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High Court Of Calcutta
S. A. MASUD, S. K. MUKHERJEE
BHUTORIA TRADING CO.LTD. - Appellant
Versus
ALLAHABAD BANK LTD. - Respondent
AFOD 251 Of 1964
Decided On : 11/12/1976
NEGOTIABLE INSTRUMENTS ACT - SECTION 89 - ENDORSEMENT OF CHEQUE - AUTHORITY OF MANAGER - ESTOPPEL - PAYMENT IN DUE COURSE - CONVERSION.
Fact of the Case:
Plaintiff sold and delivered jute to W. F. Ducat and Co. Ltd. for Rs. 57,889-7-0, who drew an uncrossed cheque on their bankers, Allahabad Bank Ltd. (defendant), payable to the plaintiff or order in payment of the price and made it over to the plaintiff's employee, Jethmal Chandalia (defendant No. 2). Defendant No. 2 wrongfully endorsed the cheque on the back thereof purporting to be for and on behalf of the plaintiff and thereafter presented the same at the counter of the defendant bank. The bank, contrary to the alleged custom or usage of the trade, wrongfully and negligently paid the cheque at its counter although the said cheque had not been presented through any bank on behalf of the plaintiff. The plaintiff claimed a decree for the sum of Rs. 57,889-7-0 interest up to the date of the institution of the suit, interest on judgment and costs.
Finding of the Court:
1. The alleged trade usage pleaded by the plaintiff in paragraph 5 of the plaint has not been established by the evidence oral or documentary, adduced in this case. 2. Jethmall had the authority to endorse the cheque in controversy on behalf of the plaintiff. 3. The plaintiff is estopped by its conduct from challenging the authority of Jethmall to endorse the cheque and realise the proceeds. 4. The payment of the cheque in question by the defendant bank has been made by the defendant bank in accordance with its apparent tenor, in good faith, and without negligence, to Jethmall who was in possession thereof the defendant is entitled to succeed. 5. The defendant bank had not converted the said cheque.
Issues: 1. Was the purported indorsement of the cheque in controversy here by the second defendant unauthorised? 2. Is there any usage or practice as alleged in paragraph 5 of the plaint? 3. Is the plaintiff estopped from alleging want of authority for reasons set out in paragraphs 12 to 14 of the written statement? 4. Was the payment of the cheque in controversy here by the first defendant in the ordinary or due course of business? 5. Was the plaintiff the true owner of the cheque in controversy? 6. Have the first and the second defendants converted the cheque as alleged? 7. What relief, if any, is the plaintiff entitled to?
Ratio Decidendi: 1. The evidence is pitifully inadequate, amorphous, occasionally contradictory and falls far short of the standard required to establish a general trade practice common to all the banks in Calcutta. 2. Section 89 of the Indian Companies Act 1913 provides that "a bill of exchange. . . . . . . . . shall be deemed to have been endorsed on behalf of the Company if. . . . . . . . . ,. . endorsed in the name of by or on behalf or on account of the Company by any person acting under its authority, express or implied". 3. The plaintiff Company, by permitting Jethmall to use the relevant rubber stamps for the purpose of endorsement on the back, represented to the defendant bank that Jethmall was, in fact, the Manager and had the authority to make the endorsement on the cheque on behalf of the plaintiff Company. 4. The payment by the defendant bank of the cheque in question has been made by the defendant bank in accordance with its apparent tenor, in good faith, and without negligence, to Jethmall who was in possession thereof the defendant is entitled to succeed. 5. Section 85(1) of the Negotiable Instruments Act provides: "where a cheque payable to order purports to be endorsed on behalf of the payee the drawee is discharged by payment in due course."
Final Decision: Appeal dismissed with costs.
( 1 ) THIS appeal is directed against a judgment and decree of Bijayesh Mukherjee, J. dated September 18. 1963 insofar as by the said judgment and decree the learned Judge dismissed the suit as against Allahabad Bank Ltd. , the first defendant, who is a respondent before us. The facts of the case may be briefly stated.
( 2 ) IN March and April the plaintiff, that is to say, the appellant before us sold and delivered to one W. F. Ducat and Co. Ltd. of 5 Clive Row, Calcutta, diverse quantities of jute for the price of Rupees 57,889-7-0 which became payable by the said buyers.
( 3 ) MESSRS. W. F. Ducat and Co. . Ltd. drew an uncrossed cheque on their bankers, the respondent Allahabad Bank Ltd. for the said sum payable to the plaintiff or order in payment of the said price and made over the same to the defendant No. 2 Jeth-mall Chandalia, an employee of the plaintiff. In the plaint, the plaintiff claimed that the defendant No. 2 had no authority to operate on the plaintiff's banking account or to endorse any cheque payable to the plaintiff's order. In paragraph 5 of the plaint the plaintiff further averred that there is a well-known usage and/or practice in the banking business and/or trade and commerce in Calcutta, well known to the defendant at all material times, that a cheque payable to a limited Company cannot be encashed at the counter of the drawee bank and that the same can only be encashed if presented for payment through the bank of the payee.
( 4 ) THE defendant No. 2 wrongfully, dishonestly, fraudulently and without authority endorsed the said cheque on the back thereof purporting to be for and on behalf of the plaintiff and thereafter presented the same at the counter of the defendant bank.
( 5 ) IT is contended by the plaintiff that the defendant 'bank, contrary to the afore" said custom or usage of the trade, wrongfully and negligently paid the cheque at its 'counter although the said cheque had not been presented through any bank on behalf of the plaintiff. The cheque was paid under circumstances which afforded reasonable grounds for suspicion and put the defendant No. 1 on enquiry as to the authority of the defendant No. 2 to receive payment of the cheque or use the proceeds thereof in fraud of the plaintiff and deprive the plaintiff of the same.
( 6 ) THE defendant bank should have known on reasonable enquiry that the defendant No. 2 had no authority to endorse the cheque payable to the plaintiff's order or to encash the same.
( 7 ) THE bank acted negligently in not making due enquiry as to the authority of the defendant No. 2 to realise the proceeds of the said cheque and had any such enquiry been made, the bank would have ascertained that the defendant No. 2 had no authority to endorse or realise the proceeds of the said cheque.
( 8 ) THE plaintiff contended that the payment, of the said cheque was not made in due course or in the ordinary course of business. The endorsement of the cheque made by the defendant No. 2 was unauthorised, fraudulent and forged.
( 9 ) THE plaintiff pleaded that the defendants Nos. 1 and 2 had converted the said cheque and the proceeds thereof to their own use as a result whereof the plaintiff has suffered damages.
( 10 ) IN the alternative, the plaintiff claimed the said sum against the said defendants as moneys had and received by the said defendants to the use of the plaintiff. An allegation of conspiracy was made by the plaintiff against the defendant No. 2 and the defendant No. 3 K. L. Maheswari, a constituent of the bank who identified the defendant No. 2 before payment was made by the bank. It is important to note that the defendant No. 3 was dismissed from the suit by the plaintiff of his own accord with the result that the allegation of conspiracy or of any act of omission or commission on the part of the defendant No. 3 cannot be sustained.
( 11 ) ON the basis of the aforesaid allegations, the plaintiff claimed a decree for the sum of Rs. 57,88
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