The Judgment of the Court was delivered by
Bakewell, J.:— The plaint in this case was presented on 17th June 1912 and alleged that the plaintiff was the agent of the defendant and his father for the collection of the kist of a certain village and borrowed monies on their authority, and claimed payment of a specific sum, the balance shown by the statement of account therewith filed, interest thereon, and damages for costs incurred by the plaintiff in a suit filed against him in respect of money borrowed on behalf of the defendant. In his defence, dated 26th February 1913, the defendant denied the authority of the plaintiff to borrow monies and defend suits and otherwise challenged the correctness of plaintiff's accounts and alleged that upon proper accounts being taken a balance would be found due to the defendant in respect of which be was about to take steps against the plaintiff.
On the 24th February 1913 issues were framed as to the correctness of plaintiff's accounts. On the 20th June 1913 the defendant applied for leave to file an additional written statement containing a prayer that a decree might be given in the suit for the amount found due to him on taking the accounts between the parties; and by order, dated 24th, June, 1913, the defendant was allowed to amend his written statement accordingly.
The learned District Munsif found that the defendant's claim was birred and that his written statement was not within the terms of Order VIII, rule 6, Civil Procedure Code, but the learned Subordinate Judge held that the suit being for an account, a decree could be passed against the plaintiff in favour of the defendant.
It is clear that the defendant's written statement does not fall within the terms of Order VIII, rule 6, because it does not claim an ascertained sum of money and it does not contain the particulars of the debt. It has been held by this Court that debt means a present obligation to pay a liquidated sum of money—Sabju Sahib v. Noordin Sahib(1). As is pointed out in that case, it is not sufficient to constitute a debt that a sum of money may ultimately be recoverable. The claim of both the plaintiff and the defendant is for the balance to be found due on taking an account of the agency transactions, and the allegation contained in paragraph 4 of the defendant's original written statement that the plaintiff was compelled to employ persons to perform defendant's duties and the allegation of plaintiff that he incurred costs in proceedings against which defendant was bound to indemnify him constitute claims for damages for breach of the contract of agency.
It has been argued that under Order XX, rule 19, a set off is admissible otherwise than under Order VIII, rule 6, and a decree may be given for the defendant. This rule appears to adopt the decisions of this Court that cross demands arising out of the same transaction may be set-off though they do not fall within the strict terms of Order VIII. rule 6, and to allow a decree to be passed for the defendant in such cases, but it does not deal with the question of limitation.
A set-off was originally merely a defence to an action, and it has been held that the right to plead this defence arises when the action is brought, so that it does not become barred subsequently by the statute of limitations, Walker v. Clements(2).
The right has now become one of attack as well as of defence and the defendant occupies the position of a plaintiff in respect of any balance claimed by, him. No decision of this Court: has been cited before us that in a suit upon a contract the plaintiff is precluded from setting up the defence of the statute as well as any other defence to the attack of the defendant.
In taking an account of the amount, due under a mortgage the mortgagor is entitled to set-off any sums due to him under the mortgage contract whether a suit would lie therefor or not; the mortgagee is a creditor claiming payment of his debt, and the mortgagor's claim is in effect a defence, and his rights under the contract have not been extinguished though he may be precluded by the statute from bringing a suit—Parasurama Pattar v. Venkatachellam Pattar If the mortgagee, on the other hand, has monies of the’ mortgagor in his hands, he can, in taking the account in a suit by the mortgagor, appropriate them towards payment of a sum due to him by the “mortgagor notwithstanding that a suit would be barred— Sheo Saran Singh v. Mohabir Pershai Saha. This is also a set-off in defence to the plaintiff's claim. In Chidambara Mudaliar v. Krishnaswami Pillai(3) a trustee was held to be entitled to set up his right to be indemnified out of the trust estate when sailed upon for an account; he still held the office of trustee and the Court would not remove him from his office and so deprive him of the right to possession of the trust property and of paying himself thereon without providing for payment of the amount found due to him. In case where the Court is administering a fund, it will have regard to the subsisting rights of the parties, and the fact that any party could not take separate proceedings to enforce this right is immaterial — Chidambara Mudaliar v. Krishnaswami Pillai.
In the case of a suit upon contract it has been held by this Court that the defendant cannot plead an equitable set-off which is barred at the date of suit, because the amount claimed is not legally recoverable Vyravan Chetty v. Srimath Deivasikamani Nataraja Desikar(4)
I respectfully agree with the observations of my learned brother upon the decisions of the Allahabad High Court which have been cited, and I am of opinion that in pleading an equitable set-off the procedure of Older VIII, rule 6, of the Code, should be followed.
In the present case, the defendant's right to sue his agent for an account was not barred on the 17th June 1912 when the plaintiff's suit was instituted, but became barred immediately thereafter under article 89 of the Limitation Act, 1908. I am of opinion that when the defendant filed his written statement there was no sum due by the plaintiff to the defendant within the meaning of Order XX, rule 19, because there was no amount then legally recoverable by the defendant from the plaintiff. I think that, since the defendant's, claim was not barred at the date of the suit, he was entitled to plead that thsre was a sum in the plaintiff's hands which the latter was bound under his contras to apply in satisfaction of his demand; but that, since a suit could not be brought by the defendant to enforce his claim, he could not led that there was a further sum payable to him.
I would allow the appeal and restore the District Munsif's decree with costs here and in the Lower Appellate Court
Phillips, J.:— In this case, the plaintiff sues as agent of the defendant to recover the balance of money due to him by the litter and states that, if accounts of receipts and disbursements are looked into, it will to found that money is owing to him. The defendant put in a written statement stating that as a matter of fact nothing was due by him to the plaintiff and asked that the suit should be dismissed. At a later date be put in an additional written statement which was permitted to be filed under Order VIII, rule 6, in which he claimed that a balance was due to him on the accounts and stated that he was prepared to pay the requisite Court-fee if ordered to do so. The defendant's claim being that, of principal against agent, it would be governed by article 89 of the Limitation Act and his claim would have been barred on the day after the plaint in this suit was filed as the agency terminated on the 31st May 1909.
The question in this appeal is whether a decree can be given to the defendant for the balance found due to him, notwithstanding the fact that when he put in his claim to set-off that claim would have been barred by limitation. No doubt if the claim could be treated as a set-off under Order VIII, rule 6, the provisions of Order XX, rule 19(1), would justify the decree in defendant's favour. I have, however, no hesitation in stating that this is not a case of set-off under Order VIII, rule 6. In the first place, there is no ascertained sum of money. The amount depends upon the examination of the accounts. Money was not legally recoverable on the data the claim was made, and the written statements do not contain particulars of debts sought to be set-off. This being so, I do not think that the provisions of Order VIII, rule 6, can be applied to this case.
The next question is whether it can be treated as an equitable set-off. In the first place, I would point out that there is really no set-off pleaded, for all that the defendant says is, that if the accounts between himself and cha plaintiff are looked into, a balance will be found due to him, that is to say, that on the true view of the facts stated in the plaint the decree should be for defendant and not for plaintiff. However, treating it as an equitable set-off, we have to sea whether is in be allowed although barred by limitation. In mortgage suits, sums are allowed to be sat off in taking accounts of the mortgage even though barred by limitation and this principle, is recognized in Parasurama Pattar v. Venkatachallam Pattar, Sheo Saran Singh v. Mokabir Psrshad Saha and Edward Dalgieish v. Romdin Singh Chowdhury, and it was held in Chidambara Mudaliar v. Krishnaswami Pillai that a trustee was entitled to have a decree for the amounts due to him from the trust in a suit brought for his removal, although his right to sue for these amounts was barred by limitation. But those cases are cases in which the relationship between the parties still subsisted. In the former cases it was that of a mortgagor mortgagee and in the latter case the trustee was still in possession of trust property. In Vyravan Chetty v. Srimath Veivasikamani Nataraja Desikar(5) it was held by the same Bench that decided the case in Parasurama, Paitar v. Venkatachalam Pattar that a lessee could not sat up by way of an equitable set-off an liquidated claim for damages which was barred at the date of the suit. Tue main difference between that case and the present is that the present defendant's claim was not barred at the date of the suit, but became barred on the following day. The question is whether in equity he should be allowed not only to set off an amount equivalent to plaintiff's claim and thus have the suit dismissed, but also to claim a decree for an additional amount. No doubt in Walker v. Clements it was held that a set-off which was treated as a cause of action must be deemed to date from the cause of action. That case, however, was decided before Courts were empowered to decree claims on set-off, for until 1375 a set-off could only be pleaded as a defence and could not be treated as a substantial claim and the English Courts have always recognized that a claim on a set-off is subject to the law of limitation in the some way as the principal claim—vide Rawley v. Rawley. On principles of equity, therefore, is the defendant entitled to get a decree in this suit? It is not disputed that his claim must be allowed to the extent of plaintiff's claim and the plaintiff's suit dismissed. But the further question, whether he is entitled to a decree for money, has arisen. If his claim is allowed, he will be in the exceptionally fortunate position of putting forward a claim in a Court of law which be claims to have tried at no risk to himself. He has paid no Court fee on his claim and merely undertakes to pay what is necessary in case he gets a decree. Whereas, if no decree is given, be evades all liability. If the plaintiff had not brought this suit, he certainly could not have prosecuted, his claim. It would, therefore, not seem right that be should be allowed to evade the statute of limitation merely because plaintiff has filed a suit against him. No doubt in Pragi Lal v. Maxwell it was held by Oldfield, J., that a claim like the present one should be allowed, but the other learned Judge in that case expressly differed on the ground that although a set-off could be admitted as an equitable protection to the defendant against his being cast in the plaintiff's suit, it could not be allowed in order to obtain a decree in his favour. No authority in this Court has been brought to our notice in which a decree has been given for defendant in a suit brought by plaintiff on accounts, but there is a case in Parmanand v. Jagat Narain, in which such a decree was given for the defendant. The ground on which this decision was based was that a suit for accounts against an agent necessarily involves an undertaking by the plaintiff to pay to the defendant any sum that may be found due to him. This, I think, is taking a somewhat large view of the indention of a plaintiff in such a suit, for it could rarely be his intention to bring a suit is order that a decree might be given against him. On principles of equity, therefore, I think shat the defendant's claim to a decree should be disallowed on the ground that such a decree would have the effect of enabling him to evade the law of limitation. In that view I agree in the order proposed.
K.R