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Bombay High Court
Hon'ble Anoop V. Mohta, J.
First Appeal No. 138 of 1989
Karamchand Thapar and Brothers Ltd.
versus
Central Bank of India, Nagpur and others
Counsel :
Mr. C. S. Samudra for Appellant
Mr. Hafiz F. Karbhari for Respondents
The main legal point established in the judgment is the liability of the drawee under the N.I. Act, emphasizing the necessity of acceptance to render a drawee liable and the drawee's obligation to pay the bill upon acceptance.
Headnote:
Negotiable Instruments Act - Liability of Drawee - Sections 31, 32, 61, 64, 78 - The court discussed the liability of the drawee of a negotiable instrument and the provisions for payment under the N.I. Act. It emphasized that the drawee's liability arises only when he accepts the bill, and no cause of action can arise to the payee against the drawee if there is no acceptance. The court also highlighted the necessity of acceptance to render a drawee liable and the drawee's obligation to pay the bill upon acceptance. The judgment modified the decree by dismissing the plaintiff's claim against the appellant.
Fact of the Case:
The respondent filed a suit against the appellant and other defendants for the amount of Rs. 2,20,320.81 based on credit facilities and hundies. The appellant, as the acceptor of the hundies, was claimed to be primarily liable for payment under the N.I Act. The suit was decreed against all defendants, including the appellant.
Finding of the Court:
The court found that the appellant was not liable for the payment on non-accepted hundies and the interest thereon. It also concluded that there was no agreement between the bank and the appellant regarding the payment of interest for delayed payment on accepted hundies. The judgment modified the decree by dismissing the plaintiff's claim against the appellant.
Issues: The issues revolved around the liability of the drawee under the N.I. Act, the necessity of acceptance to render a drawee liable, and the existence of an agreement between the bank and the appellant regarding the payment of interest.
Ratio Decidendi: The court emphasized the necessity of acceptance to render a drawee liable and the drawee's obligation to pay the bill upon acceptance. It also highlighted that the appellant was not liable for the payment on non-accepted hundies and the interest thereon, as there was no agreement between the bank and the appellant regarding the payment of interest for delayed payment on accepted hundies.
Final Decision: The judgment modified the decree by dismissing the plaintiff's claim against the appellant and restricted the appellant's liability to the tune of Rs. 1,24,153.46.
This Appeal has been preferred by the original defendant No. 16/appellant herein against the original plaintiff/respondent No. 1 herein - Central Bank of India and other original defendants Nos. 2 to 15/respondent Nos. 2 to 15 herein, and thereby challenged the judgment and decree dated 11th July, 1988, passed in the Special Civil Suit No. 236 of 1975 between the parties, in respect of the finding, as well as, the decree against the said defendant-appellant herein.
2. The respondent No. 1-original plaintiff had filed the Suit basically against the respondent No. 2 and respondent Nos. 3 to 15 as Partners of the respondent No. 1 for the amount of Rs. 2,20,320.81 on the basic agreement/transaction called credit facilities including Clean Demand Endorsed Bills Limit and a Usance Bill Limit. From time to time, parties used to execute necessary documents like pronote. The said Bill Limit was for Rs. 2,00,000/- and Rs. 4,00,000/- which was increased from time to time. On 27-9-1972, a consolidated pronote was executed to the tune of Rs. 84,00,000/-. The respondent No. 1 alleged that it was a practice in the Bill Discounting Limits that the respondent No. 2 used to prepare the hundies in the name of a drawee and submit it to the respondent-plaintiff for discounting purposes. The respondent No. 1 used to purchase the hundies and make the payment to the respondent No. 2 immediately on its submission. Thereafter, within the time limit, the drawee of the hundi, on acceptance of the hundi, used to make payment of the bills connected with the hundi to the respondent No. 1. This practice was continued since 1959 till the Coal Mines (Taking Over Of Management) Act, 1973, came into force. The Custodian was appointed. The appointment date for the Coal Mines (Nationalization) Act, 1973, is 1st May, 1973. Based on that, the Custodian was inter-charged of the assets of the Mine owners from 31st January, 1973 to 30th April, 1973.
3. The respondent No. 2 was doing a business of coal mining and owned Ballarpur, Shasti and Ghugus Coal Mines. As per the practice, after despatch of the coal to the purchaser party, the respondent No. 2 used to prepare the bill of the goods sold and used to submit it for discount, along with hundies to the respondent No. 1-Bank. The respondent No. 1-Bank immediately on submission used to credit the amounts of bill to the account of the respondent No. 1 and on acceptance of the drawee of the hundi, the amount was to be recovered from the drawee. The plaintiff had restricted the Suit for the claim of Bills Discounting Facility against the original defendant Nos. 1 to 16.
4. As alleged, the appellant-original defendant No. 16 was the acceptor of the hundies and the drawee and, therefore, primarily liable for payment of the amount claimed under the provisions of the Negotiable Instruments Act (for short "N.I Act') and, therefore, the decree was claimed against all the defendants. The Suit was based on the hundies and the amount due on the said hundies. Along with the Suit, Schedule-C was filed that gave full particulars of the plaintiffs' claim in the suit, based on the respective hundies with over due interest and other details. This Schedule remained undisputed. The Schedule further provides date of purchase, number of hundies, amount of bill, due date, date of acceptance of payment, interest at 12% upto 15-9-1975 and amount of paid bill. Accordingly, total amount of the suit, as referred above, was claimed. The undisputed position on the record further shows the date and details of the number of accepted hundies and the interest claimed thereon. The same is reproduced as under :
"A) Madras Office :
Hundi No. Amount of Bill Date of Acceptance Interest of Hundi not accepted
1 2 3 4
786(Exh.l44) 16,736,57 Not accepted 4,835.75
789(Exh.l45) 15,613.05 Not accepted 4,487.05
Total of 2 + 4 = Rs. 41,672.42
B) Bangalore Office :
785(Exh.l38) 7,602.33 Not accepted 2,343.20
799(Exh.l40) 3,304.36 Not accepted 1,107.35
810(Exh.
