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Meghji Malsee Ltd. Vs. P.C. Oommen of Pulivelil Kizhakkethil House and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKerala High Court
Decided On
Case NumberA.S. No. 458 of 1958
Judge
Reported inAIR1963Ker306
ActsEvidence Act, 1872 - Sections 114; Negotiable Instruments Act, 1881 - Sections 31; Contract Act, 1872 - Sections 70
AppellantMeghji Malsee Ltd.
RespondentP.C. Oommen of Pulivelil Kizhakkethil House and ors.
Appellant Advocate V. Parameswara Menon, Adv.
Respondent Advocate K.C. John, Adv. for Respondent (No. 2),; George Vadakkel, Advs. and;Official Liquidator for;
DispositionAppeal dismissed
Cases ReferredPrince v. Oriental Bank Corporation
Excerpt:
commercial - dishonour of cheque - section 114 of evidence act, 1872, section 31 of negotiable instruments act, 1881 and section 70 of contract act, 1872 - first defendant issued two cheques in favour of plaintiff - plaintiff entrusted them for collection to his bank - payment not made by third defendant bank as cheques were missing while in transit - plaintiff sued for amount of two cheques - suit decreed against first defendant and dismissed against third defendant - whether third defendant liable for amount - no provision that drawee liable on instrument - drawee of cheque having sufficient funds of customer liable only towards drawer and not towards payee - no proof of negligence or as to loss or damage sustained - decree dismissing suit against third defendant affirmed. - .....them through the travancore bank to the bank of deccan, kottayam, which is the 3rd defendant's head office and which may be referred to hereafter as the head office. it was common ground that the head office transmitted the cheques by post under certificate of posting to the third defendant. it is the case of the 3rd defendant firstly, that it had no funds of the first defendant to honour the cheques and secondly, that when the envelopes were opened at mannar the cheques were found missing, having been abstracted while in transit. some correspondence ensued between the concerned banks, but the cheques were not traced and no payment was made. the plaintiff filed the suit against the four defendants, the 2nd defendant being the brother, and being alleged to be a partner of the first.....
Judgment:

S. Velu Pillai, J.

1. The plaintiff sued for the amount of two cheques, one for Rs. 2727/- dated the 7th November, 1955, and the other for Rs. 2657-12 as. dated the 12th November, 1955, drawn in his favour by the first defendant on the 3rd defendant, the Bank pf Deccan Ltd., Mannar branch. The plaintiff entrusted them for collection with the Union Bank of India, Cochin, which forwarded them through the Travancore Bank to the Bank of Deccan, Kottayam, which is the 3rd defendant's head office and which may be referred to hereafter as the head office. It was common ground that the head office transmitted the cheques by post under certificate of posting to the third defendant. It is the case of the 3rd defendant firstly, that it had no funds of the first defendant to honour the cheques and secondly, that when the envelopes were opened at Mannar the cheques were found missing, having been abstracted while in transit. Some correspondence ensued between the concerned banks, but the cheques were not traced and no payment was made. The plaintiff filed the suit against the four defendants, the 2nd defendant being the brother, and being alleged to be a partner of the first defendant. The Additional District Judge decreed the suit against the first defendant and dismissed it against the others. This appeal was instituted against defendants 2, 3 and 4, but was pressed at the hearing only against the 3rd defendant.

2. The first question to determine is whether the 3rd defendant was in funds to make payment. This aspect of the case has not been properly dealt with by the lower Court. The plaintiff had alleged in the plaint that the first defendant had an overdraft account with the 3rd defendant, and in particular had remitted a sum ofRs. 2800/- on the 23rd November, 1955, into the bank, for making payment under the cheques. The 3rd defendant while denying these allegations generally, had in a way admitted that the first defendant was being given accommodation occasionally. On the 7th January, 1957, an application was filed for the plaintiff calling upon the 3rd defendant to produce its account books and other records so far as they related to the first defendant. This was ordered on the same day, directing the 3rd defendant 'to produce the records mentioned in this petition, if he is in possession of the same on or before 18-1-1957.' The 3rd defendant did at no time demur to this or make any statement that it had no account books or other records. It is unthinkable that a bank would disclaim possession of such records. After the above order was passed, a series of applications for adjournment were made on behalf of the 3rd defendant. Afterwards the 3rd defendant went into liquidation and at the last stage of the trial an application made to implead the provisional liquidator was dismissed. The account books and other records of the 3rd defendant if produced, would have proved almost conclusive. The 3rd defendant must be held to have withheld these documents, and it is only proper in the circumstances, to draw a presumption that the documents if produced would go against the 3rd defendant. On this ground, differing from the lower Court, I hold that the 3rd defendant was in funds to make payment under the cheques.

3. There is no sufficient basis for holding that the cheques' were as a matter of fact abstracted while in transit and did not reach their destination, the 3rd defendant. It is seen from Ext. P-4, that the earlier cheque was despatched from the head office on the 10th November, and the cover was delivered on the I5th November, 1955, and that the later cheque was despatched similarly on the 17th November, and the cover was delivered on the 21st November, 1955. On the 24th November, 1955, the head office intimated the Travancore Bank, Kottayam, that the cheques were found missing. By Ext. P-3 the head office addressed the first defendant on the 3oth November, 1955, intimating him that the cheques had been abstracted from the covers before they were delivered and requesting him to issue duplicates. The head office also addressed the Superintendent of Post offices by Ext. P-4 on the 1st December, 1955, requesting him to take up investigation as to the loss of the cheques during transit. It is not known what came of it. Even the covers received are not in evidence. The first defendant wrote to the plaintiff by Ext. P-13 on the 2nd November, 1955, that to his knowledge the cheques in question had been duly delivered to the 3rd defendant, but that for some reason or other, it was being stated that they were lost. The first defendant seems to have left for Bombay and he addressed the plaintiff again by Ext. P-18, stating that what the 4th defendant had been saying about the loss of the cheque was all false. He also sent to the plaintiff three other cheques which had come into his possession. There is some suspicion about the first defendant's conduct in relation to this, but there is nothing to connect him with the disappearance of these two cheques.The cheques having been despatched admittedly from the head office by post under certificate of posting, it is fair to presume in the absence of anything to the contrary, that they were duly delivered to the 3rd defendant. The fact that some cheques have come into the first defendant's hands may suggest, that the 4th defendant handed over them after receiving them, to serve some purpose. However that be, the 3rd defendant must be presumed to have received the cheques, and having been in funds was not justified in withholding payment.

4. The most important question is whether the plaintiff cart hold the 3rd defendant liable for the amount. Section 31 of the Negotiable Instruments Act is the only provision to which my attention was invited, which deals with the liability of a drawee of a cheque. It enacts that

'the drawee of a cheque having sufficient funds of the drawer in his hands, properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, must compensate the drawer for any loss or damage caused by such default.'

This speaks of the liability of the drawee to the drawer, but not to the payee of the cheque. In Jagjivan Mavji v. Ranchhoddas Meghji, AIR 1954 SC 554, dealing with Section 31, the Supreme Court observed as follows:

'There is no provision in the Act that the drawee is as such liable on the instrument, the only exception being under Section 31 in the case of a drawee of a cheque having sufficient funds of the customer in his hands; and even then, the liability is only towards the drawer and not the payee. This is elementary law .....'

So under the Negotiable Instruments Act there isno legal basis for holding the 3rd defendant liable to the plaintiff.

5. It was also alleged in paragraph 6 of the plaint, that when the plaintiff had been to Mannar to make enquiries as to the fate of the cheques, the

'4th defendant showed the plaintiff the bank accounts wherein a payment of about Es. 2800/-made by the first defendant on or about 23-11-1955 for payment towards the above cheques was seen credited.'

That there was an entry in the above terms may be presumed on account of the suppression of the account books. There being nothing in the Negotiable Instruments Act to hold the 3rd defendant liable to the plaintiff, resort must be had to general principles to decide whether the plaintiff's claim can be sustained. The claim can only be if at all, as for money had and received for the plaintiff's use. I find that this principle is subject to limitations. In W. P. Greenhalgh and Sons v. Union Bank of Manchester, 1924-2 KB 153 at p. 161 the Court observed:

'If a person making a payment of money ..... to another, states definitely that such payment is to be used for a particular purpose, and the person to whom it is made does not dissent,he accepts it for the purpose and must use it....only for the purpose for which he receives it; and if the purpose for which the receives it is to pay the money to a third party, and that third party to whom he is told to pay it is informed of the fact that the payment has been made and that the payee is instructed to pay it to him, the 3rd party is in law entitled to recover the money from the person into whose hands it has been put as money had and received for his benefit.'

The rule was stated in similar terms in Warwick v. Rogers, (1843) 134 ER 595:

'There are many cases which establish that no action for money had and received will lie against a banker or agent in respect of funds which his principal has ordered him to pay to any person, at the suit of the person in whose favour the order is made, when the banker or agent has not assented to the order and communicated his assent to the plaintiff.'

On the facts, in (1843) 134 ER 595, it was held that no such assent was communicated. The law as to the liability of a Banker to a holder is summarised thus in Paget's Law of Banking, 6th Edition, at page 298:

'There must be an acknowledgment to, if not a contract with, the specific person who is plaintiff in the action, that the money has been received for his use or is held at his disposal.'

and the learned author relies on the passage extracted above from (1843) 134 ER 505. For the plaintiff the statement of the law in the Negotiable Instruments Act by Bhashyam and Adiga, 1956 edition page 206, that a drawer bank can be held liable if money is paid into the bank by the drawer of the cheque to meet a particular bill and he assents to the same was pressed into service. The authority relied on is the decision of House of Lords in Prince v. Oriental Bank Corporation, (1878) 3 AC 325 at p. 334. On the facts of the case, the point did not arise. However, the rule in (1843) 134 ER 595 was affirmed and was supported on the ground, that the money had been paid specifically for payment of a particular bill and had been accepted by the bank as such and by such acceptance the bank had made itself liable to hold it for the plaintiff. There was no occasion to consider the limitations to the above rule. I adopt the rule in W. P. Greenhalgh's case, 1924-2 KB 153 cited as governing the liability of a Banker to the holder. All that can be held on the facts in the present case is that a remittance of Rs. 2800/- was made by the first defendant on the 23rd November, 1955, supported by the two cheques, and That this was supported by the entry in the account book. This may be deemed to spell assent of the 23rd defendant but no communication of such assent to the plaintiff was even pleaded. The plaintiff himself came to know about this when he made enquiries on his own as to what happened to the cheques. The rule stated above cannot apply, The plaintiff cannot be given a decree against the third defendant even to the extent of Rs. 2800/-as for money had and received for the plaintiff's use.

6. Finally it was urged, that the claim for damages for negligence against the 3rd defendant has to be sustained. The allegation as to negligence in paragraph 13 of the plaint is not clear or sufficient. However, the evidence furnished by the correspondence, does not show that the third defendant or the head office in Kottayam had been negligent in intimating the plaintiff or the banks concerned, about non-payment. There is no proof of negligence or as to the loss or damage sustained.

7. It follows that the decree dismissing the suit against defendants 2 to 4 has to be affirmed, though on other grounds. The appeal fails and is dismissed. In view of the circumstances referred to above, as regards the possession of funds and the receipt of the cheques, I do not order costs to defendants 3 and 4 in this appeal, but the plaintiff shall pay the costs of the second defendant who has been unnecessarily impleaded.


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