S.C.R. SUPREME COURT REPORTS 563

allowed the appellant's application for the renewal of z959

his lease under r. 47 of the Mineral Concession RulesR .

1

-v k ..

. a1a o en ala~,,.

of 1949. The argument is wholly untenable. That v.

rule provides that a mining lease granted by a private s1ate of

person shftll be subject to certain conditions therein Andhra Pradesh

specified. Th0 first condition thus laid down is that

the term of the lease should be renewed at the option of

the lessee for one period not exceeding the duration of

the original lease. The effect of this rule is, as it were,

to insert statutorily some new terms in the lease itself.

In other words, this rule does not do anything more

than add some terms to the lease. When, however,

the lease is determined under the second proviso, these

terms must also fall with it.

No other point

has been urged before us and for

reasons

stated above, we think that these appeals

should be dismissed with costs

and we order accord-

ingly.

Appeals dismissed.

THE

HINDUSTAN FOREST COMPANY

v.

LAL CHAND AND OTHERS

(S. R. DAS, C.J., s. K. DAS, A. K. SARKAR,

K. N. W ANCHOO and M. HIDAYATULI,AH, JJ.)

Limitation-M ietual accO'unt--Reciprocal demands-Contract

for supply of goods-Delivery of goods and payments, whether

independent

obligations-] ammu and Kashmir Limitation Act, I995

(]ammu

and Kashmir IX of

r995), art. rr5-Indian Limitation

Act, z908 (9 of r908), art. 8 5·

Under a contract for the sale of goods, the buyer paid an

advance. amount t~~ards the price of the goods to be supplied

and

yanous

quantities of goods were thereafter delivered by the

., sellers. The buyer from time to time made various other

payments towards the price

of the goods after they had been

delivered. The last delivery

of goods was made on June 23,

1947, and the suit was brought on October ro, 1950, by the sellers

for

the balance of the price due for goods delivered. The sellers

pleaded

that the suit was within time and relied on art. IIS of

the

Jammu and

Ka~hmir Limitation Act under which the period

of limitation was six years for a suit " for the balance due on a

mutual, open and current account, where there

have been

re­

ciprocal demands between the parties. "

Das C. J

I959

August x9·

564 SUPREME COURT REPORTS [1960(1))

'959 Held, that art. IIS was not applicable to the case as there

- was no mutual account based on reciprocal demands.

The Hindustan Forest payment made by the buyer after deliveries had been given to it

Company were in discharge of the obligations to pay the price due on

v. account of these deliveries; the amount paid in advance was paid

Lal Chand under the contract in discharge of obligations to arise , none of

such payments created an independent obligation in the sellers

towards

the buyer.

Sarkeir ].

Tea Financing Syndicate Ltd. v. Chandrakamal Bazbaruah,

(1930) I.L.R. 58 Cal. 649, approved,

CIVIL APPELLATE JURISDICTION: Civil Appeal No.

161 of 1955.

Appeal from

the judgment and decree dated 4th

Jeth

2011, of the Jammu and Kashmir High Court in

Appeal No. 1of2009, arising out of the judgment and

decree dated the 2nd Magh 2008, of the said High

Court in original suit No. 40 of 2007.

S. K. Kapur and N. H. Hingorani, for the appellant.

Bhawani Lal and K. P. Gupta, for the respondents.

1959. August 19.

The Judgment of the

Court was

delivered

by

·

SARKAR J.-This appeal arises out of a suit filed in

the High Court of Jammu and Kashmir for recovery

of price of goods sold and delivered. The only point

involved in it is whether the suit was governed by

art. 115 of the Jammu and Kashmir Limitation Act.

The courts below have held, and this has not been

disputed

in this appeal, that if that article did not

apply, the suit would fail on the ground of limitation. Sometime in November 1946, the parties entered

into an agreement in writing for the supply by the

sellers, the respondents, to the buyer, the appellant,

of 5,000 maunds of maize, 500 maunds of wheat and

100 maunds of Dal at the rates and times specified.

The agreement stated that on the date it had been

made the buyer had paid to the sellers Rs. 3,000 and

had agreed to pay a further sum of Rs. 10,000 within

ten or twelve days as advance and the balance due for

the price of goods delivered, after the expiry of every

month. It is admitted that the said sum of Rs. 10,000

was later paid by the buyer to the sellers.

-

S.C.R. SUPREME COURT REPORTS 565

V a.rious quantities

of goods were thereafter delivered

. z959

by the sellers to the buyer and though such deliveries . -

had not been made strictly a.t the times specified in Hindcustan Forest

h b

~~

t e contract, they had been accepted by the uyer. v.

The buyer in its turn made various payments towards Lal Chand

the price of the goods delivered but not month by

month and had not further paid it in full. The last Sarkar .T·

delivery of goods was made on June 23, 1947, and the

suit was brought on October 10, 1950, for the ha.lance

of the price due.

The learned Judge of the High Court who heard the

suit held that art. 115 had no application and dismis­

sed

the suit as barred by limitation. The sellers went

up in appeal which was heard

by two other learned

Judges

of the High

Court. The learned Judges of the

appellate bench of the High Court held that art. 115

of the Jammu & Kashmir Limitation Act applied and

the suit was not barred. They thereupon allowed the

appeal and passed a decree in favour of the selJers.

The buyer has now come

up in appeal to this

Court.

Article 115 of the Jammu and Kashmir Limitation

Act which is in

the same terms as art. 85 of the Indian

Limitation Act except as to the period oflimitation, is

set

out below :

Description of suit Period of Limitation

For the balance due on a

Six years.

mutual, open and current

account, where there have

been ,reciprocal demands

between the parties.

Time from which period

begins to run

The close of the year in

which the last item admit­

ted or proved is entered in

the account i such year to

be computed as in the ac-

count.

If the article applied the suit would be clearly with­

in time as

the last item found to have been entered in

the

acc0t~nt was on June 23, ~947. The only question

argued

at the bar is whether the account between the

parties was mut,ual.

The question

what is a mutual account, has been

considered by

the courts frequently and the test to

determine

it is well settled. The case of the Tea

Financing

Syndicate Ltd. v. Ohandrakamal Bezbaruah (1)

may be referred to. There a company had been

(r) (1930) 1.L.R. 58 Cal. 649.

72

566 SUPREME COURT REPORTS [1960(1)]

z959 advancing monies by way of loans to the proprietor

. F of a tea estate and the proprietor had been sending

Hindustan orest h £ 1 d l' ·

c mpany tea to t e company or sa e an rea isat10n of the

0

v. price. In a suit brought by the company against the

Lal Chand proprietor of the tea estate for recovery of the bale.nee

of the advances made after giving credit for the price

Sarkar J. realised from the sale of tea, the question a.rose as to

whether the case was one of reciprocal demands result­

ing in the account between the parties being mutual

so as to be governed by art. 85 of the Indian Limita­

tion Act. Rankin, C.J., laid down at p. 668 the test

to be applied for deciding the question in these words:

" There can, I think, be no doubt that the require­

ment of reciprocal demands involves, as all the

Indian cases have decided following Halloway,

A.C.J., transactions

on each side creating

independ­

ent obligations on the other and not merely

transactions which create obligations on one side,

those

on the other being merely complete or partial

discharges of such obligatidns. It is further clear

that goods as well as money may be sent by

way

of payment. We have therefore to see whether

under

the deed the tea, sent by the defendant to the

plaintiff for sale, was sent merely by way of

dis­

charge of the defendant's debt or whether it was

sent

in the course of dealings designed to create

a

credit to the defendant as the owner of the tea sold,

which credit when brought

into the account would

operate

by way of set-off to reduce the defendant's

liability."

The observation of Rankin, C.J., has never been

dissented from in our courts and we think it le.ya

down the law correctly. The learned Judges of the

appellate bench of the High Court also appear to have

applied the same test as that laid down by Rankin, C.J. •

They however came to the conclusion that the account

between

the parties

was mutual for the following

reasons:

" The point then reduces itself to the fact that

the defendant company had advanced a certain

a.mount of money to the plaintiffs for the supply of

grains. This excludes the question of monthly

S.C.R. SUPREME COURT REPORTS 567

I959 payments being made to the plaintiffs. The plain-

. tiffs having received a certain amount of money, Hindustan Forest

they became debtors to the defendant company Company

to this extent, and when the supplies exceeded v.

Rs. 13,000 the defendant company became debtors Lal Chand

to the plaintiff and later on when again the plaintiff's

supplies exceeded

the amount paid to them, the

defendants again became the debtors. This would

show

that there were reciprocity of dealings and

.

transactions on each side creating independent

obligations on

ther

other."

The reasoning is clearly erroneous. On the facts

stated by the learned Judges there was no reciprocity

of dealings; there were no independent obligations.

What in fact had happened was that the sellers had

undertaken to make delivery of goods and the buyer

had agreed to pay for them and had in part made the

payment in advance. There can be no question that

in so far as the payments had been made after the

goods had been delivered, they had been made towards

the price due. Such payments were in discharge of the

obligation created in the buyer by the deliveries made

to

it to pay the price of the goods delivered and did not

create any obligation on the sellers in favour of the

buyer. The learned Judges do not appear to have

taken a contrary view of the result of these payments.

The learned Judges however held

that the payment

of Rs.

13,000 by the buyer in advance before delivery

had started, made the sellers the debtor. of the buyer

and had created an obligation on the sellers in favour

of the buyer. This apparently was the reason which

led them to the view

that there were reciprocal dem:l.nds and that the transactions had created inde­

pendent obligations on each

of the parties. This view is

unfounded.

The sum of Rs.

13,000 had been paid as

and by way of advance payment of price of goods to

be delivered. It was paid in discharge of obligations

to arise under

the contract. It was paid under the

terms of the contract which was to buy goods and pay

for them. It did not itself create any obligation on

the sellers in favour of the buyer ; it was not intended

to be

. and did not amount to an independent transac-

Sarkar].

568 SUPREME COURT REPORTS [1960(1)]

'

959

tion detached from the rest of the contract. The

Hindustan Forest sellers were under an obligation to deliver the goods

Company but that obligation arose from the contract and not

v. from the payment of the advance alone. If the sellers

Lal Chand had failed to deliver goods, they would have been

Sarkar].

liable to refund the monies advanced on account of the

price and might also have been liable in damages,

but such liability would then have arisen from the

contract and not from the fact of the advances having

been made. Apart from such failure, the buyer could

not recover the monies paid in advance. No question

has, however, been raised as

to any default on the

part of the sellers to deliver goods. This case

there­

fore involved no reciprocity of demands. Article 115

of the Jammu and Kashmir Limitation Act cannot be

applied

to the suit.

The learned Judges appear also to have taken the

view that since the goods were not delivered at the

times fixed in the contract, and the prices due were not

paid at

·the end of the months, the parties clearly

indicated

their intention not to abide by the contract.

We are unable

to agree with this view. Such conduct

only indicated

that the parties had extended the time

fixed under

the contract for delivery of the goods and

payment of price, leaving the contract otherwise

unaffected.

The learned Judges also observed

that the contract

did not provide how the amount advanced was to be

adjusted.

But it seems clear that when the contract

provided that the advance was towards the price to

become due, as the learned Judges themselves held, it

followed by necessary implication that the advance

had·

to be adjusted against the price when it became due.

So there was a provision in the contract for adjusting

the advance.

We

think it fit also to observe that it is somewhat

curious

that any question as

to the application of

art. 115 was allowed to be raised. The applicability

of that article depends on special facts. No such facts

appear in the plaint. There is no hint there that the

account was mutual. We feel sure that if the atten­

tion of the learned Judges of the High Court had been

S.C.R. SUPREME COURT REPORTS 569

drawn to this aspect of the matter, they would not

have permitted any question as to art. 115 being

raised, and

the parties would have saved considerable

costs thereby.

We therefore come to

the conclusion that the appeal

must be allowed.

The judgment and order of the

learned Judges of the appellate bench of the High

Court are set aside and those of the learned

Single

Judge of the High Court are restored. The appellant

will be entitled to

the costs in this Court and of the hearing of the appeal before the High Court.

Appeal allowed.

SHIV A JUTE BALING LIMITED

v.

HINDLEY AND COMPANY LIMITED

(B. P. SINHA, P. B. GAJENDRAGADKAR and

K. N. W ANCHOO, JJ.)

Arbitration-Contract--Award passed pending legal proceedings

challenging

the existence and validity of contract-Validity-Breach

of contract-Contract providing for penalty

as liquidated damages­

Award granting maximum-Legality--Indian

Contract Act, r872

(9 of r872), ss. 73, 74-Arbitration (Protocol and Convention Act,

I937

(6 of

r937) s. 7(e)-Arbitration Act, r940 (IO of I940),

SS. 33, 35·

The appellant company, incorporated in India, entered into

a contract on

June 18, 1945, for the supply of five hundred bales

of jute, with the respondent company which was incorporated in

England and which had its registered

office in London. The

contract, inter alia, provided

that in the event of default of tender

or delivery, the seller shall pay to the buyer as and

for liquidated

damages ms. per ton plus the excess (if any) of the market value

over

the contract price, the market value being that of jute

contracted for on the day following

the date of default. There

was a provision

for arbitration, under which any claim or dispute

whatever arising out of, or in relation to this

contract or its

construction or fulfilment shall be referred to arbitration in

London in accordance with the bye-laws of

the London Jute

Association. Disputes having arisen regarding the performance

of

the contract the respondent referred the matter to the arbitra­

tion

of the London Jute Association, who appointed two of its

members as the arbitrators. The appellant dicl not reply to the

notice given by the arbitrators but filed an application on

1959

Hindustan Forest

Company

v.

Lal

Chand

Sarkar].

1959

A11gust ZI.