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Phool Chand v. Laxmi Narain
Structured Summary of the Opinion
Factual and Procedural Background
Kesrimal (appellant-defendant, deceased) was a member of the Jodhpur Bullion Association and entered into forward transactions with Laxmi Narain (respondent-plaintiff) under the Association's rules and usage. The defendant sold 51 bars of silver to the plaintiff at various rates for the Vaida of Migsar Sudi 5, S 2011 (corresponding to 30 November 1954). On 25 November 1954 the plaintiff went to the defendant's shop and asked his son and munim to cover the sale by purchasing 51 bars for the same Vaida; they told him the sales had already been covered, which the plaintiff denied.
The parties exchanged telegrams: the plaintiff sent Ex. A-29 (26-11-54) denying any instruction to cover the sale and demanding immediate cover; the defendant replied by Ex. A-30 (same day) alleging the plaintiff had personally squared up the sales on 23-11-54 and 24-11-54; the plaintiff retorted by Ex. A-2 (27-11-54) again denying settlement and claiming Rs. 6,698-2-0, payable on 4 December.
The plaintiff instituted the present suit for recovery of Rs. 6,694-10-0 on 3 December 1957. The defendant's defence asserted that, under instructions of the plaintiff, the transactions had already been squared up on 23-11-54 and 24-11-54 — an allegation disbelieved by the courts below. The usage of the Jodhpur Bullion Association required payment and delivery on the third day after the Vaida (i.e., 3 December 1954 in this case).
Procedurally: the trial court held the suit within limitation but did not specify the applicable article of the Limitation Act. The first appellate court held Article 89 applicable. The learned Single Judge held Article 65 applicable. This special appeal challenges which article of the Limitation Act applies and whether the suit is within limitation.
Legal Issues Presented
- Which article of the Limitation Act is applicable to the plaintiff's suit for recovery arising from the forward contracts: Article 65, Article 89, Article 90, or another provision?
- Whether the suit, instituted on 3 December 1957, is within the period of limitation having regard to the applicable article and the date on which the cause of action arose (i.e., the date of breach or of termination of the agency).
Arguments of the Parties
Appellant's Arguments
- The defendant (appellants) contended that the transactions had already been squared up on 23-11-54 and 24-11-54 under instructions of the plaintiff (i.e., there was no outstanding liability).
- The learned counsel for the appellants argued that the alleged breach occurred on 25-11-54 when the defendant refused to carry out the plaintiff's instructions, and therefore limitation should run from that earlier date.
- It was also contended on behalf of the appellants that the agency terminated on 30-11-54 (an earlier date than the date the Court ultimately accepted).
- The appellants argued that the plaintiff was not bound by the usage of the Jodhpur Bullion Association.
Respondent's Arguments
- The respondent-plaintiff consistently denied that any squaring up had occurred on 23-11-54 or 24-11-54 and maintained that the outstanding sale remained and should be covered on the due date; he claimed amounts based on the prevailing rate and sought recovery.
- The respondent relied on the usage of the Jodhpur Bullion Association that fixed the date for payment as the third day after the Vaida (3 December 1954), contending that performance (and any breach) fell due on that date.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| AIR 1960 Pat 223 | Explained that for suits based on agency the Limitation Act's articles especially applicable are Articles 89 and 90; held Article 90 is residuary and that "neglect" or "misconduct" in Article 90 contemplates tortious acts. | The Court observed this authority did not help appellants because no tortious act was alleged here; mere disobedience of a principal's instructions does not amount to a tort. |
| AIR 1953 Mad 694 | Held Article 90 to be a residuary article dealing with claims of a principal against an agent; interpreted "neglect or misconduct" as misconduct in the course of agency duties; in that case Article 120 applied for recovery of fiduciary receipts. | The Court noted this decision was also not helpful to appellants because the present case did not involve fiduciary receipts or tortious misconduct. |
| AIR 1924 All 467 | Applied Article 90 where municipal funds were embezzled by an employee due to negligence of an officer who disregarded rules — a case of tortious act. | The Court cited this as an example of Article 90 applied to tortious conduct; it reinforced the view that Article 90 applies to tortious misconduct, unlike the present non-tortious dispute. |
| Firm Nand Lal v Firm Ramji Das, AIR 1927 Lah 122 | Held that where parties agreed on a future date for delivery, the cause of action for breach arises on the date originally fixed for delivery; thus limitation begins from that date even if the parties later agreed on a settled damage amount before that date. | The Court relied on this authority to hold that the breach in forward contracts occurs on the date fixed for performance (3 December 1954 in the present case) and not on an earlier date of alleged refusal. |
Court's Reasoning and Analysis
The Court approached the issue in steps:
- Consideration of Articles 89 and 90 (agency-related articles): The Court reviewed authorities (including AIR 1960 Pat 223 and AIR 1953 Mad 694) explaining that Article 90 is residuary and that the "neglect or misconduct" contemplated by Article 90 involves tortious conduct. The Court concluded that no tortious act was alleged here — at most the defendant disobeyed instructions — and therefore Article 90 did not apply.
- Consideration of Article 65 of the Limitation Act: The Court set out Article 65 which provides a three-year period "for compensation for breach of a promise to do anything at a specified time." The Article begins to run "when the time specified arrives." The Court analyzed the two parts of Article 65 and concluded that the first part — dealing with breach of a promise to do something at a specified future time — is applicable to these forward contracts (not the second part which deals with contingent contracts under Section 31 of the Contract Act).
- Determination of the date of breach: The Court rejected the appellants' contention that the breach occurred on 25-11-54 (when the defendant allegedly refused to carry out instructions). It reasoned that the contracts required performance and payment on 3-12-54 and that the defendant could, despite earlier false assertions, have performed on the due date. Therefore the breach consisted in failure to make payment on 3-12-54, and the cause of action arose on that date. The Court relied on Firm Nand Lal v Firm Ramji Das (AIR 1927 Lah 122) to support that the cause of action in a forward contract accrues on the date fixed for performance.
- Date of termination of agency and recoverability: The Court addressed alternative dates of termination proposed in earlier proceedings (25-11-54, 30-11-54, 3-12-54) and held that the agency terminated on 3-12-54. On termination, the difference became recoverable from the agent, and this difference was recoverable only on 3-12-54.
- Usage of the Association: The Court held that the parties intended the transactions to be governed by the rules and usage of the Jodhpur Bullion Association; hence the plaintiff was bound by those rules, which fixed the performance date (3-12-54).
- Conclusion on limitation: Having held Article 65 applicable and that limitation begins to run from the time specified for performance (3-12-54), the Court concluded that the suit filed on 3-12-57 was within the three-year period.
Holding and Implications
APPEAL DISMISSED. The Court dismissed the special appeal with costs.
Direct consequences on the parties:
- The Court held that Article 65 of the Limitation Act is applicable to the plaintiff's claim arising from the forward contracts, and that limitation began to run from the date specified for performance, namely 3 December 1954.
- Because the suit was instituted on 3 December 1957, it was within the three-year period prescribed by Article 65; accordingly the plaintiff's suit was maintainable and not barred by limitation.
Broader implications:
The opinion does not purport to lay down a new principle of law beyond applying established distinctions among limitation provisions (distinguishing non-tortious agency disputes from tortious misconduct attracting Article 90 and applying Article 65 to forward contracts). No new precedent was expressly framed by the Court in this opinion beyond these applications to the facts.
1. This is a special appeal against the judgment of a learned Single Judge of this Court in second appeal by special leave.
2. Kesrimal, appellant-defendant, deceased, was a member of the Jodhpur Bullion Association. Laxmi Narain, respondent-plaintiff, entered into transactions with him in accordance with the rules and usage of that Association. He sold 51 bars of silver at rates varying between Rupees 159/- and Rs. 159-3-0 on 4 different dates for the Vaida of Migsar Sudi 5, S 2011 corresponding to 30th November, 1954. On 25th November, 1954, the plaintiff went to the shop of the defendant and asked his son Babulal and his Munim who were present at the shop to cover up the sale of 51 bars by purchasing 51 bars for the same Vaida. They told him that the sales had already been covered. The plaintiff had never given any such instructions to the defendant. He accordingly sent a telegram, Ex. A-29, to him on 26-11-54, which runs as follows:--
"Yesterday, I asked you to square up my outstanding sale of fifty one silver bars at the market closing rate, but as the rate substantially fell down you, in order to get undue advantage falsely alleged that you had covered up my sales. I never instructed you to cover my outstanding sales and in fact you never did so. I still hold my outstanding sale standing with you and instruct you to cover up the sale immediately after the receipt of this telegram. Failing this you alone shall be responsible for all costs and consequences."
3. On the same day the defendant sent a telegram, Ex. A-30, to the plaintiff in which he alleged that the latter had personally squared up the sales on 23-11-54 and 24-11-54- This telegram runs as follows:--
Your telegram of today absolutely take. No outstanding bars with us. You personally squared up your sales of fifty-one bars by purchasing twenty-five bars at Rs. 159-6-0 on 23-11-54, eighteen bars at 159-1-6, one bar at 159-1-9 and seven bars at 159-2-0 on 24-11-54. You have also taken full copies of all these accounts from us on 24-11-54 and agreed to pay Rs. 1,087-15-6 on 25th morning. But since you want to escape your liability you have sent this false telegram. Pay the outstanding amount within a week else taking legal steps.
4. The plaintiff then sent telegram, Ex. A-2 on 27-11-54 to the defendant in which he stated that he never squared up the sale as alleged by the defendant. He claimed a sum of Rs. 6,698-2-0 from him at the rate of Rs. 154-6-0 which was the prevailing rate on 25-11-54 as well as 26-11-54. He stated that this amount was payable on 4th December. This telegram runs as follows:--
"Your reply to my telegram is a tissue of lies and speaks well of your ulterior motives. Your allegation that I squared up sale of fifty-one bars absolutely false and invented with a view to escape your liability. Transaction never squared up by me nor I gave any instructions to that effect which will be proved at proper place. You never gave any statement of account and so there was no occasion to settle your account. It is false that I ever received any copies of accounts and agreed to pay any amount. On the contrary I claim from you Rs. 6,698-2-0 at the rate 154-6-0 which was the prevailing rate when you received my telegram. I call upon you to make payment of the aforesaid amount on 4th December, 1954, the due date, otherwise proceeding as may deem proper at your costs and consequences."
5. The present suit was instituted for the recovery of Rs. 6,694-10-0 on 3-12-57. It was contested by the defendant on the ground that under instructions of the plaintiff the transactions had already been squared up on 23-11-54 and 24-11-54. This allegation has been disbelieved by the Courts below. It has also been held that according to the usage of the Jodhpur Bullion Association payment and delivery were to be made or taken on the 3rd day after the date of Vaida. In this case the payment was to be made on 3rd December, 1954. The trial Court held that the suit was within limitation, but did not indicate which article of the limitation act was applicable. The first appellate Court held that Article 89 of the Limitation Act was applicable. The learned Single Judge has held that Article 65 is applicable. The sole question which arises for determination by us is as to which article of the limitation act is applicable and whether the suit is within limitaton.
In AIR 1960 Pat 223, it was observed that for a suit based on agency, the articles especially provided for in the Limitation. Act are only Articles 89 and 90 with this difference that as between them Article 90 is a residuary article. It was further held that the word "neglect" or "misconduct" as used in Article 90 of the Limitation Act contemplates something which is tortious in nature. In that case Article 89 was applied. This authority does not help the appellants. In the present case no tortious act is attributed to the agent. Mere disobedience of the instructions of the principal does not amount to a tortious act.
7. In AIR 1953 Mad 694, also it was held that Article 90 was a residuary article dealing with claims of a principal against an agent.
"We are inclined to hold that the neglect or misconduct contemplated by the article is neglect or misconduct in the course of and intimately connected with the agency duties, 'qua' agent. It is in this view that this article has been applied to cases where a principal sues the agent to recover the secret profits made by the agent."In that case Article 120 was applied on the ground that the defendant owed a fiduciary duty towards the plaintiff to give up all the moneys he received on his behalf. This case also is of no help to the appellants.
8. In AIR 1924 All 467, funds of the Municipality were embezzled by an employee on account of the negligence of the Executive Officer, who disregarded the rules and instructions. In this case Article 90 was applied. This was clearly a case of a tortious act.
9. No case was cited in which it was held that Article 90 was applicable to a case of a non-tortious nature.
10. Article 65 runs as follows:--
Description. of suit.
Period of limitation Time from which period begins to run.
65. For compensation for breach of a promise to do anything at a specified time or upon the happening of a specified contingency.
Three years When the time specified arrives or the contingency happens.
11. The learned Single Judge held that the second part of this article was applicable namely
"for compensation, for breach of a promise to do anything...... upon the happening of a specified contingency."We are of the opinion that this part is only applicable to a contingent contract as defined in Section 31 of the Contract Act. The contract in suit is not a contract of that nature. It is the first part of it which is applicable to the present suit. The transactions in suit were forward contracts, that is, contracts to be performed at a future date. The contracts were for giving or taking delivery or paying differences on a future date namely 8rd December, 1954.
12. The learned counsel for the appellants contended that a breach of contract took place on 25th November. 1954, when the defendant refused to carry out the instructions of the plaintiff. We are Unable to accept this contention. The contract was to be performed on the 3rd December, 1954. Despite the fact that the defendant falsely alleged on 25th November, 1954 that the contract had already been squared up he could have performed the contract on 3rd December, 1954 when it was to be performed. In any case payment under the contract was to be made by the defendant on 3rd December, 1954 and the breach consisted in not making the payment on that date. The breach of contract therefore took place on 3rd December, 1954. In firm Nand Lal v Firm Ramji Das, AIR 1927 Lah 122, the plaintiff entered into an agreement with the defendant to sell to him cotton seeds which were to be delivered in the month of Magh, corresponding to 12th January to 12th February. Before the time for delivery arrived the parties decided that the actual delivery of the cotton seeds would not take place and agreed to Rs. 121-14-0 as the damages due to the plaintiff from the defendant on that account. The plaintiff instituted a suit for the recovery of this amount. It was dismissed by the first appellate Court holding that it was barred by limitation. According to that Court the limitation for the recovery of Rupees 121-14-0 began to run from the date of the settlement of the damages between the parties and not from the date on which the delivery was originally agreed to be given. It was held by the High Court that the cause of action was the breach fay the defendant which happened on the date originally fixed for the delivery of goods. The suit of the plaintiff was accordingly held to be within time. This decision is applicable to the facts of the present case.
13. The learned Single Judge did not decide as to when the agency terminated. He mentioned 3 alternative dates namely 25-11-1954, 30-11-1954 and 3-12-1954 On behalf of the appellants it was contended that the agency terminated on 30-11-54. In our opinion, the agency terminated on 3-12-54. On termination of agency the difference became recoverable from the agent. This difference was only recoverable on 3rd December, 1954. Therefore, it cannot be held that the agency terminated before 3rd December, 1954.
14. Another argument put forward on behalf of the appellants was that the plaintiff was not bound by the usage of the Jodhpur Bullion Association. We are unable to accept this argument. The intention of the parties clearly was that the transactions will be carried out in accordance with the rules and usage of the Jodh-pur Bullion Association. Consequently the plaintiff was bound by the rules and usage of the Association. We accordingly hold that Article 65 of the Limitation Act is applicable and the time specified for the performance of the contract being 3rd December, 1954, limitation began to run from that date. The suit which was instituted on 3rd December, 1957, was within limitation.
15. We accordingly dismiss the appeal with costs.
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