Panasonic India Pvt. Ltd vs National Radio Electronics & Ors

VALMIKI J. MEHTA, J (ORAL)

This Regular First Appeal under Section 96 of the Code of Civil Procedure, 1908 (CPC), is filed by the plaintiff in the suit impugning the Judgment

of the Trial Court dated 24.08.2005 by which the trial court has decreed the suit for recovery, filed by the appellant/plaintiff seeking recovery of a sum

of Rs.3,24,655/-, only for an amount of Rs. 34,419.95/-, and which is the amount of the last invoice dated 30.10.2001 which was within limitation of

three years of the suit having been filed by the appellant/plaintiff on 27.10.2004.

The facts of the case are that the appellant/plaintiff appointed the respondents/defendants as its dealers of electronic goods. The respondent

no.1/defendant no.1 is a partnership firm of which respondent nos.2 and 3/defendant nos.2 and 3 are the partners. The case of the appellant/plaintiff

was that as per its books of account, various amounts were due and the respondents/defendants on their request were given a credit note for a sum of

Rs.2,86,251/- towards Local Advertisement Support and after such an amount was credited in favour of the respondent/defendant on 14.08.2003,

there remained a balance of a sum of Rs.1,88,753/-, and this amount is claimed by the appellant/plaintiff as principal amount, with interest at 24%

being claimed on the amount of Rs.1,35,902/-, and thereby totalling the suit claim amount to Rs.3,24,655/-. Â

The respondents/defendants did not appear in the suit and were proceeded exparte. Â

The appellant/plaintiff led evidence to prove its case by proving the invoices exhibited as Ex.PW1/6 and Ex.PW1/7. As already stated above the

last invoice Ex.PW1/7 is dated 30.10.2001. The statement of account was proved as Ex.PW1/8. Trial court however has held that the statement of

account is not an open mutual and current account under Article 1 of the Limitation Act, 1963 and therefore limitation will have to be seen bill wise.

Since the suit was filed on 27.10.2004 and only one invoice being Ex.PW1/7 dated 30.10.2001 was within three years of filing of the suit, therefore suit

was dismissed as barred by limitation for invoices prior to Ex.PW1/7 dated 30.10.2001 and decreed only for the invoice amount in Ex.PW1/7. The

relevant paras of the impugned judgment in this regard are paras 3 to 5 and these paras read as under:-

“3. In ex-parte evidence, plaintiff has filed affidavit of Sh. Roopesh Kumar Sharma, Asstt. Manager (Legal) of the plaintiff company. He has

proved in his affidavit authorization in his favour as Ex.PW1/1, certificate of incorporation of the plaintiff company as Ex.PW1/2, authorization in

favour of Sh. Vinit Aggarwal, who had instituted the present suit as Ex.PW1/3. Defendant No.1 is deposed to be a partnership firm and defendant

Nos. 2 and 3 are its partners who approached the plaintiff in New Delhi and represented that they were dealing in sale of electronic goods and were

interested in dealership of plaintiff‟s products for Kannur District, Kerala, therefore, plaintiff appointed defendant No.1 as one of its dealer for Kannur

District, Kerala. Defendant No.1 is deposed to have been purchasing the products from the plaintiff from time to time against bills Ex.PW1/4 to

Ex.PW1/6 and payment made by the defendant were shown in statement of account. It is deposed that last purchase was made by defendants on

30.10.01 vide invoice Ex.PW1/7. However, it is deposed that defendants had defaulted in making payment as per terms agreed which they did not pay

despite several requests. It is deposed that plaintiff called upon the defendants to pay the outstanding amount on receipt of which defendants

approached the plaintiff for settlement of outstanding amounts subject to issuance of credit note in favour of defendants in the sum of Rs.2,86,251

towards local Advertisement Support and same was duly credited by the plaintiff on 14.8.03. It is deposed that as per books of account maintained by

the plaintiff a sum of Rs.1,88,753.20 is due and payable by the defendants towards principal amount. Copy of statement of account has been proved

as Ex.PW1/8. It is deposed that plaintiff is also entitled to interest @24% per annum (Rs.1,35,902.30 from October 2001 till filing of the suit) inasmuch

as defendant failed and neglected to make payment of outstanding amount. In all plaintiff has claimed Rs.3,24,655.50.

From perusal of the evidence as discussed above, it is clear that earlier name of the plaintiff was M/s National Panasonic India Pvt. Ltd. which has

subsequently been changed to M/s Panasonic India Pvt. Ltd vide certificate of incorporation Ex.PW1/2. It also stands proved on record that Sh. Vinit

Aggarwal was competent to file the present suit as is clear from Ex.PW1/3. It also stands prove on record that defendant No.1 is a partnership firm

and defendant Nos. 2 and 3 are its partners. It also stands proved on record that defendants purchased goods from the plaintiff vide invoices

Ex.PW1/4 to 1/7. Ex.PW1/4 and Ex.PW1/5 are dated 30.9.01, Ex.PW1/6 is date 24.10.01. According to the plaintiff, last purchse was made on

30.10.01 vide Ex.PW1/7. It also stands proved on record that defendants failed to pay the amount due towards them. According to the plaintiff, it

served a notice of demand on the defendants on receipt of which defendants approached the plaintiff for settlement subject to issuance of credit note

in favour of defendants for a sum of Rs.2,86,251/- which the plaintiff did. It is deposed that according to books of accounts maintained by the plaintiff

a sum of Rs.1,88,753.20 is due and payable towards principal. Plaintiff has also claimed interest @ 24% per annum from the date of filing of suit. In

all plaintiff has claimed a sum of Rs.3,24,655.50.

Present suit has been filed on 27.10.04. It is not the case of the plaintiff that account maintained by the plaintiff is mutual or running account so as

to enable the application of different rule of calculating of period of limitation. In the present case, goods have been supplied on invoice basis. First two

invoices are dated 30.9.01. Third invoice is dated 24.10.01. Since suit has been filed on 27.10.04, therefore, claims against invoices Ex.PW1/4 to

Ex.PW1/6 are time barred and only invoice which is within the period of limitation is Ex.PW1/7 because goods were supplied on 30.10.01. Invoice

Ex.PW1/7 is for a sum of Rs.34,419.95. Plaintiff has also claimed interest @ 24% per annum. In my considered opinion, rate of interest as claimed by

the plaintiff is quite exorbitant. However, it should taken note of that transaction between the parties is commercial one and plaintiff is entitled to a

reasonable interest from the defendants. In my view award of interest @ 10% per annum will meet the ends of justice. I am of the view that plaintiff

is entitled to recover interest @ 10% per annum on the amount of Rs.34,419.95 from the date of invoice till date of realisation.â€​

Counsel for the appellant/plaintiff argues that the trial court has erred in holding that the account was not an open mutual and current account

inasmuch as, the appellant/plaintiff in its plaint had pleaded in paras 8 and 9 that the account maintained by the appellant/plaintiff of the

respondents/defendants was an open mutual and current account. Â I however cannot agree with this because in paras 8 and 9 of the plaint, there is

no averment that the account maintained between the parties is an open mutual and current account.

Paras 8 and 9 of the plaint which are relied upon on behalf of the appellant/plaintiff read as under:-

“8. The last purchase made by the Defendants from the Plaintiff was vide Invoice dated 30.10.2001 and the last „on account‟ payment made by

the Defendants was on 10th September, 2001.

That the Plaintiff has been maintaining books of accounts in regular course of their business with respect to the bills raised upon the Defendants and

the „on account‟ payment received from them.â€​

In my opinion, even if there was an averment in the plaint that the account maintained by the appellant/plaintiff of the respondents/defendants was

an open mutual and current account, it has still to be seen that whether in fact the account which is maintained by the appellant/plaintiff of the

respondents/defendants Ex.PW1/8 is an open mutual and current account. In law, an account can be an open mutual and current account under

Article 1 of the Limitation Act only if there are shifting balances or independent obligations. The aspect of there existing shifting balances or

independent obligations is sine qua non in view of the judgments of the Supreme Court in the cases of Hindustan Forest Company Vs. Lal Chand &

Others, AIR 1959 SC 1349 and Kesharichand Jaisukhal Vs. Shillong Banking Corporation AIR 1965 SC 1711. I have applied the ratios of both these

judgments in the recent judgment dated 25.7.2017 in RSA No.85/2016 titled as ICICI Bank Ltd. Vs. Mohd. Zaheen and the relevant paras of this

judgment are paras 7 to 11 and these paras read as under:-

“7. The facts of the case are that the appellant/plaintiff filed the subject suit for recovery of Rs.2,57,601.67/- against the respondent/defendant on

account of the respondent/defendant having availed the overdraft facility in the current account maintained by the respondent/defendant with the

appellant/plaintiff/bank. Admittedly, the last entry in the overdraft account whereby overdraft facility was availed was on 22.2.2011. Suit was filed on

29.8.2014 and hence the suit was held to be time barred having been filed three years after 22.2.2011.

The issue argued on behalf of the appellant before this Court, and as reflected from the order dated 22.3.2016 passed by the learned Single Judge

of this Court while issuing notice in this RSA was that Article 1 of the Limitation Act, 1963 applies and limitation will be counted from the close of the

year in which the last item of transaction is admitted or proved. Â It was accordingly argued that the courts below have wrongly dismissed the suit as

time barred by applying Articles 19 and 21 of the Schedule of the Limitation Act.

In my opinion to a simple overdraft account Article 1 of the Limitation Act does not apply because in an overdraft account there is no mutuality of

transactions i.e there are transactions which only create obligations on one side with the other entries being only towards complete or partial discharge

of such obligations. For Article 1 of the Limitation Act to apply there has to be mutuality of obligations and not one sided obligations. This has been

held by the Supreme Court in the judgment in the case of Hindustan Forest Company Vs. Lal Chand & Others, AIR 1959 SC 1349, and relevant

paras 7 to 10 of which judgment read as under:-

“7. 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, may be referred to. There a company had beenadvancing monies by way of loans to the

proprietor of a tea estateand the proprietor had been sending tea to the company for sale andrealisation 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 ofreciprocal 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 independentobligations on the other and not merely transactions which createobligations on one side, those on the

other being merely complete orpartial discharges of such obligations. It is further clear that goods aswell as money may be sent by way of payment.

We have therefore tosee whether under the deed the tea, sent by the defendant to theplaintiff for sale, was sent merely by way of discharge of

thedefendant's debt or whether it was sent in the course of dealingsdesigned to create a credit to the defendant as the owner of the teasold, 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 companyhad advanced a certain amounts of money to the plaintiffs for thesupply of grains.

This excludes the question of monthly payments being made to the plaintiffs. The plaintiffs having received a certainamount of money, they became

debtors to the defendant company tothis extent, and when the supplies exceeded Rs. 13,000 the defendantcompany became debtors to the plaintiff and

later on when again theplaintiff's supplies exceeded the amount paid to them, the defendantsagain became the debtors. This would show that there

werereciprocity of dealings and transactions on each side creating independent obligations on the other.

The reasoning is clearly erroneous. On the facts stated by thelearned Judges there was no reciprocity of dealings; there were noindependent

obligations. What in fact had happened was that thesellers had undertaken to make delivery of goods and the buyer hadagreed 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 theobligation created in the buyer by the deliveries made to it to pay

theprice of the goods delivered and did not create any obligation on thesellers 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 underthe

contract. It was paid under the terms of the contract whichwas to buy goods and pay for them. It did not itself create anyobligation on the sellers in

favour of the buyer; it was notintended to be and did not amount to an independent transactiondetached 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 paidin 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.â€​     (emphasis added)Â

Similar was the view of the Supreme Court in the case of Kesharichand Jaisukhal Vs. Shillong Banking Corporation AIR 1965 SC 1711, where

however in the facts of the case Article 1 of the Limitation Act was held to apply on account of reciprocal obligations existing because in the

overdraft account there were also deposits which were made by the customer and which thus created independent obligations to repay the amount of

cash deposits and also on account of the cheques, hundis and drafts deposited for collection. The ratio in the case of Hindustan Forest Company

(supra) was however reiterated in Shillong Banking Corporation’s case (supra) that there is required existence of mutual dealings between the

parties. The relevant paras of the judgment in the case of Shillong Banking Corporation (supra) are paras 10 to 12, and these paras read as under:-

“10. The next point in issue is whether the proceedings are governed by Art. 85 of the Indian Limitation Act, 1908, and if so, whether the suit is

barred by limitation. The argument before us proceeded on the footing that an application under s. 45(D) of the Banking Companies Act is governed

by the Indian Limitation Act, and we must decide this case on that footing. But we express no opinion one way or the other on the question of the

applicability of the Indian Limitation Act to an application under s. 45(D). Now, Art. 85 of the Indian Limitation Act, 1908 provides that the period of

limitation for the balance due on a mutual, open and current account, where there have been reciprocal demands between the parties is three years

from the close of the year in which the last item admitted or proved is entered in the account; such year to be computed as in the account. It is not

disputed that the account between the parties was at all times an open and current one. The dispute is whether it was mutual during the relevant

period.

Now in the leading case of Hirada Basappa v. Gadigi Muddappa, Holloway, Acting C.J. observed:

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.

These observations were followed and applied in Tea Financing Syndicate Ltd. v. Chandrakamal Bezbaruah and Monotosh K. Chatterjee v. Central

Calcutta Bank Ltd., and the first mentioned Calcutta case was approved by this Court in Hindustan Forest Company v. Lal Chand, Holloway, Acting

C.J. laid down the test of mutuality on a construction of s. 8 of Act XIV of 1859, though that section did not contain the words ""where there have

been reciprocal demands, between the parties"". The addition of those words in the corresponding Art. 87 of Act IX of 1871, Art. 85 of Act XV of

1877 and Art. 85 of the Act of 1908 adopts and emphasizes the test of mutuality laid down in the Madras case.

In the instant case, there were mutual dealings betweenthe parties. The respondent Bank gave loans on overdrafts, andthe appellant made

deposits. The loans by the respondentcreated obligations on the appellant to repay them. Therespondent was under independent obligations to repay

theamount of the cash deposits and to account for the cheques,hundis and drafts deposited for collection. There were thustransactions on each side

creating independent obligations onthe other, and both sets of transactions were entered in the sameaccount. The deposits made by the appellant were

not merelycomplete or partial discharges of its obligations to therespondent. There were shifting balances; on many occasions the balance was in

favour of the appellant and on many other occasions, the balance was in favour of the respondent. There were reciprocal demands between the

parties, and the account was mutual. This mutual account was fairly active up to June 25, 1947. It is not shown that the account ceased to be mutual

thereafter. The parties contemplated the possibility of mutual dealings in future. The mutual account continued until December 29, 1950 when the last

entry in the account was made. It is conceded on behalf of the appellant that if the account was mutual and continued to be so until December 29,

1950, the suit is not barred by limitation, having regard to s. 45(O) of the Banking Companies Act. The Courts below, therefore, rightly answered issue

No. 1 in the negative.â€​     (underlining added)Â

 In the present case, it is seen that there is no mutuality of obligations and transactions are one sided only being in the nature of grant of

overdraft by the appellant/plaintiff/bank to the respondent/defendant and therefore any payment by the respondent/defendant is only towards

discharge of the obligation created in favour of the appellant/plaintiff/bank. There are no transactions on each side creating independent obligations

because there is no obligation of the appellant/bank towards the respondent/defendant. Therefore, Article 1 of the Limitation Act cannot come to aid

of the appellant/bank. Suit, therefore, filed on 29.8.2014 was barred by limitation on account of the last overdraft facility being availed on 22.2.2011

and on which date will arise the balance due in the overdraft account in favour of the appellant/bank and against the respondent/defendant.â€​

On examination of the statement of account Ex.PW1/8, it is seen that there is only one relationship between the parties, i.e. the appellant/plaintiff as

seller and the respondents/defendants as suppliers/dealers, and there are therefore no independent obligations because there is only one relationship.

Statement of account Ex.PW1/8 also does not show shifting balances of any existing credits in favour of the appellant/plaintiff and sometimes debits

against the appellant/plaintiff on account of excess payments having been made by the respondents/defendants to the appellant/plaintiff. Therefore,

once there are no shifting balances, the statement of accounts Ex.PW1/8 cannot be said to be an open mutual and current account. Â

There is therefore no merit in the appeal. Dismissed.