, the problem In this case is whether the accounts could be consolidated in this manner, on the eve of the plaint, as

the plaintiffs sought to do. If such consolidation was not permissible or possible, it will be a question of fact, and evidence whether the Coimbatore

and Kumbakonarn accounts should be properly regarded as open, mutual and current accounts.

Both with regard to this aspect, and with regard to the question of the implied appropriations urged on behalf of the appellant and stressed by

Sri Thiruvenkatachari, on the principle of S. 59 of the Contract Act, we do not propose to make any pronouncement now, in view of the order of

remand. We think we have sufficiently elucidated that the matter is fairly intricate, and that adequate material has not been placed before Court by

either party, or by both the parties, For this, of course, the parties are themselves to blame, but, we are unable to see how there can be a

satisfactory adjudication of the rights in this matter, on such a truncated trial. We do not think it is necessary to say anything more. The necessary

issues will now be framed In the light of our observations, and the suit be tried, with liberty to both the parties to adduce fresh oral and

documentary evidence; needless to say, we expect the defendant to examine himself, if he is really serious about his case that the Coimbatore and

Kumbakonarn accounts did not involve reciprocal demands and obligations and, further, that these accounts were jurally distinct and that a

consolidation was unjustified. The costs of this appeal will abide and follow the result of the demand. The court fee paid will be refunded.