1965 (2) TMI 105 - SC - Indian Laws

Appeal dismissed, costs awarded. Suit not time-barred. Mutual account nature. Agent for collection. Dissenting opinion rejected.

The court dismissed the appeal with costs, finding that the suit was not barred by limitation under Article 85 of the Indian Limitation Act, 1908, due to ... - Issues Involved:1. Whether the suit is barred by limitation.2. Whether the respondent is bound to give credit to the appellant for the sum of Rs. 8,800.Detailed Analysis:Issue 1: LimitationThe primary question was whether the proceedings were governed by Article 85 of the Indian Limitation Act, 1908, which pertains to mutual, open, and current accounts with reciprocal demands between the parties. The appellant contended that the suit was barred by limitation.The court noted that Article 85 provides a three-year limitation period from the close of the year in which the last item admitted or proved is entered in the account. The account between the parties was acknowledged as open and current. The critical issue was whether it was mutual during the relevant period.The court referred to the leading case of Hirada Basappa v. Gadigi Muddappa, where it was established that mutuality requires transactions on each side creating independent obligations. The court found that the dealings between the appellant and the respondent were indeed mutual, as the respondent bank gave loans on overdrafts, and the appellant made deposits, creating independent obligations on both sides. The mutual account was active up to June 25, 1947, and continued until December 29, 1950, when the last entry was made. Therefore, the suit was not barred by limitation, and the court answered this issue in the negative.Issue 2: Credit for Rs. 8,800The appellant argued that the respondent, having credited the appellant's account with the amount of the two cheques on the Bharati Central Bank and having accepted the cheque on the Nath Bank on its own responsibility, should not be allowed to claim that it received the cheque as an agent of the appellant. The appellant also contended that the respondent acted negligently and breached its duty as the collecting agent.The court found that the two cheques on the Bharati Central Bank were entrusted to the respondent for collection. The respondent credited the appellant's account with the cheques' amount before they were cleared and debited the account when the cheque on the Nath Bank was dishonored. The respondent acted in good faith and accepted the cheque on its own responsibility, which was later ratified by the appellant.The respondent followed the appellant's instructions to accept a demand draft from the Bharati Central Bank in lieu of the cheque on the Nath Bank. The court held that the respondent acted as an agent for collection and did not breach its duties or act negligently. The respondent's actions were in line with the prevailing banking practices at Shillong. Therefore, the court concluded that the respondent was not bound to give credit to the appellant for the sum of Rs. 8,800 and answered this issue in the negative.Separate Judgment:Mudholkar, J., dissented from the majority opinion. He argued that the respondent, by accepting the demand draft on its own responsibility and seeking to be treated as a preferential creditor of the Bharati Central Bank, could not claim the amount from the appellant. He concluded that the respondent acted for itself and not as the appellant's agent once the cheques were credited to the appellant's account. Therefore, he held that the appellant's name should not be included in the list of the respondent's debtors and allowed the appeal with costs.Conclusion:In accordance with the majority opinion, the appeal was dismissed with costs. The court upheld the findings that the suit was not barred by limitation and that the respondent was not bound to give credit to the appellant for the sum of Rs. 8,800.