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The Central Bank of India Ltd. Vs. Khub Ram Roop Chand and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtPunjab and Haryana High Court
Decided On
Case NumberFirst Appeal No. 174 of 1952
Judge
Reported inAIR1960P& H157
ActsNegotiable Instruments Act, 1881 - Sections 1, 5 and 13; Indian Paper Currency Act, 1871 - Sections 21
AppellantThe Central Bank of India Ltd.
RespondentKhub Ram Roop Chand and ors.
Cases ReferredKomal Singh Ju Deo v. Rambharosa Namhelal
Excerpt:
.....'shah jog' hundi is not equivalent to a hundi payable to bearer and it ought not to be paid by the drawee unless it has endorsed on it, when presented, the name of the 'shah' by whom it is presented or rather by whom it is sent for presentation, although it is presented by a respectable person. rambharosa namhelal, air 1943 nag 99, held that the payee must be a specified and named person or persons and it cannot consist of an indefinite class like 'respectable holders'.hence 'shah jog' hundis are not negotiable instruments within the meaning of the act. it was clearly the duty of the bank to call upon the drawees to pay the money within the usual course of three days from the dte of presentment and to send back the hundi to their branch at hailey mandi after the expiry of the said three..........to the bank along with a railway receipt for 267 bags of barley on payment of rs. 12,500/- by the bank. the hundi was then sent to the calcutta office of the bank and it is alleged that it reached there on 19-1-1948 because of the fact that postal arrangements were to some extent disorganised in those days.according to the allegations of the plaintiff bank made in their plaint the hundi was presented to the drawee firm on the 20th january 1948 but the drawee firm kept on promising payment for a long time and on the 15th february, 1948 they finally refused to pay. on 25-2-1948, the hailey mandhi branch of the bank sent a registered notice to defendant no. 1 which is exhibit p. g., on the present record. in this notice they informed messrs khub ram-rup chand that the hundi for rs......
Judgment:

(1) The facts giving rise to this appeal are as under. Firm Messrs Singh Ram-Mata Din, defendants No. 4, drew a hundi in favour of Firm Messrs Khub Chand-Rub Chand, defendant No. 1 on the firm of Messrs Bansi Dhar-Ghansham Das of Calcutta for a sum of Rs. 12,500/-. The said hundi was duly endorsed by defendant No. 1 in favour of the plaintiff-Bank and was handed over to the Bank along with a railway receipt for 267 bags of barley on payment of Rs. 12,500/- by the Bank. The hundi was then sent to the Calcutta Office of the Bank and it is alleged that it reached there on 19-1-1948 because of the fact that postal arrangements were to some extent disorganised in those days.

According to the allegations of the plaintiff Bank made in their plaint the hundi was presented to the drawee firm on the 20th January 1948 but the drawee firm kept on promising payment for a long time and on the 15th February, 1948 they finally refused to pay. On 25-2-1948, the Hailey Mandhi Branch of the Bank sent a registered notice to defendant No. 1 which is Exhibit P. G., on the present record. In this notice they informed Messrs Khub Ram-Rup Chand that the hundi for Rs. 12,500/- had been dishonored and that if the of the receipt of the notice the stock of barley covered by the railway receipt would be sold in the open market at the best buyer rate at the defendants risk and if there was any shortfall the firm would be liable to the Bank for the same.

It is alleged by the plaintiff Bank that on 18-3-1948, and 23rd March, 1948, goods covered by the railway receipt were actually sold at Calcutta through Firm Messrs. Baldeo Ram-Behari Lal and the total amount received by the said sale was Rs. 5,006/9/9. On 29-4-1948, the Hailey Mandi Branch of the Bank served another notice on Messrs Khub Ram Rup Chand calling upon them to pay Rs. 7,493/3/6 as the balance due from them after allowing them Rs. 5,006/9/9 as the price of barley realised at Calcutta. Defendant No. 1 having failed to pay the said amount the plaintiff Bank brought the present suit against them as also against Messrs. Singh Ram-Mata Din for the recovery of Rs. 8,249/6/3 made up as under:

Principal Rs. 7,493/6/3.Interest at 9 p. c. p. a. from Rs. 756/- /- 10th January 1948 to the date of institution of the suit. ---------------------Total Rs. 8,249/6/3.

Rup Chand and Khub Ram partners of defendant No. 1 who had been impleaded as defendants Nos. 2 and 3 respectively filed separate written-statements contesting the claim of the transaction really was been Singh Ram-Mata Din, the plaintiff's and the Calcutta firm and that their firm Messrs. Khub Ram-Rup Chand had nothing to do at all with the transaction and had merely lent their name for the purpose of making an endorsement on the hundi in favour of making an endorsement on the hundi in favour of the Central Bank. The endorsement and signatures of Raup Chand were alleged to have been obtained by the plaintiff's 'merely for the sake of formalities of the Bank'. The hundi was alleged to be without consideration so far as they were concerned. It was further pleaded that no notice of dishonour had at any time been given to them and that the plaintiff Bank was not entitled to bring the suit in question. The genuineness of the sale of goods and the price recovered were also challenged. The trail Court framed the following ten issues in the case-

1. Whether the hundi in suit was negotiated under the signatures of defendant No. 2 on behalf of the joint Hindu family firm Khub Ram Rup Chand?

2. Whether the ownership of the goods consigned by the railway receipt in dispute passed on the plaintiff by reason of the endorsement in their favour?

3. Whether notice of dishonour was given to the defendant?

4. At what price were the goods sold?

5. To what amount is the plaintiff entitled and against whom?

6. Whether the hundi was required to be presented to Bansi Dhar Ghansham Das at Calcutta in order to make the defendants liable?

7. If so, was the hundi duly presented?

8. Whether there was an agreement between the paties that signatures of defendant No. 2 were to be merely formal and the defendants were not to be liable?

9. Whether Rup Chand defendant No. 2 received Rs. 12,500/- from the plaintiff?

10. If so, is the defendant receiving the amount in suit not liable?

(2) After recording evidence of the parties the trial Court found that the hundi in suit had been negotiated under the signatures of defendant No. 2 on behalf of the joint Hindu family firm Khub Ram-Rup Chand, that the ownership of the goods consigned by the railway receipt in dispute had not vested in the plaintiff Bank by reason of the endorsement of the hundi in their favour, that no notice of dishonour was given to the defendants, that the goods were sold for Rs. 5,006/9/9, that the hundi was required to be presented to M/s. Bansi Dhar-Ghansham Das of Calcutta, that it was actually presented to them, that there was no agreement between the parties to the effect that the signatures of defendant No. 2 were to be merely formal and that defendants Nos. 1 to 3 were not to be liable on the hundi, that Rup Chand actually received Rs. 12,500/- from the plaintiff Bank and that the defendants were liable to pay to the Bank a sum of Rs. 8,249/6/3. In the result, the suit of the Bank was dismissed on the ground that the notice of dishonour had not been given to the defendants. Aggrieved against the said decree the plaintiff Bank has come up to this Court in first appeal.

(3) The only points that arise for decision in this appeal are-

(1) Whether a notice of dishonour of the hundi in question was necessary in the present case; and

(2) whether such a notice had ever been given within reasonable time.

The learned counsel for the plaintiff Bank urges that the hundi in dispute was a 'Shah Jog' hundi and did not therefore fall within, the ambit of the definition of a 'bill of exchange' as given in the Negotiable Instruments Act. The hundi is in the following terms:

'Compliments from Singh Ram Mata Din, Hailey Mandi, Pataudi Road, to Bansi Dhar-Ghansham Das of Calcutta.

We have drawn this hundi for Rs. 12,500/- (rupees twelve thousand and five hundred), doubt of Rs. 6,250/- (rupees six thousand two hundred and fifty) on you under date Poh Badi 15, given to Bhai Khub Ram-Rup Chand of Hailey Mandi. Please make payment immediately on its receipt to a respectable person after satisfying yourself according to the usage of market.

Hundi drawn on Poh Badi 15, Sambat 2004 (corresponding to the 11th January, 1948). A railway receipt for 267 bags of barley accompanies this hundi. Signature of:Mata Deen.Address:Bansi Dhar-Ghansham Das,15, Shiv Thakur Lane, Calcutta,'

The exact word used in the oriental language, in which the hundi is written is 'Shah' which means a respectable person. The hundi was made payable to a 'Shah'. There can be no doubt that a hundi of this type will fall within the definition of 'Shah Jog' hundi which term is well-known in the commercial world. Unlike a hundi payable to the bearer or a hundi payable to a specified person, a 'Shah Jog' hundi is payable only to a respectable person, and when a hundi of this type is issued it definitely casts a liability on the payee to see that the person to whom the payment is made is in fact a respectable person. Commercial people issue such hundis as a matter of abundant precaution because they do not wish that the payment of the same may be made to a person who may be penniless or a bankrupt. According to S. 13 of the Negotiable Instruments Act, a 'negotiable instrument' means a promissory note, bill of exchange or cheque payable either to order or to bearer. Evidently a hundi is neither a promissory note nor a cheque. The question then remains whether it is a bill of exchange as defined by the said Act. Section 5 of the Act reads as follows:

'A 'bill of exchange' is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.

A 'Shah Jog' hundi is neither payable to a certain person nor to order of a certain person. It is also not payable to the bearer. The command contained in the hundi is that it should be paid to a 'Shah' or a respectable person after ascertaining whether such a person is actually a respectable person or not. Technically therefore it does not fall within the definition of bill of exchange as given in the Negotiable Instruments Act. The Negotiable Instruments Act, however, is not a complete code on all types of negotiable instruments. Section 1 of the reads as under:

'1. This Act may be called the Negotiable Instruments Act, 1881.

It extends to the whole of India except the State of Jammu and Kashmir but nothing herein contained affects Indian Paper Currency Act, 1871, section 21, or affects any local usage relating to any instrument in an oriental language; Provided that such usage's may be excluded by any words in the body of the instrument which indicate an intention that the legal relations of the parties thereto shall be governed by this Act; and it shall come into force on the first day of March, 1882.'

This section,therefore,clearly provides that the strument in an oriental languag. A 'Shah Jog' hundi has always been held to be a document of this type and it has been held in various cases that such a hundi is a negotiable instrument although it is not a negotiable instrument as defined by the negotiable Instrument Act.

(4) It was held by a Division Bench of the Allahabad High Court in Mangal Sen Jai Dev prasad v. Ganeshi Lal, AIR 1936 All 396, that a 'Shah Jog' hundi which is a document in vernacular is a negotiable instrument although it does not come within the definition of a 'bill of exchange'.

(5) A Division Bench of the Lahore High Court in Murli Dhar Shankar Das v. Hukam Chand Jagadhar Mal, AIR 1932 Lah 312, held that a 'Shah Jog' hundi is not equivalent to a hundi payable to bearer and it ought not to be paid by the drawee unless it has endorsed on it, when presented, the name of the 'Shah' by whom it is presented or rather by whom it is sent for presentation, although it is presented by a respectable person.

(6) A Full Bench of the Nagpur High Court in Komal Singh Ju Deo v. Rambharosa Namhelal, AIR 1943 Nag 99, held that the payee must be a specified and named person or persons and it cannot consist of an indefinite class like 'respectable holders'. Hence 'Shah Jog' hundis are not negotiable instruments within the meaning of the Act.

(7) Bhashyam on the Negotiable Instruments Act. 9th Edition says at page 448 as under.

'Though local usage's in connection with hundies are saved from the operation of the Act, it has been held by the Bombay High Court, that the provisions of the Act apply to hundis also, in the absence of any local usage to the contrary. And the learned Judges of the Allahabad High Court, in applying the Act to hundis, say:

'If we look to the Negotiable Instruments Act which though not having force or effect in regard to an instrument of the kind sued upon may be usefully consulted unless any local usage to the contrary is proved, the hundi before us being in the vernacular, we think that the doctrine of notice of dishonour as propounded in the Negotiable Instruments Act may with property be applied, the reasonable time within which it is to be given being determined according to the circumstances of the case.' But, the distinction between the rules laid down by the Bombay and Allahabad High Courts is important; because, while the Allahabad High Courts is important; because, while the Allahabad High Court bases the application of the Act to hundis, on the ground of the reasonableness of the rules in this Act, the Bombay High Court insists on its application as a matter of course, in the absence of any local usage to the contrary. The latter view seems to be more correct, as it accords with the strict construction of the wording of section 1.'

(8) From what has been said above it is quite clear that a 'Shah Jog' hundi does not technically fall within the definition of a bill of exchange or a negotiable instrument as defined by the Negotiable Instruments Act. It is all the same a negotiable instrument and has all the incidents of the same. Section 1 of the Act expressly recognises such instruments which are written in oriental languages and are in vogue on the basis of local usage. A hundi of this type must necessarily be presented to the drawee and a notice of dishonour of the same must be given to the drawer, endorser and all other concerned parties. Technical rules with regard to the time within which a notice of dishonour has to be given or the manner in which the same has to be given as provided for in the Negotiable Instruments Act would not necessarily apply to such notices, but the notice must all the same be within reasonable time and the provisions of law contained in the Negotiable Instruments Act must 'substantially' as contradistinguished from 'technically' be complied with.

(9) We cannot accept the contention of Mr. N. L. Saluja, learned counsel for the Bank, that a 'Shah Jog' hundi is not a negotiable instrument of any purpose and that a notice of dishonour of such a hundi need never be given.

(10) The only other point that arises for decision is whether a notice of dishonour was given to the parties concerned within the reasonable time. It is conceded that this notice was never given to the drawer firm Messrs Singh Ram-Mata Din. The plaintiffs rely on notices Exhibits P. G. and P. D. which were sent by them to Messrs. Khub Ram-Rup Chand on 25-2-1948 and 29-4-1948 respectively. It is contended by the learned counsel for the respondents that these notices do not comply with the requirements of law, and that even if they are treated as notices of dishonour, they cannot be said to have been given in reasonable time. Section 106 of the Negotiable Instruments at provides that if the holder and the party to whom notice of dishonour is given carry on business or live (as the case may be) in different places, such notice is given within a reasonable time if it is dispatched by the next post or on the day next after the date of dishonour. If the said parties carry on business or live in the same place, such notice is given within a reasonable time if it is dispatched by the next post or on the day next after the date of dishonour. If the said paties carry on business or live in the same place, such notice is given within a reasonable time if it is dispatched in time to reach its destination on the day next after the date of dishonour. If the said paties carry on business or live in the same place, such notice is given within a reasonable time if it is dispatched in time to reach its destination on th day next after the day of dishonour. If is true that this section does not apply to the present case, but the provisions of the section cannot altogether be ignored while finding out what would be the reasonable time for such a notice in a particular case. the hundi in this case is alleged to have reached the Calcutta Office on 19th January 1948. The Bank must be presumed to possess dispatch and receipt registers. The same have not been produced in Court and it cannot therefore be definitely found that it actually reached the Calcutta office on the 19th January 1948 and not earlier. Assuming that it actually reached on the said date and also assuming that it was presented to the drawee firm on the 21st January 1948, there is nothing to show what the Bank was doing with the hundi between 21st January 1948 and 15th February,, 1948. The period which elapsed between these two dates is almost twenty-five days and it is not understood what steps the Bank was taking with regard to the hundi during all these days. It is not the case of the Bank that the hundi was accepted for payment by the drawees, nor does the hundi possess any such endorsement on it. It was clearly the duty of the Bank to call upon the drawees to pay the money within the usual course of three days from the dte of presentment and to send back the hundi to their Branch at Hailey Mandi after the expiry of the said three days with the note that the hundi had not been honoured. The Bank's case is that there were several hundis drawn against the same firm of Calcutta, that is Bansi Dhar-Ghansham Das and that the said firm kept on promising payment of the various hundis and actually honoured some of the hundis on dates beyond three days of the presentment.

(11) Our attention has been drawn to the statement of Shri B. P. Dev, who was examined by the Bank on commission. At page 55 of the paper book he stated as under:

'I cannot say who actually of their firm called on us but from out books (refers to books and says) I find that they made payment of our Hailey Mandi Office B. P. 37 on 3rd February, 1948 and B. P. 28, 29 on 27th January, 1948, 1948 B. P. 30 on 4th February, 1948. All these bills were presented along with B. P. 31, thus showing that their representative called on us on the dates mentioned above.'

The hundi in dispute is B. P. 31 and the learned counsel contends that the other hundis presented on the same day as the one in dispute were actually paid on different dates ranging from 27th January to 4th February, 1948. This, in our opinion, is no explanation for the Bank's keeping the hundi with them for an indefinite time. Even assuming that the Bank expected that this hundi would be paidalong with other hundis, the Bank should have been completely disillusioned from this impression when they found that all other hundis had been honoured on or before the 4th February, 1948 but that the hundi in question had not been honoured even up to that date. There was no justification at all for the Bank to retain this hundi with them after three days from the presentment of the same, and in any case after the 4th February, 1948. The delay between 4th February, 1948 and 15th February, 1948 has not been explained by any one on behalf of the Bank. The notice, Exhibit P. G., was given on the 25th February, 1948. The delay of the period between the 15th February, 1948 and 25th February, 1948 has again not been explained. On the facts of the present case it cannot be held that the Bank gave notice of dishonour within a reasonable period. The plaintiff admits in para 7 of the plaint that the price of barley was depreciating and this fact is supported by the evidence also. It is stated by Sri Kishan Aggarwala who was examined on commission that the rate of barley on 18th January 1948 was Rs. 25/- per maund and on 24th January it went down to Rs. 20/- per maund. In the statement of accounts, Exhibit P. E. 10, it is mentioned that the rate of barley in March 1948, went down to Rupees 12/- per maund. It is also in the evidence of Sri Kishan Aggarwala that the rate of barley continued to fall from 10th January 1948 onwards. On the 5th March 1948 it was Rs. 15/- per maund and on the 10th March it was Rs. 14/10/-. The barley in question was actually sold by the Bank at Rs. 12/- per maund. The want of notice of dishonour in reasonable time actually prejudiced the drawers and the endorsers inasmuch as the rates of barley fell down and they were not able to recover adequate price of the same.

(12) In our opinion, the case of the plaintiff Bank has been rightly dismissed and we confirm the decree of the trial Court and dismiss the present appeal. In the peculiar circumstances of the case, however, we leave the parties to bear their own costs throughout.

(13) Appeal dismissed.


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