Skip to content


Bezonji Byramji and Co., Jalna and ors. Vs. Central Bank of India Ltd., Bombay - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal Nos. 197, 198 and 455 of 1959 and C.M.P. No. 5421 of 1962
Judge
Reported inAIR1963AP348
ActsNegotiable Instruments Act, 1881 - Sections 43 and 59; Indian Contract Act, 1872 - Sections 196 and 198
AppellantBezonji Byramji and Co., Jalna and ors.
RespondentCentral Bank of India Ltd., Bombay
Appellant AdvocateD. Narasaraju and ;C. Obulapathi Choudary, Advs.
Respondent AdvocateRaja Ram Ayyar and ;R. Vaidyanadhan, Advs.
Excerpt:
commercial - dishonour of hundies - sections 43 and 59 of negotiable instruments act, 1881 and sections 196 and 198 of contract act, 1872 - hundies drawn in favour of respondent by appellant either as drawer or endorser dishonoured - appellant authorized agent through power of attorney to draw hundies in favour of respondent - drawee did not honour hundies - appellant claimed all bills drawn are accommodation bills and not trade bills - high court observed discounting of accommodation bills not prohibited - wide powers given to agent for discounting bills - respondent acted in good faith and without negligence - no collusion or fraud proved on part of respondent - held, appellant liable for payment to respondent either as drawer or endorser for dishonoured hundies. - - those three.....umamaheswaram, j.1. while appeals nos. 197 and 198 of 1959 are filed by messrs. bezonji byramji and co., jalna and another, as against the decision in o. s, nos. 86 and 87 of 1953 on the file of the subordinate judge's court, anantapur against the central bank of india, appeal no. 455 of 1959 is filed by the central bank of india against the decision in o. s. no. 84 of 1953 on the file of the subordinate judge's court, anantapur against messrs. bezonji byramji and co., and another. all the three suits o. s. nob. 84, 86 and 87 of 1953 were tried together by the subordinate judge, anantapur and evidence was recorded in o. s. no. 84 of 1953 as identical questions arose for decision in all the three suks.while the learned subordinate judge decreed o. s. nos. 86 and 87 of 1953, he dismissed o......
Judgment:

Umamaheswaram, J.

1. While appeals Nos. 197 and 198 of 1959 are filed by Messrs. Bezonji Byramji and Co., Jalna and another, as against the decision in O. S, Nos. 86 and 87 of 1953 on the file of the Subordinate Judge's Court, Anantapur against the Central Bank of India, appeal No. 455 of 1959 is filed by the Central Bank of India against the decision in O. S. No. 84 of 1953 on the file of the Subordinate Judge's Court, Anantapur against Messrs. Bezonji Byramji and Co., and another. All the three suits O. S. nOB. 84, 86 and 87 of 1953 were tried together by the Subordinate Judge, Anantapur and evidence was recorded in O. S. No. 84 of 1953 as identical questions arose for decision in all the three suks.

While the learned Subordinate Judge decreed O. S. Nos. 86 and 87 of 1953, he dismissed O. S. No. 84 of 1953 against defendants I and 2. The appeals are consequently filed by the aggrieved parties.

2. The case of the plaintiff, the Central Bank of India Limited, was that as the hundies which were issued by Messrs. Bezonji Byramji and Co., as the drawer or the endroser were dishonoured, the Bank was entitled to proceed against Messrs. Bezonji Byramji and Co., either as the drawer or the endorser. The learned Subordinate Judge accepted the contention of the plaintiff that in all the cases the liability of Messrs. Bezonji Byramji and Co., as the drawer or the endorser arose. He held that consequently the plaintiff was entitled to a decree in O. S. Nos. 86 and 87 of 1953. So far as O. S. No. 84 of 1953 was concerned, the learned Subordinate Judge took the view that the drawer's limit was exceeded and that consequently the Bank was not exceeded to recover the amount from Messrs Bezonji Byramji and Co,

3. For the purpose of understanding the contentions of the parties, it is necessary to set out a few relevant facts. Messrs. Bezonji Byramji and Co., the 1st defendant was carrying on business at Jalna. The 1st defendant had a branch by name Messrs Bezonji Byramji and Co., at Guntakal. Though it was disputed in the court below that the 1st defendant had no connection with the 2nd defendant, the court below held that the 2nd defendant was a branch of the 1st defendant-firm. The learned Advocate General did not question that finding but conceded that the 2nd defendant was a branch of the 1st defendant.

4. The 2nd defendant appointed one Mino-cher Rustomji as the agent under a power of attorney to carry on the business of the 2nd defendant-firm at Guntakal. The power of attorney runs in the following terms :

'I/We authorise Mr. Minocher Rustomji whose specimen signature is given below to make, draw, accept or otherwise sign any bill of exchange or other negotiable instrument and to discount the same with your bank or otherwise and to also endorse cheques or other negotiable instruments of any description.

I/We undertake to pay the bank all such sums due together with all charges if any of such bills remains unpaid.

This authority shall Continue in force until I/We shall have expressly revoked it by notice in writing delivered to you.'

Acting on this authority, the agent Minocher Rustomji was either drawing hundies or enforcing hundies in favour of the Central Bank. The hundies which form the subject-matter of the three suits fall into three categories. Exs, A-42, A-43, A-44, and A-45 were hundies forming the subject matter of O. S. No. 86 of 1953 and were drawn by Michocher Rustomji as the Agent oi Messrs Bezonji Byramji and Co., in favour of the Central Bank of India payable by Valji Jatha-bhai and Co., and Kanji Ganji and Co., respectively. As the drawee did not honour the hundies and pay the amounts, the Central Bank of India gave notice of dishonour to Messrs Bezonji Byramji and Co., and O. S. No. 86 of 1953 was instituted for recovery of the sums payable in respect of those four hundies.

Exhibits A-49, A-5o and A-5I form the subject-matter of O. S. No. 87 of 1953. Thosehundies were issued by M. Rustomji and Sons, the 3rd defendant, of which Minocher Rustomji was the managing partner. Those three hundies were drawn in favour of Messrs. Bezonji Byramji and Co., payable by C. H. Dada Sahib and V, G. Bhatia and Co. Those three hundies were endorsed by Minocher Rustomji as the agent of Messrs. Bezonji Byramji and Co., in favour of the Central Bank of India. When the hundies were presented to Dada Sahib and Bhatia and Co., they were dishonoured. So, the Central Bank sued both Messrs. Bezonji By-ramji and Co., and M. Rustomji and sons as the endorsers and drawers respectively.

The last set of hundies are five in numberand they are Exhibits A-I3 and A-32 to A-35.They were drawn by Messrs. Bezonji Byramjiand Co., in favour of Rustomji and sons payableby Kanji Ganji and Co., Dada Sahib andV. G. Bhatia and Co., When the hundieswere discounted, the monies were paid into thehands of Rustomji and Sons and were so enteredin the Bank accounts. When the hundies weredishonoured, the Central Bank instituted the suitboth as against the endorsers Rustomji and Sonsand the drawers Messrs. Bezonji Byramji andCo.

5. The main defence that was put forward by the learned Advocate General on behalf of Messrs. Bezonji Byramji and Co., was that all these bills were not trade bills but were only accommodation bills. According to his contention these accommodation bills ought not to have been discounted by the Bank and liability fastened on the principals Messrs. Bezonji Byramji and Co. In support of this argument, he invited our attention to a passage in Mr. M. L. Tannan's Banking Law and Practice in India, 9th Revised edition at page 279. The passage relied on is in the following terms:

'In the first place, the banker should see that the bills he discounts, are genuine, commercial bills and not in the nature of accommodation paper, as the former have an advantage of being backed up by goods while the latter is, without any real backing. For example, when a cloth merchant in Calcutta buys a few bales of dhoties from a Bombay merchant, and being unable to pay cash for this purchase, accepts a bill drawn upon him by the Bombay merchant, he hopes to sell the goods and meet his acceptance with their sale proceeds. Thus, the bill is backed up by actual goods, dhoties. On the other hand, if the bill discounted is a 'kite' or accommodation paper, which is merely a means between the drawer and the acceptor of raising money it will not have such goods as a backing. The proceeds of such, a bill may be utilised, not in the actual purchase of fresh goods but either in the payment of certain expenses or antecedent debts. Although, it may appear to be difficult to distinguish between the bills of one class from those of the other, a banker, generally does not experience much difficulty in differentiating between the genuine bills and the accommodation paper.' What is stated in the text book is merely a matter of prudence to be adopted by the bankers. I The learned Advocate General has not been able I to draw our attention to a single provision of lawwhich prohibits bank from discounting accommodation bills. It is of interest to note that the Bills of Exchange Act of 1882 recognises the legality ot accommodation bills. Section 28 of the Bills of Exchange Act 1882 runs in the following terms :

'(1) An accommodation party to a bill is a person who has signed a bill as drawer, acceptor, or endorser, without receiving value therefor, and for the purpose of lending bis name to some other person.

(2) An accommodation party is liable on the bill to a holder for value; and it is immaterial whether, when such holder took the bill, he knew such party to be an accommodation party 01 not.'

Even the Negotiable Instruments Act recognises accommodation bills. Exception I to Section 43 of the Negotiable Instruments Act refers to accommodation bills and it provides that

'no party for whose accommodation a negotiable instrument has been made, drawn, accepted or indorsed can, if he has paid the amount thereof, recover thereon such amount from any person who became a party to such instrument for his accommodation'.

The proviso to section 59 also deals with accommodation notes or bills. The proviso states that any person who, in good faith and for consideration, becomes the holder, after maturity, of a promissory note or bill of exchange made, drawn or accepted without consideration, for the purpose of enabling some party thereto to raise money thereon, may recover the amount of the note or bill from any prior party. So, the law merchant recognises accommodation bills as being perfectly legal. We therefore do not agree with the learned Advocate General that the Bank was not justified in discounting accommodation bills.

6. The next contention of the learned Advocate General was that during the months of July to November 1951 various hundies issued by Minocher Rustomji were dishonoured by the drawees and that the Bank was consequently not justified in discounting the hundies which form the subject-matter of the three suits. This contention was dealt with by the learned Subordinate Judge in paragraph 30 of the judgment. It is no doubt true that 30 hundies drawn on M. Hanu-manthappa of Bellary, 2 hundies drawn on V. G. Bhatia and Co., of Adoni, 33 hundies drawn on C. 1. Dada Saheb and 2 hundies drawn on Valji Jethabhai and Co., were dishonoured. The mere fact that the hundies were dishonoured is not a sufficient ground for the Bank to refuse to discount the suit hundies so long as the Bank was confident that the drawers or the endorsers were in a position to pay the hundy amounts.

It was admitted by D. W. 2 that Messrs. Bpzonji Byramji and Co., was having transactions tc the extent of Rs. i.oo.ooo'/- every year. P. W. 3 stated in his evidence that defendants i and 2 are first class parties. From the evidence of the Bank Officers examined as P. Ws. 2 and 3, it is clear that when the bills were dishonoured the drawers or the endorsers were paying the amount. The learned Advocate General invited our attention to the evidence of D. Ws. 5 to 7 in support of his contention that the drawees were all in the nature of dummies and that there was no evidence that they would' ever honour and pay the amounts of the hundies. It is no doubt true that Messrs. Bezonji Byramji and Co., was. carrying on business in cotton pressing and ginning. D. W. 5 was employed as a clerk in Kanji Ganji and Co., and the company was doing business in groundnut oil. Hanumanthappa and sons were carrying on trade in ghee and Vanaspathi. Dada Sahib was an iron merchant at Bellary. When accommodation bills are issued, it is not necessary that the drawee should carry on the same business as is carried on by the drawer. If really they are genuine trade bills, the question as to what business is being carried on by the drawees becomes irrelevant. It was admitted by D. W, 6 that the hundies were issued with his consent and knowledge. So also D. W. 7 stated that the hundies were being drawn in his name with his knowledge and consent. The evidence discloses that in respect of the various hundies which were drawn on third parties, the hundi amounts were, being paid by Minocher Rustomji either on behalf of the drawer or drawee. We have been carefully taken through the evidence and we do not find that the agent of the Guntakal branch ever knew that on behalf of the drawees, the amounts were paid by Minocher Rustomji. There is also no evidence that the agent was guilty of any bad faith or negligence in discounting the bundles. There is no legal duty cast on the Bank to inform the principal Messrs, Bezonji Byramji and Co., that the hundies issued in respect of some of the drawees by his agent had been dishonoured and that ultimately amounts were paid either by the drawer or by the endorser. There is no pleading that the Bank colluded with Minocher Rustomji with a view to defraud the principal. The evidence of D. W. i is particularly significant. Even in the examination-in-chief he stated that he did not know whether the suit hundies were in respect of the agent's own transactions or that of his own business. He no doubt added that the amount covered by the hundies had not been entered in the firm's accounts at Gunlakal. There is no specific evidence on behalf of Messrs. Bezonji Byramji and Co., that the amounts were utilised by the Agent for his own business. 'Ths various accounts maintained by the agent with the Bank have been marked as Exhibits in the Court below. The learned Subordinate Judge hae carefully analysed those accounts and found in paragraph 31 of the judgment that there is nothing to show that the amounts of the bills drawn by or endorsed by Minocher Rustomji as the power, of-attorney agent of Messrs. Bezonji Byramji and Co., were credited to the accounts of Rustomji and Sons, the 3rd defendant herein. No attempt was made by the learned Advocate General in this Court to show that those sums which were realised by Minocher Rustomji by discounting the hundies had been credited to the account of the third defendant.

7. It was next suggested that the bills ought not to have been dismounted when there was no account in the Bank in the name of Messrs Bezonji Byramji and Co. It was also contended that cash ought not to have been paid across thp counter into the hands of the Agent. There is no warrantin law lor either of these contentions. It is not necessary that when bills are discounted, he should be a customer with a bank account nor is there Any prohibition for the Bank discounting the hundi and paying the amount in cash.

8. The evidence on record does not establish that the Bank did not act in good faith or was a party to the fraud played by the agent on his principal. Exhibits A-12 and A-11 clearly show that even though the principal suspected that his agent Minocher Rustomji was not acting properly, ho did not take any steps to cancel the power oi attorney. Exhibit A-12 is a letter dated 1-6-1951. It was addressed to the agent by the principal. It is stated therein that the agent should not draw any amount for his private use. Similarly Exhibit A-11 is to the effect that the principal's confidence in the agent was shaken. This aspect of the question was dealt with by the Subordinate Judge in paragraphs 23 and 34 of the judgment. The learned Subordinate Judge was perfectly justified in holding that it was only due to the principal's negligence that loss if any has resulted to him and not due to the negligence of the Bank authorities.

9. As soon as the hundies were dishonoured, notice of dishonour was given to the principal. A notice marked as Exhibit A-3 was also issued by the Bank to the principal on 14-12-1951, It is important to note that no reply was sent thereto by the principal. Soon after the receipt of this notice, the principal cancelled the power of attorney on 8-1-1962 under Exhibit A-5. The principal sent for the agent and asked for his explanation in regard to the issue of the several hundies. D. W. 2, Omkarmull, was sent by the principal to make enquiries in regard to conduct of Minocher Rus-tomji and to make a report. It is clear from Exhibit A-81 that all the account books and hundi books were handed over by the agent to the principal in February 1952. The account books as well as the hundy books were not produced before the court by the 2nd defendant. In September 1953, the Bank gave the suit notices marked as Exhibits A-18 to A-20. Thereafter the principal filed a criminal complaint marked Exhibit A-16 against his agent. Paras 15 and 16 of the complaint are of great importance. In paragraph 15 he states that the agent utilised the credit of the principal and collected Rs. 50.000/-. In paragraph 16, the relevant portion is in the following terms: --

'The accused has admitted his guilt and has been evading payment and making false and fraudulent representation to his principals.'

An argument was addressed by Sri V. Raja-ram Iyer, the learned advocate for the Bank, that the principal has ratified the fraudulent act of his agent and that he is in any event liable to pay the amounts. There is considerable force in this contention. Section 198 of the Indian Contract Act has no application to the facts of the case. The principal was in full possession of all the facts after suit notice was given to him. He directed D. W. 2 to make an enquiry into the transactions. The agent had handed over to him the accounts as well as the hundi books. In the witness box, he stated that he was not in a position to say whetherthe amounts were utilised for the purpose of his own business. We are inclined on the particular facts of this case that the terms of Section 196 of the Indian Contract Act are complied with and that under the terms of Exhibit A-16 the principal had ratified the agent's transactions.

10. Even assuming that the agent had committed fraud on the principal by utilising the monies for his own purpose, it is clear from the decision of the House of Lords in Lloyd v. Grace, Smith and Co., 1913 AC 716 that a principal is liable for the fraud of his agent acting within the scope of his authority, whether the fraud is committed for the benefit of the principal or for the benefit of the agent. We sgree with the contention of the learned Advocate General that section 238 of the Indian Contract Act has no application to the fraud committed by the agent on his princi- . pal.

11. The power of attorney is very wide in its terms. It authorises the agent to make, draw, accept, or otherwise sign any bill of exchange or other negotiable instrument. It also authorises to discount the same with the Central Bank or otherwise and also to endorse cheques or other negotiable instruments of any description. There is a further undertaking to pay the bank all sums due with all charges if any of such bills as remain unpaid. The bank is consequently entitled to sue Messrs. Bezonji Byramji and Co., on the strength-of this power of attorney marked as Ex. A-7 for all hundies either drawn or endorsed by his agent,

12. Dealing with the power of an agent under a power of attorney issued in his favour, Lord Brougham held in Bank of Bengal v. Fagan, 5 Moo Ind App 27 at p. 40, in the following terms:

'But it is said, that the power was given to do the acts in question on the donor's behalf. This is really only saying, that what the agent is to do, he is to be as representing the principal; as doing it on behalf of, or in the place and in the right of. the principal. But it is further said, that even if the expression be read as only amounting to this, the endorsement is to be only made for the benefit of the principal, and not for the purposes of the agent. We do not see how this very materially affects the case, for it only refers to the use to be made of the funds obtained from the endorsement, not to the power; it relates to the purpose of the execution, not to the limits of the power it-self; and though the endorsee's title must depend upon the authority of the endorser, it cannot be made to depend upon the purposes for which the endorser performs his act under the power.'

13. The next decision strongly relied on bv Sri V. Rajarain lyer, the learned Advocate for the Bank, is Hambro v. Burnand, (1904) 2. K. B. tO. He pointed out that the bank authorities could not dive into the motives of the agent acting on a general power of attorney and question him for what purposes he was drawing the funds. The passage relied on is in the judgment of Collins, M. R. at p. 19 and it runs as follows:

'It has been contended for the appellants that, although express authority was given in writing, as in the present case, authorising an agent to make such a contract as he has made, it is open to the principal to say that, nevertheless,if it appears, on inquiring into the motives which existed in the agent's mind, that he intended in making the contract, to misuse for his own ends the opportunity given to him by his authority, and apply it to a purpose, which, if the principal had known of it, he would not have sanctioned, then, because cause agent was so influenced by improper motives, the principal is not liable upon the contract made by him. I should have said myself, apart from authority on the subject, that such a proposition could not hold water.'

Reference was next made to the decisions of the American courts. It was pointed out by the learned Judge that ultimately the American courts have authoritatively laid down as the true principle that, where a written authority given to an agent covers the thing done by him on behalf of his principal, no inquiry is admissible into the motives upon which the agent acted. Mathew L. J. rightly pointed out that if a third party should make an inquiry of the Agent as to his motives for entering into the contract or as to the purposes for which the amount would be utilised, it 'would be regarded by the agent as an affront'.

Reliance was aiso placed on the decision of the Privy Council in 5 Moo Ind App 27. We agree with the learned Judges that it would be sheei . impertinence on the Bank authorities before whom the general power of attorney is produced to en quire Minocher Rustomji for whose purposes he is : drawing or endorsing the hundies.

14. The learned Advocate General strongly relied on a passage at page 187 in Bowstead on Agency, 12th Edition. The passage is in the following terms:

'A third party dealing in good faith with an agent acting within his apparent authority is not prejudiced by the fact that the agent is acting for his own benefit and not the principal's but the very nature of the transaction may be noticed to the third party that the agent is exceeding his authority, e.g., the form of cheques may be sufficient to put a hanker on notice.'

On the facts of this case, we are satisfied that the Bank authorities acted in good faith and without any negligence when they discounted the hundies on the strength of the power of attorney that was issued by Messrs. Bezonji Byramji and Co., in favour of the agent. As pointed out supra, there is no collusion or fraud alleged or proved on the part of the Bank authorities. So, the decisions relied on by the learned Advocate General viz, Mt. Ram. Kaur v. Raghbir Singh, AIR 1920 Lah 134 and Ganga Baksh v. Manla. Bux, AIR 1026 Oodh 337 have no application to the facts of the present case. In AIR 1020 Lah 134, it was clearly found that Raghbir Singh acted in collusion with Bihari Lal. In AIR 1926 Oudh 337, the learned Judges found that the agent acted fraudulently and collusively.

15. In the result, we confirm the judgment of the Subordinate Judge and dismiss Appeals Nos. 197 and 108 of 1959 with costs.

16. We shall now take up appeal No. 455 of of 1059. While the learned Subordinate Judge came to the conclusion that the act of the agent is binding on the principal, he held that inasmuchas the drawer's limit was fixed at Rs. 15,000/-no decree can be passed as against the principal. In paragraph 19 of the plaint it was alleged by the appellant that Messrs. Bezonji Byramji and Co., being the drawers of the five hundies, they were liable along with the endorser the 3rd defendant. In the written statement, no plea was raised that as the drawer's limit was fixed at Rs. 15,000/- Messrs. Bezonji Byramji and Co., cannot be proceeded against on the basis of those hundies. What was stated in paragraph 12 of the written statement is that in the notice issued by the Bank, it was stated that the sanctioned limit of Messrs. Bezonji Byramji and Co., was fixed at Rs. 30,000/- only and that the excess of Rs. 20,000/- was availed of from the sanctioned limits of the 3rd defendant in his personal capacity. No issue was raised as to whether O. S. 84 of 1953 was liable to be dismissed on the ground that the drawer's limit of Rs, 15,000/- was exceeded.

The learned Subordinate Judge permitted this point to be raised and held in paragraph 48 of the j udgment that as the drawer's limit exceeded Rs. 15,000/- the suit for recovery of Rs. 20,000/--in O. S. No. 84 of 1953 should be dismissed. He relied on Exhibits A-72, A-3, A-8, B-32 and B. 28 for coining to this conclusion. We have perused Exhibit A-72 and there is no reference to the limits either as a drawer or as an endorser. It is only a circular issued in regard to submission of proposals for renewal of or increase in existing C/C clean and/or bills limits. Exhibit A-3 is the notice that was issued by the Bank to the defendants 1 and 2 after the bills were dishonoured. There is only a reference to 'limit' in that document. It does not mention the amount of the limits. Exhibit A-5 is the letter cancelling the authority granted to Minocher Rustomji under Exhibit A-7. In that document it is asserted by the and defendant that Minocher Rustomji was entitled to draw hundies or endorse hundies to the extent of Rs. 3o,ooo/-.

The power of attorney marked as Exhibit A-7 does not mention any such limits. It is very general and wide in its character. The two documents on which great reliance is placed by the learned Advocate General are Exhibits B-32 and B-28. Exhibit B-32 is a private and confidential letter dated 8-12-1951. This letter is addressed by Sri Y. Ramarao to the Head Office of the Central Hank. Referring to Messrs. Bezonji Byramji and Co., it is mentioned that the clear drawer's bills' limit is Rs. 15,000/- and the endorser's bills' limit is Rs. 15,000/-. So far as the limits of the 3rd defendant are concerned, it is mentioned that the endorser's bills' limit is Rs. 20,000/-. To the same effect is Exhibit B-28. Those two documents no doubt support the contention of the learned Advocate General that the limit of defendants I and 2 as drawers is fixed at Rs. 15,000/-, the limit as the endorser at Rs. 15,000/- and the 3rd defen-ant's limit as the endorser at Rs. 2o,ooo/-. But it is significant to note that Sri. Y, Ramarao was not examined. What his source of information is is not clear from the evidence on record. When. P. W. 2 the Bank Manager. Guntakal was examined he was not cross-examined in regard to the limits. The managing partner of the 1 st defendantfirm was examined as D. W. 1. in his examina-tion-in-chief, he stated that he is not liable to pay the amounts claimed by the Central Bank in O. S, Nos. 84, 86 and 87 of 1953 for the following reasons:

'The reason why I say J am not liable is that it was the duty of the plaintiffs bank to inform me as soon as the first Hundi was dishonoured but the plaintiff bank did not give me notice of dishonour of any of the suit hundies'.

He did not say that inasmuch as the drawer's limit of Rs. I5,ooo/- was exceeded, he is not liable to pay the amount claimed by the plaintiff in O, S. No. 84 of 1953. Even though the notice-was issued under Exhibit A-3 as early as 14-12-1951 the liability in respect of the five hundies forming the subject-matter of O, S. 84 of 1953 was not repudiated

Even in the complaint Exhibit A-16 it was stated in paragraph 15 that the agent had drawn Rs. 50,000/- and that he was guilty of the offence of criminal breach of trust. What is alleged in paragraph 16 of the complaint is that the accused had admitted his guilt and had been evading payment and making false and fraudulent representations to his principals. No distinction was made between the liability in respect of O. S. No. 86 of 1953 and the liability in respect of O. S. No. 84 of 1953. Even though it was contended in this court by Sri V. Rajarama lyer, the learned Advo-cate for the appellant, that in the absence of a pleading and an issue this point ought not to have been raised, no application for the amendment of the written statement for raising the plea based on Exhibits 6-32 and B-28 was filed before this Court.

17. Apart from holding that the evidence on record is not sufficient to establish that such limits were fixed by the Bank, we are inclined to think that the Bank is entitled to waive the limits and discount the bills over and above those limits. There is no evidence that the power of the agent was restricted as a result of mutual agreement between the principal and the bank that it should not discount the bills beyond those limits. The power as aforesaid is very wide and there is no restriction as to what amounts he might draw from the Bank by discounting the bills.

18. Our conclusion is also fortified by a different process of reasoning. The five hundies forming the subject-matter of O. S. No. 84 of 1953 were all drawn in favour of Rustomji and Sons by Minocher Rustomji as the agent of the 2nd defendant-firm payable by third parties. Rustomji and sons discounted the hundies by endorsing in favour of the Central Bank. The liability of Rustomji and Sons arises as the endorser by reason of the non-acceptance of the hundies by third par-tics. When the amounts were paid to Rustomji and Sons, they were so entered in the bank accounts. The contention of the learned Advocate General that inasmuch as the amounts are entered in the name of Rustomji and Sons in the hank accounts, the liability of the drawer Bezonji Byramji and Co., by its power of attorney agent Minocher Rustomji is at an end is unsustainable.

The liability of Bezonji Byramji and Co., , arises under the general law. The drawer is liable for the hundi amount when it is not accepted bythe third party. The limits referred to in the documents Exs. B-32 and B-28 can only refer to thedrawer's liability or the endorser's liability whenthere are direct dealings between the drawer orendorser with the Bank. If the hundies had beennegotiated and passed through several hands itcannot be contended that the liability of BezonjiByramji and Co., as the drawer or the endorsercould not be enforced by the holder. The hundieswhich form the subject-matter of O. S. Nos. 86 and87 of 1953 were discounted on behalf of the principal either as the drawer or the endorser directlywith the Bank. The limit of Rs. 15,000/- referredto in Exhibits B-28 and B-32 as to the drawer'slimit or the endorser's limit refers only when thebank pays the amount directly into hands of theagent of Bezonji By ramji and Co., either as thedrawer or the endorser. We are inclined to thinkthat the drawer's limit referred to in ExhibitsB-28 and B-32 does not apply to these hundies.(19) In the result, we modify the decree ofthe court below and hold that defendants 1 and 2are also liable to pay the amount prayed for. Theappellant will be entitled to costs both in thelower court as well as in this court as against defendants 1 and 2 also. C. M. P. No. 62: Ordered.


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