Lallubhai Shah, Kt., Acting C.J.
1. This suit came on for hearing as a contested short cause on August '30, 1923, before Mr, Justice Coyajee when issues were raised. On that day the plaintiffs found it necessary to ask for an adjournment to have evidence relating to a certain letter of lien passed in their favour by Marshall & Co., Glasgow, taken on commission and the case was adjourned. It has now come on for hearing before me. After recording evidence and hearing arguments on October 15, I reserved judgment. I ordered the case to be set down for further arguments today. I have heard further arguments and have recorded further evidence of the defendants as to certain facts relating to the presentation of the bill for acceptance which were adverted to in the course of the arguments.
2. The material facts relating to this suit are really not in dispute and are sufficiently proved. The defendants are dealers in crockery and glassware in Bombay. They indented certain goods through Marshall & Co., Bombay Branch, from Marshal] & Co., Glasgow. Marshall & Go. sent certain goods in pursuance of these indents and on March 23, 1921, they drew a bill of exchange to the order of themselves for 167-9-0 payable at sixty days after sight 'documents against payment.' The defendants were the drawees and Marshall & Co. (Bombay) were drawees in case of need, Messrs. Marshall & Co. (Glasgow) indorsed the bill in blank and sent it on to their bankers, the Royal Bank of Scotland (Glasgow), for collection. The Bank sent this bill to their London Office. The bill bears the endorsement 'remitted for collection by Royal Bank of Scotland, London Office,' to the Mercantile Bank of India, Bombay. The bill was presented by the Mercantile Bank of India, Bombay, to the defendants. But, according to the evidence on behalf of the defendants which I accept, the bill was not accepted by them but returned to the Bank. The Bank then referred the matter to the Bombay Branch of Marshall & Co., who were mentioned in the bill as drawees in case of need. Marshall & Co., Bombay Branch, then took this bill to the defendants' firm. At that time the term 'documents against payment' was altered to 'documents against acceptance' which is noted in pencil on the bill, and the bill was accepted by the defendants. The indorsement of acceptance is in these terms: 'Accepted. Payable at the office of the Mercantile Bank of India, Limited, Bombay.' The documents were then handed over to the defendants. The due date for payment was June 23, 1921. No payment was made on that day and the fact of the bill having been dishonoured for non-payment was duly noted on June 24. Though no one stage a point was made that the dishonouring for nonpayment was not proved, it has been accepted before me as a fact and it is clear from the protest attached to the bill that it was dishonoured for non-payment on behalf of the drawees as well as on behalf of the drawees in case of need.
3. Subsequently, defendants had some correspondence with the local branch of Marshall & Co. with reference to the goods indented by them. In the result the defendants asked Marshall & Co. to secure certain payments from the Insurance Company; and as a fact Marshall & Co. (Glasgow) realised 18-4-2 from the Insurance Company in September 1921. The defendants made payments amounting in all to Rs. 1,500 in three items of Rs. 500 each to Marshall & Co., Bombay Branch. Before the further payment of Rs. 500 was made apparently Marshall & Co. failed in November 1921 and the last cheque of Rs. 500, which has been referred to in the evidence, was cancelled.
4. After the adjudication order, the present plaintiffs, who are the Royal Bank of Scotland, received Rs. 500 from the trustee of the drawers' estate: in part payment of this bill some time before August 1923. The Mercantile Bank made a demand for the sum in respect of this bill in April 1922 on the defendants.
5. Ultimately the present suit was filed by the Royal Bank of Scotland to recover the sum due from the defendants on the bill of exchange as holders in due course.
6. The defendants pleaded that the plaintiffs were merely agents for collection, that they throughout dealt with Marshall & Co., Bombay Branch, in respect of this bill, that they made substantial payments in respect of this bill to the Bombay Branch of Marshall & Co., that the plaintiffs were not holders in due course and that in any case the payments made by them to Marshall & Co., Bombay Branch, should be given credit for in this suit.
7. The difficulty has arisen in the case on account of the insolvency of Marshall & Co.
8. On these pleadings five issues have been raised : but the most important issue in the case is whether the plaintiffs are holders in due course. I shall deal with that question first.
9. On a consideration of the arguments and the provisions of the Negotiable Instruments Act, to which reference has been made, I have come to the conclusion that the plaintiffs were holders in due course. The expression 'holder in due course' means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque payable to bearer, I need net refer to the second part of definition of this expression, as I do not think that it can apply to the facts of this case. The indorsement on the bill of exchange by Marshall & Co. is an indorsement in blank as defined by Section 16 of the Negotiable Instruments Act. The name of the Royal Bank of Scotland is not mentioned as indorsee and the indorsement in blank has not been converted into indorsement in full as contemplated by Section 49 of the Negotiable Instruments Act, It is a bill on which the only indorsement is an indorsement in blank. Having regard to explanation (2) of Section 13 as amended, it is clear that this bill was at the date of the presentation payable to bearer though originally drawn as payable to the order of the drawers. The instrument was handed over to the Bank for collection with the indorsement in blank. Thus the plaintiffs became holders thereof. They were holders for consideration. It is proved in the case that Marshall & Co. had current account with this Bank, and it is common ground that Marshall & Co. were indebted at the time and afterwards to a large extent far in excess of the amount of the bill. The letter of lien, which is proved by the evidence recorded on commission, shows that 0 they were entitled to a lien (in this bill in respect of the amount due to them. That letter distinctly gives a lien to the Bank c. over all bills which might be sent to them for collections and also expressly mentions that they would have the right to sue in respect of those bills. It is also clear on the evidence that when this bill was seat for collection to the plaintiff's by Marshal] & Co. they wrote to the defendants here informing them of the fact that the bill was sent for collection to the plaintiffs. The bill, as I have already stated, was presented in the first instance by the Mercantile Bank of India on behalf of the plaintiffs to the defendants. According to the provisions of Section 27, sub-section (3), of the Bills of Exchange Act, 1882, (45 & 46 Vic. c. 61) undoubtedly the plaintiffs would be holders for value, and it is not contested, and it cannot be contested, that having regard to the definition of ' consideration ' according to the Indian Contract Act, the Bank holding the bill for collection with a lien on the bill would be holder for consideration. It may be that Marshall & Co. sent the bill for collection to them, but, having regard to the state of their account with the Bank and their agreement with the Bank, the Bank would have a right in respect of the amount of this bill. It is not necessary to refer to the cases bearing-on the question as to whether the Bank would be holder for value when such a bill is sent to them for collection prior to the statute of 1882 as the law has been stated in sub-section (8) of Section 27 of the statute: and here we are governed by the definition of ' consideration ' according to the Indian Contract Act. I may mention, however, that even prior to that enactment the position of a holder, to whom the drawer was indebted, obtaining possession of a bill of exchange payable at a future date has been clearly stated in the case of Currie v. Misa (1875) L.R. 10 Ex. 153 The law with regard to the bill of exchange payable at the future date has been stated in both the judgments. In the judgment of Lord Coleridge C. J. it is pointed out that it is too late to dispute that a pre-existing debt due to the transferee of a bill entitles him to all the rights of a holder for value. I am, therefore, satisfied that the plaintiffs were holders for value, that is, for consideration. There is no specific provision in the Indian Negotiable Instruments Act corresponding to a 27, sub-section (3) but there can be no doubt that the law in India is not different on this point. There is also the presumption mentioned in Section 118, according to which a holder is to be presumed to be a holder in due course until the contrary is proved.
10. That being so, it is clear that they are entitled to sue the acceptor in respect of this bill; and unless their position as holders in due course was in any sense modified in law by the fact that Marshall & Co., Bombay Branch, intervened in the matter and got the bill accepted, it is clear that they must succeed in the suit,
11. As regards the point made by Mr. Wadia on behalf of the defendants that the bill was really presented to the defendants by Marshall & Go,, Bombay Branch, and accepted at their instance arid subsequent payments were made to Marshall & Co. by the defendants in respect of the goods on that understanding, I have come to the conclusion that the legal position of the plaintiffs as holders in due course is not altered thereby in any way and that the defendants cannot claim to set off those payments against the amount of the bill. It is undoubtedly a case of hardship in the sense that the defendants have paid certain sums to Marshall & Co,, to whom the money was payable in respect of the goods. But the defendants were duly informed of the fact that the bill was sent for collection to the plaintiffs, and though the term ' documents against payments ' was altered at the time the indorsement for acceptance was made, the bill must be deemed in my opinion to have been presented on behalf of the plaintiffs by the Mercantile Bank. The alteration in the term ' documents against payment' does not affect the plaintiffs' rights to recover on the bill so long am the plaintiffs do not object, I do not see how the defendants can complain of this alteration which was assented to by them and made at their instance, Whatever the rights as between the defendants and the original drawers of the bill may be in consequence of the payments, which are proved to have been made by the defendants to Marshall & Co., I do not see how according to law the defendants can get credit for these payments in a suit by the holder in due course in respect of the bill accepted by them. Unfortunately the defendants made payments to Marshall & Go. after accepting the bill without a proper realisation of their legal liability in respect of the bill as acceptor to the holder in due course.
12. I shall now deal briefly with the issues as framed. On the first issue my finding is in the affirmative.
13. As regards the second Issue my finding is in the negative. Though the bill was sent to them for collection by Marshall & Co., Glasgow, I cannot say that they were merely collecting agents in the sense that they had no other right or interest in respect of this bill. On this ground my finding is against the defendants.
14. My finding on third issue is in the affirmative. I cannot see how the maintainability of the suit by the plaintiffs can be affected by the bankruptcy of Marshall & Co. and in fact this point has not been pressed.
15. I have already stated my reasons in respect of the fourth issue and my finding is in the negative.
16. As regards the fifth issue my finding is in the negative. Though a copy of the letter, dated June 22, 1922, has been produced on behalf of the plaintiffs, no attempt has bean made to prove that that letter was in fact delivered to the defendants; and in the course of the arguments Mr. Kemp did not press that point. I have not overlooked the fact that there was a demand by the Mercantile Bank of India in April 1922, At the same time I may add that it can make no difference in the result whether the demand was made or not.
17. Deducting the sum of Rs. 500, which has been admittedly received by the plaintiffs in respect of this bill, there will be a decree for Rs. 2,134-8-7 with interest at eight per cent, per annum from June 23, 1921, to this date, and costs and interest on judgment at six per cent, per annum.
18. As regards the costs of the commission, strictly perhaps the plaintiffs may be entitled to those costs. Having regard to the circumstances of the case, 1 think it is rather hard upon the defendants that they should have to pay the costs of the commission; and I am not quite satisfied that the plaintiffs might not have produced better materials here before taking out a commission, which might have afforded prima facie proof of the letter of lien and which might have dispensed with the necessity of the commission. Under the circumstances I direct that the costs of the commission should be borne by the plaintiffs.