IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MR. JUSTICE S.S.SATHEESACHANDRAN TUESDAY, THE 6TH JULY 2010 / 15TH ASHADHA 1932 AS.No. 218 of 1996 --------------------------- (OS.NO.39/1990 OF SUB COURT,KOTTARAKKARA .................... APPELLANT/PLAINTIFF: ----------------------------------- M/S. TRAVANCORE PLYWOOD INDUSTRIES LTD., PUNALUR, REPRESENTED BY ITS RECEIVER AND MANAGER, G. SADASIVAN PILLAI, APPOINTED BY THE HON'BLE HIGH COURT OF KERALA, IN THE PLACE OF MANAGING DIRECTOR. BY ADVS. SRI.B.GOPAKUMAR, SMT.CHINCY GOPAKUMAR. RESPONDENTS/DEFENDANTS: --------------------------------------------- 1. M/S. NARASAIAH & CO. GONGANAMMAPET, TENALY – 522 201, ANDHRA PRADESH, REPRESENTED BY ITS MANAGING PARTNER. 2. R. VENUGOPALA RAO, C/O. NARASAIAH & CO. SANTHIPURAM, NEAR AKKAYAPALAM TELEPHONE OFFICE, VISAKHAPATTANAM – 530 016, ANDHRA PRADESH. 3. R. SREENIVASA RAO, NARASAIAH & CO. (DIED). 4. R. VENKATESWARA RAO, NARASAIAH & CO. RAJA RANGAYYAPPA RAO STREET, VIJAYAWADA – 520 001, ANDHRA PRADESH. 5. SMT. RANGINENI TULASAMMA, C/O. NARASAIAH & CO. GONGANAMMAPET, TENALI – 522 201, ANDHRA PRADESH. A.S. NO.218/1996-A: 6. APARNA, W/O. LATE SREENIVASA RAO, C/O. R. THULASAMMA, NARASAIAH & CO. OF GONGANAMMAPET, TANALI – 522 201, ANDHRA PRADESH. 7. POOJA, D/O. SREENIVASA RAO, C/O. R. THULSAMMA, NARASAIAH & CO. GONGANAMMAPET, TENALI – 522 201, ANDHRA PRADESH. R1, R2, R4 & R5 BY ADVS. SRI.S.K.BRAHMANANDAN, SRI.G.S.PRABHU, SRI.S.K.PREMACHANDRA PRABHU, ADV. SRI. RAJU JOSEPH (AMICUS CURIAE). THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 06/07/2010,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: prv. THOTTATHIL B.RADHAKRISHNAN & S.S.SATHEESACHANDRAN, JJ. --------------------------------------- A.S.No.218 of 1996 --------------------------------------- Dated this the 6th day of July, 2010 JUDGMENT THOTTATHIL B.RADHAKRISHNAN, J. The plaintiff is the appellant. It appointed the first defendant firm, of which the other defendants are partners, as the agent to deal in plywood and other products of the plaintiff. Inter-state movements of goods belonging to the plaintiff was effected. The defendants operated from Andhra Pradesh. They had sold the goods, as agents of the plaintiff, in Vijayawada in the State of Andhra Pradesh. 2. Disputes arose between the parties. Terminating the agency, the plaintiff sued the defendants by filing O.S.No.55/85 before the Sub Court, Kottarakkara. That suit was decreed. The defendants appealed to this court seeking leave A.S.No.218 of 1996 :: 2 :: to sue as indigents. That application was dismissed. 3. Later, on the ground that the plaintiff had, in the earlier suit, reserved its right to sue the defendants for the sales tax amount allegedly collected by them and left unpaid to the appropriate Tax Department, the suit from which this appeal arises was filed. The court below found that the present suit is not hit by order II rule 2 of the Code of Civil Procedure and that the claim stands proved, however, that the suit would be governed by Article 4 in Part I of the Schedule to the Limitation Act, 1963 and is hence barred by limitation. 4. In this appeal, the issue that arises for consideration is whether the finding of the court below that the suit is barred by A.S.No.218 of 1996 :: 3 :: limitation is sustainable in law and on facts. If that finding is liable to be set aside, the further question would be as to whether the defendants would successfully show that the dismissal of the suit would stand on other grounds. 5. Learned counsel for the plaintiff argued that the court below having found against the claim only on the plea of limitation, the suit is liable to be decreed reversing that finding as the cause of action for the suit had arisen only after the notice of the Assistant Commissioner of Sales Tax Circle, Kollam was issued making demand for payment of tax and that whether or not the tax demanded was paid, the liability accrues. 6. Per contra, the learned counsel for the contesting defendants argued that the A.S.No.218 of 1996 :: 4 :: liability to account cannot be fastened on the 1st defendant inasmuch as it related to payment of sales tax which is a liability of the plaintiff as a dealer and is not referable to the defendants. He argued that the court below was justified in taking the view that the suit is barred by limitation and it would make no difference whether the suit would be governed by Article 3 or 4 in Part I of the First Division to the Schedule to the Limitation Act. 7. Having regard to the issue of limitation posed in the context of Articles 3 and 4 in the frst division to the Schedule to the Limitation Act vis-a-vis the question that may arise as to the liabilities under the Sales Tax Laws of the State of Kerala and State of Andhra Pradesh and the consequence of assessments that could have been made against the respective A.S.No.218 of 1996 :: 5 :: dealer in terms of those laws, we requested Sri.Raju Joseph to assist the court as Amicus Curiae. He has, threadbare gone through the entire pleadings, the facts and circumstances of the case the evidence and has projected before us different aspects of the matter. He would point out that the materials suggest that the defendants were not dealers in relation to the transactions in question, whereas the plaintiff was the registered dealer in the State of Kerala and the State of Andhra Pradesh and were operating as if they themselves, were the sole dealers for the purposes of taxation laws. Dilating further, he points out that the finality of the assessment orders would or would not have generated demands under the Sales Tax laws which could compel the plaintiff-dealer to make payment. There could also be action by coercive A.S.No.218 of 1996 :: 6 :: steps under the Revenue Recovery laws. However, it is rightly pointed out by him that what has been reserved in the earlier suit is something on which the plaintiff could be sued at that point of time because even going by the present plaint, the plaintiff was well aware of the alleged wrongs committed by the 1st defendant as agent in relation to the management of the amounts collected as tax. He rightly points out that whatever is collected as tax under the taxation laws qua the 1st defendant in relation to the transaction, there could only be a contractual liability of the defendants on the basis of the agreement they had with the plaintiff. 8. With the aforesaid, we see that the plea of the plaintiff is that the first defendant, as its agent, had collected monies towards sales tax from customers and had not A.S.No.218 of 1996 :: 7 :: accounted for such amounts. This means that the plaintiff alleges that the defendants had received money on behalf of the plaintiff from the customers, but had not accounted. Obviously, it is an allegation that the agent had received movable property (money) on behalf of the plaintiff and had left it unaccounted to the principal, viz., the plaintiff. This obviously bring the suit clearly within Article 3. Also, the amount collected being nothing but tax, the law of the land obliges the person collecting tax to remit. This liability is statutory, over and above the contractual liability, qua the plaintiff. As we found that Article 3 governs the suit in question, the time from which the period of limitation beings to run is when the amount is, during the continuance of the agency, demanded and refused or, where no such demand is A.S.No.218 of 1996 :: 8 :: made. The agency was terminated and the earlier suit was filed we back in 1985. It is not a matter left to the fancy of the plaintiff to preserve for itself or reserve for itself the right to sue in relation to which the cause of action had arisen. Any such reservation or preservation, as the plaintiff may call it, is nothing but an abandonment of the right sue since the time will start to run, notwithstanding any such reservation and once the time begins to run, it does not stop or hold back on the volition of the plaintiff. So much so, time began to run from the termination of the agency and the institution of the earlier suit and the so-called 'reservation' by the plaintiff would not save the situation. Therefore, the suit was clearly barred by limitation, though for reasons different from those stated by the court below. A.S.No.218 of 1996 :: 9 :: 9. Before parting, we record our appreciation for the valuable assistance rendered by Advocate Sri.Raju Joseph. In the result, the appeal fails and the same is dismissed. Having regard to the questions raised, we direct the parties to suffer their respective costs. Sd/- (THOTTATHIL B.RADHAKRISHNAN) JUDGE Sd/- (S.S.SATHEESACHANDRAN) JUDGE sk/ //true copy// P.S. to Judge.