1. This is an appeal from the decision of the First Class Subordinate Judge of Surat dismissing the plaintiffs' claim against defendant No. 1, the drawers of the hundi in question. The facts are summarised by the trial Judge and are shortly as follows.
2. The plaintiffs had a current deposit account with defendant No. 1, who also did business at Surat. The plaintiffs wanted to remit a sum of Rs. 6,000 to the Bombay firm of Ishverlal Amthalal, and in order to enable them to do so they applied to defendant No. 1 for a 'Namjogi hundi' drawn by defendant No. 1 and made payable to Ishverlal Amthalal, whose name was mentioned in the hundi as the payee. A sum of Rs. 1-14-0 was taken for the 'hundiaman' charges and debited to the plaintiffs' account, and the sum of Rs. 6,000 was similarly debited. The plaintiffs on receiving the hundi sent it by ordinary post to Ishverlal Amthalal on April 22, 1935. But the cover containing this hundi appears to have gone astray in post and the hundi was intercepted by some thief who cleverly removed the name of Ishverlal Amthalal, the payee, thereon, thus making the hundi read 'Payable to Shah...', and on the reverse he made an endorsement making the hundi amount payable to Messrs. Greaves Cotton & Co. This endorsement, however, bears no signature whatever. The hundi appears to have been delivered to Messrs. Greaves Cotton & Co., who presented it to the drawees, the firm of Raichand Motichand at Bombay, who paid the amount of the hundi to Messrs. Greaves Cotton & Co. As there was no reference about this hundi in Ishverlal Amthalal's letter to the plaintiffs sent two or three days later, the plaintiffs were put on their enquiry. In reply to their letter, they were informed by Ishverlal Amthalal that the hundi had never reached him, but that enquiries showed that the amount thereof had been paid as a result of the forged endorsement thereon to Messrs. Greaves Cotton & Co. A few days later the plaintiffs served notices of demand on both defendant No. 1, the drawers, and defendant No. 2, the drawees. Both of them repudiated liability, defendant No. 1 on the ground that the hundi given by them at the request of the plaintiffs had in fact been cashed by the drawees thereof and hence they were in no way liable as to what happened to the hundi itself after it had left their possession and had been handed over to the plaintiffs. The drawees also denied negligence in their reply. Later this suit was filed. Defendant No. 1 appeared to defend on the ground mentioned in his written statement, but defendant No. 2 failed to appear at the hearing.
3. There was an ex parte decree against defendant No. 2, the drawees, and rightly so because it is obvious on an examination of the hundi 'khoka' as it now stands with the name of the payee erased that it was distinctly tampered with and a waving line substituted. The result of the alteration is one which a person with reasonable care could have easily detected and the drawees were undoubtedly guilty of negligence in paying the hundi amount to Messrs. Greaves Cotton & Co.. It, however, transpires that Raichand Motichand & Co., defendant No. 2, have subsequently become insolvents. The plaintiffs therefore turn to the drawees, defendant No. 1, for the payment of the amount.
4. In his argument the learned Counsel for the plaintiffs has tried to steer clear of the suit having been based on the hundi itself. He now argues that he paid Rs. 6,000 in consideration for the said hundi; amount of which has not been paid according to the agreed terms to Ishverlal Amthalal, and that therefore he is entitled to a return or refund of the sum of Rs. 6,000 from defendant No. 1 because they have failed to carry out their part of the contract, viz. payment to Ishverlal Amthalal of Rs. 6,000 by the drawees.
5. One has, however, to look at the plaint in the suit to see that this contention cannot hold water. In para. 9 of the plaint it is stated:
In the above circumstances, the present suit has been filed to recover Rs. 6,000 of our principal amount and Rs. 102-0-0 of interest at the rate of 12 annas per month per hundred according to the custom of hundi from April 23, 1935, till the date of the suit and Rs. 1-14-0 of the discount charges (hundiaman), altogether the suit has been filed to recover Rs. 6,103-14-0.
It is difficult to reconcile the argument that the suit is on a basis entirely different from that of the hundi as is now sought to be made out with the language of this paragraph in the plaint. In dealing with the basis of his claim the learned Counsel for the plaintiffs in his opening address relied on portions of paragraph 5 of the plaint wherein it is stated:
Not only that but the defendant No. 1 has been culpably negligent in not discharging his own duty according to law by not giving information to the defendant No, 2 that the said hundi (of ours) was a 'Namjogi' hundi, etc., and the firm of Ishverlal Amthalal not having received the amount of the said hundi from the defendant No. 2, the defendant No. 1 is also liable to play to us Rs. 6,000 of the hundi and Rs. 1-14-0 being the discount charges thereof.
One has further to ask the question : If the suit is not on the hundi itself, how are defendant No. 2, the drawees, liable and why were they joined in the suit as a co-defendant? The plaintiffs' learned Counsel contends that his suit is based on a cause of action of failure of consideration. Defendant No. 2 could certainly not be sued on such a cause of action, and as it is admitted that the identical hundi was honoured and paid to Messrs. Greaves Cotton & Co., I fail to see how there could be said to have been a failure of consideration. Fortuitous circumstances coming into existence after the hundi left defendant No. 1 resulting in Ishverlal Amthalal not getting the hundi payment from defendant No. 2 make no difference.
6. I am therefore of opinion that the suit as originally framed in the plaint was designed to be one on the hundi itself. On the facts of this case (when the plaintiffs are not in possession of the hundi) the cause of action, to my mind, open to them is necessarily one in damages for wrongful conversion of the hundi, or for moneys had and received, if they had chosen to file at suit against Messrs. Greaves Cotton & Co., which for some mysterious reason they have failed to do. Defendant No. 2, the drawees, could only possibly be liable, if at all, to the plaintiffs on the basis of a cause of action for wrongful conversion of the hundi, or in damages and on no other account. Under the circumstances, I do not see how it is now open to the plaintiffs to argue that they are suing apart from the hundi, especially when the ground set out in the memorandum of appeal para. 6 states:
Sections 36, 37 and 38 of the Negotiable Instruments Act have not been duly considered and applied to the facts of the case.
7. Another test which might be applied as to the nature of the suit sough to be made out in the plaint is the fact that one of the important exhibits relied upon by the plaintiffs and produced by them is a set of rules of the Bombay Shroff Association according to which this hundi, as mentioned or the face of it, was drawn. If the suit was not based on the hundi, I fail to see why the rules of the Bombay Shroff Association with reference to such hundis were produced and relied upon in this case. If the suit is based on the hundi itself, then a cause of action based on wrongful conversion would be one based on tort, and it has been held in cases of this kind that a suit based on a contractual relationship cannot be altered to a suit the basis of which is one in tort.
8. However, I am prepared! to consider this case on the basis that this is in effect a suit for damages for wrongful conversion inasmuch as the drawees, defendant No. 2, took possession of the hundi from Messrs. Greaves Cotton & Co., and have retained it. A suit on the hundi itself could not be maintained, as after it was lost to the payee Ishverlal Amthalal and to the true owners the plaintiffs, it was further paid by defendant No. 2, drawees, and discharged by Messrs. Greaves Cotton & Co., who presented it for payment. There can be no doubt on the undisputed facts in the case that the true owners of the hundi were the plaintiffs and that in the circumstances they would in law be entitled to claim back the return of the hundi (in an undischarged state) from defendant No. 2, i.e. in the condition in which it left the plaintiffs, Defendant No. 2 not being in a position now to return the hundi in an undischarged state (in which it left the plaintiffs) would certainly be liable in damages for wrongful conversion of the hundi, the measure of damages being the amount of the hundi. Messrs. Greaves Cotton & Co. would also be liable for wrongful conversion in law as they derived title to the hundi under a forged endorsement albeit innocently.
9. The question then before us is whether defendant No. 1 the drawers of the hundi are liable to the plaintiffs for the claim in suit. Apart from the fact that the hundi was asked for from defendant No. 1 by the plaintiffs themselves, all that the drawer in such a case guarantees, to my mind, is that the drawee will honour and pay the hundi when it is presented to him on maturity, and if the drawee fails to do so, then the drawer undertakes to repay the amount thereof, provided the said hundi is returned in an undischarged state to the drawer. The plaintiffs in this case are obviously not in a position to return the hundi in an undischarged state to the drawers, defendant No. 1, and hence they could only fall back upon the plea that the hundi has not been paid by the drawees. The gravamen of the charge levelled against defendant No. 1 is that they failed to intimate to the drawees the fact that the hundi was a Namjogi hundi in favour of Ishverlal Amthalal.
10. Hundis are specially saved from the general law under Section 1 of the Negotiable Instruments Act and are governed by the custom attaching to hundis. No attempt has been made to prove any custom as to the drawer's duty being to give any such information to the drawee as to the hundi being drawn in favour of a particular payee.
11. The evidence on record is all one way against this contention, as in the plaintiff Sitaram Lallubhai's own statement he states:
I have never received back money of the hundi from the drawer without returning the hundi to him. The uncashed hundi is to be returned to the drawer if the hundi money is to be had. If the hundi is lost, a duplicate would be asked or its money. There is no instance of the hundi having been lost and money received for such a hundi. I do not know of any instances like that of others.
In the defendant's munim's deposition he pleads ignorance of the rules of the Bombay Shroff Association relative to 'Namjogi' hundis. The defendant in his evidence states:
If the man who took the hundi brings it back, we would pay the money not otherwise. If our agent has not accepted a lost hundi after the reply we would draw a duplicate hundi or refund the money.
In the absence of any such custom being proved-it was not even alleged in the plaint-and in the absence of any other evidence that there was any such duty on the drawer, I am unable to hold, that the drawer in this case was guilty of any neglect of duty with reference to the hundi or as to the absence of any such intimation from him to the drawee.
12. Now, it is admitted that the same hundi which found its way to Messrs. Greaves Cotton & Co. under the forged endorsement was presented to the drawees, and has in fact been paid by them. It is, therefore, to my mind, certainly not a case of a dishonour of the hundi, or refusal to pay on the part of the drawees. It is, however, pointed out that it was not a payment to Ishverlal Amthalal. In the rules relied upon by the plaintiffs, there is Rule 30, to which our attention has been drawn by the learned Counsel for the defendant, which reads:
It is safe to write on the hundi to be sent for acceptance in Bombay by the person sending the hundi to Bombay that the amount should be paid to a; certain person at his address, so that if the hundi is lost or mislaid then by writing in such manner the acceptor will hesitate to pay the amount to any other person.
Now, it appears to me that the words appearing in this rule, viz. 'by the person sending the hundi to Bombay,' can only refer to the plaintiffs in this case, and that hence the omission, if any, was on the part of the plaintiffs themselves.
13. Several cases have been cited by the learned Counsel for the plaintiffs, but as admitted by him there is no decided case wherein the question of the liability of the drawer in such a case has been gone into or decided. The case nearest to the present one as regards facts is, I think, the one reported in Ganesdas Ramnarayan v. Lachminarayan I.L.R. (1894) Bom. 570 There the plaintiff at Sholapur having bought a shah-jogi hundi drawn at Sholapur upon the defendants in Bombay, endorsed it to Ramrukh Ramkisson, and sent it by post to him for collection. In course of its transmission it was stolen, and the name of Ramrukh Ramkisson was expunged, and another name, viz. that of Dwarkadas Lalji, was substituted. On December 9, 1893, the hundi was presented for payment to the defendants in Bombay by a person giving his name as Dwarkadas Lalji, and the defendants paid it without enquiry as to the responsibility or position of the person to whom they paid it. The plaintiff sued the defendant for value of the hundi. It was held that the defendants-drawees-were guilty of conversion of the hundi and were liable to the plaintiff, the lawful owner thereof, in trover. It is noteworthy that in that case the drawers of the hundi were originally made party defendants to the suit, but that at the suggestion of the trial Court, on its being pointed out that there was no cause of action disclosed against the drawer the claim against the drawer was abandoned.
14. The case of Thorappa v. Umedmalji : (1923)25BOMLR604 does not help very much, except that there also the question was not of the liability of the drawer, but it does indicate that the cause of action in such a case would be one based on wrongful conversion.
15. We have also been referred to the case of Jugjivandas Jamnadas v. The Nagar Central Bank, Ltd.I.L.R. (1925) Bom. 118 : 28 Bom. L.R. 226 but that again was a case of a cheque, and there it was held that the drawee being discharged by payment in due course, under Section 85 of the Negotiable Instruments Act, the drawer was also discharged. But the case of a cheque, I am afraid, is on a different basis, and the law appertaining to cases of cheques could have no bearing on the issues in the present case, and it cannot be inferred that because the drawee in this case remained liable by reason of having paid to a wrong party under a forged endorsement that therefore the drawer defendant No. 1 also continued to be liable.
16. In Burchfietd v. Moore (1854) 23 L.J.Q.B. 261 a bill of exchange was, without the privity of the acceptor, altered by inserting the words 'payable at A' and afterwards endorsed to the plaintiff for value who took it bona fide and without knowledge of the alteration, it was held that that was a material alteration which discharged the acceptor. The plaintiff's remedy in such a case is confined to a right to recover the consideration for the bill as between himself and his immediate endorser; and a similar remedy may be resorted to between all prior parties until the party is reached through whose fraud or laches the alteration was made. I think the principle underlying that decision would apply to the facts of the present case, and no party to the instrument prior to the one who was responsible for the alteration or fraud could possibly be held liable. Defendant No. 1, the drawers, would in any event not be hence liable.
17. In Sulleman Hussein v. The New Oriental Bank Corporation, Limited I.L.R. (1890) Bom. 267 Sir Charles Sargent C.J. made a remark which might be of some help and guidance in this case which was as follows (p. 279):
By this course of reasoning the conclusion is arrived at that the bill was not dishonoured by the Bank's refusal to pay the plaintiff in Bombay, and, therefore, that the Bank, as drawers, are not liable.
18. Mr. Coyajee has referred us to the case of Ram Singh v. Gulab Rai-Mehr Chand I.L.R. (1920) Lah. 262 where it was held by Sir Shadi Lal C.J. that the alteration in the hundi reducing the period of payment was a material alteration within the meaning of Section 87 of the Negotiable Instruments Act, 'Plaintiff having failed to prove that this was done with the consent of Ram Singh and Chajju Ram, or in order to carry out the common intention of the original parties, the hundi was thereby rendered void as against them, and plaintiff could not be allowed to fall back upon the contract as it existed prior to the alteration.' The principle underlying that case may, I think, well be applied to the present one, and it is, therefore not open to the plaintiffs to say that defendant No. 1 is yet liable after payment of the hundi by defendant No. 2-after the forged endorsement-especially as defendants were in no way concerned or privy to the alteration in the hundi.
19. The learned Counsel for the plaintiffs in the course of his reply mentioned in support of his contention that defendant No. 1 continued to be liable that in case a hundi was burnt or otherwise destroyed, he had a right to get back the Rs. 6,000 from the drawer, or a duplicate of the hundi. This, to my mind, does not militate against the drawer's position in this case for the simple reason that in the hypothetical case taken by the learned Counsel it would be the undoubted right of the drawer before giving a duplicate (or 'Painth' of 'Petha' as it is called) first to ascertain definitely from the drawee that the original had not been acted upon, and presented or paid, and could not possibly be acted upon, by first satisfying himself as to the destruction of the document. The drawers in this case were in no way responsible for the hundi (sent by the plaintiffs by ordinary post) falling into the hands of the thief, or the alteration which resulted in the loss of money to the present plaintiffs, or in the payment by the second defendant of the hundi; hence the proximate cause cannot be laid at the door of defendant No. 1. He is in the position of a defendant here and even if this were considered to be a case of 'pari delicto' the maxim 'positio potior est defendantis' would apply.
20. Even if the suit were on a hundi, as is mentioned in the memorandum of appeal, and Section 37 were applicable, it would not help the plaintiffs' case. Section 37 of the Negotiable Instruments Act states that the maker of a promissory note or cheque, the drawer of a bill of exchange until acceptance, and the acceptor are, in the absence of a contract to the contrary, respectively liable thereon as principal debtors. The words 'until acceptance' are important. In this case not only was the hundi drawn by defendant No. 1 accepted, but it in fact was paid by the drawees defendant No. 2.
21. In the case of Norman v. Ricketts (1886) 3 T.L.R. 182 a customer was asked for 'the favour of a cheque within a week.' The cheque was sent by the customer by post in consequence of this request. The cheque was stolen in transit, and it was paid by the bankers of the drawer to the thief. It was held that the debtor was in no way responsible, as the sending of the cheque was payment. In his short judgment the Master of the Rolls stated (p. 182):
If a debtor had to pay his creditor money, as a general rule the debtor must come and pay his creditor. But if the creditor asked him to pay in a particular way, the debtor might do so.
In the present case plaintiffs asked defendant No. 1 to debit their account with Rs. 6,000 and to give them a 'Namjogi' hundi for the amount on a Bombay firm. Defendant No. 1 did so according to plaintiffs' express instructions. No further duty hence lay on their shoulders, except the liability to repay if the hundi was returned dishonoured or unpaid
22. In his opening address the learned Counsel for the plaintiffs touched upon the point that the 'khoka' of the hundi was in the possession of defendant No. 1. Though no further argument was developed on the point, I might mention that defendant No. 2 in sending the 'khoka' of the hundi to defendant No. 1, the drawers, for the purpose of accounts were not dealing with the live hundi which had already on being discharged by Greaves Cotton & Co. lost its character of being a 'hundi' known as such in Indian mercantile usage.
23. The appeal will, therefore, be dismissed with costs.
N.J. Wadia, J.
24. I agree.