M. Ramnarain Pvt. Ltd. . & another vs State Trading Corporation of India Ltd.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1987 Supreme(Bom) 280

IN THE HIGH COURT OF BOMBAY
P.S. Shah M.L. Pendse, JJ.
M. Ramnarain Pvt. Ltd. another.... Appellants.
Versus
State Trading Corporation of India Ltd..... Respondent.
Appeal No. 44 of 1981 in Suit No. 540 of 1970, decided on 9-9-1987.
Advocates appeared :
F.S. Narimen with R.A. Dada, Virag v. Tulzapurkar and Shrikant Shah i/b Nanavati Tijoriwala Co., for appellants.
K.S. Cooper with R.A. Kapadia i/b Bhaishankar Kanga amd Girdharilal, for respondent.

Headnote:Section 141.
       See Negotiable Instruments Act, 1881, Section 32.
       NEGOTIABLE INSTRUMENT ACT, 1881
       Section 32-Contract Act, 1872, Section 141-Drawers liability IC bill of exchange dishonoured-By way of security, delivery of bill of exchange to payer-Payee failed to proved to enforce right under bill-Drawers liability to pay amount to discharged.
       The Corporation having failed to preserve the bills of exchange by not instituting any proceedings against Nichol the acceptor till the expiry of the period of limitation, the right available to the drawer to proceed against the acceptor was irrevocably lost and consequently the liability of defendant No.1 to pay the amount under the letter dated July 18, 1967 also stands discharged. As the liability of defendant No.1 stands discharged, it follows that the liability of defendant No.2, who was the guarantor would also be discharged.
       Sections 32, 117-Compensation suit-By drawn against acceptor-Bill dishonoured-Not maintainable.
       The drawer is entitled to recover from the acceptor damages provided the drawer is required to pay to the holder of the bill. Section 55 of the Bills of Exchange Act, 1882 provides that the drawer of a bill by drawing it engages that on due presentment It shall be accepted and paid according to its tenor, and that if it be dishonoured the will compensate the holder or any indorsor provided that the requisite proceedings on dishonour are duly taken. In fact this section indicates that it was necessary for the holder of the bill to adopt requisite proceedings and requisite proceedings can be nothing but an action in the Court of law to recover the proceeds of the bills, the contention that it was open for defendant No.1 to file action against Nichol in respect of dishonoured bills is without any merit.

Judgment

M.L. PENDSE, J.:---The State Trading Corporation of India Limited the respondent original plaintiff (hereinafter referred to as 'the Corporation'), is constituted for the purpose of effecting and encouraging exports of goods of Indian origin to foreign countries. The appellant No. 1 original-defendant No. 1 is a Private Limited Company registered under the Companies Act, 1956 and carries on business of exporting textile goods, while appellant No. 2 original defendant No. 2 is a Director of defendant No. 1. The Corporation instituted suit on the Original Side of this Court on July 15, 1970 for recovery of Rs. 23,88,998,91 with interest on Rs. 18,18, 451.39 paise at the rate of 9% per annum from the date of institution of the suit till judgment and thereafter at the rate of 6% per annum till payment or realisation. The claim made by the Corporation in the plaint was that by letters dated June 4, June 6 and June 26, 1967 defendant No. 1 represented to the plaintiff Corporation that defendant No. 1 had concluded sale of 2500 bales of heavy cess green to Indonesia for shipment during end June or early July 1967. The sale was concluded in favour of Mr. N.V. Leader Weaving, Dyeing and Furnishing Mills (hereinafter referred to as "leader"). The Corporation claimed that defendant No. 1 stated in the letters that the total value of the shipment would be about Rs. 30,00,00/- C and F, and defendant No. 1 would require financial accommodation of Rs. 5,50,000/- during last week of June 1967 for payment of export duty, Port Commission and other charges at the time of export. Defendant No. 1 promised to guarantee the party to whom the goods were to be sold as well as the realisation of the foreign proceeds and undertook to indemnify the Corporation for any loss. The Corporation pleaded that in accordance with the request and the assurances, on July 1, 1967 the Corporation lent and advanced to defendant No. 1 a sum of Rs. 5,11,000/- at interest at the rate of one per cent above the State Bank rate. Defendant No. 1 agreed to endorse the shipping documents in favour of the Corporation with a view to enable the Corporation to negotiate the same and further agreed to draw bills of exchange on M/s. Nichol Industrial Development Co. of Hongkong (hereinafter referred to as "Nichol") payable at 90 days' sight in respect of the goods shipped. The Corporation further lent and advanced to defendant No. 1 a sum of Rs. 8,43,950/- on July 13, 1967 on interest at the aforesaid rate. An agreement between the Corporation and defendant No. 1 was recorded in the letter dated July 18, 1967 and the letter reads as under :

18th July, 1967

The State Trading Corporation of India Ltd.,

13, Lindsay Street,

Calcutta-16.

Dear Sirs,

2400 bales HEAVY CESS GREEN

shipment to INDONESIA

-----

In consideration of your advancing us funds towards the full C and F Value of Rs. 27,09,900/- (Rupees twenty seven lakhs nine thousand nine hundred) only against the value of the goods of the above shipment being effected by us, we guarantee for the repayment of the entire sum advanced by you with interest at 9% (nine per cent) untill the foreign proceeds are realised. Further, we agree to INDEMNIFY you for any consequences thereof.

Yours faithfully,

for M. RAMNARAIN PVT. LTD.

SD/-

(R.C.V. Ram)

Mr. Madanmohan Ruia's personal guarantee will be submitted to you today or tomorrow as soon as received.

Sd/-R.C.V.Ram

19/7"

In accordance with an endorsement made at the foot of this letter, defendant No. 2 forwarded the deed of guarantee to the Corporation and under this deed defendant No. 2 guarantee to the Corporation due payment of sum of Rs. 27,09,900/- which the Corporation agreed to advance to defendant No. 1 with interest thereon at the bank rate plus one percent per annum with quarterly rests. The Corporation pleaded that on the strength of the agreement recorded in the letter dated July 18, 1967 and on the strength of the guarantee, the Corporation paid a further sum of Rs. 13,54,950/

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