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(b) If so, whether the defendant instructed the plaintiffs to wait for the payment till after the inspection of the goods by the Government of Bahawalpur? . (13) Whether the plaintiffs have not made any demand on the defendant for payment of the amount of the bills? (14) Whether the statement of account filed with the plant is correct? (15) What is the rate of interest to which the plaintiffs are entitled ? (16) What is the amount due and payable by the defendant to the plaintiffs?"

14. I will first take up issues 3, 4, 5 (a) and 5 (b). These are interconnected in relation to the facts and can be conveniently dealt with together. It may be recalled that the case set out by the plaintiffs in paras 7 and 8 of the plaint was that the plaintiffs were informed in July 1954 that the defendant had removed his goods from his godown which goods were hypo thecated with the plaintiffs and this action was fraudulent on the part of the defendant and amounted to breach of trust and was without the knowledge and consent of the plaintiff's that the plaintiffs therefore proposed to institute legal proceedings against the defendant in this regard but the latter intervened and offered to assign the plaintiffs his‑ right to recover certain moneys due to him from the Government of Bahawalpur in respect of supply of furniture made by him to that Government, In keeping with, these allegations Mr. Khalid Hasan, an employee of the plaintiff bank who was at that time the manager of the bank at Liaquat Bazar, Karachi and where the defendant had his account, stated in the witness box that the hypothecated goods were removed by the defendant in July 1954 and having come to know of this they instituted criminal proceedings against the defendant in the Court of the Additional City Magistrate, Karachi and it was then that the defendant approached the bank and informed them that the goods had been sent to Bahawalpur Government that he was prepared to assign the bills due from that Government in favour of the bank and the bank should recover the amount and adjust it against his account and the bank accepted this proposal: It, however, became quite clear at the trial that this case was palpably untrue. This would appear from what follows:--

15. The Bahawalpur Government or more properly the Bahawalpur State held controlling shares of the Bank of Bahawal pur, namely the plaintiffs. At all material times Mr. Hasan Mahmud was the Chairman of the Board of Directors of the Bank and was also the Chief Minister of the State of Bahawalpur. Khawaja Muhammad Iqbal was as that time the General Manager of the Bahawalpur Bank. The defendant Karim Hayat who was doing business in the name of Mohmand Brothers stated in his evidence that in July 1954 Mr. Hasan Mahmud accompanied with other officers and‑ the said Khawaja Muhammad Iqbal came to his show room for buying furniture for the Bahawalpur State. They selected the furniture which was ready. Accordingly a formal letter dated 4th July 1954, Exh. 98, ' was addressed by the defendant to 'the Executive Engineer, Building and Roads, Bahawalpur describing the furniture which had been selected and their rates. The acceptance of the State is contained in the letter of the Under‑Secretary, P: W. D., Bahawalpur, dated 29‑7‑54 Exh. D/96. This document like many others is an admitted document. It is stated in this letter that the articles of the furniture had been inspected by Aali Martabat, the Chief Minister himself and these can, be accepted at the rates mentioned in the schedule and the defendant should arrange to despatch it to Bahawalpur and deliver it at the Tosha Khana Store. The rates shown in the Schedule would be ex‑godown, Karachi. Then follows the passage which may be reproduced:‑- "I am further directed to state that the Government of Bahawalpur with concurrence of the Finance Department has agreed to sanction an advance of Rs. 20,000 in your favour. Khwaja Muhammad Iqbal, General Manager, Bank of Bahawal pur Ltd., Karachi, is being advised to pay the amount to you." This letter was written at Karachi as would appear from the evidence of the defendant as well as from what is written at the top of this letter, namely "Camp Karachi". This sum of Rs. 20,000 was actually paid by the bank to the defendant on 2nd August 1954. The. plaintiffs' own document which is an order to its branch at Bahawalpur for the recovery of this sum Of Rs. 20,000 and which is dated 2‑8‑54 (Exh. P/44) clearly contains a statement in the remarks column as follows:-- "C. T. dated 29‑7‑54 advance payment order." Mr. Khalid Hasan, who was taking the stand that this Rs. 20,000 was not paid on the instruction of the Bahawalpur Government and by way of advance towards the purchase of furniture, when con fronted with the plaintiffs' own document, Exh. P/44, first stated that he did not think that the said endorsement in the remarks column of Exh. 44 referred to an order of an advance payment. When further pressed he attempted to give an explanation by saying that when the defendant had presented a demand draft, Exh. P/41, the bank people asked him as to what this demand draft meant and he must have told them that this was an order of advance payment and it was for this reason that the said endorsement on Exh. P/44 was made. However, when he was further pressed he admitted that the mention of "C. T. dated 29‑7‑54" refers to Exh. D/96, that is the order signed by the Under‑Secretary, P. W. D., Bahawalpur Government. Considering that the Under‑Secretary, Bahawalpur Government was at Karachi and the furniture was being purchased which had been selected by the Chief Minister of Bahawalpur who was also the Chairman of the Bank and that the document, Exh. D/96, clearly states that Khawaja Muhammad Iqbal is being instructed to pay the sum of Rs. 20,000 it was rather amazing that the bank and its officer Mr. Khalid Hasan should have attempted to show that this payment of Rs. 20,000 was not on account of an advance in respect of the furniture which had been purchased by the Bahawalpur State. The several documents taken by the bank from the defendant, such as Exh. P/41, P/42 and P/43, were merely for the purposes of record of the bank because in point of fact an agreement had been reached to which the flank was a party that the furniture, the value of which was admittedly Rs. 1,20,355, was going to be delivered to Bahawalpur Government and the amount of it was going to be received by the Bahawalpur Bank. Moreover, in view of the further admission by Mr. Khalid Hasan that 9 bills of the furniture Exhs. P/45 to P/45/3 and P/47 to P/51 and the railway receipts were handed over by the defendant to the Bank along with demand draft upon an agreement that ‑ the bank should deliver these to the Bahawalpur State against payment of Rs. 1,20,355 and the circumstances accompanying the placing of the order, it is abundantly clear to me that the story of the plaintiffs that the defendant had fraudulently removed the hypothecated goods and that it was on institution of legal proceeding or the threat of it that he agreed. with the bank that they should recover the money of the bills, is nothing but a figment of imagination and contrary to the facts. In fact, when pressed Mr. Khalid Hasan admitted that the criminal complaint of which he had spoken had been filed in 1952 or 1953, whereas the events of the present suit occurred in July and August 1954. That complaint was on another matter and had been dismissed long before. My finding, therefore, on issues 3 and 4 is in the negative in the terms stated above and I hold that the sale of these goods to the Bahawalpur State and the dispatch of it from the godown of the defendant for transport to Bahawal pur was with the full knowledge and consent of the Bank authorities. It will now be convenient to deal with issues 5(a) and 5(b).

16. Though the case set up in the plaint as shown above was that the defendant had fraudulently removed the hypothecated goods and it was only on the threat of legal proceedings that he assigned the right to the bank to recover "certain moneys due to him from the Government of Bahawalpur" and that a power of attorney in that respect was executed by him, yet at the trial it was found impossible to adhere to this position for very long and Mr. Khalid Hasan admitted that the R/Rs of all the goods covered by the bills were handed over to the bank by the defendant along with demand drafts. The bank produced only one demand draft Exh. P/92, dated 20th August 1954 for Rs. 50,625, yet when it was put to Mr. Khalid Hasan that on 11th and 20th August 1954 both the set of bills, namely Exhs. P/45 and P/47, along with demand drafts and R/Rs and written instructions about the delivery were given to the Bank he admitted that this may be correct. The defendant stated that two demand drafts were given to the bank, one for Rs. 50,625, Exh. P/92, and another for Rs. 69,370 along with the relative bills and R/Rs. This is completely borne out by the admission of Mr. Khalid Hasan that on 25th August 1954 the R/Rs of both the set of bills, Exhs. P/45 and P/47 were handed over by the bank to the S. D. O. (Bahawalpur State). The fact that the bank had received the bill for Rs. 69,370 as admitted by them and the relative R/R it must follow that this was accompanied by a demand draft as in the case of the other bill. The next question is as to under what terms were these demand drafts and the R/Rs along with the bills were handed over by the defendant to the bank. The plaint, of course, is completely silent about it, but Mr. Khalid Hasan, conscious of the true position and the documents on record, made the following statement in the examination‑in chief. "On 25th August 1954 we wrote to the defendant that the Government of Bahawalpur was not prepared to pay the bills unless the furniture, in respect of which those bills had been sent, was delivered to them. The letter is Exh. P/52. These goods were lying in the wagons at the Bahawalpur Railway Station and the bank had the railway receipts. The defendant agreed that we should hand over the goods to the Bahawalpur Government. We accordingly released the goods and delivered them to the Bahawalpur Government. The total of these nine bills amounted to Rs. 1,20,355." In this letter Exh. P/52 it is stated that the Government was not prepared to make payment of the bill on the ground that under the Government orders dated 29th July the furniture should be delivered at Toshakhana Stores for verification. The instruction was then asked whether the railway receipts may be delivered to the Government free of payment. The stand first taken by Mr. Khalid Hasan was that he did not remember if there were any instructions along with the R/Rs that they were not to be delivered to the Bahawalpur State until payment was made. This stand evidently was taken to counter the specific case set out by the defendant in his written statement in para 7 that the plaintiffs had‑ drawn two demand drafts upon the Executive Engineer, Bahawalpur for Rs. 50,625 and Rs. 69,730 against five Railways receipts covering seven wagons of furniture and these were handed over to the plaintiffs upon trust to hand over these only against payment on the said two demand‑ drafts and that the plaintiff bank which was owned by the Bahawalpur State and which was the banker of that State in breach of this obligation handed over the goods and the documents without receiving the payment. Mr. Khalid Hasan, however, was pointedly asked in cross‑examination as to why they asked the defendant by their letter dated 25th August 1954, Exh. P‑52, for instruction whether the R/Rs should be delivered free of payment if there has been no instruction by the defendant to the contrary, and the answer which he first gave was that he could not give any explanation. He then went on to add unwillingly that there may have been some instructions that the R/Rs should not be delivered without payment. Later on, however, he made a categorical admission that "there was instruction to the bank that the delivery of R/Rs should be made against payment.".

17. The contention of Mr. Arfin, the learned counsel for the bank, however, was that in so far as the contract between the defendant and the State as represented by Exh. D/96 provided that the defendant had to despatch the goods to Bahawalpur and deliver it at the Toshakhana Stores, how could the bank insist upon payment from the State against the mere delivery of R/Rs. It was urged that if in terms of the agreement the defen dant himself could not insist upon payment against R/Rs how could the bank be expected to achieve this result. This is certainly a pertinent question but the answer to it is found in the statement of Mr. Mr. Khalid Hasan himself. This is what he said:‑-- "The bank had at no time released the good from the hypo thecation under which they were. It was because of this hypothecation that the arrangement was reached between the bank, the seller Karim Hayat and the Bahawalpur State that the payment will be made against the delivery of R/Rs." The defendant was cross-examined also on this point and he stated, "it is true as would 4ppear from Exh. D/96 that payment was to be received after the goods had reached Toshakhana Stores and had been inspected by the State Officer. However, I would like to explain that I had told the ‑ State Officer that the goods were pledged with the bank and how could I deliver it to them. Upon that it was agreed that the R/R of of the goods should be delivered to the bank and they would' deliver it to the State against payment and for any shortages and damages I would be responsible." He went on to add that it was upon this understanding that tale document, Exh. D/96 was written. However, in view of the clear admission of Mr. Khalid Hasan as reproduced above and the fact that the document, Exh. 96, contained the term of delivery in the Toshakhana it appears to be inescapable that this agreement for payment against R/Rs between they Bank, the defendant and the Bahawalpur State's representative was reached sometime after the execution of Exh. D/96. That the bank had full notice of Exh. D/96 is established beyond doubt by the reference to it in the bank's document Exh. P/44, in which in the remarks column it was said that this payment of Rs. 20,000 was on account of advance with reference to C. T. dated 29‑7‑

54. The R/Rs and the demand drafts were delivered to the bank between 11th and 20th August in respect of the two lots, of goods covered by the two sets of bills Exhs. 45 and

47. I have, therefore, no hesitation in holding and in fact it is now a matter of admission that when these documents were handed over to the bank by the defendant there was an agreement that the R/Rs should be delivered only against the payment upon the two demand drafts, one of which has been produced by the plaintiffs.

18. The next question is whether the R/Rs were delivered by the bank to the Bahawalpur State's representative with or without the consent of the defendant. Mr. Khalid Hasan's state ment in this regard has already been referred to above, namely that upon the writing of the letter Exh. 52, dated 25th August 1954 the defendant agreed that they should hand over the goods to the Bahawalpur Government without insisting upon pre‑payment. It is significant to note that this was not the case set up in the plaint. On the contrary, the case was that under the pressure of legal proceedings the defendant had authorised the bank to recover the amount of bills and in that regard a power of attorney had been given by him to the bank. Mr. Khalid Hasan himself had first attempted to deny the existence of instruction for delivery only against payment. It was later on that he admitted the existence of such. instructions. The denial of the existence of instruction and the case set up by the plaintiffs in this regard in the plaint is inconsistent with the stand subsequently taken that the delivery ‑of R/R or of the goods was upon the instruction of the defendant. There was no reference in the Examination‑in‑Chief by Mr. Khalid Hasan as to how the defendant's agreement in this respect had been obtained however, in cross‑examination. when he was asked as to when the goods or the R/R had been delivered to the Bahawalpur Government he first stated that he could not say as to on what date this was done. His attention was then drawn to the endorsement of the S. D. O. of the Bahawalpur State on the back of the demand draft Exh. P/92. This endorsement is dated 25th August 1954 and it is stated therein that R/Rs had been received from the Bank of Bahawalpur free of payment. We can take it now that a similar endorsement was made on the same day on the other demand draft for Rs. 69,

730. When the attention of Mr. Khalid Hasan was drawn to the date of this endorsement and he was asked as to why the R/Rs were delivered to the S. D. O. on 25‑8‑54 when no instructions had been received from the defendant he dame out with the explanation for the first time that he had received instructions on telephone from the defendant and this was conveyed to their Bahawalpur office on the same day. This answer was evidently given because Mr. Khalid Hasan was conscious of the fact that the letter Exh. P/52, also bore the date of 25th August. It appeared rather extra ordinary that on the same day that this letter was written by the bank to the defendant at Karachi there should also take pl4ce delivery of the R/R to the S. D. O. at Bahawalpur. Mr. Khalid Hasan, when asked as to how this letter, Exh. 52, was sent to the defendant, answered that this was by peon delivery. He was called upon to show the entry of the date of receipt from the peon book and he said that he may be able to do so. This, however, was never produced. He was asked whether any note of this telephonic consent was made by the bank and he answered in the negative. He was further asked whether any confirmation in writing of this telephonic conversation was taken he said. that there was no record to indicate it. He was then confronted with the reply of the bank, Exh. D/84, to the lawyer's notice sent to it by the defendant. That notice is Exh. D/83 and is dated 15th January 1955. In this notice the bank was pointedly asked as to why they had released the documents of the goods without payment and the bank was then called upon to pay to the defendant the difference between the sum of Rs. 1,20,355 after adjusting the payments already received by the defendant from the bank. The reply to this notice was‑sent on 19th January 1955, through the bank's lawyer as per. Exh. D/84 where it was stated that the delivery had been made to the Government of Bahawalpur in terms of the contract of sale between the defendant and the Government of Bahawalpur, whereby‑the goods had to be delivered at the Toshakhana Stores. It was further stated that the statement contained in para 1 of the defendant's notice that the railway receipts were handed over to the bank for collection and release of documents against payment was incorrect. There was no mention whatever that the delivery had been made upon a consent having been received from the defendant in this regard. Indeed, it will be noticed that the very fact of the delivery of R/Rs by the defendant to the bank was denied. Mr. Khalid Hassan clearly felt uncomfortable when he was asked as to why this fact of the consent to which he was now deposing not mentioned in the reply of notice and answered: "May be that the reference to the contract was considered quite sufficient by the advocate." When further pressed he said that the instructions to the advocate had been given by the Bill Officer of the bank and added that this Bill Officer was aware of the permission given on telephone by the defendant about the handing over of the R/Rs to the State Officer without payment. When further pressed he said that when he saw the reply, Exh. D/84, he thought that this was sufficient and that the omission to make reference to the consent of the defendant was not material. I do not find it possible to believe that in face of a clear accusation by the defendant through a lawyer's notice that the bank had handed over the documents in breach 'of obligation and against instruction, the plaintiffs would not have referred to the alleged telephonic consent of the defendant if that had been true. In view of all that has been said above I hold that the bank had not obtained the consent of the defendant before it delivered the R/Rs to the State Officer at Bahawalpur on 25‑8‑

54. Mr. Arfin stressed the fact that the defendant did not make an issue of it at that time and had later on even given a power of attorney and also written to the State authorities to pay the money. But all this is clearly understandable. The defendant having learnt that the goods had been delivered without receiving payment would have seen no point in making a row about it just then because he must have hoped that the bank which was an institution of the Bahawalpur State would not be let down by the State and. would be able to recover the money of the bills, the correctness of which had never been disputed by the State. However, when he found that payment had not been made he did take a clear stand in January 1955, by his lawyers' letter Exh. D/83, any correspondence thereafter would not alter the situation and must be read subject to what had been said by the defendant's lawyer in Exh. D/83.

19. The next question is as to what is the consequence of the plaintiffs having handed over the R/Rs and having obtained an endorsement on the demand drafts to the effect that the R/Rs had been delivered free of payment. One of the demand drafts has been produced by the bank. This is Exh. P/92 and has been often mentioned. The other demand draft has been kept back by the bank and I will take it that it was in the same term as this demand draft. This demand draft is addressed to the Executive Enginer, Building and Roads, Bahawalpur and reads as follows:‑ "On demand pay to the order of the Batik of Bahawalpur Ltd. a sum of Rs. 50,625 for value received against R/Rs Nos. G. 342351, etc. Drawer, Mohmand Bros. 70, Garden Road, Karachi." That this document is a bill of exchange was not disputed. That A the bank was holder of this bill cannot also be disputed. That the plaintiffs, the holder, acquiesced in a qualified acceptance of this bill of exchange by the‑State is clear from the endorsement obtained by them from the Executive Engineer on the back of the demand draft where it is said that acceptance was free of payment. I have already held that the defendant had not consented to this. Upon these facts, in my opinion, the results flowing from section 86 of the Negotiable Instruments Act clearly follow. Section 86 lays down:‑- "

86. Parties not consenting discharged by qualified or limited acceptance.‑- If the holder of a bill of exchange acquiesces in a qualified acceptance, or one limited to part of the sum mentioned in the bill, or which substitutes a different place or time for payment, or which, where the drawees are not partners, is not signed by all drawees, all previous parties whose consent is not obtained to such acceptance are discharged as against the holder and those claiming under him, unless on notice by the holder they assent to such acceptance. Explanation:‑An acceptance is qualified‑ (a) Where it is conditional, declaring the payment to be dependant on the happening of any event therein stated; (b) where it undertakes the payment of part only of the sum ordered to paid; (c) where, no place of payment being specified on the order, it undertakes the payment at a specified place, and not other wise or elsewhere; or where, a place of payment being specified in the order it undertakes the payment at some other place and not otherwise or elsewhere; (d) where it undertakes the payment at a time other than that at which under the order it would be legally due." In this case inasmuch as the plaintiffs took a qualified acceptance of the demand draft inasmuch as they did not insist upon payment before delivery of documents and accepted the promise of payment at a future date as is abundantly clear from the correspondence which has followed between the bank and the State, the defendant whose consent was not obtained to this kind of acceptance is discharged against the bank to the extent of the amount of the two demand drafts which totaled, Rs. 1,20,

355. If the drawee chooses to accept, the holder of a bill is entitled to require an absolute and unconditional acceptance, that is an acceptance according to the tenor of the bill. Unless it be so accepted, he may treat the bill as dishonoured and protest accordingly. It is, however, open to him to take a qualified acceptance, but if he does so he does it at his own risk and discharges all parties prior to himself, unless he obtains their consent. (See Bhashyam & Adiga on Negotiable Instrument, 11th edition, page 424). My finding, therefore, is that the defendant having been discharged in respect of these two bills the bank became liable to the defendant in the sum of Rs. 1,20,

355. I answer issues 5 (a) and 5 (b) accordingly.

20. There is another aspect of the matter and this is relevant to issues 8 &

9. It is the plaintiffs' own case in .the plaint as well as in the evidence of their manager, Mr. Khalid Hasan that the defendant had assigned to the plaintiffs his right to recover the money of these bills from the Bahawalpur State. Considering that the right to recover was being assigned to the bank had accepted the assignment, we will take it that this assignment was complete and proper. There were also the two demand drafts in respect of the. total price of the furniture sold to, the Bahawalpur State, whereby the bank had been authorized is' recover it from the State. It is nobody's case that, this assignment at any time was cancelled. What the Plaintiffs have alleged is that there was an agreement that if the bank was not able to make recoveries of the assigned claim from the Bahawalpur State, the defendant would reimburse to the plaintiffs the full amount due and payable to them by the defendant. I do not accept this story of an agreement to reimburse. There is no cur mention of it anywhere in any of the large number of documents which are no record and the correspondence which has passed in this case. There is no mention of it even in the lawyer's notice of the plaintiffs referred to above. There was no occasion for this agreement or for that matter of such an understanding because the plaintiff bank which, though a limited company, was an institution created by the Bahawalpur State authorities and the Chairman of the Bank and the Chief Minister of the State were one and the same person and the furniture had been selected by the Chief Minister himself, would have any reason to think that it would not be able to recover this money from the Bahawalpur State. And now reverting to the case of assessment, let us see as to what are the consequences of it. Section 130 of the Transfer of Property Act lays down that upon a transfer of an actionable claim by writing all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee. It is further provided that the transferee of an actionable claim may sue or institute proceedings for the same in his own name without obtaining the transferor's consent to such suit or proceedings and without making him a party thereto. In the present case, therefore when this claim was assigned by the defendant to the bank, all, the rights and remedies of the defendant in respect of this claim vested into the bank. It may be recalled that Mr. Khalid Hasan himself stated that at no time the bank had released its charge upon the hypothecated goods and it was for this reason that a tripartite agreement had been reached between the bank, the defendant and the State whereby the State was to make payment to the bank. This vesting having taken place it was for the bank to recover the money of the two bills amounting to Rs. 1,20,355 from the State, and if the State failed to do so to sue it in its own name. This was never done and there is no explanation for it except this that the bank did not want to file a suit against the Bahawalpur State of which it was a creation though in law having an independent status. The liability of the State to pay the aforesaid sum was unquestionable and was not disputed and could not have been disputed. There are documents produced by the plaintiff's themselves such as Exhs. P/54, P/58, P/59 and P/61 showing that promises were being held out for payment and that the claim itself was not denied. If the bank had done its duty and filed a suit against the Bahawalpur State or after the merger, under the Establishment of West Pakistan Act, against the Province of West Pakistan who became the successor‑in‑interest of the Bahawalpur State, to whom the 55 % share holding had also passed, there would have been no defence to the claim of the bank and they would have got a decree for the aforesaid sum without any difficulty. In fact, I asked Mr. Arfin as to why even now steps were not being taken to get the money from the Province of West Pakistan and there was no satisfactory reply. Therefore, if the bank itself in spite of the assignment failed to take the logical step to file a suit and recover the money they must be held liable to the defendant to account for that sum. In fact, in view of the assignment and the agreement on behalf of, the State to pay the amount to the bank it is doubtful if the defendant could himself institute a suit against the State for the recovery of the said sum. At no time did the bank tell the defendant, "we are not going to file a suit against the State we are canceling the assign ment and you better proceed against them yourselves." Even when the defendant told the bank through the lawyer's notice. Exh. D/83, that the bank had become liable to account for the sum of Rs. 1,20,355 the bank's lawyer in the reply, Exh. D/84, said that his clients were themselves anxious for the quick collection of the said bills. For all these reasons I hold that the duty to recover the money from the State was that of the bank and if they failed to do so they must be answerable to the defendant in the sum of Rs. 1,20,

355. Issue No. 9 is answered accordingly. As regards issue No. 8 I have already found that there was "no agreement of reimbursement.

21. We now come to the question of limitation. The determination of this question would involve the consideration of issues 1, 3(a), 6 and

7. Issue No. 1 is upon the point whether the parties had a mutual, open and a current account at the plaintiff bank at Liaquat Bazar, Karachi. It may be stated here that it is not in dispute that if this account is held to be a mutual account so as to attract the provisions of Article 85 of the Limitation Act under which limitation commences from the close of the year in which the last item is entered in the account, then the suit would be within time. It is also not disputed that if Article 85 does not apply then the claim on account would be barred by limitation unless saved by the acknowledgment as pleaded by the plaintiffs. Exh. P/88 is the statement of accounts produced by the bank. It commences from 2nd of July 1951 on which date a sum of Rs. 50,000 had been advanced by the bank to the defendant. Four documents were executed by the defendant on that day. The first is an application in the printed form by the defendant in the name of M/s. Mohmand Brothers, in which name he was doing business, requesting the bank to open a cash credit account. This is Ex‑h. P/32. The next is ,a promissory note by the defendant in favour of the bank for the sum of Rs. 50,000 which had been borrowed on that day. The third document is an agreement of hypothecation of the goods, namely tie furniture of the defendant, in consideration of the bank having allowed the defendant an advance of Rs. 50,

000. This is Exh. P/35. The fourth document is an agreement for cash credit of the usual time. All these four documents were executed on 2nd July 1951 on which date the account was opened with an advance of Rs. 50,000 by the bank to the defendant. Exh. P/88, the certified statement of accounts filed by the bank, would show that certain deposits had been made from time to time and also withdrawals, but at no time the balance shifted in favour of the defendant. He was throughout in debit Article 85 reads: "For the balance due on a mutual, open and current account Wore there have been reciprocal demand between the parties." The period of limitation in such a case is three years from the close of the year in which the last item admitted or proved is entered in the account; such year to be computed as in the account. In this case the close of the account year would be the 31st of December. The present suit was instituted on 29th July 1957.

22. That the account in this case was open and current is not in dispute. The question is whether it was also mutual which is a requirement of Article

85. In order that an account can be said to be mutual there ought to be items upon either side independent of one another giving rise at one time or another to independent obligation and there must be mutual dealing in the, sense that both parties came under liability to each other. In order for such mutuality of account to exist as will arrest the bar of the statute each party to the account must extend credit to the other on the faith of an admitted indebtedness. But where the account reveals that the defendant never paid more than what was due to the plaintiffs the account, though open and current, would not be a mutual account. The applica tion of Article 85 with reference to banking transactions has been dealt with by Rustomji on Limitation, 6th edition at page

511. With reference to decided cases it has been observed that Article 85 applies to banking transactions if the balance is now one side and then on the other, and the change does not appear to arise from a merely accidental and passing over payment. If the payments were such as to show an intention of wiping out the previous over‑drawals and nothing more it wouldn't be a mutual account. In the case of Uma Shanker Prasad v. The Bank of Bihar Ltd. (A I R 1942 Pat. 201) it was held by Shearer. J. with whom Meredith, J. agreed that‑-- "an open and current account between the parties must still be shown to be a mutual account to attract the provisions of Art.

85. Mutual, open and current account means a course of dealing where each party furnishes credit to the other on the reliance that on settlement the accounts will be F allowed, so that one will reduce the balance due on the other. To be mutual, there must be transactions on each side creating independent obligations on the other, and not ‑merely transactions which created obligations on the. one side, those on the other being merely complete or partial discharges of such obligations." The same view was taken in a judgment of the Dacca High Court in the case, of Ejahar Meah Choudhury v. Rajkuman Chakra borty (P L D 1956 Dacca 1 94). Now, applying these principles to the facts of the present case, it must be noticed that the account started with an advance of Rs. 50,000 by the bank to the defendant against the security of his goods in his shop. There has then been a deposit of Rs. 17,994‑6‑0 on 30th July 1951 and then again G a withdrawal of Rs. 3,000 on 21st January 1952 and it goes on in this way. An examination of all these entries until the parties broke off would show that all the deposits by the defendant are in the nature of re‑payment in an attempt to wipe out the debt. The balance has never shifted. The defendant has all along been in debit. There have been no reciprocal demands, nor the mutual giving of credit. I am, therefore, unable to hold that this was a case of a mutual account so as to attract the provisions of Article

85. That being so, Article 57 would apply and in that case it is not disputed that the claim on account would be barred by time unless it is saved by acknowledgment.

23. Mr. Arfin cited two decisions in support of the con tention that this was a mutual account. The first of these is the well‑known case of the Tea Financing Syndicate Ltd. v. Chandra Kamal (A I R 1931 Cal, 359). . However, the facts of this case are clearly distinguishable from the present one. In that case the plaintiff company had agreed to advance to the defendant sums of money as might be required to the extent of and not exceeding Rs. 80,000 on the security of the entire crop of the tea estate for the year 1920. The defendant hypothecated the entire tea crop for that Season and agreed to transmit the manufactured tea to the company in Calcutta for sale by them in Calcutta by public auction and it was arranged‑that the sale‑proceeds thereof should be credited by the company to the defendant in his account current, the defendant agreeing to repay the company the amount to be advanced to him. This agreement was acted upon on both sides. Upon these facts it was held that the plaintiffs' liability to account to the defendant for the proceeds of the tea sold by them was an independent obligation and the circumstances that they were expected and intended to apply such sums as would be necessary in liquidation of their advances did not mean that this was an account in which the obligations were all and on one side as distinct from an account in which there are cross claims or reciprocal demands. Article 85 was, therefore, applied. There was no such independent obligation in the case before me. The defendant sold his own goods and did from time to time make certain deposits which were clearly in the nature of an attempt to wipe out his liability. The mere fact that on one or two occasions he gave his bill to be collected by the bank did not create that kind of independent obligation which is the crux of mutuality. The Calcutta case, therefore, in my opinion, does not help the plaintiffs.

24. The other case cited was from Dacca. This is the case of Reliance Ltd. v. Prafulla Kumar (P L D 1953 Dacca 200). In this case also the argument which weighed with the learned Judges of the Dacca High Court was the fact that the defendant had first opened a current account with the bank with an initial deposit of Rs. 101 and to that extent the bank became a debtor. This is not the case. here. In the present case the account was opened with an initial advance of Rs. 50,000 by the bank to the defendant. This case can be distinguished from the present one upon this short ground. My finding, therefore, on issue No. 1 is that the account was not a mutual account.

25. The next question is whether the plaintiffs' claim was saved from limitation by an acknowledgment by the defendant This is the subject‑matter of issue No.

7. The case of acknow ledgment is‑based upon a letter dated 1st April 1955, Exh. P/60. This is a letter by the defendant to the bank and reads as follows:‑ "This is to request you that when the amount of our bills on account of furniture supplied by us to the Government of Bahawalpur in 1954 is received by you from the State P. W. D., the balance amount, after adjusting our outstanding accounts with you, may please be credited to the account of Messrs Mahmud & Co., Naz Chambers, 2nd Floor, Frere . Road, Karachi, in lieu of our accounts with them." The circumstances in which this letter was written has been stated by the defendant in his evidence. This is what he said:‑ "I was called to the house of Mr.. Hassan Mahmud when Kh. Muhammad Iqbal was also present.. I owed him some money and he asked me that I should give him such a letter as Exh. P/60 and on that being done he will see that the payment in respect of the furniture is made by the Bahawalpur State within two or three days. If the bills had been paid by the State the balance after the adjustment of my account with the bank would have been definitely much more than my liability to Mr. Hassan Mahmud who was the partner or proprietor of Mahmud & Co. However, I was in distress and I executed this document under pressure. This letter was drafted by Kh. Muhammad Iqbal. This letter was typed at the house of Mr. Hasan Mahmud." Admittedly, Mahmud & Co. mentioned in this letter was the concern of Mr. Hasan Mahmud, the then Chief Minister of the Bahawalpur State and the Chairman of the bank. That this letter was typed at the residence of Mr. Hasan Mahmud is easily deduceable from the fact that when it was typed the address at the top was shown as 14‑N, Islamabad. This, however was later cancelled by pen and above it was written 70, Garden Road, which was the address of the defendant's place of business. I am, therefore, satisfied that the circumstances in which this letter was written have been truly stated by the defendant. This is borne out by the contents of the letter itself. The emphasis of Mr. Arfin was on that part of the letter wherein it is said: "after the adjusting our outstanding accounts with you". This statement, however cannot be read in isolation of the rest of the letter and the circumstances deposed to by the defendant. The defendant by his lawyer's notice dated 15th January 1955, Exh. D/83, had already claimed a sum of Rs. 45,355 from the bank out of the sum of Rs. 1,20,

355. The rest was to be adjusted to what had been the dues of the bank. In this letter the defendant had also categorically stated that by handing over the goods to the State without payment the bank had acted in breach of obligation. Therefore, the letter Exh: P/60 which was written about 4 months thereafter must be read in this context. And what was the purpose of this letter? The purpose was not an acknowledgment of liability but a direction that the balance of the amount of the bill be credited to the account of Messrs Mahmud & Co. An acknowledgment within the meaning of section 19 of the Limitation Act must be one which is of a present subsisting liability. In order that a demand should be taken out of the Statutes of limitation on the ground of an acknowledgment, the language of the debtor must amount to an unequivocal admission of a subsisting debt. It was so held in the case of Sambasiva' Ayyar v. Subramania Pillai (I L R (1935) Mad. 312 at p. 315). Can it be said in the light of the background of the case and the contents of this letter Exh. P/60 that the defendant was making an unequivocal admission of a subsisting debt The answer, in my opinion, is in the negative. He had on the contrary claimed that the bank was his debtor, and therefore when he tells the bank "Pay the excess of the amount to such and such person after adjusting the outstanding account." I do not see that it can be held that he was acknowledging a subsisting debt. My finding, therefore, on issue No. 7 is in the negative.

26. It may be stated here that in the course of the cross examination the defendant admitted that early in 1958 Mahmud & Co. (to which reference has already been made earlier) had collected from the State of Bahawalpur the sum of Rs. 23,

000. He explained the circumstances in which this was done. He said that he had been told by Mr. Hasan Mahmud while travelling together in a train that if he executed a power of attorney to enable him to recover his dues from the State he would see to it that the bank was paid the rest of the amount of the bill relating to the furniture which had been supplied to it. I accept this explanation. This is supported by the Plaintiffs' own document, Exh. P/60, to which‑ reference has been made in the previous paragraph. It must be remembered that a suit had already been filed by the bank against the defendant and if he agreed to the suggestion of Mr. Hasan Mahmud his action must be held to be completely bona fide. When a question was put to the defendant that Mr. Hasan Mahmud had recovered the entire amount of the bill relating to the furniture from the State the defendant spiritedly replied that if it was found that he had recovered anything more than Rs. 23,000 from the State then he would be liable to the plaintiff to the entirety of their claim in this suit. I asked the plaintiff's counsel on more than one hearing whether there was any evidence available to contradict the assertion made by the defendant as stated above, but no evidence was produced. This circumstances, therefore, does not affect the defendant's case in this suit.

27. Issue No. 2 was not pressed and was dropped. With regard to issue No. 6, the execution of the power of attorney, Exh. P/56, was admitted by the defendant. The circumstances in which this was executed is clear from the plaintiffs' own letter dated 30th September 1954, Exh. P/55, in which the plaintiffs have written to the defendant saying that they have been advised by the Executive Engineer, Bahawalpur Division that he will make the payment of the bills to the bank if the defendant gave it a power of attorney. The defendant was, therefore, requested by this letter to execute a power of attorney in favour of the bank to enable them to realize the proceeds of the bills. In these circumstances if the defendant fulfilled the request of the plaintiffs as a result of which it was hoped that the bank would be paid by the State I do not see how this power of attorney can be used against the defendant in the suit. Issue No. 6 is answered accordingly.

28. Issue No. 10.‑‑This relates to the payment of Rs. 20,000 by the bank to the defendant on 2nd August 1954, and another sum of Rs. 5,000 on 20th August 1954. While dealing with issues 5 (a) and (b) I have already held that this payment of Rs. 20,000 was made by the bank under the instructions of the State authorities and the bank paid it because it was hoping to soon recover the money of the bill relating to the price of furniture. I further hold that this sum of Rs. 5,000 was also paid in the same way. I accept the evidence of the defendant that as the R/Rs had been delivered to the bank and the defendant was sorely in need of money, this payment was made by the bank on an oral direction by Mr. Hasan Mahmud. This is borne out by overwhelming circumstances: One of them is that though the alleged discounting is said to have taken place on 20th August 1954 the relative formal documents were taken on 23rd October 1954. I accordingly hold that the payments of Rs. 20,000 and Rs. 5,0. 0 were in partial payment of the price of the furniture to the defendant, on the instructions of the State authorities. The bank, of course, expected to adjust it on recovery of the sum of Rs. 1,20,355 from the State. Issues 10 (a) and (b) are answered accordingly. Issues 11(a) and (b) and 12 need no further finding in view of what has already been held above on Issues 5 (a) and (b).

29. Issue No. 13.‑On this issue reliance was placed by Mr. Arfin on Exhs. P/89 and P/91. Exh. P/89 is a routine letter and is dated 7‑12‑

55. Exh. P/91, however, contains a clear demand by the bank for the payment of the outstanding in the case credit account as the Government of Bahawalpur was not prepared to make payment. But this letter was written on 25th October 1956. The defendant denied having received the letter Exh. P/89 and also Exh. PJ

91. But, in any case, the demand was not made more than a year and a half after the goods had been delivered to the Bahawalpur State. The defendant had already made his position clear by his lawyer's letter dated 15th January 1955. It was said that the defendant did not reply to these letters assuming that he received them. But he himself has stated in his evidence that his whole officer was closed and so was the business and he had no ‑establishment wherefrom letters could be typed and sent. If, therefore, he sent any letter it must have been in his hand. I, therefore, hold that if a demand was made it was long after the defendant had denied his liability and had actually made a demand of the payment of surplus amount from the bank.

30. Issue No. 14.‑The objection of the defendant with regard to the correctness of this account was to various items, such as payment of godown charges, lawyer's fees, freight charges, etc. There is no evidence upon which the defendant could be held liable in respect of these sums. The rest of the account was not disputed except as to the rate of interest.

31. Issue No. 15.‑This relates to the question of the rate of interest to which the plaintiffs may be entitled. The plaintiffs have claimed interest at 9%, but if the defendant had been held to be liable his liability would be to pay interest at 6%, because that is what is provided in the agreement between the parties.

32. Issue No. 16.‑In view of my findings on issues 5(a) and (b), 8 and 9 and other findings as recorded above I hold that the plaintiffs are not entitled to the claim in suit or any part of it. I accordingly dismiss the plaintiffs' suit with costs. K. B. A. Suit dismissed.