P L D 1976 Quetta 99 (PLP)

Arts. 57 & 85-Open, mutual. and current account-Civil suit- Recovery of loan - Defendant-appellant a creditor of plain tiff respondent, an amount standing to his credit in plaintiff Bank's account, defendant subsequently obtaining overdraft, and remaining indebted to respondent-Bank throughout-Account never closed nor its nature expressly changed or reciprocity of dealings coming to end Possibility of shifting of balance in appellant's favour not ruled out (appellant being in a position to deposit a larger amount than debit balance at any time and thus attaining position of creditor again) Account between parties, hell, not a loan account but an open mutual and current account attracting provision of Art, 85 and not Art.

57. The real test is to see as to whether there have been reciprocal dealings between the parties or not. In the present case on the date of opening of balance-sheet, the appellant was the creditor and the respondent was the debtor. Thereafter the appellants remained a debtor throughout and the respondent remained a creditor. It cannot therefore be said that there was no reciprocity of dealings between the parties. The account was also not settled and both the parties remained creditor and debtor. S. H. Jaffari for Appellant. Basharatullah for Respondent. Date of hearing: lst July 1976. The appellant has assailed the validity of the judgment and decree dated 5th June, 1972 passed by the learned District Judge, Quetta whereby he upheld the judgment and decree passed by the Civil Judge, Quetta dated ` 31st March, 1972 in favour of the respondent and against the appellant.

2. The facts forming the background of the case are that the respondent instituted a suit for the recovery of Rs. 2,771 against the appellant in the Court of Civil Judge, Quetta. The respondent averred that the appellant was maintaining a mutual open and current account with the respondent-Bank and he requested for overdraft facility which was extended to him to the extent of Rs. 5.000 at the rate of 10% per annum as interest with monthly rests. The appellant enjoyed the overdraft facility and withdrew various sums of money at different occasions. Thus on 15-8-1967 there was a debit balance of he. 2.110 in his account which increased to the amount in suit on 31st January, 1970. The appellant contended that the suit was barred by time and that the account opened by him carne to an end in the year 1964 whereafter he had no dealings with the defendant. He also denied having ever requested or enjoyed overdraft facility. According to him Messrs Naqi and Sons of which he was sole proprietor requested for a loan of Ra. 10,000 for business purposes which was not sanctioned. He further averred that no interest was ever agreed to be paid to the respondent. On the pleading of the parties the following issues were framed (a) Whether the suit is within time? O. P. (b) Whether the suit is maintainable in view of objection C of the written statement? O. D. (c) Whether a sum of Rs. 2,771 inclusive of interest at the rate of 10% per annum i3 outstanding against the defendant as on 31st January 1970 ? O. P. The parties produced evidence, both documentary and oral and the Civil Judge came to the conclusion that the suit was within time and that it was maintainable. On merits the suit of the respondent was decreed as prayed. The appellant being aggrieved by the judgment and decree of the trial judge preferred an appeal to the learned District Judge, Quetta which was also dismissed on 5th June, 1972. I have heard the arguments of Mr. S. H. Jafery the learned counsel for the appellant. His first contention is that the account did not fall within the definition of mutual open and current account and therefore the provisions of Article 85 of the Limitation Act did not attract to the case. According to him Article 57 of the Limitation Act was applicable in accordance with which the suit should have been filed within three years of the obtaining of loan and as it was not done the suit when it was instituted was hopelessly time barred. Admittedly Article 57 of Limitation Act deals with the loans and allows a period of three years for the filing of a suit for the recovery of the loan which is to be computed from the date the loan was extended whereas Article 85 of the Limitation Act deals with the mutual open and current accounts and provides that the suit should be filed within three years. The period of three years is to be computed from the close of the year in which the loan item admitted or proved was entered in the accounts and such year was to be computed as a year in the account. The position which emerges from this contention is that if it is established that the nature of the account between the parties was of a loan account then Article 57 of the Limitation Act would apply and admittedly the suit would be barred by time on the date it was filed. However if on the other hand it is proved by the record that the account was mutual open and current then the provisions of Article 85 of the Limitation Act would be applicable and the suit would undisputedly be within time. It would therefore be necessary to examine se to what was the nature of the account. The first entry in the statement of account is dated 7th May 1964 which shows a credit balance of Rs. 15 in favour of the appellant. Second entry is dated 8th May 1964, which shows that the appellant withdrew an amount of Re. 500 from the respondent-Bank. There are several other entries which show withdrawal of several amounts from the respondent-Bank. On 15th August, 1967 and 31st October, 1967 the appellant deposited Re. 250 and Rs. 500 respectively in his account. To conclude, the statement of account shows that the appellant withdrew from the Bank various sums of money on four occasions only. The other entries made in the account are in respect of interest. From the perusal of this statement it comes out crystal clear that the account was mutual open and current. The learned counsel for the appellant has contended that except the first entry dated 7th May, 1964 when an amount of Re. 15 was shown to the credit of the appellant all other entries are debit entries and even if the payments were made by the appellant the same were made to discharge his liability as a debtor. According to him it is necessary in order to constitute mutual dealings that there must be transactions on each side creating independent obligations on the other hand not mere transactions which created obligations on the one side and the others being merely in partial discharge of such obligations. I am afraid i cannot contribute to this view because an open account means an account which has not been closed or settled and therefore even if the dealings between the parties have come to a stop at one stage the account will still be called an open account -so far as there has not been an adjustment or settlement between the parties to the account and the same has come to a close. An open and current account means a running unsettled and unclosed account. In the instant case the nature of the account was such that it was continuing and had never B been closed and therefore it was an open and current account for all practical purposes. Whether this account was also mutual or not is yet a question to be determined. The real test is to see as to whether there have been reciprocal dealings between the parties or not. In the present case on the date of opening of balance-sheet, the appellant was the creditor and the respondent was the debtor. Thereafter the appellants remained a debtor throughout and the respondent remained a creditor. It cannot therefore be said that c there was no reciprocity of dealings between the parties. The account was also not settled and as I have already observed and both the parties remained creditor and debtor at one stage therefore to say that it was a loan account which except for one entry of Rs. 15 which shows the appellant to be creditor all other entries were debit entries and even if he made any payments the same were in partial discharge of his obligation as a debtor and therefore the nature of the account changed from open mutual and current account to a loan account would be a fallacious argument. The nature of the account never changed despite it that only at one stage the appellant was creditor and thereafter he remained a debtor throughout. The nature of the dealings would not change the nature of the account as long as this fact has bee D specifically expressed and the intention to change the account from mutual open and current account to a simple loan account is established. The mutual accounts are the accounts which consist of a reciprocity of dealings between the parties and even in cases where there is a possibility of shifting of balance from one side to the another the mutuality of the transaction shall be presumed to have been maintained. The fact that the appellant has all along been a debtor would not prove that the account was not mutual. The learned counsel for the appellant has placed reliance on Ejahar Meah Chowdhury v. Rajkumar Chakraborty (P L D 1956 Dacca 194 ). In this case it has been held that the expression mutual would mean that there have been reciprocal demands between the parties and in such cases where the nature of account is such that there have been reciprocal demands between the parties the provisions of Article 85 of the Limitation Act would apply. In the instant case it is well settled that there have been reciprocal demands between the parties and the account had never been settled or closed therefore it cannot be said that it was a loan account showing unilateral transaction and therefore the provisions of Article 57 of the Limitation Act would apply. This ruling therefore does not come to the rescue of the appellant. In Tea Financing Syndicate v. Chandrakamal Bez Barua (A I R 1931 Cal. 359) the parties had entered into an agreement whereby the plaintiff-Company agreed to advance to the defendant various sums of moneys as might be required by the borrowing party not exceeding Re. 80,000 on the security of the tea crop. The defendants to the case hypothicated the entire tea crop for the season and agreed to transmit the manufactured tea to the Company in Calcutta for sale by them to be auctioned. It was agreed that the sale proceeds shall be credited by the Company to the defendant's account which was a current account. The defendants in the case agreed to pay to the Company the amount agreed to be advanced to him. Consequently various sums of money were advanced from time to time and the defendant in the case consigned tea to the Company for sale by public auction. The proceeds were credited to the account. The plaintiffs-Company sued for the recovery of the balance of money whereupon an objection was taken that the provisions of Article 85 did not apply. It was finally hold that in such cases where there was mutuality of transaction and the account was mutual open and current account the provisions of Article 85 of the Limitation Act would apply. The learned counsel also placed reliance on Bhimabi Morarji & Co. v. Hargorind Mohamlal Firm and others (A I R 1938 Rang. 270) In this case it was held that to constitute mutual account there must be transactions on each side creating independent obligations on other. The test of mutuality was held to be the nature of dealings between the parties which should be such that the balance is sometimes in favour of one party and sometimes in favour of the other. It was further held that the mere fact that one party has been debtor throughout does not go to show that the account was not mutual. In this case it was finally held that looking to the nature of dealings the provisions of Article 85 of Limitation Act applied. This ruling as well does not help the learned counsel for the appellant. The last case cited by him to support his contention that the account was not mutual open and current was Robert Cotton Associates Ltd., Khanewal v. Khan Karam Hussain Khan and two others (P L D 1972 S C 109). In this case their Lordships held as under :- `'The judicial test with regard to mutual accounts has been laid down by stating that there must be mutual dealings between the parties in the sense that both come under a liability to each other." It was further held that so long as there was a possibility of the shifting of the balance from one side to the other the mutuality of transaction was maintained.

5. In the instant case as I have already observed the appellant was a creditor on 7th May, 1964 and an amount of Rs. 15 stood to his credit thereafter he obtained an overdraft and remained indebted to the respondent bank throughout. However the account was never closed nor its nature expressly changed or the reciprocity of dealings came to an end. The possibility of shifting of balance in favour of the appellant could also not be ruled out because the nature of accounts was such that at any time the E appellant could have deposited a larger amount than the debit balance and could attain the position of a creditor again. In view of what has been stated above I am of the confirmed view that the account between the parties was not a loan account but an open mutual and current account and therefore the provisions of Article 85 of the Limitation Act applied. The suit was accordingly within time. The findings of the Courts below are free from any error and are therefore upheld.

6. For the foregoing reasons I do not find any substance in this appeal which is hereby dismissed with costs. S. A. H. Appeal dismissed.