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R.D. Sethna Vs. Jwalaprasad Gayaprasad - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai
Decided On
Case NumberAppeal No. 17 of 1914 and Suit No. 1219 of 1912
Judge
Reported inAIR1914Bom260; (1914)16BOMLR972
AppellantR.D. Sethna
RespondentJwalaprasad Gayaprasad
DispositionAppeal dismissed
Excerpt:
.....june 1912, the plaintiff received in bombay a letter from r, at harpalpur advising despatch of a railway receipt for 300 bags of linseed stated to have been consigned by from ranipur, and asking the plaintiff to sell- the goods and meantime to accept and pay on presentment two shah jog hundies for rs. 3,000 each. the same day one of those hundies was presented by defendant no. 1 for payment; and the other, by one no payment was made. the railway receipt was received on the 11th. the plaintiff delivered it to k and received rs. 5600 from him. the plaintiff then paid the amount of the hundi to defendant no, 1 in full and he paid the balance of what he bad received from k. the goods, however, never arrived and the plaintiff took back the receipt and refunded the amount to k. subsequent..........of harpalpur in alipur state in the bundelkhand agency. the letter enclosed what purported to be a railway receipt for 300 bags of linseed stated to have been consigned by ramlal from ranipur station and the plaintiff was asked to sell the goods and meantime to accept and pay on presentment two hundies for rs. 3000 each dated the 15th jethsud 1969 drawn by ramlal in favour of the second defendant firm of munalal gayaprasad. on the same day one of the hundis being a shah jog hundi drawn on the plaintiff by ramlal in favor of munalal was presented by the first defendant and on the same day the other hundi mentioned in the letter was presented by godaldas vallabdas.4. the first defendint's firm being respectable shroffs and fulfilling the qualifications of a shah the plaintiff paid them the.....
Judgment:

Basil Scott, Kt., C.J.

1. This is an appeal from a decree of Mr. Justice Macleod dismissing the suit.

2. The suit was filed by Bansidhar Lachminarayen now an insolvent and represented by the Official Assignee to recover from the defendants Rs. 3,000 with interest from the 10th June 1912 upon a plaint containing the following allegations:-

3. On the 10th of june 1912, the plaintiff received a letter addressed to his firm in Bombay purporting to be from one Ramlal Ramprasad of Harpalpur in Alipur State in the Bundelkhand Agency. The letter enclosed what purported to be a railway receipt for 300 bags of linseed stated to have been consigned by Ramlal from Ranipur station and the plaintiff was asked to sell the goods and meantime to accept and pay on presentment two Hundies for Rs. 3000 each dated the 15th JethSud 1969 drawn by Ramlal in favour of the second defendant firm of Munalal Gayaprasad. On the same day one of the Hundis being a Shah Jog Hundi drawn on the plaintiff by Ramlal in favor of Munalal was presented by the first defendant and on the same day the other Hundi mentioned in the letter was presented by GoDaldas Vallabdas.

4. The first defendint's firm being respectable Shroffs and fulfilling the qualifications of a Shah the plaintiff paid them the amount of the Hundi on their responsibility according to the well-established custom in regard to Shah Jog Hundis. The plaintiff delivered the railway receipt to one Kilachand in fulfilment of a contract for sale of linseed and received from Kilachand Rs. 5,600. As the goods mentioned in the railway receipt never arrived the plaintiff in August took back the railway receipt and refunded the amount paid by Kilachand He was informed by the Railway Company on the 22nd of August that the railway receipt appeared to be a fabrication. The plaintiff also began inquiries on his own account from which he had reason to believe that the second defendant firm belonged to Kamlaprasad Munalal, the Station Master of Harpaipur, that no such person or firm as Ramlal Ramprasad by whom the Hundis purported to be drawn ever existed and that the Hundis and the railway receipt were fabricated by the said Kamlaprasad Munalal or by some one at his instigation or in collusion with him for the purpose of defrauding the plaintiff. The plaintiff says that in accordance with the well-established custom among Shroffs and according to the rules of the Marwari Panch Shroff Association in respect of Hundis the Shah who obtains payment of a Shah Jog Hundi is, in the event of the Hundi turning out to be a false, fraudulent, stolen or forged Hundi, bound to refund the amount of the Hundi with interest unless he produces the actual drawer or the person who committed the fraud.

5. It was proved at the hearing that the above statement of facts as appearing in the plaint was not correct in that the Hundi was presented for payment to the plaintiff on the 10th June by the first defendant and payment was then refused and was only made on the nth after the arrival that day of the railway receipt and after the payment by Kilachand of Rs. 5,600 being ninty per cent, of the price of the linseed supposed to be represented by the railway receipt. It was also proved that the Marwari custom referred to in the plaint as declared in the rules of the Marwari Association is that 'In case of a Hundi coming in any fraudulent way if the party receiving the amount of the Hundi receives it as a Shah he is absolved from liability if he traces the Hundi to its source. But if he does not do so he must repay the amount of the Hundi with interest.

6. According to the statement in the plaint the fraudulent way here referred to covers not only the case of a forged but also of a stolen or lost genuine Hundi. To the same effect is the plaintiffs deposition. The first issue raised was whether the Hundi in question was paid on the responsibility of the first defendant as a Shah and in accordance with the custom alleged.

7. The plaintiff with reference to this issue deposed that he not know the writer Ramlal or the firm of Munalal Gayaprasad and if he had not got the railway receipt he would not have paid the Hundi. He only paid on the Hundi and another Hundi presented by another firm of up to ninty per cent of the value, of the goods. He paid the defendant's Hundi in full and the other in part. He received Rs. 5600 for the railway receipt from Kilacnland before he paid the defendants. The learned Judge, however, disposed of the first issue by saying 'the Shih does not guarantee the solvency of the drawer, he guarantees the genuipeness of the Hundi. A drawee will not pay a Hundi unless he has funds in his hands belonging to the drawer, or is willing to give him credit. And he will not pay on presentation of a Shah Jog Hundi to a Shah unless ha is satisfied as to the respectability of the Shah as he looks to him in case of anything afterwards going wrong with the Hundis: see Davlatram Shriram et.al. v. Bulakidas Khemchand (1869) 6 B.H.C.R.O.C.J. 24. Therefore the issue is somewhat meaningless. We are unable to accept this view which was also pressed upon us by the appellant's counsel. In the case decided by Sir Joseph Arnould it was common ground that if payment were made to a Shah as such on a Hundi which afterwards turned out to be stolen or lost the drawee who has paid is entitled to a refund from the Shah to whom it has been mistakenly paid (unless he otherwise discharges himself in the customary way).' Sir Joseph Arnold says at p. 29: 'It seems to me that this evidence strongly tends to show that the drawee of the hundi, in accepting and paying it looks very mainly to the shth as responsible in case of anything afterwards going wrong with the hundi; and that he relies on the solvency and respectability of shah as one of the principal grounds in inducing him to make payment without further inquiry.

8. But in the case of a lost or stolen Hundi the Hundi is ex hypothesi genuine : therefore the liability of a Shah who is paid does not rest on a guarantee of genuineness. The liability of a holder who endorses a Bill of Exchange and passes it on under English law is only that of a surety for the drawer and the acceptor but his position does not involve any liability to the acceptor.

9. We find it difficult to say what is the idea underlying the Marwari custom. It is perhaps this : that of two innocent parties the one nearest in the line of successive holders to the person who committed the fraud must find out the guilty Party at the risk of otherwise having to recoup the innocent payer. In the present case, however, it appears to us that the first defendant was paid n but as a Shah but as the indorsee for collection of a Hundi purporting to be drawn against the security of a document it representing 300 tons of linsaed, for payment was in fact refused until the railway receipt came to hand and had been sold for cash and no more was paid to the holders of the Hundis than the exact amount realised on the railway receipt. This is a state of affairs not dealt with or contemplated in Davlatram Shriram el. al. v. Bulakidas Kfiemckatid (1869) 6 Bom. H.C.O.C.J. 24. The rules of the Marwari Association which have been put in relate to cases where the party who receives the amount of the Hundi receives it as a Shah. If the plaintiff simply paid on the security of the railway receipt he would have no equity to recover back the amount from the first defendant', see Leather v. Simpson (869) 6 Bom. H.C. 24; and Baxter v. Chapman (1871) L.R. 11Eq. 398.

10. Assuming, however, that there might be a liability imposed on the first defendant by reason of the payment to refund or to trace the Hundi to its source this would only be the case provided notice was given within a reasonable tune of the discovery of the forgery, that is, provided the plaintiff lost no time in making this communication and claiming the refund: see Davlatram Shriram et. al. v. Bulakidas Khemchand (1869) 6 Bom. H.C. 24. The duty of the plaintiff cannot be put lower than this, although the ELndu law merchant may not be so strict as to notice of dishonour as the English law, as to which see Megraj Jagannath v. Gokaldas Mathuradas (1870) 6 H.C.O.C.J. 187. It is, however, quite clear that the plaintiff knew long before the end of August that the Hundis and the forged railway receipt were part of a fraudulent scheme of kite flying perpetrated by Kamlaprasad, the Station Master of Harpalpur, the owner of the second defendant's firm, yet no notice was given till the demand of refund on the 25th September to the plaintiff who in his ignorance had continued to deal with and give credit in account to the second defendant firm up to the end of the Maru year. It was upon this ground that the lower Court dismissed the suit and we agree that it was a sufficient ground.

11. We are also of opinion that the Hundi had been traced to its source,' within the meaning of the Marwari Association Rules before the first defendant received intimation of the fraud and that the second defendant's firm was in the circum- stances 'the person from whom the forged Hundi was bought' within the contemplation of Sir Joseph Arnould's judgment. The learned Judge thinks not, because the second defendant only sent the Hundi for collection to the first defendant, but as he gave credit in account for the proceeds he was in effect the buyer of the Hundi: see Mulchand Joharimal v. Suganchand Shivdas I.L.R. (1875) Bom. 23.

12. If the first defendant was only the holder for collection of a Hundi handed to him by the second defendant's firm who were the actual payee (and as it appears also the drawer) the second defendant's firm would be the proper defendants to proceed against : see London and River Plate Bank y. Bank of Liverpool [1896] 1 Q.B. 7.

13. We affirm the decree and dismiss the appeal with costs throughout excluding, however, the costs of cross-objections other than that as to costs.


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