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Abdul Majid Vs. Ganesh Das Kalooram Ltd. and anr. - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtOrissa High Court
Decided On
Case NumberSecond Appeal No. 47 of 1951
Judge
Reported inAIR1954Ori124
ActsContract Act, 1872 - Sections 62; Negotiable Instruments Act, 1881 - Sections 4, 30, 84, 84(1), 93 and 98
AppellantAbdul Majid
RespondentGanesh Das Kalooram Ltd. and anr.
Appellant AdvocateM.S. Rao, Adv.
Respondent AdvocateK. Patnaik, Adv.
DispositionAppeal allowed
Cases ReferredMadho Ram v. Durga Prashad
Excerpt:
.....therefore, that the defendants have failed to prove that, in fact they had sufficient money in the bank at the time to honour the cheques issued in favour of the plaintiff. in the absence of the best evidence on record, it is not possible to accept 'the statement of d. the initial fallacy underlying this argument is that this is not a suit brought by the plaintiff for compensation on account of dishonour of the cheques, while, on the contrary, as we have clearly found, the plaintiff has brought the suit for recovery of the balance or money due on the original transaction of having supplied paddy to the defendants. the further point, we should like to observe in this connection, is that the question of dishonour does not arise in view of the finding of the lower appellate court that there..........that the cheques were presented on 22-11-1946, but the manager of the bank deferred payment from time to time and ultimately the cheques were dishonoured and the bank closed all transactions with the public from 30-11-1946. the said amount of rs. 3000/-remains still due from defendants 1 and 2 as the cheques were not encashed, so the plaintiff has brought the suit for recovery of the said amount with interest at 61/4 p.cp.a.2. the defence was that defendant no. 2, as the agent of defendant no. 1, purchased from the plaintiff paddy worth rs. 4005/6/- and made cash payment of rs. 1005/6/- as alleged by the plaintiff. defendant no. 2 issued three cheques of the total value of rs. 3000/- for the balance dues. the main defence is that the cheques were not presented within a reasonable time.....
Judgment:

Mohapatka, J.

1. This is a plaintiff's Second Appeal against the judgment and decree dated 8-11-1950 of Sri A.R. Guru, Additional District Judge of Cuttack, dismissing the plaintiff's suit after reversing the judgment and decree dated 31-3-1949 of Sri B. K. Misra, Munsif of Kendrapara. The appeal arises out of a suit for recovery of Rs. 3141/710/- on the allegation that defendant No. 1 being the purchasing agent under the Government of Orissa and defendant No. 2, the agent of defendant No, 1, the plaintiff supplied 971 maunds of paddy in three instalments in the months of October and November, 1948, to defendant No. 2 acting as agent of defendant No. 1, the value of the paddy being Rs. 4005767-. Defendant No. 2 made a cash payment of Rs. 1005/6/- towards the aforesaid value of the paddy supplied by the plaintiff and for the remaining amount of Rs. 3000/- defendant No. 2 drew three cheques on 20-11-1948 to be drawn from the deposit account of defendant No, 1 in the Darjeeling Bank Ltd. (defendant No. 3) and to be presented at the Branch. Office of the Bank at Kendrapara.

The plaintiff further alleges that the cheques were presented on 22-11-1946, but the Manager of the Bank deferred payment from time to time and ultimately the cheques were dishonoured and the Bank closed all transactions with the public from 30-11-1946. The said amount of Rs. 3000/-remains still due from defendants 1 and 2 as the cheques were not encashed, so the plaintiff has brought the suit for recovery of the said amount with interest at 61/4 P.CP.A.

2. The defence was that defendant No. 2, as the agent of defendant No. 1, purchased from the plaintiff paddy worth Rs. 4005/6/- and made cash payment of Rs. 1005/6/- as alleged by the plaintiff. Defendant No. 2 issued three cheques of the total value of Rs. 3000/- for the balance dues. The main defence is that the cheques were not presented within a reasonable time to the Bank for encashment and the plaintiff did not serve any notice of the fact that the cheques were dishonoured. The Bank having closed all transactions from 30-11-1946 they have suffered a damage to the extent of Rs. 3000/-, that is, the value of the cheques issued in favour of the plaintiff, and, as such, they are absolved from the liability.

3. The trial Court found that in fact the plaintiff presented the cheques on 22-11-1946 in the Bank for encashment and that the cheques were not paid and the plaintiff also had given duenotice of dishonour of the cheques to the defendants; as such, the plaintiff, according to the trialCourt, is entitled to get a decree.

4. The lower appellate Court, after discussing the provisions of several sections of the Negotiable Instruments Act dismissed the plaintiff's suit mainly relying upon the provisions of Section 84 of the Act. The basis of his judgment is his finding that, in fact, there was no presentation of the cheques; and, as such, under the provisions of Section 34, the defendants are absolved from the liability of the value of the cheques.

5. It has got to be observed at the outset that tooth the Courts below have missed one of the elementary principles of law and have unnecessarily complicated the matter by entering into the discussion of several sections of the Negotiable Instruments Act. On a plain reading of the plaint itself, it is clear that the present suit of the plaintiff, as I have indicated above, is for recovery of the amount as the balance of the value of the paddy supplied to defendants 1 and 2 in three instalments. Indeed, he has set forth the fact of defendant No. 2 having drawn three cheques which were ultimately not encashed; but the suit is based upon the original cause of action arising on the supply of paddy by the plaintiff.

The matter is still more simplified on account of the admitted plea of the defendants that in fact they have taken delivery of paddy worth Rs. 4005/6/- and had made a cash payment of Rs. I005/6/-. When manifestly the cheques issued by defendant No. 2 have not been encashed and the plaintiff has not been paid up the amount of Rs. 3000/- the value of the cheques, the amount is still due and the plaintiff is entitled to get a decree for the amount on the above admitted position.

6. The position of law is very well settled ever since the time of the case of -- 'Sheikh Akbar v. Sheikh Khan', 7 Cal 256 (A), which serves as the leading case on the subject. Garth C. J. in this judgment, laid down the position of law to the effect that;

'When a cause of action for money is once complete in itself, whether for goods sold or for money lent, or for any other claim, and the debtor then gives a bill or note to the creditor for payment of the money at a future time, the creditor, if the bill or note is not paid at maturity may always as a rule sue for the original consideration provided that he has not endorsed or lost or parted with the bill or note, under such circumstances as to make the debtor liable upon it to some third person.'

This proposition has been consistently followed by all the High Courts in India & it may safely be laid down as a settled proposition of law. We would, in this connexion, refer to just one other decision of Richards C. J. sitting with Banerjee J. of the Allahabad High Court reported in --'Ram Sarup v. Jasoda Kunwar', 34 All 158 (B). The same principle has been reiterated that: 'If a creditor has a cause of action for the recovery of money, for which his debtor has executed a promissory note, separate from and independent of the note, he can recover upon such case, in case the note for any reason cannot be put in evidence. Nor is the creditor necessarily debarred from suing on the original cause of action by the fact that it arose out of the same transaction in the course of which the promissory note was executed.'

7. The Courts below have misdirected themselves in also having ignored the position that this is not the defendant's suit for recovery of damages from the plaintiff on the allegation that they had suffered damages on account of the cheques not having been presented in time and that notice of dishonour of the cheques was not given to them, if it was presented and dishonoured. It is significant to observe here that it is not the defendant's case that in fact there was the agreement between the parties that the balance dues of the plaintiff were completely satisfied by defendant No. 2 having issued the cheques and the plaintiff accepted the cheques unconditionally in complete discharge of his dues existing then. The position of law is equally clear that when a creditor accepts a promissory note or a bill of exchange or a cheque on account of his outstanding loan it is taken as a conditional payment and the dues of the creditor will be discharged only when the creditor receives the cash.

We may in this connection refer to a Full Bench decision of the Rangoon High Court reported in -- 'Chit Maung v. Roshan N. M. A. Kareern Oomer & Co.', AIR 1934 Rang 389 (C), where Page C. J. observed as follows:

'It is prima facie to be presumed (although the presumption is rebuttable) that the parties to the transaction have agreed that the promissory note or other negotiable instrument given and taken in such circumstances shall be treated as conditional payment of the loan; the cause of action on the original consideration for money lent being suspended during the currency of the negotiable instrument, and if and so long as the rights of the parties under the instrument subsist and are enforceable; but the cause of action to recover the amount of the debt revives if the negotiable instrument is dishonoured or the rights thereunder are not enforceable. On the other hand the cause of action is extinguished when the amount due under the negotiable instrument is paid..........'

In the case before us, as we have indicated above, there being no material to indicate that the cheques were accepted by the plaintiff as a complete and unconditional satisfaction of his dues, the presumption that it was only a conditional acceptance will prevail and when, in fact, he has not received the amount by encashing the cheques, he is, as a matter of law, entitled to fall back upon the original consideration and get a decree for recovery of the said amount.

8. Indeed, as we have indicated above, the plaintiff is entitled to a decree on a consideration of the above simple point which has been Ignored by the Courts below. But as the learned lower appellate Court has dismissed the plaintiff's suit mainly relying upon the provisions of Section 84, Negotiable Instruments Act, we should also like to make our observations on the point. Section 84(1) runs as follows:

'Where a cheque is not presented for payment within a reasonable time of its issue, and the drawer or person on whose account it is drawn had the right, 'at the time when presentment ought to have been made, as between himself and the banker, to have the cheque paid and suffers actual damage through the delay', he is discharged to the extent of such damage, that is to say, to the extent to which such drawer or person is a creditor of the banker to a larger amount than he would have been if such cheque had been paid.'

On a plain reading of the section itself, it is manifestly clear that in order that defendants 1 and 2 are entitled, to take advantage of the provisions of S. 84 of the Act, it is incumbent upon them to prove two factors; namely,

(i) that defendant No. 1 had sufficient money in deposit in the Bank in his account to honour the cheques, and

(ii) that he had suffered actual damage on account of non-presentment of the cheques within a reasonable time.

The significant words in the section are

'the drawer..........at the time when presentment ought to have been made as between himself and the banker 'to have the cheque paid and suffers actual damage'.'

In our opinion, the learned lower appellate Court has committed an error of law in examining the case entirely from a wrong point of view by throwing the onus upon the plaintiff to prove that the defendants had not the necessary credit in the Bank to pay the amount on cheques. The pertinent finding of the lower appellate Court is as follows:

'It is not the case of the respondent that the appellant had not the necessary credit in the Bank to pay the amount on the cheques either on 22-11-1946 or ,at any time subsequent till the Bank closed its business.'

In our view, it was for the defendants to have proved that they had sufficient credit at the time and on the examination of the evidence on record we are definitely of the opinion that the defendants have failed to prove each of the above ingredients. To prove that defendant No. 1 had sufficient credit in the Bank at the time, evidence was led on his behalf by exhibiting the counterparts of the cheque-book in his possession (Ext. A series) to show that subsequent to 20-11-1946 defendant No. 2 had issued cheques in favour of other for larger amounts.

Defendant No. 2, Nishakar Mohanty who was examined as D. W. 1, states in his deposition that their credit in the Bank on 22-11-1946 was Rs. 6121/-. The mere fact that they issued cheques in favour of others for larger amounts after 20-11-1946 does not prove that, in fact, those cheques were honoured or that the defendants had sufficient money in the Bank at the time. D. W 1 admits that in fact it has been so entered in their account book that the cheques (Ext. A series) issued in favour of others have been honoured. The account book had not been produced even though admittedly it was in the custody of defendant No. 1.

No steps also had been taken to produce the account-books of the persons in whose favour the cheques were issued. Nor are the records of the Bank before us to prove the same. We have got to find, therefore, that the defendants have failed to prove that, in fact they had sufficient money in the Bank at the time to honour the cheques issued in favour of the plaintiff. In the absence of the best evidence on record, it is not possible to accept 'the statement of D. W. 1 alone that they had a sum of Rs. 6121/- as deposit in the Bank on 22-11-1946, It is also clear that the defendants have not been able to prove the actual damage suffered in order to take advantage of the provisions of S. 84 of the Act.

9. Mr. Patnaik, appearing on behalf of the respondents, has drawn our attention to the provisions of Ss. 30, 93 and 98 of the Act, and a few decisions in support of his contention that the onus is upon the plaintiff to prove that the defendants had not sufficient money and that the defendants had not suffered any damage. Section 30 runs thus:

'The drawer of a bill of exchange or cheque is. bound, in case of dishonour by the drawee or acceptor thereof, to compensate the holder, provided due notice of dishonour has been given, to, or received by, the drawer as hereinafter provided.'

On the basis of this section, Mr. Patnaik contends that the plaintiff is bound to give notice of dishonour in order that, he may claim compensation as provided under the section. The initial fallacy underlying this argument is that this is not a suit brought by the plaintiff for compensation on account of dishonour of the cheques, while, on the contrary, as we have clearly found, the plaintiff has brought the suit for recovery of the balance or money due on the original transaction of having supplied paddy to the defendants.

The further point, we should like to observe in this connection, is that the question of dishonour does not arise in view of the finding of the lower appellate Court that there was no presentment of the cheques at all. So the case is really confined to the provisions of Section 84. Section 93 indeed makes mandatory provisions for giving notice of the instrument having been dishonoured and Section 98 is an exception to Section 93 making provisions for the cases in which the holder is not bound to give notice.

If indeed the plaintiff bases his case on the liability of the defendants for the instrument having been dishonoured he is bound to give previous notice to the drawer and further if he takes up the plea that notice was not necessary under the circumstances as provided in Section 98 of the Act it is for him to prove any of the conditions mentioned in Section 98. The pertinent provision for our purpose is contained in Clause (c), that is, 'when the party charged could not suffer damage for want of notice'.

10. As we have indicated already, the frame of the suit is entirely different and the plaintiff does not plead any of the conditions to dispense with notice. Mr. Patnaik relies upon a decision of Shadi Lall C. J. and Agha Haidar J. of the Lahore High Court in the case of -- 'Bahadur Chand v. Gulab Rai', AIR 1929 Lah 577 (D) in support of his contention. Their Lordships observed as follows:

'It is provided by S. 30 that the drawer of a bill of exchange is bound, in case of dishonour by the drawee or acceptor thereof, to compensate holder, provided due notice of dishonour has been given to, or received by, the drawer as hereinafter provided. A perusal of Section 106 of the Act leaves no doubt that the notice of dishonour should be given as soon as the bill is dishonoured. It is the duty of the holder to prove that due notice was given, and if not given, he was excused from doing so for any of the reasons specified in Section 98. The omission to give due notice of dishonour has the effect of discharging the persons who are entitled to such, notice.'

He has also relied upon a decision of the Allahabad High Court reported in -- 'Madho Ram v. Durga Prashad', 33 All 4 (E). In that decision their Lordships had made it clear that if the plaintiff sought to excuse the want of notice of dishonour, it lay upon him to establish that the party charged could not suffer damage for want of such notice. From our earlier discussions, it is clear that the principles laid down in the above cases have no application to the present case.

11. In conclusion, therefore, the appeal succeeds and is allowed. The Judgment and decree of the lower appellate Court are set aside. The plaintiff's suit is decreed with costs throughout.

Panigrahi, C.J.

12. I agree.


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