Skip to content


Madhya Bharat Khadi Sangh Vs. Bal Kishen Kapoor and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAllahabad High Court
Decided On
Case NumberSecond Appeal No. 1015 of 1969
Judge
Reported inAIR1979All253
ActsNegotiable Instruments Act, 1881 - Sections 9 and 32
AppellantMadhya Bharat Khadi Sangh
RespondentBal Kishen Kapoor and ors.
Appellant AdvocateS.R. Misra, Adv.
Respondent AdvocateH.S. Joshi, Adv.
DispositionAppeal allowed
Excerpt:
.....in due course - section 9 of negotiable instruments act, 1881 - consideration need not be shown if hundi payable to order - holder or endorsee becomes holder in due course - consideration is necessary when hundi given to bearer - in present suit 'hundi' was payable to order so endorsee was holder in due course - factum of consideration not important. (ii) liability of acceptor - section 32 of negotiable instruments act, 1881 - in case of default of payment acceptor bound to make loss good to any party for any loss or damage due to default. - - 1 filed appeal and the additional civil judge found that as the hundi was endorsed by defendants nos. 2 to 4 because of his failure to serve a notice of dishonour of the hundi. (2) if the hundi is payable to order, the payee or the endorsee is..........was not necessary for the respondent no. 1 to show that he had come in possession of the hundi in suit on payment of consideration to the respondents 2 to 4. the contention of the appellant's counsel that because the respondent no. 1 had not paid consideration of the hundi to respondents 2 to 4, he was not holder in due course, is not correct.19. at this stage, definition of the term 'holder' given in section 8 of the act should be borne in mind because word 'holder' only is mentioned in section 78. according to section 8, 'holder' of a negotiable instrument means a person entitled to in his own name to the possession of the instrument and to receive or recover the amount due thereon from the parties thereto. taking into account the language of the hundi in suit, it is obvious that the.....
Judgment:

P.N. Goel, J.

1. This is a defendant's appeal against the judgment and decree dated 6-1-1969 passed by the II Additional Civil Judge, Moradabad in Civil appeal No. 218 of 1968 arising out of original suit No. 59 of 1963.

2. Facts relevant for the disposal of this appeal are these : The defendant appellant carries on business in Bhopal, district Fatehgarh. The appellant placed order for supply of some utensils with defendant Nos. 2 to 4. The defendant respondents handed over railway receipt along with a hundi to plaintiff respondent No. 1. The plaintiff respondent No. 1 sent R-R and hundi to the Punjab National Bank. The hundi was payable after 21 days. The appellant accepted the hundi and took railway receipt from the bank. Thereafter the appellant took delivery of the goods. But the appellant did not make payment of the hundi to the Bank. Therefore, the, plaintiff respondent No. 1 brought suit for recovery of the amount of the hundi.

3. The appellant contested the suit on the grounds that the plaintiff respondent No. 1 was not a holder in due course of the hundi, that the liability to pay for the goods arose after the goods had been checked, that after taking delivery it was found that some of the goods were broken and some articles were short, that, therefore, the appellant wrote to respondents Nos. 2 to 4 who agree to take the amount after making deductions for the breakage and shortage, that in pursuance thereof the appellant paid Rs. 888.75 to defendants Nos. 2 to 4 by a bank draft dated 28-1-1960, that later on a small sum of Rs. 14.62 was further paid to defendants Nos. 2 to 4 and as such the plaintiff respondent was not entitled to get any amount from it.

4. The suit was contested by the defendants Nos. 2 and 3 also on the ground that the plaintiff respondent had given them no money in lieu of the hundi, that after (Sic) the payment of the hundi was not made by the appellant, the plaintiff respondent No. 1 did not give any notice to them and as such the plaintiff respondent No. 1 was not entitled to get any decree against them.

5. The Additional Munsif who tried the suit found that the plaintiff respondent No. 1 had not paid the amount of the hundi to defendants Nos. 2 to 4, that the plaintiff was not a holder in due course of the hundi, that after the hundi was not paid by the appellant, the respondent No. 1 had not given any notice to defendants Nos. 2 to 4. On the basis of these findings the plaintiff's suit was dismissed with costs.

6. The plaintiff respondent No. 1 filed appeal and the Additional Civil Judge found that as the hundi was endorsed by defendants Nos. 2 to 4 in favour of the plaintiff, the plaintiff was entitled to get a decree against the appellant. The additional Civil Judge also found that the plaintiff was not entitled to get a decree against the defendants Nos. 2 to 4 because of his failure to serve a notice of dishonour of the hundi. Consequently the Additional Civil Judge decreed the plaintiff's suit for recovery of Rs. 1268.60 against the appellant.

7. The learned counsel for the appellant contended that as the plaintiff respondent No. 1 had not paid any amount of the hundi to defendants 2 to 4, drawer of the hundi, he was not a holder in due course of the hundi and was not entitled to sue and get the amount claimed. On the other side, the learned counsel for the respondent No. 1 contended that as the appellant had accepted the hundi, in view of the provisions of Sections 32, 78 and 82(c) of the Negotiable Instruments Act, he was liable to make payment to the respondent.

8. The appellant's counsel placed reliance on the definition of the expression 'holder in due course' given in Section 9 of the Negotiable Instruments Act and two cases Tarachand Kevalram v. K. Sikri Brothers, AIR 1953 Bom 290 and Braja Kishore Dikshit v. Puma Chandra Panda, AIR 1957 Orissa 153.

9. Section 9 of Negotiable Instruments Act reads as follows :

' 'Holder in due course' means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque, if payable to bearer, or the payee or indorsee thereof, if payable to order, before the amount mentioned in it became payable and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.'

10-11. In the first case of Tarachand Kevalram (AIR 1953 Bom 290), it was observed on a consideration of Section 9 of the Negotiable Instruments Act, 'Therefore, it is only a person who comes into possession of a negotiable instrument having paid consideration for it and being a bona fide transferee that can be a holder in due course within the meaning of Section 9.'

12. In the second case of Braja Kishore Dikshit, (AIR 1957 Orissa 153) conditions necessary for a person to be holder in due course under Section 9 of the Negotiable Instruments Act were laid down as follows :

(1) that the endorsee becomes the holder in due course when it is for consideration.

(2) he can be an endorsee before the amount mentioned in the promissory note became payable; and

(3) without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.

13. Taking into account the definition of the expression 'holder in due course' given in Section 9 and two cases cited above, the legal position is :

(1) If the hundi is payable to bearer, the person who has come in possession of the hundi will be holder in due course if he obtains it for consideration.

(2) If the hundi is payable to order, the payee or the endorsee is holder in due course if the endorsement is made before the amount mentioned in the hundi became payable and the endorsee did not have sufficient cause to believe that any defect existed in the title of the person who endorsed the hundi in his favour.

14. It follows from the above that, if the hundi is payable to order then the payee or the endorsee is holder in due course. In their case, it is not necessary to show that they obtained the bill of exchange/hundi for consideration. But if the hundi is payable to bearer then the person possessing will be holder in due course only if he has come in possession of the hundi for consideration. From the definition of the term 'bill of exchange' given in Section 5 of the Negotiable Instruments Act, it can easily be found that hundi can be of two types (1) payable to order and (2) payable to bearer.

15. It is now to be considered whether the hundi in the present case is payable to order or payable to bearer. Relevant portion of the hundi in suit reads, 'on 21 days sight please pay to M/s. B. K. Kapoor & Sons, Bankers, or order of the sum of Rupees......for value received against R/R......'. This hundi is clearly payable to order and not payable to bearer.

16. In this connection reference may be made to the definition of the term 'payee' given in Section 7 of the Negotiable Instruments Act, Respondents 2 to 4 are the drawers and appellant is drawee and acceptor of the hundi in suit. According to Section 7, payee is the person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid.

17. The hundi in suit directs the appellant to pay the amount of the hundi to the respondent No. 1.

18. From what has been stated above, the respondent No. 1 is payee of the hundi which is payable to order and not payable to bearer. On these facts, it can easily be said that the respondent No. 1 is holder in due course of the hundi under second portion paragraph of Section 9 and as such it was not necessary for the respondent No. 1 to show that he had come in possession of the hundi in suit on payment of consideration to the respondents 2 to 4. The contention of the appellant's counsel that because the respondent No. 1 had not paid consideration of the hundi to respondents 2 to 4, he was not holder in due course, is not correct.

19. At this stage, definition of the term 'holder' given in Section 8 of the Act should be borne in mind because word 'holder' only is mentioned in Section 78. According to Section 8, 'holder' of a negotiable instrument means a person entitled to in his own name to the possession of the instrument and to receive or recover the amount due thereon from the parties thereto. Taking into account the language of the hundi in suit, it is obvious that the respondent No. 1 is the holder of the hundi in suit and entitled to recover its amount.

20. The liability of the appellant to pay the amount of the hundi to the respondent No. 1, after having accepted it shall now be considered.

21. Averment may be made to Sections 82, 78, 82(c) referred to by the learned counsel for the respondent No. 1. Section 32 lays down that the acceptor before maturity of a bill of exchange is bound to pay the amount thereof at maturity according to the acceptance to the holder. Section 78 lays down that subject to the provisions of Section 82(c) payment of the amount due of a bill of exchange must, in order to discharge the acceptor, be made to the holder of the instrument. Clause (c) of Section 82 relates to an instrument payable to bearer. Therefore, this provision is not applicable in the present case, it may, however, be mentioned that Section 82 deals with discharge from liability. Taking into consideration the provisions of Sections 32 and 78 it is clear that the acceptor of a bill of exchange is liable to make payment to the holder thereof. This liability is absolute and not qualified in any way. In the result the appellant was bound to make payment to the respondent No. 1

22. It is undisputed that the appellant did not make payment of the amount of the hundi in suit to the Bank through which the respondent No. 1 had sent the hundi along with railway receipt. The question, therefore, arises is what is the remedy of the respondent No. 1.

23. Para 2 of Section 32 of the Negotiable Instruments Act gives the remedy. It lays down that in default of payment, the acceptor is bound to compensate any party to the bill of exchange for any loss or damage sustained by him and caused by such default. It means that in the present case the respondent No. 1 was entitled to be compensated by the appellant for any loss or damage sustained by him by the dishonour/non-payment of the hundi in suit. In the hundi words 'for value received' have been incorporated. In para 5 of the plaint the respondent No. 1 clearly alleged that respondents Nos. 2 to 4 handed over hundi to him in lieu of Rs. 918.60. It means that the respondent No. 1 had paid the amount of the hundi to respondents Nos. 2 to 4. But there is positive finding of the trial court on the basis of the contention of respondents Nos. 2 to 4 that the respondent No. 1 had not made any payment of the hundi amount to respondents Nos. 2 to 4. This finding has not been disturbed in any way by the lower appellate court. The learned counsel for the respondent did not show in this court that in fact the respondent No. 1 had made payment of the hundi amount to the respondents Nos. 2 to 4. In these circumstances it is clear beyond doubt that the respondent No. 1 had not paid the amount of the hundi to respondents Nos. 2 to 4. Therefore, by the non-payment of the hundi by the appellant, acceptor of the hundi, no loss or damage was caused to the respondent No. 1. In this aspect of the matter the respondent No. 1 could not claim to be compensated by the appellant,

24. It is pertinent to remark that the hundi in suit was drawn on 28-11-1959. The respondent No. 1 filed suit in the beginning of the year 1963. Notwithstanding the fact that the hundi was dishonoured by the appellant, the respondent No. 1 did not give any notice of this dishonour to respondents Nos. 2 to 4 within a reasonable time as required by Section 106 of the Negotiable Instruments Act. This conduct of the respondent No. 1 is also indicative of the fact that by non-payment of the hundi, he had not suffered any loss or damage.

25. There is another aspect in the case. The appellant had placed order for the supply of utensils. In pursuance of this order respondents Nos. 2 to 4 supplied the utensils. It was thus a case of sale of unascertained goods. Section 18 of the Sale of Goods Act lays down that where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained.

26. Section 4 of this Act confers the right of examination on the buyer. After having taken delivery of the goods, the appellant examined the goods and found some articles short and some articles damaged. Consequently the appellant referred to respondents Nos. 2 to 4. These respondents agreed to give deductions for the shortage and breakage. Thereafter the appellant paid the real amount due to respondents Nos. 2 to 4 who accepted the same. Had the respondent No. 1 given notice of the non-payment of the hundi to respondents Nos. 2 to 4, the respondents Nos. 2 to 4 would have also referred the matter to him. But because the respondent No. 1 had not made payment of the amount of the hundi to the respondents Nos. 2 to 4 and had not suffered loss thereby, he did not care to give notice to the respondents Nos. 2 to 4. These respondents knew the position very well. Therefore, they accepted the amount in or about January, 1960 from the appellant. In these circumstances the appellant cannot be made to pay the amount of the hundi twice over. Each case has to be decided on its own merits. In the unusual circumstances of the case, the respondent No. 1 cannot be held entitled to the amount claimed. The Additional Civil Judge was not, in these circumstances of the case and the provisions of para 2 of Section 32 of the Negotiable Instruments Act, justified in decreeing the suit. He decreed the suit mainly in view of the provisions of paragraph 1 of Section 32.

27. The result of the above discussion is that the judgment and decree passed by the Additional Civil Judge cannot be maintained.

28. Appeal is, therefore, allowed and the judgment and decree dated 6-1-1969 passed by the Second Additional Civil Judge are set aside and the suit of the plaintiff respondent No. 1 is ordered to be dismissed. The appellant will get its costs of all the courts from plaintiff respondent No. 1.


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