Skip to content


John Andrew Lammas Dore Vs. Karachivalla and Co. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMumbai
Decided On
Case NumberO.C.J. Suit No. 397 of 1935
Judge
Reported inAIR1938Bom364; (1938)40BOMLR473
AppellantJohn Andrew Lammas Dore
RespondentKarachivalla and Co.
Excerpt:
.....by non-payment, was to call upon the 2nd defendants to pay by presenting the bills to them for payment, for that was the only 'need' which remained to be..........to go against him in case of need. otherwise it may be easy for any drawer to name a person in a bill as drawee in case of need, and the holder might claim to go against him even if he had not accepted the bill, as soon as the drawee in the first instance committed default. that would give rise to a dangerous position in mercantile transactions. if therefore it is necessary that a drawee in case of need must accept before he is bound, it follows that the bill must be presented to him for acceptance, and it must be presented to him for acceptance in all cases, even if the drawee in the first instance accepts and then dishonours the bill by non-payment. it is in my opinion wrong to say that the ' need' for acceptance by a drawee in case of need has gone when once the drawee in the first.....
Judgment:

B.J. Wadia, J.

1. Plaintiffs carry on business in England inter alia in the manufacture of shoes under the name and style of Messrs. Brooker Dore & Co., and have filed this suit to recover a sum of Rs. 2,049-5-7 on three bills of exchange in respect of three. consignments of shoes to the 1st defendants in Bombay. The bills were drawn by the plaintiffs. The 1st defendants are the drawee of the bill. The 2nd defendants are the drawee in case of need. The bills were payable forty-five days after sight. They were duly accepted by the 1st defendants, but when they were presented in them for payment on the due dates, the 1st defendants failed to pay, upon which the bills were protested for non-payment. They were subsequently presented for payment to the 2nd defendants, the drawee in case of need, but they refused to pay. They contend that the bills were never presented to them for acceptance, nor have they in fact accepted the same, and that therefore the presentment for payment was not legal, and they are not liable to pay.

2. The 1st defendants did mot appear at the hearing, though two written statements were put in by two persons who alleged that they were not partners in the. 1st defendant firm. One of the partners has been adjudicated insolvent. The only point of dispute is between the plaintiffs and the 2nd defendants, and it is a question of law. The plaintiffs contend that as the bills were once accepted by the 1st defendants, whom I will call the drawee in the first instance, and afterwards dishonoured by the 1st defendants by nonpayment, it was not necessary to present the bills over again to the 2nd defendants for acceptance. It was argued that the only ' need ' of the plaintiffs, after the acceptance by the 1st defendants and the dishonour by non-payment, was to call upon the 2nd defendants to pay by presenting the bills to them for payment, for that was the only ' need' which remained to be satisfied.

3. Under Section 7 of the Negotiable Instruments Act the maker of a bill of exchange is called the ' drawer' ; the person directed by the bill of exchange to pay is called the ' drawee'. The drawee in case of need is thus denned by the same section :-

When in the bill or in any indorsement thereon the name of any personis given in addition to the drawee to be resorted to in case of need, such person is called a ' drawee in case of need'.

The holder of a bill of exchange therefore has to resort to the drawee in case of need when the bill is not accepted by the drawee in the first instance when presented to him for acceptance, or when it is accepted by him but is dishonoured by non-payment on the date of maturity. Under Section 115 of the Act a bill is not dishonoured by a drawee in case of need until it has been dishonoured by such drawee. A bill may be dishonoured by non-acceptance under Section 91, or by non-payment under Section 92. Presumably the dishonour by non-payment under Section 92 is after the bill has been first accepted by the drawee. The holder of the bill must, if he wants to, proceed on the bill against the drawee in case of need, otherwise he would lose all his remedies. Under Section 116 the drawee in case of need may accept and pay the bill of exchange without previous protest, unlike the provision of the English law contained in Section 67(1) of the Bills of Exchange Act of 1882, according to which a bill must be protested or noted for protest before it can be presented to the referee in case of need for payment. The important question for consideration is whether it is obligatory on the holder to present the bill for acceptance to the drawee in case of need, even though the drawee in the first instance has accepted but has subsequently dishonoured the bill by non-payment.

4. An acceptor of a bill of exchange is also defined in Section 7 of the Negotiable Instruments Act. It provides that after the drawee of a bill has signed his assent upon the bill and delivered it or given notice of his signing to the holder or to some person on his behalf, he, the drawee, is called the ' acceptor'. The Act does not define what an acceptance is, but it has been denned under Section 17 (I) of the English Bills of Exchange Act as follows:-

The acceptance of a bill is the signification by the drawee of his assent to the order of the drawer.

The requisites of a valid acceptance are that the acceptance must be written on the bill itself and that it must be signed by the drawee or any authorised person on his behalf, because it is by signing the bill that the drawee signifies his assent to the order of the drawer; otherwise there is no contractual liability. The drawee in case of need is distinct from the drawee in the first instance, because his name is mentioned in addition to that of the drawee. Ordinarily there is no necessity for a bill to be presented for acceptance, because the drawer under Section 37 of the Act is liable on the bill as the principal debtor, and it is optional to the holder whether he will substitute for it the liability of the acceptor and constitute the drawer as surety for the acceptor. But by drawing a bill payable after sight the drawer makes his liability conditional upon the bill being duly presented to the drawee for acceptance, and if not accepted, upon notice of dishonour for non-acceptance being given to or received by the drawer : see Sections 21 and 30 of the Act. Further, under Section 33 no person except the drawee of a bill, or all.or some of several drawees, or a person named therein as a drawee in case of need, or an acceptor for honour, can bind himself by an acceptance. It seems to me on a consideration of all these sections that before a drawee in case of need can be bound or held liable on the bill he must accept it, that is signify his assent to the order or direction of the drawer. Just as a drawee is a person directed by the drawer to pay, and agrees to pay according to the direction by his acceptance, so also a drawee in case of need is a person directed by the drawer to pay in case of need and agrees to pay by his acceptance, because it is only on acceptance that his liability arises. It is by his acceptance that the drawee in case of need really signifies his assent to the order or direction of the drawer to go against him in case of need. Otherwise it may be easy for any drawer to name a person in a bill as drawee in case of need, and the holder might claim to go against him even if he had not accepted the bill, as soon as the drawee in the first instance committed default. That would give rise to a dangerous position in mercantile transactions. If therefore it is necessary that a drawee in case of need must accept before he is bound, it follows that the bill must be presented to him for acceptance, and it must be presented to him for acceptance in all cases, even if the drawee in the first instance accepts and then dishonours the bill by non-payment. It is in my opinion wrong to say that the ' need' for acceptance by a drawee in case of need has gone when once the drawee in the first instance has accepted. A little confusion of thought is here introduced in the meaning of the word ' need'. It only means that such a drawee is to be resorted to in case of need, that is when the need or occasion arises, and such need arises in one of two ways : when the drawee in the first instance either refuses to accept, or having accepted refuses to honour the bill at maturity.. The moment he is resorted to, he must make up his mind to accept liability, and that he can only do by his acceptance. No drawee can be held liable on a bill unless he accepts. Our Act is silent as to within what time the bill must be presented to a drawee in case of need for acceptance. Presumably it must be presented within a reasonable time after the dishonour by the drawee in the first instance. Such a presentment fcr acceptance, however, is in my opinion necessary in all cases. The holder cannot hold B liable by reason of an acceptance by A, for no contractual relationship arises between him and B merely because A has accepted. It can only arise by reason of an acceptance by B.

5. Plaintiffs' counsel, however, seeks to rely on the agreement set out in para. 2 of the plaint. It is there alleged that ' It was agreed that for the price, etc., of the said goods the plaintiffs should draw bills of exchange on the 1st defendants with the 2nd defendants as drawees in case of need.' It is not alleged between whom and when such agreement was made. It is a general agreement in respect of all bills of exchange to be drawn by the plaintiffs on the 1st defendants in respect of goods supplied to the 1st defendants. The 2nd defendants in para. 1 of their written statement say that the allegations in para. 2 of the plaint are substantially correct. They deny, however, that they were or are or ever acted as the agents of the 1st defendants. Taking the agreement as alleged, there is no breach on the part of the 2nd defendants, because having agreed to be drawee in case of need in respect of all bills of exchange drawn by the plaintiffs, they are in fact the drawee in case of need in the three bills in suit. Plaintiffs' counsel argued further that by reason of that agreement the 2nd defendants became liable to pay damages to the plaintiffs on the bills for non-payment when the bills were presented to them for payment, and he applied to the Court in the course of the hearing to raise an additional issue to that effect. The 2nd defendants' counsel objected, and I think rightly. No such allegation has been made in the plaint. It is nowhere alleged that by reason of the agreement to become drawee in case of need the 2nd defendants agreed, or must be deemed to have agreed, to become liable to pay the amount of the bills on presentment to them for payment. I do not think that such liability follows in law on the bills as the effect of an agreement to become a drawee in case of need, nor does such liability follow because the 2nd defendants carried on correspondence andi negotiations with the plaintiffs and their solicitors for an amicable settlement of the plaintiffs' claim against the 1st defendants. In that correspondence this alleged liability by reason of the agreement has never been put forward. The plaintiffs stated in one of their attorneys' letters that they intended filing a suit both against the 1st defendants and the 2nd defendants, but they have not alleged any responsibility on the part of the 2nd defendants because of such agreement. In para. 9 of the plaint the negotiations for settlement have been referred to, and at the end of it plaintiffs allege that there is now due and payable by the 1st defendants a sum of Rs. 2,577-0-11 as per particulars annexed. In the alternative they submit in para. 10 that the 1st defendants committed a breach of the contract at the end of February, 1935, when all negotiations for settlement fell through, and that therefore they were not responsible for any deterioration of the goods. The only allegation against the 2nd defendants is in para. 5 that they refused to pay when the bills were presented to them for payment, and in para. 7 that there is due by the defendants to the plaintiffs in respect of the bills a sum of Rs. 2,049-5-7 including interest. The claim thus made in the plaint against the 2nd defendants is only on the bills of exchange, and not by reason of any agreement. Whether the plaintiffs have a remedy against the 2nd defendants for any breach of the agreement by way of damages or otherwise is a question which does not here arise. In my opinion the 2nd defendants are not liable upon the bills which were never accepted by them. The alleged agreement does not obviate the necessity of a previous acceptance. Even the damages that are claimed in prayer (4) against the 2nd defendants are on account of the 1st defendants' wrongful attitude in not taking delivery of the goods, and not for breach of any agreement. How the 2nd defendants are liable because of that wrongful attitude has not been explained in the plaint, nor by the plaintiffs' counsel.

6. The only surviving claim therefore is that of the plaintiffs against the 1st defendants. Plaintiffs' counsel admitted that the amount claimed in prayer (1) ought to be Rs. 2,041-5-7 instead of Rs. 2,049-5-7. The amount claimed in prayer (2) is Rs. 527-11-4 being the charges for storage of the goods in suit and noting charges. The goods were sold by the Receiver in November, 1935, when a sum of Rs. 655 net was realised. That sum was ordered by the Court to be deposited with the Prothonotary as additional security for the 2nd defendants' costs of the suit in addition to a sum of Rs. 400 also deposited for the same purpose. In all a sum of Rs. 1,055 remains deposited with the Prothonotary.

7. There will be a decree for the plaintiffs against the 1st defendants for Rs. 2,569-0-11 with further interest at seven per cent, on Rs. 1,673-13-0 from March 11, 1935, till judgment less Rs. 655 and the costs of the suit and interest on judgment at six per cent. Suit as against the 2nd defendants dismissed with costs. The 2nd defendants to be at liberty to withdraw the sum of Rs. 1,055 deposited with the Prothonotary towards payment of their taxed costs of the suit.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //