The Delhi High Court held that when a suit is based on current, open, mutual account, the period of limitation as per Article I of the Limitation Act commences at the end of the financial year in which the last transaction as reflected in the statement of account is entered into.
The above ratio was delivered by the Delhi High Court in the judgment of Fresh and Healthy Enterprises Limited vs. M/s R.K. Brothers, RFA No.319/2017 decided on 24.08.2018.
The present matter was a regular first appeal from a judgment in a suit for recovery of monies filed by the appellant/plaintiff. Wherein he had claimed an amount of Rs.26,63,856/-. Monies were claimed on account of transactions of supply/sale and purchase of apples by the appellant/plaintiff to the respondent/defendant which were duly recorded in the ledger account of the appellant/plaintiff. Since the respondent/defendant failed to pay the suit amount, therefore, the subject suit was filed for claiming the amount which is the balance due at the foot of the running account. It is to be noted that the plaint also made reference to a cheque dated 19.7.2013 issued by the respondent/defendant which was dishonoured.
The trial court dismissed the said suit as being barred by limitation, the limitation having been calculated from 19.07.2013.
The Delhi High Court observed that the trial court had committed a gross illegality in dismissing the suit as time barred without even considering the fact that the suit was based on a statement of account. The Court stated that a suit plaint does not have to contain a statement of law that the ledger account was an open, mutual and current account under Article 1 of the Limitation Act because that is an inference or a finding of fact which has to be arrived at from the statement of account which is filed.
The Court noted that the statement of account filed in the suit as found in the trial court record, within the first few transactions itself shows that there were shifting balances. Once there are shifting balances, the suit will be on the basis of an open, mutual and current account. As per Article 1 of the Limitation Act, a suit filed on the basis of an open, mutual and current account, limitation commences at the end of the financial year for which the transactions are entered into.
The court noted that in the present case, the transactions entered into show that the last invoice entered into the ledger account maintained by the appellant/plaintiff of the respondent/defendant is dated 14.5.2013. Therefore it was held that limitation will commence as per Article 1 of the Limitation Act on 1.4.2014.
The Court also reiterated that the law is that shifting balances will automatically create an open, mutual and current account.