The principles of natural justice apply even in matters of discounting bills where the acceptance of a transport operator's lorry receipt is a relevant fact.

DESHMUKH, C.J. :- This appeal was expeditiously heard at the instance of the counsel for the State Bank of India. According to him, it raises an important question of all India importance and an earlier decision will enable the Bank to adjust its business dealings in the matter of discounting of bills.

2. The facts are not much in dispute. The appellants are the State Bank of India. They have branches all over India and all the former Indian State's Banks have been taken over by them as subsidiary Banks. The State Bank has been created under the State Bank of India Act of 1955 (No. 23 of 1955) and all the former State's Banks and Government associated Banks were taken over by the State Bank of India (Subsidiary Banks) Act, 1959. Various kinds of Banking business are being carried out by the State Bank of India, which include the discounting of bills, or the business of bill-purchase.

3. The State Bank of Mysore is the subsidiary of the State Bank of India. It has a branch at Tiptur in Karnataka. Respondent No. 1, the original petitioner, is the Kalpaka Transport Company Private Limited, incorporated under the Indian Companies Act, and carries on business as a public carrier all over India. Respondent No. 2, the original petitioner No. 2, is a Director of the first petitioner-Company.

4. This Company was floated in the year 1973, and became a private limited Company on 17th February 1973. When goods are loaded by their customers, the respondents issue, what are known as, Lorry Receipts, and undertake to carry the goods to the destination and deliver them as per instructions of the customers.

5. At Tiptur there are three different firms named D.S. Mullappa and Sons, D.S. Mallappa and Company and Deshmudre and Company, dealing in Kopra. All the firms are practically owned by the same persons. They had dealings in Kopra, and had an account with the State Bank of Mysore, at Tiptur, for the purpose of discounting their bills. These bills were always accompanied by Lorry Receipts, and, according to the usual banking practice, to the extent of the limit allowed, these bills were being discounted.

6. As it appears, before the Indian Bank Association was formed, and a Scheme was framed by them for recommending transport operators to

member banks, each branch dealt with the firms directly, to whom bill discounting facility was permitted. The transport operator, who issued the Lorry Receipts, was hardly in the picture.

7. In that manner, the three firms were discounting their bills with the State Bank of Mysore, Tiptur Branch, for a number of years, and had a large credit with that Bank.

8. Sometime in June of 1974 the Indian Bank Association prepared a Scheme for recommending transport operators to member Banks. Under this Scheme the Indian Bank Association (hereinafter referred to as 'IBA') was formed, consisting of several banking institutions as its members. This Association floated a Scheme, under which transport operators, who wanted their Lorry Receipts to be accepted for the purpose of discounting the bills of the Bank's clients, had to apply to the IBA.

They have to establish their credibility and worth in the market. If the IBA finds that the transport operator is of the requisits type, it would accept him and put him on the approved list of the IBA. One of the important conditions, which a transport operator had to agree to, was to issue the Lorry Receipts in a certain special form. If that was done, the transport operator had to bear full responsibility of loss caused to the Bank by the goods not reaching the destination for any reason whatsoever. In other words, they had to agree to the Bank being treated as the owners of the goods and for any loss caused for any reason to the Bank. In other words, in addition to the normal responsibility cast on the transport operator, full security was available to the Banks in the form of an undertaking given by the transport operator by agreeing to certain terms and conditions of the co