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High Court Of Calcutta
S. K. HAZARI
METHOD TRADING AND INVESTMENT LTD. - Appellant
Versus
SHREE AMBICA JUTE MILLS LTD. - Respondent
Suit 290 Of 1986
Decided On : 09/20/1988
NEGOTIABLE INSTRUMENTS ACT - SECTIONS 7, 33, 80 - CIVIL PROCEDURE CODE - ORDER 37, RULES 2, 3(5) - COMPANIES ACT - SECTION 446 - CO-ACCEPTANCE OF HOONDIES BY BANK MANAGER - VALIDITY OF HOONDIES - INTEREST RATE - LEAVE TO DEFEND - MAINTAINABILITY OF SUIT.
Fact of the Case:
Plaintiff lent Rs. 25 lakhs to Defendant 1, which was acknowledged by three hoondies co-accepted by Defendant 2, Punjab National Bank, through its Manager. The hoondies were dishonored, and the Plaintiff filed a suit under Order 37 of the Civil Procedure Code for a summary judgment against both Defendants. Defendant 2 contested the suit, claiming that the co-acceptance was beyond the Manager's authority and that the hoondies were void.
Finding of the Court:
The Court held that the Defendant 2 Bank, through its Agent and Manager, accepted the hoondies in suit and that the said hoondies are valid and enforceable in law. The Court further held that the Plaintiff cannot claim interest more than 6% per annum as specified in Section 80 of the Negotiable Instruments Act.
Issues: 1. Whether the co-acceptance of the hoondies by the Bank Manager was valid? 2. Whether the hoondies were void due to lack of authority and interpolation? 3. Whether the Plaintiff was entitled to interest at the rate of 18.5% per annum? 4. Whether the suit was maintainable against Defendant 2 despite the liquidation of Defendant 1 under Section 446 of the Companies Act?
Ratio Decidendi: 1. The Court relied on Section 7 of the Negotiable Instruments Act, which states that a drawee of a bill of exchange can bind himself by an acceptance. The Court held that since the Defendant 2 Bank was the drawee of the hoondies, the co-acceptance by its Manager was valid. 2. The Court rejected the argument that the hoondies were void due to lack of authority and interpolation. The Court noted that the Manager had the authority to accept the hoondies as per the Power of Attorney granted by the Bank, and that the interpolations did not invalidate the hoondies. 3. The Court held that the Plaintiff was not entitled to interest at the rate of 18.5% per annum as claimed in the suit. The Court applied Section 80 of the Negotiable Instruments Act, which provides that the interest rate on an instrument shall be 6% per annum unless otherwise specified. Since the hoondies did not specify any interest rate, the Court awarded interest at the rate of 6% per annum. 4. The Court held that the suit was maintainable against Defendant 2 despite the liquidation of Defendant 1 under Section 446 of the Companies Act. The Court noted that the Plaintiff was seeking a judgment and decree against Defendant 2 alone, and that the liquidation of Defendant 1 did not affect the Plaintiff's claim against Defendant 2.
Final Decision: The Court granted a summary judgment in favor of the Plaintiff against Defendant 2 for a total sum of Rs. 23,70,812.50, including principal, interest, and costs. The Court also rejected Defendant 2's application for unconditional leave to defend the suit.
( 1 ) THIS is a suit under O. XXXVII of the Civil P. C. , inter alia, praying for a final judgment and decree for a sum of Rs. 32, 34, 740, 46 p. in favour of the plaintiff against the defendant 2 less a sum of Rs. 1, 50,000/- paid by the defendant 1 after the institution of the suit and for other reliefs. The plaintiff's case is that in or about June 1983 at the request of the defendant 1 the plaintiff agreed to lend and advance a sum of Rs. 25 lakhs repayable by the said defendant on demand after 90 days. The said loan and advance was made by the plaintiff to the defendant 1 as and by way of temporary accommodation for the purpose of business of the defendant 1 after duly deducting the interest for 90 days on the said sum of Rs. 25 lakhs at the rate of 18% per annum. The plaintiff paid the said sum by Pay Slip/pay Order No. 230954 dt. 01-06-83 issued by the Bank of India, Calcutta Main Branch drawn in favour of the Punjab National Bank, A/c. Sri Ambika Jute Mills Ltd. , dt. 2nd June, 1983 a sum of Rs. 23,84,375/ -. The defendant 1 in acknowledgement of the said loan and advance executed three several hoondies dated 1st June 1983, two for Rs. 10 lakhs each and one for Rs. 5 lakhs and the due date of the said three several hoondies was lst June 1983. The said three hoondies were duly presented to the defendant 2, Punjab National Bank, for payment through Sri N. C. Saha, Notary public of Premises No. 18, Old Post Office Street, Calcutta on 2nd Sept. , 1983, but the defendants, Sri Ambika Jute Mills Ltd. and the defendant 2, Punjab National Bank, failed and neglected to pay the said sum of Rs. 25 lakhs and the said three hoondies were dishonoured by non-payment. Each of the defendants was duly given notice of such dishonour. Between Sept. , 1983 and April 1986, the defendant 1 from time to time made payment of a sum of Rs. 6,25,000/- to the plaintiff and alter giving due credit of the sum of Rs. 6,25,000/- the plaintiff is entitled from each of the defendants to a sum of Rs. 32,34,740. 40 p. The particulars whereof are as follows :
i) Principal sum Rs. 25,00,000. 00
ii) Interest 18. 5% per annum calculated till April 30, 1986 Rs. 13,59,740. 46
Rs. 38,59,740. 00
Less : Amount paid Rs. 6,25,000. 00
Balance due : Rs. 32,34,740. 46
Total
The plaintiffs further case is that the defendant 2, Punjab National Bank, accepted the said hoondies as a co-acceptor. The plaintiffs have annexed the xerox copies of the said three hoondies with the plaint.
( 2 ) THE defendant 2, Punjab National Bank, filed affidavit-in-opposition, The case of the defendant 2 is that on June 2, 1983 one Radhakrishan More as Director of the defendant 1, accepted three several hoondies on behalf of the defendant 1 and the said hoondies were co-accepted by one Sri R. Prasad, Manager, Punjab National Bank, Shyambazar Branch with the stamp impression of the said branch of the defendant 2 Bank on 2nd June, 1983. It is submitted by the learned advocate appearing on behalf of the defendant 2 that Sri R. Prasad signed the said hoondies in furtherance and pursuance of the conspiracy between the plaintiff and the defendant 1 and the said Sri R. Prasad. That on 2nd June, 1983 a Current Account No. 1199 was opened at the Shyambazar Branch of the defendant 2 Bank by its three Directors, viz. Sri Radhakrishan More, (2) Dhanraj Bagaria and (3) Sri Narayan Prasad Bagaria, in the name of the defendant 1 Sri Ambika Jute Mills Ltd. and a sum of Rs. 2100/- was deposited by cash in the said Current Account. On 3rd June, 1983 a draft bearing No. 230954 dt. 1st June, 1983 for a sum of Rs. 23,84,375/- was deposited and on 4th June, 1983 the proceeds thereof were credited to the said current account of the defendant 1. The co-acceptance made by Sri R. Prasad, the Manager of the defendant 2, Bank, was beyond his power and authority and without any sanction obtained from the competent authority and the same was done by the Manager not in the usual course of busine
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