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P.C. Cherivan Vs. Varkev George and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKerala High Court
Decided On
Case NumberC.R.P. 1442 of 1972
Judge
Reported inAIR1974Ker76
ActsCode of Civil Procedure (CPC) , 1908 - Order 8A
AppellantP.C. Cherivan
RespondentVarkev George and anr.
Appellant Advocate Kalathil Velayudhar Nair and; T.K.M. Unnithan, Advs.
Respondent Advocate T.M.K. Nambier and; T.S.V. Iyer, Advs.
DispositionRevision dismissed
Cases ReferredUthaman Chettiar v. Thiagaraia Pillai.
Excerpt:
.....invoking procedure under 38a right of defendant to be indemnified by third party - third party who issued cheque bound to indemnify defendant to whom cheques issued - no privity of contract between plaintiff and third party required. - motor vehicles act, 1988[c.a.no.59/1988] section 147 (1)(b)(i) [as amended in 1994]; [v.k. bali, cj, m.ramachandran & s. sirijagan, jj] third party risk gratuitous passengers - liability of insurance company held, gratuitous passengers in transport vehicles, including a motor cycle, can have coverage only when a comprehensive policy or extended policy as might be possible to be issued has been availed of by the owner of the vehicle. only in such cases, the insurance company is required to compensate. payment of premium alone can cast a corresponding..........the suit, therefore, is not maintainable and that the plaintiffs remedy is against the third party the drawer of the cheques. the third party's case is that it is true that the cheques were issued by him; but they were issued only as accommodation cheques, he had given no personal under-taking to the plaintiff-bank for discounting the cheques. the cheques are drawn without consideration, and were brought into existence in pursuance of illegal transaction. there was an understanding that both the congress (o) and the kerala congress would jointly collect funds for the election and out of the funds so collected, the kerala congress would be given initially rupees two lakhs on the expectation that the central organization of the congress (o) would contribute substantially for the.....
Judgment:
ORDER

K. Sadasivan, J.

1. Second counter-petitioner In I. A. No. 1238 of 1971 in O. S. No. 16 of 1971 on the file of the Sub Court of Kottayam. is the revision petitioner. He is stated to be a prominent member of the Indian National Congress (Organization). In connection with the mid-term poll of the Kerala Legislative Assembly held in September. 1970. an electoral arrangement was brought about between the Congress (O). and the Kerala Congress by which the former agreed to pay two lakhs rupees to the latter towards its election funds. In pursuance of this arrangement, the revision petitioner issued two cheques to one Varkey George of the Kerala Congress (defendant in the suit) drawn on the Indian Bank Ltd. The cheques are dated 2-9-1970. The defendant took the cheques to the plaintiff-bank (The Padiniarekara Bank) on 4-9-1970. and the bank received the cheques for collection, and paid the defendant the entire Rs. 50,000/- covered by the cheques. When the plaintiff-bank (presented the cheques to the Indian Bank on 27-10-1970, they were returned dishonoured. Thereupon, the suit was filed against the defendant for the money covered by the cheques with interest at 6% from the date of discounting viz.. 4-9-1970. The plaintiffs allege that at the time the cheques were presented to the plaintiff-bank, the defendant had given the assurance that he would pay back the entire amount on 19-9-1970, and that the plaintiff need not send the cheques for collection in the meantime. The plaintiff waited till 27-10-1970 and seeing that the amount was not returned, sent the cheques for collection. It is in this background that the suit was filed by the plaintiff-bank against the defendant, leaving aside the revision petitioner third party who had issued the cheques.

2. Defendant's case is that the plaintiff and the third party are related to each other, and are close business associates. The cheques were presented to the plaintiff-bank on the specific direction of the third party: the cheques are drawn for valuable consideration and that the defendant had not given any personal assurance to the plaintiff as alleged in the Plaint. Even no notice of dishonour has been sent to the third party. The suit, therefore, is not maintainable and that the plaintiffs remedy is against the third party the drawer of the cheques. The third party's case is that it is true that the cheques were issued by him; but they were issued only as accommodation cheques, He had given no personal under-taking to the plaintiff-bank for discounting the cheques. The cheques are drawn without consideration, and were brought into existence in pursuance of illegal transaction. There was an understanding that both the Congress (O) and the Kerala Congress would jointly collect funds for the election and out of the funds so collected, the Kerala Congress would be given initially rupees two lakhs on the expectation that the Central Organization of the Congress (O) would contribute substantially for the election expenses of the Kerala Congress. Since there was delay in making available the funds from the Indian National Congress, the cheques in question were issued so that, the defendant might borrow on the strength of the cheques. They were not intended for collection at all.

3. I. A. No, 1236 of 1971 was filed under Order VIII-A of the C. P. C. prav-ing for leave of the court to issue notice to the third party for his impleadment as according to the defendant, he is entitled to contribution and indemnity against the third party.

4. The question is simple and falls in a narrow compass. The fact is undisputed that the two cheques were issued by the third party to the defendant drawn on the Indian Bank Ltd., and they were taken to the plaintiff-bank and cashed. The plaintiff-bank in their turn, sent them for collection to the Indian Bank and got them returned with the endorsement Refer to drawer', evidently showing that there were no funds in the bank to the drawer's credit. It is in this situation that the plaintiff-bank instituted the suit. There cannot be any doubt that the suit is one on the cheque and under Section 37 of the Negotiable Instruments Act the drawer of the cheque is a necessary party to such a suit. The drawer of the cheque in the absence of a contract to the contrary is liable in such an action as principal debtor and the other parties thereto liable only as sureties. Section 38 would lay down that as between the parties so liable as sureties, each party is in the absence of a contract to the contrary also liable thereon as a principal debtor in respect of each subsequent party. It is clear therefore, that the drawer (third party in the present case) is liable as principal debtor in respect of each subsequent party. This law of course, is subject to a contract to the contrary, and to justify the exoneration of the third party from the action the plaintiff would put forward a contract to the contrary, saving that the defendant had given an undertaking that the money would be returned on 19-9-1970 and that he had requested the plaintiff not to send the cheque for collection in the meantime. Prima facie there is no basis for this contention. Even if there was such an undertaking, the cheques having been presented for collection and returned dishonoured, the position would assume a different complexion altogether and without the drawer on the party array, no finality could be had for the action. In invoking the procedure under Order VIII-A what is material is not the plaintiff who files the suit but the right of the defendant to be indemnified by the third party. (Rangaswami v. Ramaswami. AIR 1971 Mad 328). It is the definite case of the defendant that the cheques were issued In pursuance of an electoral arrangement and to provide funds for the election campaign of the Kerala Congress. The amount covered by the cheques was only in part payment of the amount promised. In the circumstances, the Plea of the third party that the cheques were issued without consideration must fail. Order VIII-A is intended to benefit the defendant who if defeated in the action, is entitled to reimbursement by wav of indemnity. In such a case, the policy of the rule is that the defendant need not be driven to a fresh suit to out the indemnity into operation. Veeraswami J (as he then was) would observe in Parasmal v. Rajalakshmi (AIR 1970 Mad 47):--

'Conceived, as it is. for the benefit of the defendant all that is necessary for the application of third party procedure is whether if the plaint claim is allowed the defendant has a claim, in that event, for indemnity by reason of such claim be-ins allowed from a third party. If that requisite is satisfied, the Court will not be justified, on any extraneous ground, from refusing third party procedure.'

In the present case it is obvious that the third party who issued the cheques is bound to indemnify the defendant to whom the cheques were issued, and it would be sheer waste if the defendant is driven to a fresh suit for contribution from the third party. That liability can conveniently be adjudicated upon In the present suit itself. The following observation of Anantanaravanan C. J. in Rudranpa v. Narasimha (AIR 1965 Mad 495) is particularly relevant in this connection. The learned Judge observed:--

'Order 8-A. R. 1 manifestly applied to the situation. Any later suit that might have to be filed by the defendant against the proposed party in case the present suit by the plaintiff (assignee) succeeded, might well be brought within the scope of an action for 'indemnity' which expression has to be broadly interpreted and means 'claims to indemnity as such either at law or in equitv'. Order 8-A was a separate provision, formulated in the interests of justice, and its applicability was not affected by Order 34 Rule 1 provided that the facts of the case warranted the impleading of the proposed third party. The impleading of the proposed third party was also in the substantial interest of justice with regard to the scope of Order 1 Rule 10 Civil P. C,'

That was a suit filed by the assignee of the mortgagee. The defendant-mortgagor applied under Order 1 Rule 10 and Order 8-A, Rule 1 to implead the original mortgagee (assignor) as party defendant claiming that he had discharged the debt before assignment by payment to the original mortgagee, reiving on the receipt purported to have been passed by the original mortgagee. The original mortgagee and the plaintiff denying the genuineness of the receipt opposed the application.

5. It is not necessary that there should be any privity of contract between the plaintiff in the suit and the third party sought to be impleaded. The plea that the cheques were only accommodation cheques is also of no avail, as was held in Bank of Hindustan v. Govindarajalu. AIR 1934 Mad 75). Ramesam. Officiating C. J. speaking for the Bench observed:--

'Mere knowledge on the part of the endorsee of the fact that the bill or note is an accommodation note or bill whether the knowledge is at the time of the endorsement, or afterwards is absolutely irrelevant. Not knowledge but actual contract to the contrary is the only thing that will effect a reversal of prima facie position, namely, that the maker or the acceptor, is the principal debtor and the payee or the drawee is the surety'.

The contract to the contrary, as we have already seen, is of no consequence in the present case. The third party when he drew the cheques was undoubtedly meaning business as is clear from the surrounding circumstances and he cannot now shirk responsibility for the amount. Learned counsel for the revision petitioner invited my attention to the ruling in Uthaman Chettiar v. Thiagaraia Pillai. (AIR 1956 Mad 155) wherein the Court observed:--

'It is inexpedient, inadvisable, and dangerous to issue a third party notice, simply because the defendant in a suit on a promissory note alleges in the written statement that several other persons are jointly liable with him and wants third party notices to be issued to them, even though the plaintiff does not claim any remedy against them, and does not admit their liability'.

This decision of the learned single Judge is seen to have been dissented from in subsequent decisions of the same Court. In AIR 1971 Mad 328 cited already, the learned Judge has pointed out that (AIR 1956 Mad 155) is no longer good law. Moreover. the facts of the above case stand on a different footing. Even in that case, the learned Judge has pointed out that third party notices can be issued when justified by the contents of the document promissory note, or cheque etc. In the present case. I need not reiterate that on the contents of the cheque notice should go to the third party, the drawer of the cheque. For avoiding multiplicity of proceedings also. such a course is necessary in the present case.

6. The revision petition in the circumstances, is dismissed. No costs.


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