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Thomman Thresia v. Pothen Chako .
Factual and Procedural Background
The plaintiffs entrusted Rs. 900 in two instalments to the defendant to negotiate with one Kumaran Nair for a sale of the plaintiffs' equity of redemption in certain mortgaged properties. The plaintiffs alleged payments of Rs. 500 on 5-3-1122 (22-10-1946 A.D.) and Rs. 400 on 2-6-1123 (16-1-1948 A.D.), and alleged that the defendant failed to pay the advance to Kumaran Nair and obtain the sale as entrusted. The plaintiffs subsequently took a sale deed directly from Kumaran Nair on 3-9-1123 and brought this suit on 7-8-1126 (21st March 1951 A.D.) for recovery of the entrusted amount and interest.
The defendant denied the entrustment and contended that the suit was barred by limitation. The trial Court found that only the Rs. 500 payment (5-3-1122) was proved, that this sum was entrusted to the defendant for negotiation and payment of the advance, and held that the plaintiffs' cause of action arose on 3-9-1123; it gave a decree for recovery of Rs. 500 and interest. The lower appellate Court accepted the defendant's contention on limitation (applying Article 62) and dismissed the suit. The plaintiffs appealed, and this is the second appeal addressing whether the suit is barred by limitation.
Legal Issues Presented
- Whether the plaintiffs' suit for recovery of the entrusted money is barred by limitation.
- If limitation is in issue, which provision of the Limitation Act governs: Article 62 (for money received for plaintiff's use) or the provisions applicable to principal-agent relationships (Articles 88, 89 or 90)?
Arguments of the Parties
Plaintiffs' (Appellants') Arguments
- The plaintiffs alleged two payments to the defendant (Rs. 500 on 5-3-1122 and Rs. 400 on 2-6-1123) made for the specific purpose of obtaining a sale from Kumaran Nair; the cause of action arose when they ultimately obtained the sale on 3-9-1123 and did not get credit for the entrusted amount.
- The plaintiffs claimed interest from 3-9-1123 and proceeded on the basis that their cause of action arose on that date.
Defendant's (Respondent's) Arguments
- The defendant denied the entrustment (denied receipt or the alleged obligation to use the money as claimed by the plaintiffs).
- The defendant contended that, on the plaintiffs' case, the suit was governed by Article 62 of the Limitation Act and that the cause of action arose on the date of entrustment (5-3-1122), making the suit time-barred.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Jaganji v. Bandan, AIR 1930 All 397 (Allahabad High Court) | Where sums are entrusted to a defendant who acts as an agent or intermediary and retains them, a suit for recovery by the principal is covered by Article 90 (suit by principal against agent for neglect or misconduct). | The court relied on this decision to support the characterization of the defendant as an agent and to hold that a suit for the wrongful retention of entrusted sums is covered by Article 90 of the Limitation Act. |
| Shib Chandra Roy v. Narain Mukherjee, ILR 32 Cal 719 | Authority treating the term "movable property" in Article 89 as including money. | Collected among decisions cited in support of the court's conclusion that Article 89 (suit by principal against agent for movable property received and not accounted for) can apply where the movable property is money. |
| Pran Ram v. Jagadish Nath, ILR 49 Cal 250 ; AIR 1922 Cal 355 | Authority that "movable property" includes money for the purposes of Article 89. | Followed as precedent for the proposition that Article 89 may apply to suits concerning money received by an agent and not accounted for. |
| Venkatachalam v. Narayanan, ILR 39 Mad 376 ; AIR 1916 Mad 281 | Authority treating "movable property" in Article 89 as inclusive of money. | Used to reinforce the court's view that Article 89 can govern recovery of entrusted money when the agent has received but not accounted for it. |
| Asghar Alikhan v. Khurshed Ali Khan, ILR 24 All 27 (Privy Council) | Authority that "movable property" under Article 89 includes money. | Adopted as part of the body of authority supporting the application of Article 89 to money entrusted to an agent and not accounted for. |
Court's Reasoning and Analysis
The court proceeded in a stepwise manner, sticking to findings made by the courts below and the plaint allegations:
- The court analysed the nature of the relationship created by the transaction: the plaintiffs entrusted money to the defendant for a specific purpose — to negotiate, if possible, a sale with Kumaran Nair and to pay an advance to him so as to obtain a firm agreement. The court concluded this created a principal-agent relationship rather than a simple case of one person holding another's money for that person's use.
- The court considered Article 62 of the Limitation Act, which applies to "money payable by the defendant to the plaintiff for money received by the defendant for the plaintiff's use" and observed that Article 62 is inapplicable where the defendant has duties beyond merely holding and returning the money. The court cited Bhaumikh's commentary noting that Article 62 will not apply where the defendant has other duties in respect of the money.
- Turning to the provisions dealing with agency, the court examined Articles 88, 89 and 90:
- Article 88 (suit against a factor for an account) was found not to fit the facts.
- Article 89 (by a principal against his agent for movable property received and not accounted for) and Article 90 (other suits by principals against agents for neglect or misconduct) were identified as the applicable provisions.
- Application of Article 89: The court held that the agency continued until it became impossible for the defendant to obtain the sale deed from Kumaran Nair — specifically until the plaintiffs executed the sale deed themselves on 3-9-1123. Because no demand to account had been made and no time-limit for the agent's performance had been fixed, the second part of Article 89's third column ("where no such demand is made, when the agency terminates") applied; time therefore began to run from 3-9-1123.
- Application of Article 90: The court reasoned that once the plaintiffs took the sale deed on 3-9-1123 and the defendant thereafter failed to return or account for the entrusted amount, that failure constituted neglect or misconduct on the agent's part. Under Article 90, limitation runs from when the neglect or misconduct becomes known to the plaintiff; here the plaintiffs could not have known of the neglect or misconduct prior to 3-9-1123. Thus, for Article 90 as well, limitation begins on 3-9-1123.
- The court also addressed the contention that Article 89 did not apply because it speaks of "movable property." It relied on a body of precedent (collected in Mitra's Limitation Act) holding that "movable property" includes money, and treated Article 89 as applicable to money entrusted to an agent and not accounted for.
- Because both Article 89 and Article 90 carry a three-year limitation period, and because in either event time began running from 3-9-1123, the plaintiffs had until 3-9-1126 to file suit. The present suit, filed on 7-8-1126, was therefore within time and not barred by limitation.
Holding and Implications
Core Holding: The second appeal is allowed; the suit is not barred by limitation. The decree of the lower appellate Court is set aside and the decree of the trial Court is restored.
Direct consequences:
- The trial Court's decree in favour of the plaintiffs (a decree for recovery of Rs. 500 and interest, as awarded by the trial Court) is restored.
- The plaintiffs' suit was held to fall under Articles 89 and/or 90 of the Limitation Act rather than Article 62, and their cause of action is treated as arising on 3-9-1123 for limitation purposes.
Broader implications: The opinion applies established authorities to treat entrusted money given to an agent as falling within Articles 89 and 90 (with "movable property" including money), but the opinion does not state or purport to create a new legal precedent beyond applying existing law to the facts. No broader or novel precedent is announced in the text of the opinion.
JUDGMENT
1. The only question for decision in this second appeal is whether the suit is barred by limitation or not. According to the plaint allegations, one Kumaran Nair had taken an assignment of a decree for redemption of certain mortgaged properties which were in the possession of the plaintiffs, the defendant and other persons, and as the plaintiffs desired to obtain from him a sale of the equity of redemption they entrusted a sum of Rs. 900/- to the defendant, who was an acquaintance of the said Kumaran Nair, for negotiating the sale. The defendant was to settle with Kumaran Nair the terms of the sale and pay to him as advance the amount entrusted, and at the time of the execution of the sale deed this advance was to be adjusted against the sale consideration payable by the plaintiffs and they were to pay only the balance sale consideration. Alleging that the defendant did not pay the amount to Kumaran Nair and obtain from him the sale for them in pursuance of the terms of the entrustment and they had therefore to take a sale deed after direct negotiations with Kumaran Nair and paying the full sale consideration, without getting any credit for the amount entrusted by them to the defendant for payment of the advance, the-plaintiffs brought this suit on 7-8-1126 (21st March 1951 A.D) for recovery of the said amount and interest thereon. They had taken the sale from Kumaran Nair on 3-9-1123 and the suit was brought on the basis that their cause of action arose on the said date and they were entitled to get interest also from 3-9-1123. The defendant denied the entrustment and contended further that the suit was barred by limitation. The plaintiffs' case was that the entrustment was made by means of two payments, one of Rs. 500/- on 5-3-1122 (22-10-1946 A.D) and another of Rs. 400/- on 2-6-1123 (16-1-1948 A.D). The Courts below concurrently found that the plaintiffs have not proved the second payment of Rs. 400/- and that the first payment of Rs. 500/- on 5-3-1122 is true. They also found that this amount of Rs. 500/- was entrusted to the defendant for paying the advance to Kumaran Nair and obtaining from him a sale deed for the plaintiffs as alleged by them. On the question of limitation, the findings were divergent. According to the defendant, the suit is governed by Article 62 of the Limitation Act, and the plaintiffs' cause of action arose on the date of the entrustment, namely, 5-3-1122. The first Court repelled this contention and, holding that the plaintiffs' cause of action arose only on 3-9-1123, gave a decree to them for recovery of Rs. 500/- and interest thereon. The lower appellate Court upheld the defendant's contention regarding limitation, and reversing the first Court's decree, dismissed the suit without costs. Plaintiffs have therefore brought this second appeal.
2. The plaint allegations and the concurrent findings of the Court below are to the effect that the amount of Rs. 500/- was paid by the plaintiffs to the defendant for a specific purpose, namely by negotiating and obtaining for them a sale from Kumaran Nair and for paying the advance to him. At the time of the entrustment nothing had been settled as regards the terms of the sale deed to be taken, and neither the plaintiffs nor the defendant was sure whether Kumaran Nair would agree at all to give a sale to the plaintiffs. The defendant was to negotiate with Kumaran Nair and if the latter was agreeable to give a sale, settle the terms of the sale with him and pay the amount entrusted by the plaintiffs as advance to Kumaran Nair so as to take a firm agreement.
3. Therefore, what has really happened in this case is that the plaintiffs constituted the defendant as their agent for negotiating with Kumaran Nair and obtaining a sale from him for them and pay to him the necessary money for carrying on, on their behalf, the work with which he was entrusted, that is to say, the amount was paid by the plaintiffs to the defendant for a specific purpose in connection with the work of the agency the defendant had undertaken on behalf of the plaintiffs. Article 62 of the Limitation Act reads:
“62. For money payable by the defendant to the plaintiff for money received by the defendant for the plaintiff's use. Three years. When the money is received.
4. This Article cannot obviously apply to a case where a principal has paid money to his agent in connection with the work of the agency and the latter has not made use of the money for the purpose for which it was entrusted to him and is wrongfully retaining it with him. The money no doubt, belonged to the plaintiffs even after it was paid to and received by the defendant, but the obligation or duty that fell on him on receipt of the money was not to hold it on behalf of the plaintiffs, or for the plaintiff's use and return it to the plaintiffs; but to negotiate with Kumaran Nair for a sale, and if Kumaran Nair agreed to give a sale to the plaintiffs, to pay the amount to him as advance and obtain from him a firm agreement. The legal relationship between the plaintiffs and the defendant was therefore one of principal and agent and not merely of two persons one of whom has received money belonging to the other and has to hold the same for and on behalf of the other. In Bhaumikh's book on the Indian Limitation Act, third edition, it is pointed out at page 394:
“where the defendant is not under a mere duty to hand over the money which he received but has other duties as well in respect of it, Article 62 will not apply.”
5. Cases of agency are governed by Articles 88, 89 and 90. Article 88 cannot obviously apply to this case as it provides only for a suit against a factor for an account. Article 89 provides for a suit by a principal against his agent for movable property received by the latter and not accounted for. That article reads:
‘89. By a principal against his agent for movable property received by the latter and not accounted for. Three years. When the account is during the continuance of the agency demanded and refused or, where no such demand is made, when the agency terminates.”
and Article 90 reads:
“90. Other suits by principals against agents for neglect or misconduct. Three years. When the neglect or misconduct becomes known to the plaintiff.”
6. As the money, in the present case, was received by the defendant for paying the advance to Kumaran Nair on behalf of the plaintiffs there was undoubtedly a duty on his part to return or account for it if for any reason the amount could not be or was not paid to Kumaran Nair. Before the plaintiffs took the sale deed from Kumaran Nair, the defendant had not paid the advance to him, and after they took the sale deed directly from him paying the full sale consideration the defendant could not pay any advance to him, and his agency also automatically terminated with the execution of the sale deed. The defendant was therefore clearly bound, after the execution of the sale by Kumaran Nair, either to return the amount or to account for it to the plaintiffs; and his retention of the money without accounting for it would be either neglect or misconduct on the part of the agent. Therefore, this is clearly a case coming under Article 90 of the Limitation Act. I am fortified in this view by the decision of the Allahabad High Court in Jaganji v. Bandan, AIR 1930 All 397 (A), wherein it has been held:
“The position of the defendant in the transaction in which various sums of money were from time to time entrusted to him was that of an agent. He was either a middleman or intermediary on behalf of the plaintiff. The sums of money were entrusted to him with the specific direction that they should be paid in one instance to the brothers and in the other to Moti Chaube. If the defendant abused his position and retained the money, the suit for recovery of the sums which he wrongfully retained in his hands was clearly covered by Article 90, Lim. Act, it being a suit by the principal against an agent for neglect or misconduct.”
7. Article 89 also would apply to this case. The agency which the plaintiffs had granted to the defendant for negotiating with Kumaran Nair on their behalf and obtaining for them a sale deed on payment of the amount entrusted with him as advance can be deemed to have been terminated only with the execution of the sale deed on 3-9-1123. It is true that the defendant had not paid the amount to Kumaran Nair before that date, but till then neither the plaintiffs nor the defendant had issued any notice terminating the agency, and as no time limit had been prescribed at the time of the entrustment for getting Kumaran Nair's agreement and paying the advance to him, the agency must be deemed to have continued till it became impossible to obtain the sale deed from him. It was only with the execution of the sale deed on 3-9-1123 that it became impossible for the defendant to obtain Kumaran Nair's agreement and pay the advance to him. Therefore, this is a case to which the second part of the third column of Article 89, namely, “where no such demand is made, when the agency terminates”, applies. Since the suit contemplated in the first column of Article 89 is a suit for movable property, it was urged that Article 89 would not apply to the case. But it has been held in several cases that the terms ‘movable property’ in the first column of Article 89 would include money also. These cases have been collected & mentioned at page 468 of Mitra's Limitation Act, 13th edition. They are Shib Chandra Roy v. Narain Mukherjee, ILR 32 Cal 719 (B); Pran Ram v. Jagadish Nath, ILR 49 Cal 250 : (AIR 1922 Cal 355) (C); Venkatachalam v. Narayanan, ILR 39 Mad 376 : (AIR 1916 Mad 281) (D) and Asghar Alikhan v. Khurshed Ali Khan, ILR 24 All 27 (PC) (E). Following these decisions, I hold that the expression ‘movable property’ in the first column of Article 89 would include money also and that the present suit would fall under Article 89 also.
8. In the present case the period of limitation will be the same whether it is Article 89 or Article 90 that is applied. As it is the second part of the third column of Article 89 that applies to this case, time begins to run only from 3-9-1123 which is the date on which the agency terminated, and the plaintiffs have three years' time from that date to file the suit under Article 89. Under Article 90 time begins to run when the neglect or misconduct becomes known to the plaintiffs. As the neglect or misconduct is the failure of the defendant to return the money to the plaintiffs after the execution of the sale deed on 3-9-1123 and his retention of the same thereafter, the plaintiffs could not have known that neglect or misconduct earlier than 3-9-1123. Therefore, under that Article also plaintiffs have 3 years from 3-9-1123 to file the suit. Thus, whether it is Article 89 or Article 90, that is applied, the plaintiffs had time till 3-9-1126 to file the suit. It follows that the present suit filed on 7-8-1126 is not barred by limitation.
9. In the result, the second appeal is allowed with costs throughout, the decree of the lower appellate Court is set aside and that of the trial Court restored.
K.S.B
10. Appeal allowed.
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