PETITIONER: <ORG>. Vs. RESPONDENT: <NAME> & CO. DATE OF JUDGMENT: 22/03/1966 BENCH: <NAME>, V. BENCH: <NAME>, V. SUBBARAO, K. SHELAT, J.M. CITATION: 1967 AIR 181 1966 SCR 1 CITATOR INFO : RF 1977 SC1275 (13) C 1989 SC1555 (8) ACT: Contract-Difference between sale and agency to sell-Account stated, what is-When can be re-opened. HEADNOTE: The respondent was a trader in hider. and skins and the appellant was an exporter. During the period January to August 1949, there were several contracts between them. The contracts mentioned that the appellant was buying the goods for resale in U.K. The price quoted was C.I.F. less 2 1/2 %. The contracts also provided that time should be the essence of the contract, that the sales tax was on respondent's ac- count, that the respondent was answerable for weight as well as quality, that there should be a lien on the goods for moneys advanced by the appellant, and that any dispute regarding quality should be settled by arbitration according to the custom of the trade in the U.K. The course of dealing between them showed that before the goods were shipped they were subjected to a process of trimming and reassortment in the godowns of the appellant with a view to make them conform to London standards, that the goods were marked with the respondent's mark and that premiums were paid to the respondent in case the goods supplied were of special quality. The respondent filed a suit on the original side of <ORG> praying that an account should be taken of the dealings between himself and the appellant on the ground that the appellant was his agent. The appellant's case was, that there was an outright purchase of the respondent's goods and that the appellant was not an agent of the respon- dent. The trial Judge dismissed the suit. On appeal <ORG> held that the appellant acted as a del credere agent of the respondent and directed the taking of accounts. In appeal to this Court, it was contended by the appellant that: (i) the terms of the contracts and the course, of dealing between the parties showed that the appellant was not the agent of the respondent but was an outright purchaser of the goods, and (ii) that there was a settled account between the parties which the respondent could not reopen. HELD:(i) The appellant was the purchaser of the respondent's goods under the several contracts and not his agent for sale, and therefore, the view taken by <ORG> was not correct. The essence of sale is the transfer of title to the goods for price paid, or to be paid, whereas the essence of the agency to sell is the delivery of the goods to a person who is to sell them, not as his own property but as the property of the principal who continues to be the owner of the goods, and the agent is liable to account for the proceeds. On the terms of the contract and the course of dealing between the parties, the contract was not one of agency for sale but was an agreement of sale. The appellant purchased the goods from the respondent 2 1/2% less and sold them to the London purchasers at the full price so that the 2 1/2 % was its margin of profit and not its agency commission. The fact that the goods were sent with the respondents 2 mark, that the premium was paid outside the terms of the contract, that the appellant considered it fair and just to pay the whole of the premium to the respondent or to share it with him, and that additional burden with respect to weight and quality was thrown on the respondent, have no significance, in deciding the nature of the contract. The clause with regard to lien is consistent with the transac- tion being an outright sale, because the appellant was acting as creditor of the respondent and charged interest on advances only till the date of shipment of the goods when it became the purchaser of the goods from the respondent. An agent can become a purchaser when the agent pays the price to the principal on his own responsibility. The clause regarding arbitration in the U.K., though unusual, is not also inconsistent with there being a sale of goods between the parties in India. [3H-4B; 5G-H.] (ii) The accounts were settled between the parties and the respondent could not be allowed to reopen the settled account as there was no proof of fraud, mistake or any other sufficient ground. Accounts are "settled or started" if they are submitted and accepted as correct by the other side to whom they have been rendered. For almost every shipment the appellant prepared a full and detailed statement of account and sent it to the respondent. The account contained items both of credit and debit and the figures on both sides were adjusted between the parties and a balance struck and the respondent accepted their accuracy and never raised any objection to them. [11H; 14 E-F]. <NAME> v. <NAME>, (1934) L. R. 61 I.A. 273 and <ORG>, 4 B and S 497, applied. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 164 of 1964. Appeal from the judgment and decree dated December 15, 1959 of <ORG> in O.S. Appeal No. 22 of 1955. <NAME> and <NAME>, for the appellant. <NAME>, and <NAME>, for the respondent.

The Judgment of the Court was delivered by <NAME>, J. This appeal is brought against the judgment of <ORG> dated December 15, 1959 in O.S. Appeal No. 22 of 1955.

The respondent was a trader at Madras in hides and skins. The appellant was a firm, <ORG> Limited, doing business among other things as exporters of hides and skins. For the period of 8 months commencing from January, 1949, there were as many as 101 contracts entered into between the appellant and the respondent. The case of the respondent was that he entered into an agreement with the appellant to act as agents for shipping the goods (hides and skins) to United Kingdom and for finding purchasers there. It is alleged that the appellant used to make payment to the respondent in respect of the goods sent to it for shipment in the nature of advances and he used to set off these advances when payment was made to the respondent after the goods were shipped. The respondent will hereinafter be referred to as the plaintiff and the appellant as the defendants. The plaintiff tentatively claimed a sum of Rs. 56,564/and odd as due to him as balance of the price of the goods and a further sum of Rs. 40,275/- as representing the loss sustained by him by reason of the defendants' conduct in not shipping his goods under the "Shaik mark". The plaintiff accordingly prayed that an account should be taken of the dealings between the parties for the period in question. The defendants contested the suit on the ground that it was not an agent of the plaintiff but it purchased hides from the plaintiff for export and for resale in the United Kingdom. The case of the defendants was that there was an outright purchase of the goods from the plaintiff for the purpose of resale in the United Kingdom. The defendants also contended that a sum of Rs. 4,351 /- and odd was due to it from the plaintiff and it prayed for a decree against the plaintiff for that amount by way of counter-claim. The trial Judge held, by his judgment dated May 6, 1954 that the defendants were only purchasers of the goods from the plaintiff and the idea of agency was quite inconsistent with the nature of the transactions between the parties. The trial Judge came to the conclusion that the plaintiff was bound by the statements of account rendered by the defendants from time to time. After giving an opportunity to the parties to produce further evidence, the trial Judge held that since there was no fraud the accounts could not be reopened and the claim of the plaintiff with regard to Rs. 157/- in respect of the marine insurance alone was sustainable. The trial Judge accordingly dismissed the suit and decreed that counter- claim of the defendants after deducting the said sum of Rs. 157/-. The plaintiff preferred an appeal to <ORG> under the Letters Patent. By its judgment dated December 15, 1959 <ORG> reversed the decision of the trial Judge and held that the defendants acted as del credere agents of the plaintiff for effecting the sale of the plaintiff's goods in the United Kingdom. On this basis <ORG> decreed the plaintiff's suit and directed the taking of accounts, as prayed for, from the defendants, though in respect of some of the items the claim of the plaintiff was negatived. <ORG> also held that the plaintiff was liable to pay to the defendants the amount claimed by them by way of counter-claim.

The first question presented for determination in this case is whether the defendants were acting as del credere agents of the plaintiff or whether the defendants were outright purchasers of the goods supplied to them by the plaintiff. In the approach to this question it is necessary to notice the distinction between a contract of sale and a contract of agency. The essence of sale is the transfer of the title to the goods for price paid or to be paid. The transferee in such case becomes liable to the transferor of the goods as a debtor for the price to be paid and not as agent for the proceeds of the sale. On the other hand, the essence of agency to sell is the delivery of the goods to a person who is to sell them, not as his own property but as the property of the principal who continues to be the owner of the goods and who is therefore liable to account for the proceeds. The true legal relationship between the parties in the present case has, therefore, to be inferred from the nature of the contract, its terms and conditions and the nature of respective obligations undertaken by the parties. It is necessary, at this stage, to set out briefly the course of the dealings between the parties which has been summarised by <ORG> as follows:

"The plaintiff used to purchase tanned hides of all sorts in Periamet (Madras), and in his godown assort them according to quality, pack them into bales and mark them with his mark, viz., <NAME> or S. M. A. Mark. Then the bales would be delivered into the defendants' godown where the bales would be opened and re- assorted so as to conform to London specification and standard. In the process of putting the goods into that shape, there used to be necessity for the defendants to cut and trim the pieces and sometimes call on the plaintiff for replacement of the pieces which fell below the standard. Thereafter, the defendants used to re-pack them into bales each weighing 600 pounds and then ship the goods themselves as shippers and obtain the necessary shipping documents on the basis of c.i.f. contracts. The goods would be shipped to the defendants' <ORG> where they were sold to London purchasers. All the expenses incurred in connection with the goods prior to shipment, such as carriage, trimming and assortment in the defendants' godown were all to be borne by the plaintiffs. So also expense in connection with the shipment, such as freight, insurance, short weight, etc., were all to be home by the plaintiff. After the goods were shipped and as soon as the shipping documents were got ready. the price of the goods was calculated at the price fixed in the contract notes and after deducting the expenses and the advances with interest thereon, the balance, if any, was paid to the plaintiff either by cheque or by credit being given in his accounts. For every shipment a contract note was being sent by the defendants to the plaintiff. So also, a statement of account with a covering letter as well as a cheque for the balance found due to the plaintiff were being sent to the plaintiff from time to time. In all, there were 101 contract forms and several statements of accounts sent to the plaintiff in respect of the shippers. To none of those contracts or statements of account did the plaintiff raise any objection at any time. "

The question whether the defendants took delivery of the plaintiff's goods as agents for sale or whether they purchased the goods outright must largely depend upon the terms of the contract of which a sample is Ex. P-1. All the 101 contracts were prepared in the same printed form. Exhibit P-1 is the contract dated January 21, 1949. It is in the form of a letter sent by the defendants to the plaintiff. It opens with the sentence "We confirm buying from you for resale the following subject to U.K. Import Licence". Then follows a description of the goods giving the number of bales, the average weight and range, the assortment and the price per lb. in pennies. The price quoted is said to be c.i.f. less 21 per cent. The goods were already shipped by the s.s. 'City of Florence'. The seller is said to be liable to pay brokerage at the rate of one pie per lb. Then follow the terms of the contract which are to the following effect:

" Landed weight to be accepted, payment on presentation of documents in order. It is understood that the above goods are for re- sale in United Kingdom. You are responsible irrespective of any inspection by us in Madras for selection and quality of the goods at destination where inspection and acceptance thereof will be made by our agents or the ultimate buyers. In the event of any dispute or claim in respect of goods covered by this contract, failing amicable settlement with buyers, such claim is to be submitted to arbitration according to the custom of the trade in the United Kingdom and the result of such settlement or arbitration is binding on you. We have a charge or lien on all goods covered by this contract for all moneys advanced by us including expenses incurred and interest thereon. Insurance through <ORG> Madras, Limited. Time is an essence of the contract."

In the first place, it is important to notice that the contract in the opening portion specifically makes a mention of the fact that the defendants were buying the goods for resale, and in the paragraph containing the terms of the contract it is reiterated that the goods were intended for resale in the United Kingdom. On the face of it, therefore, the contract is clearly not one of agency for sale but it reads as an agreement of sale. If the defendants were intended to be constituted as the agents for sale the terms of the contract would have been entirely different. Another important feature in this case is that there is a definite price fixed in the contract for the plaintiff's goods. According to the plaintiff the rates fixed in the contract were the ones at which the goods were sold to London purchaser and not a different rate and the defendants were agents who were obtaining for him only the price at which the goods were sold at London. It is true that the defendants admit that before fixing the price as between themselves and the plaintiff they used to ascertain the London price by cable. It is also true that the plaintiff was debited in the statement of account with the expenses of the cable. Even so, if the defendants were simply acting as agents for the sale there was no need at all to fix the price in the contract as between them and the plaintiff. It was contended for the plaintiff that according to the contracts the prices fixed are c.i.f. less 2 1/2 per cent and discount of 21 per cent was the commission for the defendants as agents. There is no use of the word " commission" in the contracts and we see no reason to hold that 2 1/2 per cent should be taken as commission and not as a margin of profit. The important point is that if the contract was one of agency there was no need to mention the price at all as between the plaintiff and the defendants. It may be that in most cases the prices which the defendants obtained from the London purchasers were the same as the prices stipulated in the contracts with the plaintiff but the fact remains that they obtained 21 per cent discount on the sale price, that is to say, they purchased the goods from the plaintiff 2 1/2% per cent less and sold them to their London purchasers at the full price, so that 2 1/2 per cent was their margin of profit. It is possible that sometimes they sold the goods to the London purchasers at a higher price in which case they would be entitled to the difference in prices as a profit in addition to the 2 1/2 per cent which they got from the plaintiff. In all there are 101 contract forms and in accordance with these contract forms statements of account were furnished by the defendants to the plaintiff. Exhibit P-1A is the statement of account dated January 25, 1949 based upon the contract note Ex. P-1. It is true that the plaintiff did not sign any one of the contract forms, but all of them were received by the plaintiff without any objection. Statements of account were Prepared in terms of these contracts and the plaintiff was receiving moneys from the defendants on the basis of these contracts and according to the price fixed therein. He did not, at any time, raise the slightest protest against the terms of the contract or against the price fixed therein. On the other hand, he received all the contract forms and statements of account as well as the moneys sent to him by cheque. The plaintiff cannot, therefore, be heard to say that he was not a consenting party to the contracts.

There is also the circumstance that before the goods were shipped to London they were subjected to a process of trimming and reassortment in the godowns of the defendants with a view to make them conform to London standard and selection. In that process the defendants often called upon the plaintiff to replace the pieces found defective. If the defendants were merely acting as agents the process of trimming and reassorting in the godowns to make the goods conform to London standards and specifications will be unnecessary, for in that case the defendants were merely bound to ship the goods as they were delivered to them. Another important feature of the transaction is that in several contracts time was fixed for delivery of the goods. In some cases like the contracts in forms like P-1 to P-3 the shipment has been effected before the contract forms were issued but there are some contracts which contained the stipulation that the bales were to be sent to the godowns of the defendants for shipment to be effected "promptly" which according to D.W. 1, <NAME> meant two weeks. There were also some contracts like Ex. D-2(a) which required the goods to be sent for shipment to be effected within one month, and some other contracts within two months. All the contracts provided that time should be the essence of the contract. If the defendants were acting only as agents for the sale there is no reason why there should be a stipulation in the contract as to the time fixed for the delivery and the stipulation that time should be the essence of the contract. There is also a further condition in the contracts that the sales-tax was on seller's account, the seller being the plaintiff. This circumstance also indicates that the legal relationship between the parties was that of a seller and a purchases and not of a principal and agent.

On behalf of the plaintiff it was argued that according to the contract the goods were to be marked with the plaintiff's mark. It is true that in some of the defendants' letters such as Ex. P-10 it was mentioned that the bales were sent with the plaintiff's mark in some shipments but this circumstance has not significance. It only means that the buyer resold the goods to the London purchaser with the mark of the plaintiff. It was also contended on behalf of the plaintiff that "premium" was paid to the plaintiff in case the goods supplied were of special quality. It is in evidence, that the "premium" was extra price obtained in London if <ORG> was satisfied about the special quality of the goods (vide D- 1O). It was pointed out that if the defendants were purchasers the premium should go to them but in some cases the premium was paid to the plaintiff. Exhibits P-7, P- 10 and P- 1 8, show that for some shipments the premium was paid to the plaintiff.'The explanation of D.W. 1, Ayyalu Chetti is that in some cases the premium was paid to the plaintiff ex gratia. If in London the quality of the goods was found particularly good the premium was obtained from the London purchaser, that is to say, the premium was obtained not as in terms of the contract but as a special payment if the goods happened to be of good quality. It is a payment therefore, L/S5SCI-3 made outside the terms of the contract and there is nothing significant if the defendants considered it fair and just to pay the whole of the premium to the plaintiff or to share it with him in some cases. It was also contended by the plaintiff that According to the terms of the contract the landed weight was to be accepted and the plaintiff was to be responsible for the selection and quality of goods at the destination where inspection would be made by the defendants' agents or the ultimate London buyers. In some statements of account sent by the 'defendants the plaintiff has been debited various amounts for shortage in weight at London. The plaintiff was also informed about the claims made by the London purchasers on the ground of low standard and selection, that is to say, the plaintiff was made answerable for weight as well as quality. It is true that the liability of the, plaintiff is an additional burden thrown upon him under the terms of the contract but it is of 'no significance in considering the question as to whether the as transfer of title to the goods at the time of shipment from the plaintiff to the defendants. On behalf of 'the plantiff reference was also made to the fact that the contracts provided for a Hen on all the, goods covered by the contracts for all moneys advanced by the defendants, including expenses incurred and interest thereon. it is the admitted position that for purchasing skins and hides, the plaintiff was taking large sums of money as advances from the defendants. We find from the several statements of account that reference is made to all such advances. These advances together with interest thereon are deducted from the sale-price payable to the plaintiff and for the balance alone cheques were sent: to him. It appears that on a later date, i.e., in June, 1949 the defendants took a regular hypothecation deed, Ex. P-19 from the plaintiff in respect of all the advances to be made by the defendants. But it should be noticed that in making such advances, the defendants were only acting as creditors of the plaintiff and were, therefore, entitled to charge interest on such advances till they actually purchased the goods from the plaintiff. After the purchase of the goods they did not charge any interest on the moneys paid by them. It appears from the statements of account that interest, was charged on advances upto the date of shipment. In other words the title in the goods passed to the defendants at the moment of shipment of the goods and the fact was that interest was charged on all advances only upto the date of shipment. The charge or lien on the, goods, therefore, subsisted till the time of shipment i.e., till the title in the goods passed to the defendants under the con. tract of sale. We are, therefore, unable to agree with the Counsel for the plaintiff that the clause with regard to the. lien is not consistent with the theory of the transactions being an outright sale,. There was also a suggestion on behalf of the plaintiff that there cannot be a contract of sale subject to c.i.f. terms if there was an out right sale at Madras between the parties. We do not think there is any substance in this argument. The primary object of the contract was that there,was a purchase by the defendants from the plaintiff of the goods for resale in the United Kingdom and in keeping with this object the buyer stipulated with the seller for delivery of the goods abroad and for that purpose adopted a c.i.f. form of &de. It is also contended on behalf of the plaintiff that the term with regard to arbitration "according to the custom obtaining in United Kingdom" was not compatible with the theory of a sale between the parties. It is not possible to accept this argument as correct. It is open to the plaintiff to agree that even after the sale had taken place any dispute with regard to the quality of the goods and selection may be submitted to arbitration in the United Kingdom. It is true that a clause of this description is unusual but it is not inconsistent with the theory that there was a sale of goods between the parties at Madras. We have already observed that the contracts in this case were not c.i.f. contracts but the price alone was fixed on a c.i.f. basis. It is well-established that even an agent can become a pur- chaser when an agent pays the price to the principal on his own responsibility. In Ex parts White, In re <ORG>evil(1) <ORG> were in the habit of sending goods for sale to <ORG> who was a partner in the, firm of <ORG>, but received these, goods on his private account. The course of dealing between <ORG> and <ORG> was that the goods were accompanied by a price list. <ORG> sold the goods on what terms he pleased, and each month sent to <ORG>, an ac. count of the goods he had sold, debiting himself with the prices named for, them in the price list, and at the expiration of another month he paid the amount in cash without any regard to the prices at which he had sold the goods, or the length of credit he had given. On these facts it was held by <ORG> in Chancery that though both the parties might look upon the business as an agency, <ORG> did not, in fact, sell the goods as agent of <ORG>, but on his own account, upon the terms of his paying <ORG> for them at a fixed rate if he sold them, and the moneys he received for them were therefore his own moneys, which <ORG>, had no right to follow. A similar principle has been expressed in <ORG> v. <ORG>) In that case, certain manufacturers of ,bricks and other building materials, by an agreement in writing, appointed a firm of builders' merchants as sole selling agents of all bricks and other materials manufactured at their works". The agreement was expressed to be for three years and afterwards continuous subject to twelve months' notice by either party. While the ;agreement was in force the manufacturers informed the merchants that they intended in the future to sell their goods themselves without the intervention of any agent, (1) (1871) 6 Ch. 397 (2) [1932] 1 K.B. 710.

L/S5SCI-3(a) and thereafter they effected sales to customers directly. An action was then brought by the merchants for breach of the agreement. It was hold by <ORG> that the effect of the agreement was to confer on the plaintiffs the sole right of selling the goods manufactured by the defendants at their works, so that neither the defendants themselves nor any agent appointed by them, other than the plaintiffs, should have the right of selling such goods. It was also held that the agreement was one of vendor and purchaser and not one of principal and agent. Though the term 'agent' was used in the agreement, <ORG> considered that the substance of the transaction was that the manufacturers sold their bricks to the so-called agent who in turn sold them on their own responsibility to customers. The price charged by the manufacturers to the sole selling agents was the ruling market price and the sole selling agents were allowed a deduction of 10 per cent by way of commission on that price. The manufacturers had no concern at what rate the sole selling agents sold the goods to customers. It was clear from these facts that the sale by the selling agents to customers was a transaction in which the manufacturers were not interested and there was no privity of contract between the manufacturers and the ultimate purchasers. Reference may be made, in this connection to the following passage from <ORG>, 'Principal and Agent'. Second Edn. page 5:

"In commercial matters, where the real relationship is that of vendor and purchaser. persons are sometimes called agents when, as a matter of fact, their relations are not those of principal and agent at all, but those of vendor and purchaser. If the person called an 'agent' is entitled to alter the goods, manipulate them, to sell them at any price that he thinks fit after they have been so manipulated, and is still only liable to pay for them at a price fixed beforehand, without any reference to the price at which he sold them, it is impossible to say that the produce of the goods so sold was the money of the consignors, or that the relation of principal and agent exists-Ex parte White, In re <NAME> (1871). 6 Ch. 397A purchaser has not to account to his vendor-, his only duty is to pay him; and all the other rights and duties which exist between principal, and agent do not exist between vendor and purchaser-Ex parte Bright, In re <NAME> (1879), 10 Ch. Div. 566; Ex parte White, In re <NAME>-(1871) 6 Ch. 397-."

For the reasons already given we are of the opinion that the defendants were purchasers of the plaintiffs goods under the several contracts and not his agents for sale and the view taken by <ORG> on this aspect of the case is not correct and must be overruled.

We pass on to consider the second question involved in this viz., whether there was a settled account between the parties and whether it is open to the plaintiff to reopen it.

It is admitted in this case that for almost every shipment the defendants prepared a statement of account and sent it to the plaintiff giving full particulars of the amount due to him together with the deduction and showing the net balance payable to him and enclosing a cheque for such balance or giving a credit for the sum the accounts. Copies of such accounts are Ex. P-1A,P-2A and P-3A corresponding to the contracts Exs. P-1, P-2 and P-3.Copies of other accounts have been filed by the defendants in the Court and marked Ex. D-18 series. The plaintiff in his evidence did not deny the receipt of these accounts. On the contrary, he admitted in cross-examination that for every shipment he was getting accounts and cheques for the balance due. It is an admitted fact that to these statements of account no objection was raised by the plaintiff at any time. Nor a single document has been produced on his side to show that he ever wrote to the defendants raising an objection to the statements of account. Not only the plaintiff failed to raise objection to the several statements of account but at one stage sent a memorandum to the defendants accepting the accuracy of the accounts. On June 20, 1949, the defendants wrote a letter, Ex. P-16, to the plaintiff stating that there was a balance of Rs. 1,26,379/7/2 payable by him, and that against the balance they were holding certain goods belonging to the plaintiff and asking him to confirm the statements. On June 22, 1949 the defendants again wrote a letter-Ex. D-5, en- closing a statement of account Ex. P-17 showing the said balance of Rs. 1,26,379/7/2 and asking the plaintiff for confirmation. On receipt of this statement the plaintiff signed the memorandum, Ex. D-4 on June 22, 1949 and sent it to the defendants confirming the correctness of the balance as due by him and also confirming the stock of his goods remaining with the defendants. The plaintiff conceded in his evidence having signed Ex. D-4 after the receipt of the statement of account, Ex. P-17. The plaintiff explained that he did not look into the correctness of the figures but believed Ex. P-1 7 to be correct '&as it was sent by an English firm". The plaintiff also said that he was told by the defendants' broker that if he did not sign it, it would be harmful to him. The trial Judge refused to accept the explanation of the plaintiff and held that the plaintiff had accepted all statements of account as correct and, therefore, it must be held in law that the accounts were settled and the plaintiff could be allowed to reopen it only by proof of fraud or mistake or any other sufficient equitable ground.

The legal position is that the accounts are settled or stated if they are submitted and accepted as correct by the other side to whom the accounts have been rendered. Such a statement of accounts need not be in writing, nor is it necessary that before the accounts are settled, they should be gone into by the parties and scrutinised and supported by vouchers. It is sufficient if the accounts are accepted and such acceptance may be inferred by conduct of parties. As observed in Diniell's Chancery Practice, eighth edition, Vol. 1, p. 419:

"The mere delivery of an account will not constitute a stated account without some evidence of acquiescence which may afford sufficient legal presumption of a settlement." There is also the following passage in <NAME> and <NAME>'s Prece. dents of Pleadings, ninth edition, p. 584:

"It is not enough for the accounting party merely to deliver his account; there must be some evidence that the other, party has accepted' it as correct But such acceptance need not be express; contemporaneous or subsequent conduct may amount to a sufficient acquiescence.

Again, in <NAME> v. Jernegan(1) the Lord Chancellor was dealing with the two objections raised by' the plaintiffs counsel to the defendant's plea of a stated account. It was observed by the Lord Chancellor that there was no absolute necessity that the account should be signed by the parties who had mutual dealings to make it a stated account, for even where there were transactions, suppose, between a merchant in England and a merchant beyond sea, and an account was transmitted to England from the person who was abroad, it was not the signing which would make it a stated account, but the person to whom it was sent, keeping it by him any length of time, without making any objection which should bind him and prevent his entering into an open account afterwards. In another case, <NAME> v. <NAME>, (2) the Lord Chancellor expressed the opinion that it is the rule of the Court that where a merchant kept an account current by him for about two years without objection, the Court will consider that the accounts are stated or settled. The same principle has been expressed by <ORG> in <CITATION> (3) in which it was pointed out that it was sufficient if the accounts were accepted and such acceptance might be inferred by conduct of parties.

The contention on behalf of the defendants is that there has been a "stated" or "settled" account in this case and in the ab. sence of fraud, mistake or any other sufficient equitable ground it is not liable to be reopened at the instance of the plaintiff. In connection it is necessary to state that the expression "account (1) (1741) 2 Atk. 251. (2)[1750-51) 2 Ves. (Son.) 239.

(3) I.L.R. [1947] Bom. 878.

stated" has more than one meaning. It sometimes means a claim to payment made by one party and admitted by the other to be correct An account stated in this sense is no more than an admission of a debt out of court, while it is no doubt cogent evidence against the admitting party, and throws upon him the burden of proving that the debt is not due, it may, like any other admission, be shown to have been made in error. Where the transaction is of this character, it makes no difference whether the account is- said lo be "'stated" or to be "stated and agreed";, the so-called agreements is,without consideration and amounts to no more than an admission. There is however a second. kind of account stated where-the, account contains items both of credit and debit, and the figures on both sides are adjusted between the parties and a balance struck. This is called by Mr. Justice <NAME>, in <NAME> v. Pickkes(1) a "real account stated " and he describes it as follows:

"There is a real account stated, called in old law an insimul computassent, that is to say, when several items of claim are brought into account on either side, and, being set against one another, a balance is struck, and the consideration for the payment of the balance is the discharge of the items on each side. It is then the same as if each item was paid and a discharge given for each, and in consideration of that discharge the balance was agreed. to be due. It is not necessary,. in order to make out a real account stated, that the debts should be debts in praesenti or that they should be regal debts. I think equitable claims might might be, brought into account, and I am not certain that a moral obligation is not sufficient. It is to be taken as if the sums had been really paid down on each side; and the balance is recoverable as if money had been really taken in satisfaction; subject to this, that where some of the items are such that, if they had been actually paid, the party paying them would have been able to recover them back as on a failure of consideration, the account stated would be invalidated."

In the present case, the "settled account" between the parties falls within the second kind of "account stated" and it is to an account of this description that the equitable doctrine of "settled account" has to be considered. This statement of the law has been affirmed by Lord <NAME> in delivering the opinion of <ORG> in <NAME> v. <NAME>) as the follows:

"Indeed, the essence of an account stated is not the' character of the items on one side or the other, but the (1) 4 B. and B., 497.

(2) A.I.R. 1934 P.C. 147, fact that are cross items of account and that the parties mutually agree the several accounts of each. and by treating the items so agreed on the one side as discharging the items on the other side pro tanto, go on to agree that the balance only is payable. Such a transaction is in truth bilateral and creates a new debt and a new cause of action. There are mutual promises, the one side agreeing to accept the amount of the balance of the debt as true (because there must in such cases be. at least in the end, a creditor to whom the balance is due) and to pay it, the other side agreeing the entire debt as at a certain figure and then agreeing that it has been discharged to such and such an extent, so that there win be complete satisfaction on payment of the agreed balance. Hence, there is mutual consideration to support the pro- mises on either side and to constitute the new cause of action. The account stated is accordingly binding. save that it may be re- opened on any ground for instance. fraud or mistake which would justify setting aside any other agreement. "

In the present case, the 'correctness of the statements of account furnished by the defendants has been challenged by the plaintiff under 13 heads. In view of our finding that the transactions between the parties were not on the basis of an agency but on the basis of an outright sale the accounts cannot be reopened under any of these heads of challenges. The trial court has already gone into the evidence and has reached the finding that there was no fraud, mistake or any other sufficient equitable ground for reopening the finality of the accounts. As regards one item, viz., rebate in marine insurance, the trial court has ordered that the plaintiff should be given credit for a small sum of Rs. 157/- though there was no evidence of fraud on the part of the defendants. The trial court has rejected the claim of the plaintiff for reopening the accounts on any other ground and in view of our finding that the legal relationship between the parties was not one of agency, we see no reason for interfering with the decision of the trial court on this aspect of the case also.

For the reasons expressed, we allow this appeal and set aside the judgment and decree of <ORG> in O.S. Appeal No. 22 of 1955 dated the 15th December, 1959 and restore the judgment and decree of the trial Judge dated May 6, 1954 dismissing the suit of the plaintiff and granting a decree for the counter-claim of the defendants. The defendants are entitled to the costs of this appeal in this <ORG> and in <ORG>.

Appeal allowed.


PETITIONER: <NAME> Vs. RESPONDENT: L.M. SUD AND ORS. DATE OF JUDGMENT19/09/1990 BENCH: <NAME>, S. BENCH: <NAME>, S. AHMADI, A.M. (J) CITATION: 1991 AIR 940 1990 SCR Supl. (1) 580 1991 SCC Supl. (2) 162 JT 1990 (4) 622 1990 SCALE (2)677 ACT: Service Law: Bombay <ORG>--Deputation from one Establishment to another--Promotion obtained in the Establishment deputed to--Whether confers any right for higher posts in the parent department, on reversion. HEADNOTE: The appellant was appointed as a Tracer in <ORG> in 1955. with the appointment of a Town Planning Officer in 1957. the appellant came to be appointed as a Tracer in <ORG>. Later, the post of Junior Draftsman fell vacant in the <ORG> lishment. Respondent No. 6 was posted to fill the vacancy. However, his appointment was cancelled shortly thereafter and the appellant was appointed as Junior Draftsman with effect from 4.12. 1959. The next higher post of Surveyor-cum-Draftsman fell vacant in 1962.. Meanwhile, the appellant was suspended. <ORG> granted approval for his removal from service, but suggested that he may be reappointed. Accord- ingly. the appellant was appointed afresh as junior Drafts- man in <ORG> of <ORG> where he was previously working. Aggrieved, the appellant filed a writ Petition before <ORG>. Setting aside the order. <ORG> remanded the matter to <ORG> for fresh dis- posal. The Special Leave Petition preferred by the employer, viz., <ORG> against <ORG>'s order was dismissed. <ORG> reheard the matter and declined approval for the removal of the appellant from service. The appellant was reappointed as Junior Draftsman in <ORG> which was abolished subsequently, and he was reverted to the service of <ORG> as a Tracer, and not as a Junior Draftsman. The appellant filed an appeal against the said order. but it was rejected on the ground that direct recruits were already working as Junior Draftsmen and that there was no vacancy against which the appellant could be appointed. 581 The appellant moved <ORG> by way of a Writ petition. contending that since he had been appointed as junior Draftsman in <ORG>, he could not be repatriated to a lower post, viz.. Tracer in <ORG>. It was also contended that the Deputy <ORG> Commissioner, was a person lower in rank than the appointing authority viz., the <ORG> Commis- sioner and hence the order passed by him was without juris- diction. <ORG> proceeded on the footing that the appel- lant was on deputation from <ORG> to <ORG> and dismissed the writ Petition. The appellant has preferred this appeal against <ORG>'s order dismissing his Writ Petition. Dismissing the appeal, this Court. HELD: 1. I The appellant's promotion as junior Draftsman and proposed promotion as Surveyor-cum-Draftsman in <ORG> cannot confer any rights on him in his parent department. When he left <ORG> and joined <ORG> he was a Tracer and he can go back to <ORG> or any other Department of <ORG> only to his original post i.e.. as Tracer, subject to the modification that, if in the meantime he had qualified for promotion to a higher post. that benefit cannot be denied to him. 1.2 The order dated 16.8. 1965 was passed in pursuance of the recommendation of <ORG>, while approv- ing the appellant's removal, that he may be reconsidered for appointment. In view of this order of <ORG>, the appellant had to be given a posting and since he had been discharged from service when he was a Junior Draftsman. orders were passed appointing him as junior Draftsman. This again was made as an order of fresh appointment and the appellant's representation that he should be given seniority was rightly not accepted. There is also the further fact that the appellant was relieved from this post with effect from October 1, 1967. There has been, apparently, no chal- lenge to this order. Moreover, theses orders lost their basis once the petitioner was restored to his post in <ORG>. In these circumstances the order dated 16.8.65 or the determination of his seniority in 1966 are of no relevance to the present case. 2.1 What the appellant is really attempting is to challenge the 582 appointments of Respondents 6 to 11, which had been made in 1963-64, by a Writ Petition filed in 1978, more than a decade after the above selections and appointments had been made. It is true that, at that time the appellant, was under a cloud because he had been suspended and subsequently removed from service. But all the same, if he had desired to challenge those appointments, he should have taken immediate steps. Anyhow, these obstacles had disappeared when the tribunal, on remand by <ORG>, had and disapproved the appellant's removal from service by the order dated 13.5.1964. Atleast in 1971, when the order was passed re- storing him to the position of Junior Draftsman in <ORG>, he could and should have taken steps to Obtain his "pro-forma" promotion in the parent depart- ment. The fact remains that he took no effective steps to challenge the appointment of respondents 6 to 11 from 1963- 64 right upto 15.2.1978, when he filed the Writ Petition or atleast upto 1.10.1976, when he made a representation against the order of reversion. 2.2 S. 54(2) of the <ORG> Act, dispenses with <ORG> when it is proposed to fill the appointment from among persons already in municipal service. But the nature of the recruitment that took place is not known. That apart, the constitution of a <ORG> to decide upon the selections cannot be said to be illegal even though not mandatory in the situation. <ORG> has found that respondents 6 to 11 had been directly selected as Junior Draftsmen after proper scrutiny by <ORG>. Admittedly there was a circular among the <ORG> employees in regard to these appoint- ments and selections. The appellant should have made an application for selection at that time or, if he thought it more appropriate, should have challenged the constitution of <ORG> and the direct recruitment and put forward his claim for promotion as Junior Draftsman by virtue of his seniority. That he tailed to do at the crucial time. It may be that this was because he had certain diffi- culties facing him by way of suspension and subsequent expulsion from service. But even in 1971, after his original order of suspension and removal had been set aside, he took no immediate steps to claim his rights in the parent depart- ment. He.was apparently satisfied with his restoration as Junior Draftsman in <ORG>. Having regard to the circumstances of the appointment of respond- ents 6 to 11, the appellant was not entitled to any promo- tion in preference to them and he cannot claim appointment as Junior Draftsman when there was no such post in 1976 to which he could he appointed. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1213 of 1979.

From the Judgment and Order dated 24.4. 1978 of <ORG> in L.P.A. No. 97 of 1978.

Appellant in person.

<NAME> for the Respondents.

The Judgment of the Court was delivered by <NAME>, J. The appellant, <NAME>, challenges the validity of an order dated 30.9. 1976 passed by the Deputy Municipal Commissioner of <ORG> of the City of Ahmedabad. By the said order, the Deputy Municipal Commissioner, consequent on the staff of <ORG> working in the Town Planning Estab- lishment having to be absorbed in <ORG>, "reverted" the appellant from the post of junior draftsman in the <ORG> and appointed him to act in the post of a tracer in <ORG> of the Corpora- tion. <ORG> rejected his writ petition and hence the present appeal.

It is necessary to state the relevant facts. The appel- lant had been appointed as a tracer in <ORG> of <ORG> on 26.6. 1955 and worked there till 18th February, 1957. It appears that the Government appointed a Town Planning Officer under the provisions of section 31 of the Bombay Town Planning Act. 1954. The Town Planning Officer had to be supplied with an establishment. The establishment of the Town Planning Officer was admitted- ly temporary. An arrangement was entered into between the two authorities that the arbitrator in the planning office could select such persons from the <ORG> for his establishment as he thought fit. The Town Planning Officer demanded the services of the appellant and he was appointed as a tracer in <ORG> on 22.2. 1957. It is not clear whether the appellant went therein by way of transfer or by way of deputation as the original order dated 22.2. 1957 is not available with us. However, <ORG> and the appellant have proceeded on the footing that the appellant was deputed from <ORG> to <ORG>. Sometime later, the post of a junior draftsman fell vacant in <ORG>. The appellant tells us that he was asked to take charge of that post on 4.12. 1959. It appears that Mr. <NAME> (Respondent No. 6 in the W.P.) was posted to fill in that vacancy but, on 21.4. 1960, his appointment was cancelled and the appel- lant was appointed as junior draftsman in <ORG> w.e.f. 4.12. 1959. The appellant tells us that he had also been subsequently recommended for appointment to the post of Surveyor-cum Draftsman, which was a higher post and which had fallen vacant on 28.2. 1962. But before this proposal could materialise the appellant was suspended on 5th December, 1962 by the <ORG> and was removed from service on 13.5.64. <ORG> granted approval to the removal of the appellant from service but made certain observations suggesting that he may be re-appointed to the said post. The appellant filed a writ petition against the order of the industrial court. <ORG> eventually, set aside the order of the industrial court on 1.2. 1969 and remanded the matter for fresh disposal to the industrial court. The Municipal <ORG> preferred S.L.P. 48/71 in this Court which was dismissed on 27.1.71. The industrial court re-heard the matter pursuant to the order of <ORG> and declined approval to the order of removal of the appellant from service with the result that the order of removal dated 13.5.64 stood vacated and an order was passed on 3.3.71 by the Municipal Commissioner that the appellant was reappointed as a junior draftsman in <ORG>.

In the meantime, on 16.8. 1965, consequent on the recom- mendations of the industrial court, the appellant was ap- pointed as junior draftsman in <ORG> of <ORG> where he had been previously working. This purported to be a fresh appointment and so the appel- lant made a representation that he should be appointed in this post according to his seniority. No orders were passed on this representation except a direction that the appellant should join service within a week of receipt of the memo and then represent his case for seniority, if he so desired. Thereupon the appellant accepted the order re-appointing him as junior draftsman in <ORG> and took charge of his office. The order of <ORG> has found that the appellant was relieved from service on 1.10.1967 because of retrenchment.

When the above proceedings in the case of the appellant were taking place respondents 6 to 11 were directly selected as junior draftsmen by <ORG> and promoted to the said post. The appellant did not appear before <ORG> perhaps because of the various proceedings above referred to, as a result of which he was under suspension from 5.12. 1962 to 13.5. 1964, when he was removed and then again till 16.8.65, when he was re-

appointed as a draftsman. Once the proceedings against the appellant came to a close, the Municipal Commissioner passed order on 3.3. 1971, cancelling the order dated 13.5. 1964 removing the appellant from service. He was re-appointed as a junior draftsman in the <ORG> establishment. Subsequently, however, the <ORG> Establishment was abolished, and the appellant was served with the order dated 30.9. 1976, by which he was reverted to the services of <ORG>. On such reverter, however, as we have seen, he was posted as a tracer and not as a junior drafts- man. The appellant filed an appeal against the said order before <ORG> but his appeal was rejected on 15.3. 1977 on the ground that in the <ORG> direct recruits were already working as junior draftsmen, and that there was no post of junior draftsman vacant in the Corpora- tion, to which the appellant could be appointed. The appel- lant thereupon filed a writ petition and, as already stated, he was unsuccessful therein and hence this present appeal. The appellant's contention before <ORG> was two fold. The first contention was that since he had been ap- pointed as junior draftsman in the <ORG> establish- ment by the order dated 21.4. 1960, he could not be repatri- ated as a tracer in <ORG>, that is, to a lower post. It was also contended that the order dated 30.9. 1976 has been passed by the Deputy Municipal Commissioner, who is a person lower in rank than the person who appointed him, namely, the Municipal Commissioner and that, therefore, the order dated 30.9.76 was passed by an officer without jurisdiction. These two arguments have been reiterated before us also. So far as the second contention is concerned it may at once be pointed out that if the order dated 30.9.76 is an order of reversion by way punishment, the appellant's contention may be correct in view of the provi- sions contained in sections 53 and 56 of the Bombay Provin- cial Municipal <ORG> Act. However, if the order dated 30.9.76 has merely given effect to the abolition of the <ORG> establishment and restored the appellant to the post he can properly hold in <ORG> then no element of reversion would be involved and the Deputy Commissioner would be quite competent to pass the order in question. The only question therefore that survives for consideration is regarding the validity of an order dated 30.9.76 in so far as it purported to appoint the appellant as a tracer in <ORG> instead of as a junior draftsman. We may mention here that a point was also made that the appellant should not have been appointed as an "acting" tracer but it has been explained by the <ORG> that it was a verbal inaccuracy and that the appointment of the appellant in <ORG> is not an acting but a substantive one. This point, therefore, does not survive.

We shall proceed on the assumption that the appellant went to the <ORG> establishment (which was a tempo- rary one) by way of deputation from the Municipal Corpora- tion. There is some controversy as to whether the appellant was properly promoted as junior draftsman in the Town Plan- ning establishment. There is a suggestion that both the demand by the <ORG> establishment for the services of the appellant as well as his promotion therein were not acceptable to the <ORG> and that they were the conse- quence of undue favour shown to the appellant by the Arbi- trator who was the appointing authority. We do not think it is necessary to go into this controversy here because it is quite clear that the appellant's promotion as junior drafts- man and proposed promotion as Surveyor-cum Draftsman in the <ORG> Establishment cannot confer any rights on him in his parent department. When he left the Municipal Corpo- ration and joined the <ORG> establishment he was a tracer and he can go back to <ORG> or any other Department of the Municipal <ORG> only to his original post i.e., as tracer, subject to the modification that, if in the meantime he had qualified for promotion to a higher post, that benefit cannot be denied to him. In the present case, unfortunately, what happened was that when junior draftsmen were recruited by the Municipal <ORG> in 1959-60 and in 1963-64, persons were selected and ap- pointed to the said posts through the machinery of <ORG>. The appellant submits that he had been wrongly overlooked and that the respondents had been wrongly promoted as junior draftsmen. He points out that, under the regulations, junior draftsmen had to be appointed by promo- tion on the basis of seniority-cure-fitness and that the question of <ORG> did not at all arise. According to him, the procedure for selecting by <ORG> would not come into force when the recruitment was restricted to persons in the municipal service. In the present case, however, all the persons, who were appointed as junior draftsmen during the appellant's absence were from the municipal service. The appointment should, therefore, have been made directly by promotion without the intervening machinery of the <ORG> and the appellant being the seniormost tracer should have been appointed as junior draftsman in preference to respondents 6 to 11.

There are considerable difficulties in accepting this case of the appellant. In the first place, what he is really attempting is to challenge the appointments of respondents 6 to 11, which had been made in 1963-64, by a writ petition filed in 1978, more than a decade after the above selections and appointments had been made It is true that, at that time the appellant, was under a cloud because he had been suspended and subsequently removed from service. But all the same, if he had desired to challenge those appointments, he should have taken immediate steps. Anyhow, these obstacles had disappeared when the tribunal, on remand by <ORG>, had disapproved the appellant's removal from service by the order dated 13.5. 1964. At least in 1971. when the order was passed restoring him to the position of junior draftsman in the <ORG> establishment, he could and should have taken steps to obtain his "pro-forma" promotion in the parent department. The appellant says he was making some representations but this was not enough. The fact is that he took no effective steps to challenge the appointment of respondents 6 to 11 from 1963-64 right upto 15.2.1978, when he filed the writ petition or atleast upto 1.10.1976, when he made a represen- tation against the order of reversion.

Quite apart from the above consideration, there is no material before us to show that the appointments of respond- ents 6 to 11 were made irregularly and that the constitution of <ORG> for selecting junior drafts- men did not conform to the regulations and the provisions of the Bombay Provincial Municipal Corporations Act. The Corpo- ration has stated that they have been directly recruited. <ORG> has pointed out that the relevant regulation gave a discretion to the Commissioner to make the appoint- ments by promotion or by direct recruitment. S. 54(2) of the Municipal Act, on which the petitioner relies, no doubt dispenses with <ORG> when it is proposed to fill the appointment from among persons already in municipal service. But the nature of the recruitment that took place is not known. That apart, the constitution of <ORG> to decide upon the selections cannot be said to be illegal even though not mandatory in the situation. <ORG> has found as a fact at more than one place in the judgment that the respondents 6 to 11 had been directly selected as junior draftsmen after proper scrutiny by <ORG>. Even the appel- lant stated before us that there was a circular among the municipal employees in regard to these appointments and selections. The appellant should have made an application for selection at that time or, if he thought it more appro- priate, should have challenged the constitution of <ORG> and the direct recruitment and not forward his claim for promotion as junior draftsman by virtue of his seniority. That he failed to do at the crucial time. It may be that this was because he had certain difficulties facing him by way of suspension and subsequent expulsion from service. But even in 1971, after his original order of suspension and removal had been set aside, he took no imme- diate steps to claim his rights in the parent department. He was apparently satisfied with his restoration as junior draftsmen in the <ORG> establishment. We are in agreement with <ORG> that, having regard to the circumstances of the appointment of respondents 6 to 11, he was not entitled to any promotion in preference to them and that he cannot claim appointment as junior draftsman when there was no such post in 1976 to which he could be appoint- ed. It is not his case that any posts of junior draftsmen became vacant after his reversion to the parent department to which he could have been promoted.

The appellant contends that the fact that his eligibili- ty for appointment as a junior draftsman in the parent department had been accepted by the order dated 16.8.1965 referred to earlier. It is also pointed out that subsequent- ly a question arose of the seniority as between the appel- lant and one <NAME>. This was gone into and <ORG> accepted the position that the appellant pos- sessed qualifications required for the post of junior draftsman and that he was senior to Mr. <NAME>. This was sometime in 1966. We, however, find that this aspect of the matter does not help the appellant because the order dated 16.8. 1965 was passed in pursuance of the recommendation of the industrial court, while approving the appellant's remov- al, that he may be reconsidered for appointment. In view of this order of the industrial court, the appellant had to be given a posting and since he had been discharged from serv- ice when he was a junior draftsman, orders were passed appointing him as junior draftsman. This again was made as an order of fresh appointment and the appellant's represen- tation that he should be given seniority was not accepted, rightly, for the reason mentioned above. There is also the further fact that the appellant was relieved from this post with effect from October 1, 1967. There has been, apparent- ly, no challenge to this order. Moreover, these orders lost their basis once the petitioner was restored to his post in <ORG>. In these circumstances the order dated 16.8.65 or the determination of seniority be- tween appellant and <NAME> in 1966 do not help the appel- lant's case.

Learned counsel for <ORG> submitted to us that the appellant had not joined his post as a tracer in compliance with the order dated 30.9.76 and that by now he has also reached the age of superannuation. We are not here concerned in this appeal with the consequences of "non acceptance" of the order dated 30.9.76 by the appellant. We are only con- cerned with the question whether the appellant was rightly appointed as tracer on his reverter to the Municipal Corpo- ration and that question we have answered in the affirma- tive. We do not express any opinion on the questions raised by the learned counsel for the respondent.

In the circumstances, we are of the opinion that there are no grounds to interfere with the order of <ORG>. We, therefore, dismiss this appeal but, in the cir- cumstances, we make no order as to costs.

G.N. Appeal dis- missed.