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Andhra Pradesh High Court
Indian Bank, Secunderabad - Appellant
Versus
Boorugu Nagaiah Rajanna - RESPONDENT
Decided On: 10-29-99
The notice of dishonour must be given within a reasonable time and that it should be sent by post on the next day after the holder or any other party who was bound to give notice.
Headnote:
NEGOTIABLE INSTRUMENTS ACT, 1881 - SECTION 106 - NOTICE OF DISHONOUR - REASONABLE TIME - WAIVER - INTEREST - RATE OF INTEREST - COMMERCIAL TRANSACTION - CONTRACT RATE.
Fact of the Case:
The plaintiff bank filed a suit against the defendants, a partnership firm and its partners, for recovery of Rs. 3,00,067-40 Ps. The plaintiff had granted Bills discounting facility to the first defendant firm up to a limit of Rs. 2,50,000. The defendants had executed promissory notes, a letter of continuity and an Agreement for Bills purchase facility as Collateral Security for the repayment of amounts due to the plaintiff bank. The Bills Purchase facility was renewed from time to time. Six sets of documents were returned to the plaintiff bank reporting that they were dishonoured by the Drawees (Purchasers) when presented for payment. The plaintiff bank addressed a letter to the defendants informing them about the dishonour of the Bills and requesting them to adjust the amounts due. However, the defendants did not discharge the liability. Therefore, a Lawyer's notice was issued demanding a sum of Rs. 2,91,463-25 Ps. as on 28-2-1982 from the defendants. In spite of receipt of the notice, the defendants did not pay the amounts. The total amount thus, due from the defendants was Rs. 3,00,067-40 Ps. The defendants denied the liability and contended that the plaintiff bank failed to give notice of dishonour immediately on their dishonour. Hence, they are not liable in respect of the suit Hundies for want of notice as prescribed under the Negotiable Instruments Act. The plaintiff bank claimed interest at the rate of 161/2% p.a. from the date of filing of the suit till the date of realisation.
Finding of the Court:
1. The rate of interest mentioned in the pronote shall be treated as the contract rate of interest and in view of the judgment of the Supreme Court in D. S. Gowda's case (1994 AIR SCW 2721) referred supra, the rate of interest is 161/2% p.a. 2. The notice of dishonour dated 26-6-1980 is beyond the reasonable period, and also violates the stipulations prescribed under Sec. 106 of the Act. 3. The defendants can oppose the claim of the plaintiff for interest @ 161/2% p.a. on the ground that on merits the suit is liable to be dismissed without filing the cross-appeal or cross-objections. 4. There is no waiver of notice of dishonour.
Issues: 1. Whether the plaintiff is entitled for 161/2% per annum interest; 2. Whether the plaintiff issued the notice of dishonour in accordance with the provisions of Negotiable Instruments Act; 3. Whether the defendants can oppose the claim of the plaintiff for interest @ 161/2% p.a. on the ground that on merits the suit is liable to be dismissed without filing the cross-appeal or cross-objections; 4. Whether there is a waiver of notice of dishonour;
Ratio Decidendi: 1. The plaintiff is entitled to interest at the rate of 161/2% p.a. as the transaction is a commercial transaction and the rate of interest mentioned in the pronote shall be treated as the contract rate of interest. 2. The notice of dishonour dated 26-6-1980 is beyond the reasonable period, and also violates the stipulations prescribed under Sec. 106 of the Act. Therefore, the plaintiff is not entitled to interest @ 161/2% p.a. 3. The defendants can oppose the claim of the plaintiff for interest @ 161/2% p.a. on the ground that on merits the suit is liable to be dismissed without filing the cross-appeal or cross-objections. 4. There is no waiver of notice of dishonour as the defendants have deposited the amount of Rs. 50,000.00 under Ex. A-44 only in the month of March, 1982 i.e. on one day prior to the filing of the suit, not before the expiry of the reasonable period of notice of dishonour to be issued under the Act.
Final Decision: The appeal is dismissed. It is also dismissed against defendant No. 12 along with costs. The C. M. P. filed for receiving additional evidence is also dismissed as the ingredients of Order 41, Rule 27 are not satisfied.
( 2 ) THE averments of the plaint in brief are as follows :-The defendant No. 1 is a partnership firm and defendants 2 to 11 are the partners. The first defendant obtained Documentary Bills purchase facility for the business up to a limit of Rs. 2,50,000. 00 in the year 1971 and executed promissory notes, a letter of continuity and an Agreement for Bills purchase facility as Collateral Security for the repayment of amounts due to the plaintiff bank. The Bills Purchase facility was renewed from time to time. In the course of transactions between the plaintiff and the defendants, the branch office at Madras of the plaintiff bank returned six sets of documents to the plaintiff bank reporting that they were dishonoured by the Drawees (Purchasers) when presented for payment. After the six bills were returned dishonoured, the plaintiff bank addressed a letter dated 25/10/1980 to the defendants by registered post informing them that the abovementioned bills totalling to Rs. 2,02,000. 00 with interest thereon were returned unpaid and outstanding in the Bank Books and requesting the defendants to adjust the amounts due. However, the defendants have not discharged the ability. Therefore, on 1/03/1982, a Lawyer s notice was issued demanding a sum of Rs. 2,91,463-25 Ps. as on 28-2-1982 from the defendants in spite of receipt of the notice, the defendants have not paid the amounts. The total amount thus, due from the defendants is Rs. 3,00,067-40 Ps. and the defendants are liable to pay the said amount with interest at the rate of 161/2% p. a. from the date of filing of the suit till the date of realisation.
( 3 ) THE decree set-up by the defendants is one of denial. In addition, it is stated that the plaintiff bank granted Bills discounting facility to M/s. Lokula Kusumaiah and Brothers up to the tune of Rs. 1,50,000. 00. The said firm, as and when exceeded their limits, had obtained the additional signature of the first defendant firm as a co-obligant and discounted with the plaintiff bank. Therefore, all the Bills of Exchange filed by the plaintiff bank contain the co-obligant s signature of the firm of M/s. Lokula Kusumaiah and Brothers. The Drawee, Drawer the Purchasers at Madras and the co-obligants M/s. Lokula Kusumaiah are necessary and proper parties to the suit. In the absence of necessary parties, the defendants are exonerated.
( 4 ) THE Hundies referred to in the plaint dated 9-2-1980, 15-2-1980 and 23-2-1980 for an aggregate value of Rs. 2,02,000. 00 were drawn by Ghulam Hussain of Bakaram, Hyderabad in favour of Hafizur Rehman and Hafiz Ahmed, Periamet, Madras. The said Drawer endorsed the aforesaid six Hundies in favour of M/s. Lokula Kusumaiah and Brothers. The said M/s. Lokula Kusumaiah and Brothers and the first defendant firm endorsed the same in favour of the plaintiff. The said Negotiable Instruments were dated between 9-2-1980 to 23-2-1980 and the plaintiff has failed to give notice of dishonour immediately on their dishonour. Hence, they are not liable in respect of the suit Hundies for want of notice as prescribed under the Negotiable Instruments Act. The plaintiff neither has given notice of dishonour nor did he return the Railway receipts on account of which, the defendants have sustained loss as the consideration for the suit Hundies are with the plaintiff. Therefore, the plaintiff cannot claim any amount on account of the said Negotiable Instruments. The plaintiff intimated the dishonour of Hundies only on 25-10-1980 by which time, all recoveries of the goods under the Railway receipts dated 9-2-1980 to 23-2-1980 have become stale and not recoverable from the Railways. When the defendants explained on receipt of the suit notice, the plaintiff promised to look into the matter and made necessar
