The central legal point established in the judgment is that for a transaction to fall under Art.85 of the Indian Limitation Act, it must satisfy the characteristics of a mutual, open, and current account, involving reciprocal demands and independent obligations on both sides.

1. The plaintiff, a Banking Company, is the appellant. The defendant borrowed money from the plaintiff from time to time. The suit which was for the balance due was filed more than 3 years after the date of the last transaction. The plaintiff's case was that the amount was due under a mutual, open and current account governed by Art.85 of the Indian Limitation Act. The defendant contended inter alia that the suit

was barred by limitation. The other contentions of the defendant are not material for the purpose of this second appeal. The trial court held that Art.85 was applicable and the plaintiff was given a decree as prayed for. On appeal it was held that the transaction would not fall under Art.85 and that the suit was barred by limitation. The appeal was therefore allowed, dismissing the suit.

2. The only point arising for decision is whether Art.85 of the Limitation Act is applicable. The last item of borrowing was on 31st March 1950 and the suit was instituted on 14-8-1953. If Art.85 is applicable the suit is within time, as the plaint was presented within 3 years of the last day of 1950.

3. In deciding the nature of the transaction it is useful to refer to the circumstances under which dealings between the plaintiff and the defendant began. On 29-4-1949 the defendant sent a letter Ext. B to the plaintiff asking for overdraft accommodation. Ext. B reads as follows:

"N.R. Nair & Co, Merchants & Commission Agents,

Chalai, Trivandrum. Date: 29th April 1949 The Managing Director, Union Bank Ltd., Trivandrum.

Dear Sir,

4. We have to request you to kindly sanction us temporary credit facilities up to Rs. 2000/- (Rupees two thousand only). As usual we shall repay the same by the week end.

Thanking you and awaiting your favourable orders.

Yours faithfully,

Sd/- Sole Proprietor."

5. The request was granted and the defendant began to borrow various sums from time to time. Repayments were made fairly regularly during the initial stages as seen from Ext. A, copy of the plaintiff's ledger.' Ordinarily such a transaction would not fall under Art.85 but it was contended that on certain occasions the defendant paid more than what was due from him so as to leave a credit balance in his favour and that this was sufficient to satisfy the test of "mutuality". The leading case in India on the point is Hirada Basappa v. Gadigi Mudappa (6 M.H.C.R.142). Holloway, Ag: C.J. held as follows:

"In order that an account might 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."

6. The dictum has been the foundation of all the later decisions in India on the point. Mutuality involves reciprocal demands and the requirement of reciprocal demand has been stated to be transactions on each side creating obligations on the other. After reviewing the decisions in India, England and the United States, Mookerjee, J. also came to this conclusion in Ram Pershad v. Harbans Singh (6 Cal. Law Journal 158). We may in this connection refer to a recent decision of the Madras High Court in Kesava Chettiar v. Ramanatha Chettiar (A.I.R.1956 Madras 210). Ramaswami, J. has made an exhaustive review of decisions of the several courts and held that the distinguishing characteristics of a mutual account are:

(1) that there should be two sets of independent transactions between the parties in one of which one of the parties should hold the position of debtor and the other that of a creditor, and in the other, the reverse position.

(2) that the dealings should disclose independent obligations on both sides, and not merely obligations on one side, the acts done by the other being merely discharge of such obligations, and (3) that each party must be able to say to the other "I have an account against you".

7. The Travancore-Cochin High Court has also been following these principles. See