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Fresh & Healthy Enterprises Ltd. Vs. R. K. Brothers - (High Court of Delhi) (24 Aug 2018)

When suit is filed on basis of an open, mutual and current account, limitation commences at end of financial year for which the transactions are entered into

MANU/DE/3074/2018

Limitation

Present Regular First Appeal under Section 96 of the Code of Civil Procedure, 1908 (CPC) is filed by the Plaintiff in the suit impugning the Judgment of the Trial Court by which the trial court has dismissed the suit as barred by time. The suit has been dismissed at the initial stage even before filing of the written statement by the Respondent/Defendant. The suit was dismissed because the Respondent/Defendant had filed an application under Section 3 of the Limitation Act, 1963 for dismissing the suit as time-barred.

The subject suit was a suit for recovery of monies filed by the Appellant/Plaintiff. Appellant/plaintiff by the suit has claimed an amount of Rs. 26,63,856. Monies were claimed on account of supply/sale and purchase of Apples by the Appellant/Plaintiff to the Respondent/Defendant.

The Trial Court has committed a gross illegality in dismissing the suit as time barred without even adverting to the fact that, the suit is based on a statement of account. A suit plaint does not have to contain a statement of law that the ledger account was an open, mutual and current account under Article 1 of the Limitation Act, 1963 because that is an inference or a finding of fact which has to be arrived at from the statement of account which is filed. The statement of account which is filed with respect to transactions entered into, it is seen that within the first few transactions itself there are shifting balances. Once there are shifting balances, the suit will be on the basis of an open, mutual and current account.

As per Article 1 of the Act, a suit filed on the basis of an open, mutual and current account, limitation commences at the end of the financial year for which the transactions are entered into. The transactions entered into show that the last invoice entered into the ledger account maintained by the appellant/plaintiff of the respondent/defendant is dated 14th May, 2013. Limitation therefore will commence as per Article 1 of the Act on 1st April, 2014. The suit has been filed on 26th July, 2016 i.e. within three years of commencing of limitation on 1st April, 2014, and therefore, the suit was clearly within limitation.

The meaning of an open, mutual and current account has been dealt with by the Supreme Court in the judgments in the cases of Hindustan Forest Company Vs. Lal Chand & Others, and Kesharichand Jaisukhlal Vs. Shillong Banking Corporation, and the law is that shifting balances will create an open, mutual and current account.

The defence taken by the Respondent/Defendant of the suit being barred by time was a completely frivolous defence, and that too without filing of a written statement. Trial Court has committed a complete illegality in allowing the application under Section 3 of the Act filed by the Respondent/Defendant. The impugned order/judgment of the Trial Court is therefore set aside with costs of Rs. 25,000 payable by the Respondent/Defendant to the Appellant/Plaintiff, and which payment of costs shall be a condition precedent for the respondent/defendant to contest the suit in the Trial Court.

Relevant : The Hindustan Forest Company Vs. Lal Chand & Others, MANU/SC/0147/1959 and Kesharichand Jaisukhlal Vs. The Shillong Banking Corporation MANU/SC/0351/1965

Tags : SUIT   TIME BARRED   VALIDITY  

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