Gopal Rai and Others vs Harchand Ram Anant Ram

Coutts, J.—This is an appeal against a decree of the Subordinate Judge of Bhagalpur, decreeing a suit brought by the firm of Harchand Ram-Anant Ram against Gopal Rai and others. The plaintiff is a firm trading in Bhagalpur and the defendants are members of a joint Hindu family, of which the defendant No. 1, Gopal Rai, is the karta and they also have a business in Bhagalpur known as Gopal Rai-Sagar Mall. The plaintiff''s case is that they had a mutual, open and current account with the defendants'' firm, that there was an adjustment of this account on the 18th of Sarah Sambat 1973, when it was found that a sum of Rs. 4,498-15-6 was due by the defendants to the plaintiff. This sum with interest amounted to Rs 5,721-8-6 and the plaintiff brought the suit for this amount

The defendants admitted that they had dealings with the plaintiffs'' firm but they contended that the transactions between them and the plaintiff''s firm were not a mutual, open and current account and that the claim was barred by limitation. They also denied their liability for interest at the rate charged by the plaintiff. In addition, they pleaded a set off of Rs 14,580 on the following allegation.

There was a suit which involved a large property, known as the Lachmipur case, one Radha Kishen Bhagaria, the plaintiff and one Sheodut Ram entered into a champertous transaction and advanced money for that litigation their shares in the litigation being 8 annas, 6 annas and, 2 annas respectively. Bansidhar was the managing member of the plaintiff firm and the defendants'' case is that he made an arrangement with the defendant No. 1, Gopal, by which Gopal was to make pairvi in that case; for this he was to receive 2 per cent. of all money advanced by the plaintiff for the litigation whether it was successful or not and 6 per cent, more if it was successful. The plaintiff''s share of the money advanced for the litigation was Rs. 7,27,500.

The litigation was not successful and, consequently, Gopal claims only 2 per cent. which amounts to Rs. 14,550. The learned Subordinate Judge has found that no portion of the plaintiff''s claim for Rs. 5,724-8-6 is hatred by limitation and he has found that there was no arrangement between the plaintiff and Gopal by which Gopal was to be paid 2 per cent. of the sum advanced by the plaintiff for the litigation in the Lachmipur case whether it was successful or not.

The plaintiff''s suit has, consequently, as I have already said, been decreed. The defendants have appealed, and in the appeal the same points are raised as in the Trial Court, vis., (1) that the plaintiff''s claim on the account between the parties is barred by limitation and (2) that the defendants are entitled to the set off which they claimed. I propose to deal with this question of set-off first.

It is an admitted fact that the Lachmipur spit was financed by certain Marwaris on behalf of the plaintiffs in that suit. Bansidhar, who is the Manager of the plaintiffs'' firm, denies that he or his firm had anything to do with that litigation but it seems clear that the conclusion of the learned Subordinate Judge that Bansidhar did in fact enter into the champertous transaction alleged is correct. There is no document to show this, but in his evidence Bansidhar admits that he consulted Pleaders about that case, met Counsel and made arrangements for their convenience.

The Commissioner of the Division spoke to him about the case, he came to Patna in connection with it when it was on appeal before the High Court, and there was a question of a compromise. He attended the trial, he was present at the hearing of the appeal, and he paid the costs of the suit, both in Bhagalpur and in the Patna High Court. He says that this was done on behalf of Radha Kishen Bhagaria, who is a relative of his; but from the evidence of Radha Kishen it is clear that this is not so, for his evidence shows that he himself was paying money and was looking after the case and he had no occasion to use Bansidhar to do anything for him.

In these circumstances, I have no doubt that Bansidhar was one of the champertous, as has been found by the learned Subordinate Judge.

The question remains, however, whether in fact Bansidhar made the arrangement with Gopal, as the latter contends. We are not concerned with that portion of the alleged agreement relating to the payment of 6 per cent. in the case of the plaintiffs in the Lachmipur case being successful because, so far, they have not been successful. We are concerned only with the matter of the 2 per cent. which Bansidhar is said to have agreed to pay whether the litigation was successful or not.

Now, the probabilities are against any such arrangement having been come to. If Bansidhar had wished Gopal to be zealous in looking after the case he would hardly have promised him 2 per cent. which amounted to a large sum of over Rs. 14,000 in the case of non success. Further, it is difficult to understand why Bansidhar alone of all the champertous should have entered into such an agreement. The champertous were all working together, the pairvi benefited all, and if any arrangement was being made it would certainly have been made with the knowledge of them all.

Again, it is unlikely if the defendant No. 1 was to get 2 per cent, win or lose that he would not have asked for and got something advanced during the litigation which was of a protracted nature. Another very important consideration which tends to show that the defendants'' story is untrue, is that there is no document evidencing the agreement.

It has been urged that the parties are on friendly terms and have been doing business together, and that between Marwaris who are friends documents are very often dispensed with. This is true but there is evidence of other transactions entered into by the defendant No. 1 with Marwaris in which he took documents and one is a transaction between him and his own brother in which he got a letter specifying his claim. I think, therefore, that it is unlikely that in the case of a speculative suit such as is the Lachmipur case the defendant No. 1 would not get some document executed as evidence of the agreement.

There are other circumstances referred to in the judgment of the learned Subordinate Judge which also indicate that there could not have been any such agreement. Against these we have only the statements of defendant No. 1 Gopal and his gomasta. The defendant No. 1 is admittedly not on good terms with one Debi Prasad Marwari who was interested in the Lachmipur case on behalf of the defendants and it is not at all improbable that he might have interested himself in the Lachmipur case on behalf of the plaintiffs for that reason.

The gomasta is a servant in the employ of Gopal Babu and to that extent he is an interested witness. The evidence of the agreement is thus of a very weak character and in the circumstances of the case I find it impossible to accept it as sufficient evidence of the agreement. I accordingly agree with the learned Subordinate Judge that the set-off must be disallowed.

I now come to the question of the sum of Rs. 5,724-3-6 which is claimed by the plaintiff on a mutual, open and current account adjusted on the 18th of Savan 1973 Sambat. The plaintiffs'' claim was based, in the first place, on the account being a mutual, open and current account and consequently coming within the provisions of section 85 of the Limitation Act; and, in the alternative, on an adjustment which would bring it within the provisions of Article 115 of the Limitation Act.

The learned Subordinate Judge has found in favour of the plaintiff on both these points and he has also found that the suit is not barred by limitation on the principle laid down in the case of Kedar Nath Mitter Vs. Denobandhu Shaha and Others, , which refers to a tradesman''s account. In regard to the last point the plaintiff never claimed that limitation would be saved on the principle enunciated in the decision I have just referred to, and it is clear that the case is not one of a tradesman''s account. In regard to Article 115 of the Limitation Act it is also clear that the learned Subordinate Judge has taken an incorrect view of the law.

He has relied on the case of Jalim Singh Srimal Vs. Choonee Lall Johurry , for the proposition that an adjustment of accounts between the parties in the defendants'' presence operates as an implied contract to pay. Now, in the present case the adjustment is said to have been made in the presence of the parties but the case of Jalim Singh Srimal Vs. Choonee Lall Johurry , which related to a partnership is no authority for the proposition that in any case of accounts an adjustment in the presence of parties operates, as a fresh contract and it is conceded by Mr. Sen the learned Counsel appearing on behalf of the respondents that, unless the account is a mutual, open and current account, the adjustment will not save the suit from being barred by limitation.

The question then is, whether the account is a mutual, open and current account. The question of what a mutual, open and current account is has been fully discussed by Mr. Justice Mookerjee in Ram Pershad v. Harbans Singh (1907) 6 C.L.J. 158 in a judgment in which he reviews all the previous decisions on this point.

In that judgment he says:

An account current is an open or, running account between two or more parties or, an account which contains items between the parties from which the balance due to one of them is or can be ascertained, from which it follows that such an account comes under the term of open account, in so far as it is running unsettled or unclosed. Mutual accounts are such as consist of reciprocity of dealings between the parties, and do not embrace those having items on one side only, though made up of debits and credits.

It is not disputed that the account with which we are concerned in the present case is an open and current account. The question is, whether it is a mutual account. The test of mutuality which has been laid down is a number of decisions is, that the dealings between the parties should be such that the balance is sometimes in favour of one party and sometimes in favour of the other.

An account which consists of entries of payments made by one party in reduction of a debt to another and of payments made by the latter on behalf of the former, is not a mutual account-- Velu Pillai and Others Vs. Ghose Mahomed Rowthar and Others, . In Hajee Syud Mahomed Vs. Mussamut Ashrufoonnissa, it was held that if the balance was sometimes in favour of the defendant but generally in favour of the plaintiff, the banker, the account would not be a mutual one : and in Phillips v. Phillips (1852) 9 Hare 471 : 68 E.R. 596 it was held that a mutual account is not merely one where one of two parties has received money and paid it on account of the other, but where each of two parties has paid on the other''s account. An account under which one party has received money and paid on account of the other is not a mutual account, and this view has been adopted in a series of English decisions.

In the present case the account between the parties began as early as the year 1906 and the last transaction is said to have been after the adjustment which was made on the 3rd August 1916. The only accounts on the record are the plaintiff''s account. The defendants have not produced their accounts, and, although no presumption can arise against them for not doing so, the fact that they have not produced them has considerably increased our difficulty.

As I have already said, the accounts began in 1906 and the first balance was struck after only five transactions had taken place; this shows a balance in favour of the plaintiff of Rs. 1,258. The next balance was struck in 1909 and shows a balance in favour of the defendants of Rs. 2075-8-9. From this time on there is a balance of different amounts always in favour of the plaintiff, till the 23rd of January 1912 from which date until the 18th of January 1913 there are shifting balances, sometimes in favour of the plaintiff and sometimes in favour of the defendants; and, so far as I can discover, there were in all 17 occasions on which the balance was in the defendants'' favour during this period. From the 18th January 1913 onward until the last item of account, the balance has been continuously in favour of the plaintiff.

On the face of the accounts, therefore, it would appear that, in the years 1906 and 1907, there was a shifting balance once in favour of the plaintiff and again in favour of the defendants, and that, between the 23rd January 1912 and the 18th January 1913, there were shifting balances sometimes in favour of the plaintiff and sometimes in favour of the defendants, and, on the face of it, the account would appear to be a mutual account. It is contended, however, by the learned Counsel for the appellants that if the accounts are properly examined, it will be found that in 1906-1907 there was in fact no balance in favour of the defendants and that all the payments which have been made for the other period are merely payments to reduce a debt owed by them to the plaintiff or as to a banker for purpose of remittance. So far as the years 1906-1907 are concerned, there can be no doubt.

The item with which we are concerned is the item of Rs. 2,075-8-9 which is shown as a credit in favour of the defendants in 1907. One of the items on the credit side of the account, when it was made up in 1907, is a sum of Rs. 6,000 which was an item transferred from the nakal bahi. It appears, however, from the nakal bahi, Exhibit 3-A, that in fact, this sum of Rs. 6,000 had not been really paid'' in at the time that the account was made up; the nakal bahi itself shows that these items were credited as follows:--

and the khata immediately following the khata which shows Rs. 6,000 as a credit is for the dates beginning with 6th Magh Sudi. This clearly indicates that the Rs. 6,000 should have been shown as a credit in the next account. There was, therefore, in fact no credit of Rs. 2,075-8-9 in favour of the defendants when the account of 1907 was made up.

The account from the 23rd January 1912 up to the 18th January 1913 is a more difficult matter and, at first sight, it would appear to be a mutual account. On careful examination, however, I am satisfied that this is not so. Up till the 23rd January 1912 there was a continuous debit against Gopal, but on the 20th January he paid in Rs. 1,500 and again on the 23rd January he paid in Rs. 300 which raised his credit to Rs. 100. On the 26th January he paid in Rs. 500; on the 29th January he paid in Rs. 300 which raised his credit to Rs. 900. On the 2nd February he withdrew Rs. 3,150 which left him again with a debit of Rs. 2,250.

Between this date and the 23rd February he paid in various sums and withdrew various sums there being always a debit balance until the 19th March 1912 when, by paying in Rs. 575, his account stood at this amount to his credit. On the 29th of March he withdrew Rs. 300, reducing his balance to Rs. 275; on the 30th March he paid in Rs. 400, increasing his balance to Rs. 675. On the 2nd April he withdrew Rs. 10 leaving his balance at Rs. 665; on the 4th April he withdrew Rs. 4-8-6 reducing his balance to Rs. 660-7-6, and on the 12th April he withdrew Rs. 3,000, which again left him owing a sum of Rs. 2.339-8-6 to the plaintiff. He again paid in various sums of money up to the 25th April when, by paying Rs. 1,075 he was left with a credit of Rs. 810-7-6.

On the 29th April he paid in Rs. 700, making his balance Rs. 1,510-7-6, but on the 2nd May 1912, he withdrew Rs. 4,200, when the balance again became a debit one, and this debit continued until the 9th January 1913 when he again hid a credit of Rs. 24-2-0. On the 10th January 1913 he had a credit of Rs. 624-2-0; on the 12th January a credit of Rs. 1,524-2-0; on the 13th January a credit of Rs. 1,474-2-0; on the 15th January a credit of Rs. 2,374-2-0; on the 17th January Rs. 3,374-2-0; and on the 18th January Rs. 4,124-2-0.

From this date onwards there was a continuous debit balance against Gopal. This can hardly, I think, be called a mutual account. There was never a credit in favour of the defendant Gopal for more than a few days at a time and the account appears to be of the nature of those accounts referred to in Velu Pillai and Others Vs. Ghose Mahomed Rowthar and Others, , in Phillips v. Phillips (1852) 9 Hare 471 : 68 E.R. 596 and the cases following that decision. It was not an account indicating transactions which created independent obligations on both sides as is required in the case of a mutual account.

It is true that there was sometimes a credit in favour of Gopal, but the credit, as I have said, was only for a few days and such an account cannot be held to indicate a mutual account in which there has been reciprocal dealings between the parties. Some argument has been addressed to us in respect of two items (1) Rs. 408-14-0 which was realized from the estate of Rani Keshowati of Handwa, and (2) costs in respect of the Lodipur estate; and it is contended that these items show that there were mutual dealings between the parties.

I can, however, see no difference between realization from an estate and a payment of cash to the defendants'' credit. The account then, in my opinion, is not a mutual account. This being so, the plaintiff is not entitled to the benefit of the limitation prescribed in Article 85 of the Limitation Act; and it is admitted that if this Article does not apply then the plaintiff can get a decree for Rs. 1,045-10-0 only. In the result, then, I would uphold the decree of the learned Subordinate Judge with regard to set-off, but would modify his decree in regard to the principal amount claimed by the plaintiff to the extent indicated above. Costs will be in proportion to the success of the parties.

Ross, J.

I agree.