Messrs. Baijnath Melaram vs Navinchandra P. Patil

J.A. Patil, J.—The only short question involved in this Appeal by the Appellants (Original Defendants) is whether the suit claim is barred by limitation. The learned City Civil Court, Mumbai, having decided the question in favour of the Plaintiff, the aggrieved Defendants have come in Appeal. The facts, which are relevant for the purpose of deciding the said question, are undisputed and in brief, they are as under :

Under an agreement dated 7.1.1966, the Respondent (Original plaintiff) sold a ship called "S.S. August Levers" to the defendants for a price of Rs. 3,47,500/- and delivered the said ship to the defendants on 11th June, 1966. The agreement of sale contained a clause which put an obligation on the defendants to pay import duty, octroi, sales tax, etc, payable to the Government or any other authority. It further provided that in case any such tax or duty was charged, demanded or recovered by the Government or any authority from the plaintiff, then the defendants shall forthwith, on demand, pay or reimburse the Plaintiff for the same.

It appears that the Plaintiff in his Sales Tax Return for the relevant period did not include the sale price of the said ship. However, the Sales Tax Officer by his Order dated 8.8.1969 held that the said sale was a taxable sale and it attracted 3 per cent sales tax and 3 per cent general sales tax and also levy of penalty of Rs. 8000/- on the plaintiff. The Plaintiff preferred an appeal against the said order to the Assistant Commissioner of Sales Tax, who, however, confirmed the said order. Thereafter the Plaintiff preferred further appeal to the Sales Tax Tribunal, which partly allowed the same. However, the Plaintiff was required to deposit Rs. 20,850/- towards the sales tax for the sale of the ship to the defendants. The Plaintiff, therefore, served the defendants with a Notice dated 5th October, 1973, calling upon them to reimburse the said amount to him. The defendants, however, did not give any rely to the notice. Hence the plaintiff filed a suit for recovery of the said amount together with interest thereon on 1.11.1973.

The defendants resisted the suit and contended, inter alia, that Clause 7 in the agreement, which provided for reimbursement of sales tax paid by the vendor-plaintiff was not applicable and that it was voidable at his option. The Defendants also contended that the said clause was inserted in the agreement on account of misrepresentation. The main contention of the Defendants was, however, that the suit claim was barred by limitation.

The learned trial Judge, upon consideration of the evidence on record, rejected all the contentions raised on behalf of the defendants and held that Clause 7 in the agreement was very much applicable to the defendants and that they were liable to reimburse the plaintiff the amount of the sales tax which he was required to pay. The learned Judge, however, rejected the defendants'' contention that the suit is barred by limitation. He also held that the plaintiffs claim was governed by Article 113 of the Limitation Act, and that time would run from 31.8.1971, being the date of the order of the Tribunal, on which date the decision as to whether the sale price of the ship was leviable for sales tax or not, was finally decided.

Consistent with the abovementioned findings, the learned Judge proceeded to pass a decree in favour of the Plaintiff directing the defendants to pay to the Plaintiff an amount of Rs. 19,669.93 with future interest at the rate of 6 per cent per annum from the date of the suit till payment. It is this order which is impugned in this First Appeal.

I have heard Miss Nichani, learned Advocate for the Appellants-Defendants. None was present on behalf of the Respondent-Plaintiff.

Miss Nichani did not dispute before me that the suit claim is governed by Article 113 of the Limitation Act. However, according to her, the learned trial Judge erred in holding that the period of limitation started running from 31.8.1971. According to her, the period of limitation, in the instant case started either from the date on which the Sales Tax Officer passed an order on 8.8.1969 directing the Plaintiff to pay the sales tax or from 19.11.1969, the date on which the Plaintiff actually deposited the amount of sales tax. Miss Nichani pointed out that the suit having been filed on 1.11.1973, it was obviously beyond the period of three years from the abovementioned two dates and, therefore, it is clearly barred by time.

The claim made by the Plaintiff is for indemnifying him in the amount of sales tax, which he was required to pay in respect of the sale of the ship to the defendants. Having regard to the nature of the suit claim, I do not see any reason to differ from the learned trial Judge that the limitation for such a suit is governed by Article 113 of the Limitation Act. Miss Nichani also does not dispute this position. Article 113 provides a period of limitation of three years for any suit for which no period of limitation is provided elsewhere in the Schedule to the Limitation Act. The time from which the period of limitation begins to run is when the right to sue accrues. The material question which, therefore, requires to be considered is as to on what date the cause of action could be said to have accrued to the Plaintiff, In this respect, Miss Nichani, relied upon several authorities, to which reference is necessary. In Vishwanath Singh Behari Singh Thakur Vs. The State of Madhya Pradesh, it was held that the limitation always implies an exact cause of action and unless the cause of action has arisen, limitation cannot begin to run. In Shankar Nimbaji Shintre Vs. Laxman Supdu Shelke, it was held that in a contract of indemnity, cause of action for claiming against the promisor accrues to the promisee when the latter is actually damnified. A similar view was taken by this Court in a subsequent decision in the case of Abdul Hussain Shaikh Gulamali Jambawalla Vs. Bombay Metal Syndicate, . In that case, the purchaser had undertaken to indemnify the seller against the amount of sales tax that might be levied and the seller was required to pay sales tax. It was held that the cause of action arose on the date when the seller paid the amount and not on the date when he was ordered to pay the sales tax. It is, however, material to note that the indemnity letter in favour of the seller stated :.... In respect of the transaction under your invoice...dated 25.9.1957, we do hereby indemnify you against any amount of sales tax that may be levied by the authorities with or without any guarantee thereof, as the case may be, as and when charged.

(Emphasis provided)

Miss Nichani also relied upon the decision in Lala Shanti Swarup Vs. Munshi Singh and Others, . The Apex Court, while dealing with a case of contract of indemnity, observed that "under Article 83 of the Limitation Act (old), a suit based on the contract of indemnity is required to be brought within three years from the time when the Plaintiff was actually damnified."

The last authority relied upon by Miss Nichani is Sita Ram Goel Vs. The Municipal Board, Kanpur and Others, . However, the facts of the said case are altogether different. That was a case of a Municipal employee who was dismissed by a resolution of the Municipal Board on 5.3.1951, The order of dismissal was communicated to him on 7.4.1951. The said employee preferred an appeal to the Government which was dismissed on 7.4.1952. Thereafter, the said employee filed a suit for compensation on 8.12.1952 for wrongful dismissal. On these facts, the question which arose for consideration was as to on what date the cause of action for the said employee had arisen. The Apex Court held that it arose the moment the result of the Board was communicated to the said employee. Having regard to the facts in the said case, it is obvious that this decision will not be of much use to the defendants in this Appeal. There cannot be any dispute that the period of limitation in the instant case has to be reckoned from the date on which the cause of action has arisen. Therefore, what is necessary to be ascertained is the date on which the cause of action arose in the instant case.

Clause 7 of the agreement of sale, which is very much relevant for this purpose, reads as under :

The Purchasers shall pay import duty, part dues, octroi, if any, sales tax, general sales tax as also any other taxes, dues, duties and charges payable to the Government or to any other authority, central or local on and from the date on which delivery of the said vessel is given to the purchasers (hereinafter called "the said date"). In case any such import or other duty, sales tax, general sales tax or other taxes, dues, duties, or charges are charged, demanded and/or recovered by the Government or any authority, central or local from the Vendor, the Purchasers shall forthwith on demand pay or reimburse to the Vendor any import or other duty, sales tax, general sales tax or other taxes, dues and/or duties which may be charged or demanded by and/or paid to the Government or any authority at any time in respect of the said vessel.

[Emphasis provided]

A bare perusal of this clause makes it clear that it was the liability of the defendants to pay whatever duty, taxes, etc. were payable to the Government or any other authority for the sale transaction of the ship. It will be further seen that under this clause the defendants undertook to pay or reimburse the Plaintiff for any import or other duty, sales tax or general sales tax, etc., which may be charged or demanded by the Government or any other authority at any time in respect of the said shop. The words : ".... The Purchaser shall forthwith on demand pay or reimburse to the Vendor..." are very much material and they are relevant for the purpose of deciding the date on which case of action arose in favour of the Plaintiff to make a claim against the defendants. As is apparent from the said clause, the defendants were under an obligation to pay forthwith on demand to the Plaintiff the amount of sales tax paid by him in respect of the ship sold to the defendants. This being the position, it is not correct for Miss Nichani to contend that the cause of action arose on 8.8.1969 when the Sales Tax Officer by his order demanded the sales tax dues from the Plaintiff or on 19.11.1969 when the Plaintiff actually deposited the amount, towards the sales tax dues. Likewise the learned Trial Judge was also not correct in holding that the cause of action arose on 31.8.1971 on which date the Tribunal finally decided the question as to whether sale amount of the ship by the Plaintiff to the Defendants was or was not liable for payment of sales tax. Miss Nichani as well as the learned trial Judge, both ignored the material words in Clause 7 of the agreement of sale which unequivocally state that the Defendants were liable to pay or reimburse to the Plaintiff the amount of sales tax forthwith on demand. In the instant case, the Plaintiff by his letter dated 5.10.1973 called upon the defendants to pay the amount of sales tax paid by him. This was the date on which the Plaintiff, for the first time, made his demand for reimbursement of the sales tax paid by him. Under Clause 7 of the agreement, it was, therefore, the liability of the Defendants to pay the amount of sales tax to the Plaintiff forthwith. As already pointed out the suit was filed on 1.11.1973, that is, within one month from the date of the demand as contemplated by Clause 7 of the agreement of sales. Therefore, it is obvious that the Plaintiffs claim is well within time. Secondly, the finding of the learned trial Judge that the suit is not barred by limitation deserves to be upheld even though 1 do not agree within him on the point about the date on which the cause of action arose.

No other point is urged before me by Miss Nichani. Therefore, in the view which I have taken, no interference in the impugned order and decree passed by the learned trial Judge is called for and the same deserved to be confirmed.

In the result, the Appeal is dismissed with no order as to costs.