V.K. Abraham vs N.K. Abraham

Sethuraman, J.—The defendant in O. S. No. 91 of 19VO in the Court of the Subordinate Judge, Padmanabhapuram, is the appellant. The

plaintiff is a rubber dealer in Kulasekharam. The defendant is the owner of a rubber estate called the Cross Field Plantation at Kaliel. From the

year 1963 the defendant was supplying sheet rubber as well as scrap rubber to the plaintiff from time to time. The plaintiff was also supplying

estate stores and other materials. There were in addition cash transactions between the parties. The last of the dealings between the plaintiff and the

defendant was on 23rd July 1966. The defendant did not thereafter supply any rubber. The account of the defendant stood at a debit of, or

overdrawn on that date by a sum of Rs. 46,505.67. The plaintiff filed the present suit for reco., very of this sum along with interest at 12 per cent

per annum, after giving credit for a sum of Rs. 8,494.20 being the amount due to the defendant''s father M. K. Kuriakose on account of the price

of scrap rubber supplied by him to the plaintiff. This credit entry was made on 20-4-1968. The present suit was for recovery of Rs. 58,660

including interest and future interest and costs.

The defendant in his written statement stated that how the amount of the opening balance of Rs. 8,306.05 was due to the plaintiff was not clear,

as the plaintiff had not produced the accounts for the year 1963-64, The defendant, therefore, reserved his right to file a detailed written statement

when the particulars for the said amount were furnished by the plaintiff but he did not do so even after those accounts were filed. According to the

defendant the plaintiff had not accounted for the price of the rubber properly and the plaintiff was not justified in adjusting the amount due to

Kuriakose in his account. The defendant denied liability to pay interest, There was also a plea that the suit was hopelessly barred by limitation.

On the pleadings the following issues were framed for trial -

Was a sum of Rs. 8,306.05 due from the defendant to the plaintiff as on 31-12-1965?

Has the defendant been paid the proper price for the rubber sold by him to the plaintiff ?

Has not the entire quantity of rubber sold by the defendant to the plaintiff accounted for ?

Was there a contract between the defendant and the plaintiff that the latter shall pay the price of rubber at the rate prevailing in the Cochin

auction or Cochin market ?

Was the store purchase dated 7-1-1966 on cash or on credit ?

Has the defendant received only one of the cash payments entered on 21-1-1966 and 22-1-1966?

Are the entries dated 31-1-1966 and 8-6-1966, by transfer of accounts from M. K, Kuriakose authorised and valid ?

Is the credit entry dated 20-4-1968 by transfer of accounts from M. K. Kuriakose made on the authorisation of the defendant or whether it is a

bogus entry only to save limitation ?

Is the interest claimed excessive ?

What is the amount, if any, due from the defendant to the plaintiff?

Reliefs and costs ?

Whether the plaint claim or any portion thereof is barred by limitation ?

The learned Subordinate Judge held on issue No. 1 that a sum of Rupees 8,306.05 was due to the plaintiff as an 31-12-1965. On issues Nos.

2, 3 and 4, he found that the plaintiff had credited in his account the entire quantity of rubber sold by the defendant to him and that there was no

agreement between the parties for payment of the price at the rate prevailing in Cochin auction. He held on Issues 5 and 6 that the estate stores

purchased by the defendant were only on credit and not for cash and that the defendant had received the amount of Rs. 1,500 each recorded in

the books on 21-1-1366 and 22-1-1966. On issues Nos. 6, 7 and 8, 9, the credit for the amount due to M. K. Kuriakose given in the plaintiff''s

books as against the defendant was considered to be proper and interest was also held to be payable. On the question of limitation raised in issue

No. 12, the learned Subordinate Judge held that the dealings between the parties were of open, current and mutual accounts and not merely credit

dealings creating obligations on one side and that the suit was within time as prescribed In Article 1 of the Limitation Act. Interest at 12 per cent

was held to be payable under issue No. 9. The defendant challenges the decree of the learned Subordinate Judge.

In the present appeal Mr. S. Padmanabhan, learned counsel for the appellant, took before us only three points viz.-

Whether the suit was barred by limitation ?

Whether the accounts were properly accepted as proving the transactions between the parties ? and

Whether the plaintiff was not entitled to any interest upto the date of the suit?

We shall consider each one of these points.

In the present case the only Article of the Limitation Act to be considered is Article 1, running as follows:

Description of suit. Period of limitation Time from which period begins to run.

Art. 1, For the balance due on a mutual, Three years. The close of the year in which the last

open and our rent account, where item Admitted or proved is entered

there have been reciprocal demands in the account; such year to be

between the parties, computed as in the account.

The suit in this case was filed on 23-12-1969. As indicated earlier, the last of the transactions was on 23-7-1966. If Article 1 were to apply, then

the accounts of the plaintiff having been closed at the end of the calendar year i.e., 31-12-1966, the period of limitation would end on 31-12-

196&. As the suit had been filed on 23-12-1969, it would be within time. The learned counsel for the appellant submitted that Article 1 cannot

apply to the present case, because there is no reference In the pleadings, except in para. 5 relating to the cause of action, to the accounts between

the parties being mutual, open and current. In para. 1 of the plaint there is a reference to the supply of rubber and also to the payments and to a

further fact that the defendant had overdrawn a sum of Rs. 46,505-67. The accounts appear in the schedule. The substance of the para. 1 read

with para. 5 of the schedule (plaint ?) does, In our opinion, indicate that the plaintiff filed the present suit on the basis of the dealings between the

parties being on a mutual, open and current account. We have to look at the substance of the pleadings and an undue emphasis should not be

made on the absence of use of particular expressions as if ritualistic repetition of those expressions would alone satisfy the requirements of law. The

defendant had notice of the nature of the plea taken in the plaint and that is how issue No. 12 came to be discussed in the trial court. As far as the

present case is concerned, the substance of the account being mutual, open and current is brought out in para. 1 read with para. 5 of the plaint. In

fact, the learned Subordinate Judge has not referred to any plea taken by the defendant in the court below about the plaint not having referred in

specific terms, except in para, 5, to the account being mutual, open and current. If such a plea had been taken, then it would have been possible

for the plaintiff to consider, if necessary, amendment of the plaint. In the absence of any such plea and having regard to the manner in which the trial

has gone on, we do not consider that the appellant was justified in complaining at this stage about the absence of specific averment of the account

being mutual, open and current.

We have now to consider the question whether the transaction between the plaintiff and the defendant can be said to fall within the category of a

mutual, open and current account described in Article 1 of the Limitation Act. In Hirada Basappa v. G. Mudappa, (1870) 6 Mad HCR 142, 144,

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 discharge of such obligations.

In Velu Pillai v. Ghouse Mahomed. ILR(1894) Mad 293, a Bench o� this Court adopted the above passage and held that an account

consisting of entries of payments made by one party in reduction of his debt to the other and of payments made by the latter on behalf of the

former party for the same purpose was not a mutual account within the meaning of Article 85. It was also held that a shifting balance was a test of

mutuality, but that its absence was not conclusive proof against mutuality. These decisions have formed the bedrock of the interpretation of Article

85 of the Limitation Act of 1908, in cases decided by this and other courts. In The Tea Financing Syndicate Ltd. Vs. Chandra Kamal Bez Barua, ,

a company advancing money by way of loans to the proprietor of a tea estate and the proprietor sending tea to the company for sale and

realisations of the price were involved in a litigation in which the proprietor of the tea estate sued for recovery of the balance of the advance made

after giving credit for the price realised from the sale of the tea. The question arose as to whether the case was one of reciprocal demands resulting

in the account between the parties being mutual so as to be governed by Article 85 of the Limitation Act. Rankin C. J. laid down at page 368 the

test to be applied for deciding the question in these words (at p. 368 of AIR) .

There can, I think, be no doubt that the requirement of reciprocal demands involves, as all the Indian cases have decided following Holloway Ag.

C. J. 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. It is further clear that goods as well as money may be sent by

way of payment. We have, therefore, to see whether under the deed the tea sent by the defendant to the plaintiff for sale, was sent merely by way

of discharge of the defendant''s debt or whether it was sent in the course of dealings designed to create a credit to the defendant as the owner of

the tea sold, which credit when brought into the account would operate by way of set-off to reduce the defendant''s liability.

This passage was adopted as laying down the correct law by the Supreme Court in the The Hindustan Forest Company Vs. Lal Chand and

Others, . Their Lordships pointed out that the observations of Rankin C. J. had never been dissented from in our courts. In the case before the

Supreme Court the parties had entered into an agreement for the supply of 5000 maunds of maize, 500 maunds of wheat and 1000 maunds of dal

at the rates and time, specified. A sum of Rs. 13,000 had been paid as advance. The goods were delivered and the buyer was also making

payments. The last delivery of the goods was made on 23-6-1947, and the suit was brought on 10-10-1950, for the balance of the price due. The

Supreme Court pointed out that what had happened was that the sellers had undertaken to make delivery of the goods and the buyer had agreed

to pay for them and had in part made payments in advance. There could be no question in such a case, in their Lordships'' view that the payments

had been made towards the price due and there were no independent obligations on the sellers in favour of the buyer. It was also observed that if

the sellers had failed to deliver the goods, they would have been liable to refund the moneys advanced and also for damages. But such liability

would then have arisen from the contract and not from the fact of the advances having been made and that the buyer could not recover the moneys

paid in advance. On the facts of that case, it was held that Article 115 of the Limitation Act applicable to Jammu and Kashmir corresponding to

Article 85 of the Indian Limitation Act, 1908, did not apply, The Supreme Court has again applied the test laid down by Holloway Ag. C. J. in a

later decision in Kesharichand Jaisukhal Vs. The Shillong Banking Corporation, .

Prior to the Supreme Court decision in The Hindustan Forest Company Vs. Lal Chand and Others, another case came before a Bench of this

court in L. Kesava Chettiar Vs. M.M. Ramanatha Mudaliar, in which the plaintiff, a wholesale merchant, carrying on business in yarn had dealings

with the defendant, a retailer, in the same business. The retailer was advancing substantial sums before supplies of yarn were made by the

wholesaler. Subsequent to October 1946, payments made by the retailer to the wholesaler were mostly in the nature of payment of price for the

yarn supplied. On 7-8-1947 there was a credit balance in favour of the retailer. But after a short period of two months the retailer had again to pay

further sums as against the supply of yarn. In the suit filed by the wholesaler, the question of the applicability of Article 85 of the Indian Limitation

Act, 1908, came up for consideration. The following propositions were set out in that case-

To constitute a mutual account between two parties, the essence of the transactions should be looked at in order to find out if independent

obligations arise on both sides, resulting in possibility of reciprocal demands, even though the transactions may relate to the same commodity or to

the same kind of business.

Before deciding whether a particular course of dealings is a continuous course of transactions independent of the other transactions involved in

the case, the number of dealings do not count to decide whether the counter-claim arises upon casual transactions. The real import of the casual

transactions should be taken note of in deciding the question whether they give rise to independent obligations or whether they are merely a mode

of liquidation of the obligation already undertaken by the party.

A shifting balance may, no doubt, be a test of mutuality, but its absence cannot be taken to be conclusive proof against mutuality. The real point

to be noticed is not whether balances actually shifted but whether the nature of the transactions was such that it was capable of giving rise to

shifting balances.

The absence of actual reciprocal demands would not matter, because the point to be considered is whether such demands were capable of

being made on the account by one party upon the other.

A learned single Judge of the Andhra Pradesh High Court in Anumukonda Anjaneyulu Vs. Agricultural Traders, has doubted the correctness of

this decision in the light of the decision of the Supreme Court in The Hindustan Forest Company Vs. Lal Chand and Others, . Whatever may be

the justification for this criticism, with reference to the conclusion on facts, we do not find that any one of the propositions extracted above is open

to question or is in conflict with any authority. We consider that these propositions do continue to be valid notwithstanding any doubt about the

correctness of the actual decision in that case.

We may note in passing that this court again applied the dictum of Holloway Ag. C. J. and followed the decision of the Supreme Court in The

Hindustan Forest Company Vs. Lal Chand and Others, in Gopal Chettiar v. Shanmuga Nadar and Bros. 1967 1 MLJ 163 : AIR 1967 Mad 360 .

Briefly stated in order that an account may be called a mutual, open and current account, there must be independent transactions resulting in

possibility of reciprocal demands and shifting balances. The entries should not be mere repayments of advances already received. The accounts

must be open and continuing. Examined in this light, we consider that the account between the plaintiff end the defendant here can be said to be a

mutual, open and current account. The plaintiff has been paying moneys from time to time as required by the defendant and the payments were not

actually advances against future supplies. The plaintiff has been supplying estate stores for which the defendant had to pay and these supplies were

not intended to square up even in part the value of rubber supplied. The defendant on his part was supplying the rubber to the plaintiff.

The defendant has been asking for amounts not necessarily as advance for the supply of rubber. For instance in Ex. A-54 dated 18-10-1965,

the defendant has asked for a sum of Rupees 10,000 being sent per bearer as he was urgently in need of that amount. He does not say that this

amount was needed as and by way of any advance or towards any particular supply of rubber. Similarly in Ex. A-129 the defendant had asked for

Carboyot formic acid'''', being sent per bearer. The plaintiff sent it and had to recover the amount due therefore. There are similar items of stores

required by the defendant for which indent was made to the plaintiff. There are certain other transactions in which the defendant has stated that the

amount could be adjusted against the rubber Lo be delivered. In one of the letters the defendant has acknowledged the receipt of some manure

and has asked for a sum of Rs. 2.000 being sent per bearer one Padmanabha Pillai. It was mentioned that this amount could be adjusted by next

week. He has also asked for another load of rubber mixture by 18th July and stated that the amount could be adjusted by two weeks. There were

repayments by the defendant in cash on 27-11-1904 and 24-12-1965. The correspondence and the accounts go to show that the transactions

here failing in those categories of rubber sales, estate store supplies, and loans are clearly independent transactions in the nature of a mutual open

and current account. The decision of the Court below that the suit is not barred by limitation is thus correct.

The second point taken by the learned counsel for the appellant was that the accounts themselves should not have been accepted without

examining the scribe and without any proof to show that the entries represented real transactions. For this purpose reliance was placed on Section

34 of the Indian Evidence Act and also some decisions to be noticed presently. Section 34 runs as follows-

Entries in books of account, regularly kept in the course of business are relevant whenever they refer to a matter into which the court ''has to

enquire, but such statements shall not alone be sufficient evidence to charge any person with liability.

The illustration appended to that provision runs as follows-

A sues B for Rs. 1,000 and shows entries in his account books showing B to be indebted to him to this amount The entries are relevant, but are

not sufficient, without other evidence, to prove the debt"".

The Supreme Court has pointed out in Chandradhar Goswami and Others Vs. The Gauhati Bank Ltd., .

The original entries alone u/s 34 of the Evidence Act would not be sufficient to charge any person with liability ... ... ... Therefore, where the

entries are not admitted it is the duty of the Bank if it relies on such entries to charge any person with liability, to produce evidence in support of the

entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence. But no

person can be charged with liability on the basis of mere entries whether the entries produced are the original entries or copies u/s 4 of the

Bankers'' Books Evidence Act.

In relation to the question of the standard of proof expected in a case like this, our attention was drawn to a few decisions of this court. In Yesu

Vadian v. Subba Nakker, 52 Ind Cas 704 : AIR 1919 Mad 132 it was held as follows (at p. 13(3 of AIR) --

S. 34 of the Evidence Act lays down that the entries in books of account, regularly kept in the course of business, are relevant, but such a

statement will not alone be sufficient to charge any person with liability, that merely means that the plaintiff cannot obtain a decree by merely

proving the existence of certain entries in his books of account, even though those books are shown to be kept in the regular course of business.

He will have to show further by some independent evidence that the entries represent real and honest transactions and that the moneys were paid

in accordance with those entries. The Legislature, however, does not require any particular form or kind of evidence in addition to entries in books

of account, and I take it that any relevant facts which can be treated as evidence within the meaning of the Evidence Act would be sufficient

corroboration of the evidence furnished by entries in the books of account, if true,

In Mathilda Sice and Another Vs. Fritz Gaebele and Others, it was observed as follows :--

There is no doubt that merely putting forward accounts is of no use whatever. They must be supported by some other evidence, which the court

believes ... ... ... I lake it that the law requires proof not only of account books generally but of each item, that is, in the interest of the person

producing the books, but with regard to admissions, i.e., entries against the producer''s own pecuniary interest, the law dispenses with all proof

save that the book has been kept by or under the authority of the producer.

In Sundararajulu Nadar v. Kuppamma alias Bhagirathi, 1936 Mad WN 472, a learned Judge of this court sitting singly observed as follows-

The entries in the account books do not prove themselves, they are at most when proved, corroborative evidence - See Babu Ganga prasad v.

Boboo Inderjit Singh, (1875) 23 Suth WR 390 and unless there is proof that the entitles represent real transactions, they will not suffice to charge

any person with liability thereunder.

The effect of the decisions is that the, account, books are not by themselves sufficient to charge any person with liability, that the plaintiff has to

show by some independent evidence that the entries in his books represented real and honest transactions and that the moneys paid or the

transactions took place in accordance with those entries.

In the present case, the plaintiff has examined himself as P. W. 1. He has spoken in substance to the transactions having taken place in the

manner recorded in the books. We do not coneider that there is any deficiency in the matter of corroboration of the entries in the books as

required by Section 34 of the Evidence Act. The defendant did not produce any books of account, which he admittedly maintained on some

pretext or other. The learned counsel for the appellant stated that the failure of the defendant to produce his books had absolutely no effect in a

case like tins. According to him, he can rely on the failure of the plaintiff to prove his case. Even on the footing that the defendant''s failure to

produce the books admittedly maintained has no significance, we consider that on the fact the plaintiff had established the correctness of his

account books and spoken to the reality of the entries and the transactions. The plaintiff was carrying on his business as an individual. Though

occasionally he may not have been present when some particular transactions took place, still there is no gainsaying the fact that he knew all the

transactions that took place between him and the defendant. His evidence, in our opinion, is satisfactory to establish the correctness of the entries

in his books. There is, therefore, no error committed by the learned Subordinate Judge in holding that the amount claimed by the plaintiff was due

to him.

The last point is regarding the liability of the defendant to pay interest on the amount due by him. The defendant has stated in his deposition as

D. W. 1 that there was no agreement to pay interest on the outstanding balance and that there was no practice also to charge interest. In cross-

examination he only says that he did not know whether there was business practice to pay interest on the outstanding upto 18 per cent. The plaintiff

in his deposition has stated that there was no agreement in writing for payment of interest and that he claimed the interest as per business custom.

The plaintiff has been charging interest at 12 per cent per annum at the close of each year, as against his other customers. The learned Subordinate

Judge in para. 21 of his judgment has catalogued the instances in which the plaintiff has charged interest. We also reminder it has been established

in the present case by the accounts maintained by the plaintiff himself and there is no evidence to the contrary. The charging of interest at 12 per

cent per annum cannot also be considered to be unreasonable or excessive. It may also be pointed out that the only issue on interest is Issue No. 9

running as follows-

Is the interest claimed excessive?

The liability to pay interest was thus not put in issue. The only question was about the rate of interest. The rate of interest at 12 per cent per annum

cannot be considered to be excessive. We do not, therefore, see any reason to interfere with the judgment of the learned Subordinate Judge on

this point also.

In the result, the appeal is dismissed with costs.