High Court

Legal Reasoning

{1} S.A. No. 949-2022IN THE HIGH COURT OF JUDICATURE OF BOMBAYBENCH AT AURANGABADSECOND APPEAL NO. 949 OF 20221.Sau. Kamalabai Nandlal Rathi … APPELLANT (Ori. plaintiff)VERSUS1.M/s K.G. Industries Dal Mill2.Rajesh Kisanlal Agrawal3.Narayan Mishrilal Dayama (died)Through his legal representative3-A.Sanjay Narayan Dayama4.Sunil Knhaiyyalal Dayama … RESPONDENTS (Ori. Defendants)…Mr. Amit S. Savale – Advocate for AppellantMr. Rajendra Deshmukh, Senior Advocate a/w. Mr. ShriramDeshmukh i/b. Mr. D.R. Deshmukh – Advocate for RespondentNos.1, 2 and 4….CORAM : SANDIPKUMAR C. MORE, J.DATE : 23rd September, 2024ORDER : 1.Heard rival submissions at admission stage.2.Being dissatisfied with the judgment and order dated06.10.2017 passed by the learned District Judge – 4, DhulePooja Kale {2} S.A. No. 949-2022(hereinafter referred to as “the learned First Appellate Court”) inRegular Civil Appeal No. 255 of 2012, which set aside thejudgment and decree dated 28.06.2012 passed by the 2nd Jt. CivilJudge Senior Division, Dhule (hereinafter referred to as “thelearned Trial Court”) in Special Civil Suit No. 17 of 2004, theappellant/plaintiff has filed this Second Appeal.3.Background facts of the case are as under :The appellant/plaintiff has filed the aforesaid civil suit in theCourt of learned Trial Judge for recovery of an amount ofRs.7,70,510/- alongwith the interest. It is contended by theplaintiff that, she has deposited certain amount in PartnershipFirm of the defendants, whereby the defendants had agreed to payinterest at the rate of 18% per annum on the said amount and togive annual statement of accounts also. The amount of interestaccrued was to be merged in the capital amount and the interest ofnext year was to be calculated on that total amount. As such,amount deposited was having compound interest. The saidamount was deposited in the year 1986 and accordingly thedefendants communicated the accounts extracts to the plaintifffrom 1986 to 1995, but thereafter they did not communicate theaccounts extracts to the plaintiff. As such, by the end ofPooja Kale {3} S.A. No. 949-202231.03.2003 the amount of Rs.6,87,957/- was due from thedefendants. On 19.08.2003 plaintiff had issued the demand noticeto the defendants claiming the amount of Rs.7,70,510/- inclusiveof interest, however the defendants by refusing to pay the aforesaidamount, replied the said notice falsely and therefore, the plaintiffwas constrained to file the aforesaid civil suit.4.While resisting the suit, it was the case of the defendantsthat their Firm closed its affairs after satisfying all the dues andfrom the year 1995 it was not in existence. The Firm wasestablished in the year 1962 and it was not a financial institutionand therefore, they were not indulging in accepting the deposits oninterest. According to them, the plaintiff did not deposit anyamount with them and the suit filed by the plaintiff was not withinlimitation period of three years from the date of so called accountsextracts. As such, they prayed for dismissal of the suit. Thelearned Trial Court after conducting the trial, decreed the suithowever, the said decree has been set aside by the learned FirstAppellate Court only on the point of limitation and hence, thissecond appeal.5.Learned Counsel for appellant/plaintiff vehemently arguedPooja Kale {4} S.A. No. 949-2022that, the learned First Appellate Court has dismissed the suit ofthe plaintiff only on the point of limitation but kept intact otherfindings in favour of plaintiff that she had deposited amount withdefendant No.1 – Firm. He pointed out that, the learned TrialCourt had correctly held that the suit is within limitation as perArticle 22 of the Limitation Act. He pointed out that, after filing ofthe suit the defendant – Firm had even preferred an application forrejection of plaint under Order VII Rule 11 of the Civil ProcedureCode below Exhibit – 76 but it was rejected. Thus, he submittedthat the finding of the learned First Appellate Court in respect ofterm “statements of accounts” and “account stated”, is erroneous.He pointed out that, Article 26 of the Limitation Act has noapplication in the present matter as it does not involve concept of“account stated”. On the contrary, he claimed that the learnedTrial Court rightly held that, the contract in writing was notmandatory and oral agreement to that effect was sufficient. Insupport of his submissions he relied upon the followingjudgments:(a)Hon’ble Supreme Court in the case of Hiralal and Ors. Vs. Badkulal and Ors. reported in 1953 AIR (SC) 225Pooja Kale {5} S.A. No. 949-2022(b)Hon’ble Supreme Court in the case of Gordon Woodroffe and Co. (Madras) Ltd. Vs. Shaikh M.A. Majid and Co. reported in 1967 AIR (SC) 181(c)The Karnataka High Court in the case of Dyavanagouda Rudragouda Vs. V.S. Hubli in R.S.A. No. 128/75 decided on 15.01.19826.On the contrary, learned Counsel for the respondentssupported the judgment of the learned First Appellate Court andcontended that, the learned First Appellate Court has rightlyapplied Article 26 of the Limitation Act and dismissed the suit onthe point of limitation. According to him, the citations relied uponby the learned Counsel for appellant differ from facts of thepresent case. As such, he prayed for dismissal of this appeal atadmission stage.7.From the submissions made on behalf of theappellant/plaintiff the learned Counsel for appellant has raised asubstantial question of law as to which articles namely Article 22or Article 26 of the Limitation Act, is applicable in the instantmatter. On going through the observation of the learned TrialCourt it appears that, the learned Trial Court has appliedprovisions of the Limitation Act, 1963 under Section 30 to thePooja Kale {6} S.A. No. 949-2022present case and held that, the contract in writing is not at allmandatory and only oral agreement as claimed by the plaintiff inrespect of amount deposited with the defendants was sufficient.The learned Trial Court has relied upon the document at Exhibit –58 i.e. certificate issued by the defendant – Firm in the name ofplaintiff which indicated that certain amount was issued withthem. Thus, by applying Article 22 of the Limitation Act, the suit isheld within limitation by the learned Trial Court. However, thelearned First Appellate Court by applying Article 26 of theLimitation Act held that, the suit of the plaintiff was barred bylimitation. Therefore, only substantial question of law in theinstant matter is that whether Article 22 or Article 26 of theLimitation Act is applicable ?8.Considering the language of Article 22 of the Limitation Act,the limitation period of three years is given for recovery of amountunder an agreement that, it shall be payable on demand, includinga money of the customers in the hands of his partner, so payableand the period of limitation begins to run in such case when thedemand is made. It is not in dispute that, the plaintiff had issuednotice dated 19.08.2003, demanding the amount deposited whichwas refused by the defendants under reply dated 07.10.2003 andPooja Kale {7} S.A. No. 949-2022therefore, according to the learned Trial Court the suit institutedon 02.01.2004 from the said date of refusal of notice was wellwithin limitation. However, it is to be noted that, in the instantcase the plaintiff has not established that there was any agreementfor deposit of money.9.On the other hand, the learned First Appellate Court hasheld the suit was not within limitation mainly by observing that,after statements of accounts in the year 1995, the plaintiff did noteven care to ask for the accounts subsequently till final notice inthe year 2003. The learned First Appellate Court has observedthat, the plaintiff herself had stated that, the defendants issuedstatement of accounts lastly in the year 1995–1996 and thereforeperiod of limitation expired on 31.03.1999. Further, it was alsoobserved by the learned First Appellate Court even if it is held thatthe case of plaintiff would fall under Article 22 or Article 26 of theLimitation Act, but Article 22 was not applicable since there wasno agreement in writing in existence between plaintiff and thedefendants in respect of deposit of money. The learned FirstAppellate Court has further observed that, lastly the statementsaccounts was issued by the defendants to plaintiff in respect of herdeposited money till the year 1995–1996. It is the case of plaintiffPooja Kale {8} S.A. No. 949-2022herself that, the defendants were issuing the accounts ofstatements by merging the interest thereafter and charging furtherinterest on compound basis. Thus, if we see the language of Article26 of the Limitation Act then it is evident that, the money whichthe plaintiff is claiming from the defendants was according toaccount stated between them. The plaintiff herself stated that, thedefendants issued statements of accounts lastly in the year 1995 –1996. Thus under Article 26 of the Limitation Act, the period ofthree years for recovery of such money would start from saidstatements of accounts. It is extremely important to note that,after issuance of Exhibit – 58, which was in respect of statementsof accounts till 31.03.1996, the plaintiff never demanded theamount of deposit alongwith interest till 19.08.2003 i.e. the date ofdemand notice. Thus, considering the applicability of Article 26 ofthe Limitation Act, the period of limitation for recovery of thedeposited amount was expired on 31.03.2003 even under the newAct, 1963.10.Learned Counsel for appellant heavily relied on the judgmentof Hon’ble Apex Court in the year case of Hiralal and Ors. (supra)wherein the concept of “statements of accounts” and “accountstated” has been discussed. He pointed out that, the Hon’ble ApexPooja Kale {9} S.A. No. 949-2022Court has observed that, the word “account stated” means that,the defendants had admitted the balance amount which is not herin the present case. However, the facts of this case are differentfrom the facts of aforesaid case. Further, the Hon’ble Apex Court inthe case of Gordon Woodroffe and Co. (Madras) Ltd. (supra) hasalso observed “account stated” and “account settled”. It is observedthat, it is sufficient if the accounts are accepted and suchacceptance may be inferred by the conduct. In the instant case theplaintiff herself is saying that, up to the year 1995–1996, thedefendants had issued statements of accounts. However, there isnothing on record to show that, till the year 2003 the plaintiffdemanded the amount of deposit even after knowing the balanceamount as on 31.03.1996 and therefore, the observations ofHon’ble Apex Court in the aforesaid cases are not helpful to theappellant. Further, it has already come on record that, there wasno agreement in writing between plaintiff and the defendants inrespect of deposited amount and therefore, the findings of thelearned First Appellate Court that, Article 22 of the Limitation Actis not applicable definitely appears proper in view of thecircumstances on record. As such, the substantial question of lawas raised by the learned Counsel for appellant is appropriatelyPooja Kale {10} S.A. No. 949-2022answered by the learned First Appellate Court and therefore, theSecond Appeal needs to be dismissed as the suit of plaintiff isbarred by law of limitation.11.Accordingly, the Second Appeal stands dismissed anddisposed of at admission stage alongwith pending CivilApplications, if any.[ SANDIPKUMAR C. MORE ] JUDGEPooja Kale