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1934 Supreme(SC) 25
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD BLANESBURGH, LORD WRIGHT, AND SIR LANCELOT SANDERSON.
BISHUN CHAND FIRM - Appellant
Versus
GIRDHARILAL (DEFENDANTS) - Respondents
On appeal from the High Court at Allahabad.
Decided On : May. 14. 1934.
Solicitors for appellants:Hy. S. L. Polak & Co. Solicitor for respondents: R. S. Nehra.
An "account stated" under Article 64 of the Indian Limitation Act does not require mutual cross-claims of different natures; a mutual agreement on a balance struck from credit and debit entries in a purely financial transaction creates a new debt and a new cause of action.
Headnote:(A) Indian Limitation Act, 1908 - Article 64 - Account Stated - Whether an account stated requires mutual or reciprocal demands to fall within the scope of Article 64 - A settlement of accounts where credit and debit entries are agreed upon and a balance is struck constitutes an account stated, even if the transaction is purely financial, such as loans and repayments, and does not involve cross-claims of different natures - Such a transaction is bilateral, creating a new debt and a new cause of action based on mutual consideration, as the parties agree to the balance as the final amount due.
(B) Indian Limitation Act, 1908 - Article 64 - Effect of statute-barred items - Where an account has been settled, it is immaterial that some of the items included in the settlement were statute-barred; the striking of a balance is evidence of an agreement that items be set off, leaving the case unaffected by the Statute of Limitations.
(C) Indian Contract Act, 1872 - Section 25(3) - Promise to pay - If a valid account stated is established, the court may find it unnecessary to determine whether the party is entitled to recover under a written promise to pay a time-barred debt.
Facts of the case:
A moneylending firm sued for a balance due based on an account stated and signed by the borrowers in the lender's ledger. The trial court decreed the suit, but the appellate court reversed it, holding that the transaction was unilateral (consisting only of loans and repayments) and thus did not constitute an "account stated" involving mutual demands as required by the limitation law.
Findings of Court:
The settlement in fact made between the parties, where the balance was struck and signed by the debtors after understanding the accounts, is upheld as a valid account stated.
Issues: Whether the term "account stated" in Article 64 of the Limitation Act applies only to cases involving mutual or reciprocal demands, or whether it extends to purely financial accounts consisting of advances and repayments where a balance is mutually agreed upon.
Ratio Decidendi: The essence of an account stated is not the character or origin of the items on either side, but the fact that there are cross items of account (credits and debits) which the parties mutually agree upon to strike a balance. This process creates a new debt and a new cause of action. The requirement of "mutual demands" does not necessitate different types of claims, but rather the bilateral agreement on the balance of credits and debits. This principle applies even to relationships like that between a banker and a customer, where one party may be continuously in debt, provided the balance is mutually stated and agreed.
Result: Appeal allowed with costs here and below, and the decree of the trial court restored.
Legal Category Hierarchy
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civil law
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law of limitation
- account stated
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contract law
- consideration
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law of limitation
Judgement
Appeal (No. 112 of 1932) from a decree of the High Court (January 19, 1932), reversing a decree of the Subordinate Judge of Shahjahanpur (September 14, 1927).
The appellant firm, who were moneylenders and had had dealings with the respondents for many years, sued them on December 29, 1926, claiming Rs. 16,043, as the amount due upon an account stated on September 26, 1925, and interest since due. The only question arising upon the appeal was whether the suit was barred by limitation.
The facts appear from the judgment of the Judicial Committee.
The High Court (Mukerji and Bennet JJ.), reversing the decree of the trial judge, dismissed the suit on the ground that it was barred. The learned judges, following Ganga Prasad v. Ram Dayal (( 1901) I. L.
R. 23 A. 502.), held that art. 64 of the Indian Limitation Act, 1908, applied only where the account stated consisted of mutual demands. They were also of opinion that there was no express promise to pay so as to make s. 25, sub-s. 3 of the Indian Contract Act, 1872, applicable. The judgment is reported at I. L. R. 54 A. 506.
1934. Dunne K.C. and Hyam for the appellants. The Indian Limitation Act, 1908, Sch. I, art. 64, applied to the suit, and therefore it was not barred. That article applies although the account did not consist of mutual or reciprocal demands. If the application of the article was limited in that manner it would be superfluous having regard to art. 85. In the recent judgment of the Board in Siqueira v. Noronha ([ 1934] A. C. 332.), where the account consisted of sums due to the plaintiff for salary and drawings by him, it was held that there was an account stated resulting in a contract for good consideration to pay the balance found due. In that case the Indian Limitation Act, 1877, the material provisions of which were the same as those of the Act of 1908, applied. As appears from the judgment in Raj Narain Rao v. Ram Sarup (( 1929) I. L. R. 52 A. 480, 486.), there has been a conflict of opinion in India as to what constitutes an account stated for the purpose of art. 64. In Ganga Prasad v. Ram Dayal (( 1901) I. L. R. 23 A. 502.), followed in the present case, it has been held that art. 64 applies only where the account deals with mutual demands; the same view has been taken in several other cases. In Manjunatha Kamti v. Devamma (( 1902) I. L. R. 36 M.186.), and apparently in Kahan Chand-Dula Ram v. Day a Ram-Amrit Lal (( 1928) I. L. R. 10 Lah. 745.), the contrary was held. It is submitted that the view that art. 64 applies only where there are mutual demands is inconsistent with the judgment of the Board in Siqueiras case. (1) It was not shown in the present case that all the items of the account were barred at its date; it is to be inferred from the facts that the respondents had made a payment within the statutory period. Even if art. 64 does not apply there was on the account being taken a promise in writing by the respondents to pay the balance found due, so as to make s. 25, sub-s. 3 of the Indian Contract Act, 1872, applicable.
Abdul Majid for the respondents. What took place in September, 1925, may have amounted to an " account stated " as that expression is used in English pleading Bullen and Leake, Precedents of Pleadings, 7th ed., p. 49 ; but it was not such a statement of accounts as is referred to in art. 64. The article does not in terms refer to " a suit on an account stated " but uses language showing that it refers to a settlement of cross-claims ; the legislature had in mind the language of Blackburn J. in Lay cock v. Pickles . (( 1863) 4 B. & S. 497.) There has been a long series of decisions in India dating from Nahanibai v. Nathu Bhau (( 1883) I. L. R. 7 B. 414.), or earlier, that the article, or the corresponding article in earlier Acts, applies only where there were mutual or reciprocal demands. There is little Indian authority to the contrary. What took place here was merely an acknowledgment in writing which was ineffective
