State of Tamil Nadu vs S. Alagirisubramanian Chettiar

The defendant in 0. S. 434 of 1977, District Munsif''s Court, Madurai town, is the appellant in this second appeal. That suit was laid by the

respondent herein praying for the relief of rendition of accounts by the appellant The circumstances giving rise to the second appeal are as follows.

The appellant appointed the respondent as an agent for procurement of paddy and rice and also as a hulling agent and the respondent had to

purchase paddy from the producers with his own money and after converting the paddy into rice, supply the some to the appellant or as directed

by it. The work of hulling agency consisted of hulling for the appellant paddy and supply rice as. directed by it. Agreements in the prescribed forms

were executed by the respondent in favour of the appellant and security deposit was, also furnished. According to the respondent, in the Kuruvai

season in 1966, he purchased paddy and converted it into rice and supplied to the Government, besides converting paddy supplied by the

Government and delivering the same to it. The respondent claimed that, in respect of these transactions, the appellant had to pay him large sums of

money, besides hulling charges, commission profit and return of security deposit etc. The respondent also, stated that suits in O. S. 395 of 1969

and SC I l4 of 1970 were filed recovery of certain amounts from the appellant and O.S. 395 of 1969 was dismissed while S.C. 114 of 1970 was

decreed. A notice was sent by the appellant to the respondent demanding a sum of Rest. 2,12,803.43, under the provision of the Revenue

Recovery Act, and the reopen, the respondent instituted O.S. 138 of 1977 District Munsif Court, Madurai town for an injunction restraining the

appellant from taking further steps on the notice issued under the provisions of the Revenue Recovery Act. The respondent, though an agent,

claimed that he is entitled to call upon the appellant, the principal, to render a true and proper account for all the transactions between the

respondent and the appellant. It was under these circumstances, that the respondents instituted the suit praying for a preliminary decree directing

the appellant to render accounts to the respondent and also to pass a final decree after the taking of such accounts by the appointments of a

Commissioner.

In the written statement filed by the appellant, while admitting that the respondent was appointed as a procuring and hulling agent of the

appellant, it contended that the respondent during 1966-67, procured paddy and rice in Thanjavur Dt. on account of the appellant, but moved. the

same to Dindigul for distribution to retailers and similarly procured paddy in Nilakottai taluk on his own private money and though the respondent

was to supply to the godown as per the directions of the Civil Supplies officials, he failed to so supply and the respondent also did not render any

account relating to the transactions despite specific directions. The appellant also put forth a plea that on verification of the records available with it,

the respondent owed a sum of Rs. 2,12,803.43 towards the costs of the short supplies and resultant loss and to recover this amount a notice was

sent. The right of the respondent to demand accounts of the appellant either in law or in equity was denied. Referring to the institution of the suit in

O. S. 395 of 1969, by the respondent and the dismissal thereof, the appellant also pleaded that the respondent is estopped from filing a suit against

the respondent for rendition of accounts. An objection that the Court had no jurisdiction to entertain the suit was also raised yet another objection

that as the transactions related to 1966-1967, the suit instituted on 66-1977 was, barred by limitation was also raised.

Before the trial court on behalf of the respondent, Exs. A-1 to A-51, were marked and no oral evidence, was let in, while, on behalf of he

appellant, Exs. B-1 to B-54 were filed '' and D. W. I gave evidence. On. a consideration of the evidence let in the trial court found that though the

jural relationship between the respondent and the appellant was that of agent and principle, the respondent had to ''maintain the accounts in

''respect of. the transactions and was also in possession of the accounts and therefore not entitled to maintain the suit for rendition of accounts

against the principal viz, the appellant herein. Considering the plea of limitation raised by the appellant, the trial Court found that Art. 113 of the

Limitation Act, 1963, would apply and in view of the prior legal proceedings taken by the respondent, the suit was barred by limitation. It was also

further found by the trial court that the suit is not barred under O. 11, R. 2 C. P. C. and the respondent is not estopped from instituting the suit. On

the aforesaid conclusions, the trial Court dismissed the suit. Aggrieved by this, the respondent preferred an appeal in A. S. 92 of 1978 to the Sub

Court, Madurai. The learned Subordinate Judge differed from the conclusions arrived at by the trial court and found that the suit at the instance of

the respondent against the appellant for rendition of accounts is maintainable, that the suit was also filed in time and the institution of the prior suits

would not operate either as res judicata or bar the respondent under O. 11 R. 2 C.P.C. from claiming the relief of rendition of accounts and on

these conclusions, the lower appellate Court granted a preliminary decree for rendition of accounts in favor of the respondent and against the

appellant. It is the correctness of this that is challenged in this second appeal.

Learned Government Advocate appearing on behalf of the appellant first contended that the suit instituted by the respondent, agent of the

appellant, was not maintainable, as the respondent had not established any exceptional circumstance under which such a suit could be entertained.

Learned counsel further submitted that lower appellate Court has not considered the question whether the respondent had clearly established by

evidence that the accounts, which he was, obliged to maintain, had been lost in the circumstances mentioned by him and without rendering clear

finding that the respondent was not possessed of the accounts, the suit ought not to have been held to be maintainable. On the other hand. Mr.

S.Gopalaratnam, learned counsel for the respondent, submitted that the respondent had made out that he was not in possession of the accounts

relating to the transactions entered into by the respondent in his capacity as agent of the appellant and therefore the suit was rightly held to be

maintainable. Reliance was also placed on the decision in Narandas Morardas Gaziwala and Others Vs. S.P. Am. Papammal and Another, .

There is no dispute that the respondent was appointed as the agent of the appellant for procuring, purchasing, selling paddy and converting it

and supplying rice as per the directions of the appellant for a period of three years, 1965, 1966 and 1967. Though agreements for the years 1965

and 1966 alone have been filed as Exs. B-4 and B-5, it is now common ground that the respondent was appointed as agent even for 1967. Under

the agreement, the respondent has been entrusted with the responsibility of transporting paddy procuring on Government account, hulling it and

delivering the out-turn as prescribed either to the State or to the individuals or institutions or dealers or as per the directions of the officers of the

Government. The respondent was also considered the agent to procure paddy requisitioned by the Government from time to time. The respondent

was responsible for the loss in handling storing, transporting while disposing of, etc The duty to maintain accounts as per the Madras Paddy

Maximum Price Order, 1964 and file returns and maintain registers and accounts under the Rice Mill Industry (Regulations) Act, Madras Food

Grains Dealers'' Licence Order, 1964 etc. was also that of the respondent. The Godown and the accounts of the respondent were subject to the

inspection by the appellant''s officials and the agency was liable to be terminated or cancelled without notice for violation of any of the conditions in

the agreement or the relevant rules or orders etc. Provision was also made for taking up of penal action against the respondent herein and the

respondent was directed to provide security deposit subject to forfeiture, for violation of conditions and specific provision was also made for

recovery of any amount due from the respondent for resorting to the provisions of the Revenue Recovery Act. There is no dispute between, the

parties that the agency in favour of the respondent for 3 years in question, viz., 1965, 1966 and 1967, was subject to the aforesaid terms and

conditions. The respondent maintained that though for purposes of implementing the terms of the agreement under which he was constituted agent,

he had taken a rice mill and had also been maintaining accounts in respect of the transactions between him and the appellant, the mill was later

taken possession of forcibly by the proprietor Govindarajulu Naidu and at that time, the accounts, which had, beer, kept in the mill premises were

looted by ,Govindarajulu Naidu and therefore though an agent. the suit for rendition of accounts under the circumstance of the case as against the

principal, -viz., the appellant herein would be. the question is whether such a suit would lie.

Under See. 213 of the Indian Contract Act, it is provided that the agent is bound to render proper accounts to his principal on demand. There is

no provision in the said Act enabling an agent to institute a suit for accounts against the principal. Whatever might have been the earlier views

entertained regarding the maintainability of a suit by an agent against the principal, the Supreme Court in Narandas Morardas Gaziwala and Others

Vs. S.P. Am. Papammal and Another, , laid down that the provisions of the Indian Contract Act are not exhaustive in this regard and, that the right

of an agent to sue the principal for accounts is an equitable right arising under special circumstances. In this connection, the Supreme Court pointed

out that one of the special circumstances rendering it equitable that the principal should account to the agent arose in a case where all the accounts

are in the possession of the principal and the agent does not possess accounts at all to enable him to determine the claim of the agent for

commission against his principal. Presumably, relying upon this exceptional circumstance, the respondent had laid the suit against the appellant for

rendition of accounts on the ground that his accounts had been lost when the mill premises were forcibly taken possession of by its proprietor,

Govindarajalu Naidu. However, the respondent had not made any attempt to establish by reliable and acceptable documentary evidence, that the

accounts maintained by him had been lost at the time when Govindarajulu Naidu took possession of the premises from him forcibly. If, under the,

terms of the agreement appointing the respondent as the agent of the appellant, the respondent was obliged to maintain accounts, records, etc. and

had also maintained them, but lost them from the mill premises, the respondent is not likely to have kept quiet, it would have taken positive steps to

recover possession of the accounts stated to have been lost. Unfortunately, there is no evidence of, any such step having been taken by the

respondent after the alleged loss of the accounts and the records to recover the same. In the ordinary course, the respondent should have called

upon the owner of the rice mill, who forcibly took possession of the same, at least by notice to return the account books and other records taken

by him. The attention of the Court has not been drawn to any such notice. The respondent with a view to get back the accounts and other records,

would have resorted to some proceedings at least before the civil or criminal court. He should at least. have laid a complaint with the police before

a Magistrate. No such evidence is forthcoming Likewise; the respond should have taken some proceedings before the civil court for recovery of

the account books and other records as well as the mill premises from which be is stated to have been dispossessed wrongfully, but there is no

evidence that any such proceedings had been taken. On the evidence, the respondent has not made out that the account book and other records

are not with him and that would enable hit., to maintain the suit for accounts against the principal. The lower appellate Court was persuaded to I

pronounce in favor of the maintainability of the suit only on the fixing that the respondent had established one loss of the account books and other

records. As pointed out earlier, there is absolutely no reliable or acceptable evidence in that regard. In para 12 of the judgment, the lower

appellate Court has stated that though the responden''t took the stand that the accounts were kept in the premises of the mill and it was looted by

Govindarajulu Naidu, that was not established by him properly before a criminal court or civil court, but that had been his consistent case. Again in

para 19 of its judgment, the lower appellate Court has observed that evidence shows that the appellant instituted criminal and civil actions. The

appellant instituted criminal and civil actions. The appellate court has also proceeded to state that where the respondent had been contending for a

long time that he had lost the accounts, It will be futile to call for the records from the respondent. This approach of the lower appellate Court is

erroneous, for the institution of a suit by the agent against the principal for rendition of accounts is an equitable right available only in certain

exceptional circumstances, and, if the existence of those circumstances are not established, then a such a right would not be available.

Unfortunately, this had been lost sight of by the lower appellate Court. It took it for granted that the respondent instituted criminal and civil actions.

There is absolutely no documentary evidence to. show the institution of civil proceedings or launching of criminal proceedings with reference to the

loss of accounts and records from the mil premises, as claimed by the respondent. The circumstance that the respondent has been consistent in his

case regarding the loss of the accounts, is not proof of such loss. Consistency in a particular stand is not necessarily proof of such a stand. Learned

counsel for the respondent was called upon to point out to any evidence to show that some proceedings were taken by the respondent with

reference to the so called loss of accounts and records from the mill premises; but he was not able to. The lower appellate Court was therefore in

error in having found that the respondent had established the loss of accounts rendering the suit instituted by the respondent against the appellant

maintainable, as if an exceptional circumstances for countenancing such a suit. had been established.

Learned counsel for the appellant next contended that even on the assumption that Art. 113 of the Limitation Act, 113, would apply, the right to

sue accrued in favour of the respondent immediately after the termination of the period, for which the respondent was appointed as an agent, and,

therefore, the suit instituted on 6-6-1977, was clearly barred, on the other hand, learned counsel for the respondent submitted that the cause of

action for the institution of the suit accrued only when the claim of the respondent was, repudiated some time in September 1976 by the issue of Ex

A-1 and therefore the suit instituted in 1977 would be well within time.

That Art. 113 of the Limitation Act. 1963 would apply on the facts of the present case is not in dispute. The period of limitation prescribed

under Art. 113 is three years from the date when the right to sue accrues. The question is, when such a right to demand accounts against the

appellant accrued in favour of the respondent? As noticed earlier it is common ground that the agency of the respondent stood terminated by the

end of 1967 by efflux of time. In other words, the termination of the contract of agency in favour of the respondent took place by the end of 1967

and the rights of parties ordinarily had to be decided as on that date, especially when the entire purpose of appointment of the respondent as a

procuring hulling and supplying agent, had by then come to an end. Thus, the mutual rights and liabilities of the parties for purposes of claims

against each other arose on the clay when the contract of agency was terminated by efflux of time. The circumstance that there was some

correspondence would not, in my view, have the effect of postponing the accrual of the right to sue. In other words, on the termination of the

agency of the respondent by efflux of time by the end of 1967, the right to sue accrued and such a right should have been enforced within three

years from the date of such accrual, viz.. Wore 1970 and the suit having been instituted almost every years later, was barred. The lower appellate

Court however was of the view that the right to sue accrued only when the demand of the respondent was repudiated. On the facts of this case,

and as will be presently seen, there is no question of any repudiation giving rise to an accrual of right in favour of the respondent to institute the suit

for accounts. The agency in favour of the respondent was for a fixed period viz., till the end of 1967 and when it terminated by efflux of time. in

December 1967, rights accrued in favour of the parties, viz., toe principal and the agent and there is no question of any repudiation of that right and

the right accruing only thereafter. Even the respondent had considered in 1969 and 1970 that he had enforceable legal rights arising out of the

agency, which terminated by the end of December 1967, as could be seen from the two proceedings instituted by him. Ex. B-1 is the plaint in O.S.

395 of 1969 signed by the respondent on 19-11-1969. The '' claim made therein is for the recovery of a sum of Rs. 16,000, against the appellant.

That amount represents the value of rice bags stated to have been supplied by the respondent to the Government Godown as per the bills dated

19-11-1966, 25-11-1966, 26-11-1966 and 28-11-1966, together with subsequent interest. This suit filed by the respondent in 1969 has been

dismissed by the Sub Court, Madurai under Ex. A-17 dated 18-4-1973. It is thus seen that with reference to one of the transactions entered into

by the respondent during the subsistence of the agency, the respondent had taken steps even in 1969 to recover the amounts due from the

appellant, though the respondent was unsuccessful. This could only be on the footing that the right to sue for the recovery of the amounts alleged to

be due arose even according to the respondent immediately after the termination of the agency by the end of December 1967, by efflux of time.

Similarly, it is seen from Ex.B49 that the respondent had instituted S.C. 114 of 1970 Sub Court, Madurai,, against the appellant for recovery of a

sum of Rs, 18-550 stated to be bonus paid by the respondent to the producers. The plaint had been verified by the respondent on 2-1-1970 and

filed before the Sub Court on the same day. Finally on 14 -7-1975 that suit was decreed as could be seen from Ex. A-13. This again is clear

evidence that even according to the respondent the right to recover bonus paid with reference to the transactions, which formed the subject matter

of the agency, arose even in January 1970. The transactions sued upon under Exs. B-1 and B-49 and adjudicated by Exs. A-13 and A-17 show

that even with reference to the transactions, which had taken place during the subsistence of the agency, the respondent had proceeded to enforce

his legal rights on the footing that the cause of action had arisen dehors; any repudiation of his claim, but within three years after the termination of

the agency. If even according to the respondent, the rights arising out of transactions during the subsistence of the agency could be enforced by the

institution of proceedings referred to above within three years from the date termination of the agency, there is absolutely, no reason or justification

for treating a claim for rendition of accounts against the appellant as a right which had not accrued and had no become enforceable within the same

period When the respondent had thought fit to sue for reliefs arising out of transactions, which took place during the subsistence of the agency,

within three years after it termination, there was no impediment in hi way for seeking even the relief of rendition o accounts, as even according to

the respondent, the cause of action for recorder. of amounts relating to the transactions had arisen within three years after the termination of the

agency by the end of December 1967. On the facts and the circumstances of the case, there is absolutely no justification for giving the benefit of an

extended period of limitation to the respondent from the date of repudiation, as if only such repudiation a right to the respondent to sue for

accounts. The lower appellate Court was therefore in error in holding that the suit instituted on 6-61977 was in time.

Even on the question of the applicability of O.11 R.2(3) C.P.C., the respondent ought to have been non-suited. The respondent had taken

proceedings under Exs. B-I and B-49 for the recovery of certain amounts against the appellant even in 1969 and 1970. These claims are based

only on the footing of the agency between the respondent and the appellant. Based on the same, the respondent was also entitled to seek the relief

of rendition of accounts against the appellant, subject, of course, to the respondent establishing that he could claim the benefit of exceptional

circumstances to maintain such an action against the appellant. However, the respondent did not sue for the relief of rendition of accounts against

the appellant even then. In other words, the respondent had omitted to seek the relief of rendition of accounts against the appellant and such

omission was not with the leave of court in view of the omission of the respondent to sue for the relief of rendition of accounts, which was available

to him even then, he cannot afterwards sue for the relief so omitted in view of O. 11 R. 2(3) C.P.C. The courts below were therefore in error in

holding that the respondent would not be precluded from claiming the relief of accounts against the appellant.

Thus, on a consideration of the facts and evidence the court below was in error in holding that the suit is maintainable and that it is also not

barred by limitation and further that the provisions of O. 11 R. 20) C.P.C. would not preclude the respondent from claiming the relief of rendition

of accounts: Consequently, the second appeal is allowed; the judgment and decree of the lower appellate Court are set aside and those of the trial

court will stand restored. There will be however no order as to costs.

Appeal allowed.