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Indian Overseas Bank, Madras and anr. Vs. Naranprasad Govindlal Patel - Court Judgment

LegalCrystal Citation
SubjectBanking;Contract
CourtGujarat High Court
Decided On
Case NumberLetters Patent Appeal No. 102 of 1977
Judge
Reported inAIR1980Guj158; (1980)0GLR132
ActsIndian Contract Act, 1872 - Sections 10
AppellantIndian Overseas Bank, Madras and anr.
RespondentNaranprasad Govindlal Patel
Appellant Advocate M.H. Chhatrapati and; Bhagubhai H. Shah, Advs.
Respondent Advocate G.A. Pandit, Adv. for; C.M. Trivedi, Adv.
Excerpt:
.....until the cheque in question was dishonoured on february 11, 1970 it had continuously enjoyed the overdraft facility with -the bank. the learned trial judge as well as the learned single judge have held that the plaintiff has proved the later part though it has failed to prove that there was any talk with the, agent of the bank when geeta mandir branch of the bank was opened. in our opinion failure to prove the first part of its pleadings is not inconsistent with the subsequent part of its pleadings which it has proved, the document produced by the bank shows that the bank started honouring overdrafts from the plaintiff from february 20, ~ 1966..this facility continued right until the bank dishonoured the cheque in question on february 11, 1970. in other words, overdraft dealings..........limited was wrongly dishonoured on february 11, 1970. the plaintiff also alleged that it had an overdraft facility with the bank to the extent of rs. 5000/-. the cheque in which was dishonoured by the bank was a sum of rupees 3,916/04 ps.2. in defence it was contended by the bank that the plaintiff had no overdraft facility and that the cheque was dishonoured because there was no sufficient cash balance in its account.3. the learned trial judge held that the plaintiff had overdraft facility with the bank and that the bank had wrongly dishonoured the cheque in question even though the cheque could be honoured within the limits of overdraft facility. he, therefore, passed in favour of the plaintiff a decree for damages and awarded to it a sum of rs. 500/-.4. the bank appealed against.....
Judgment:

S.H. Sheth, J.

1. The plaintiff firm filed the present suit against the defendants to recover a sum of Rs. 5,000/- on account of damages suffered by it. Indian Overseas Bank is the defendant. The plaintiff's case is that a cheque drawn by it on Indian Overseas Bank, Geeta Mandir Branch, Ahmedabad and payable to m/s. Mysore Commercial Union Limited was wrongly dishonoured on February 11, 1970. The plaintiff also alleged that it had an overdraft facility with the Bank to the extent of Rs. 5000/-. The cheque in which was dishonoured by the Bank was a sum of Rupees 3,916/04 ps.

2. In defence it was contended by the Bank that the plaintiff had no overdraft facility and that the cheque was dishonoured because there was no sufficient cash balance in its account.

3. The learned trial judge held that the plaintiff had overdraft facility with the Bank and that the Bank had wrongly dishonoured the cheque in question even though the cheque could be honoured within the limits of overdraft facility. He, therefore, passed in favour of the plaintiff a decree for damages and awarded to it a sum of Rs. 500/-.

4. The Bank appealed against the decree. It was First Appeal No. 907 of 1973, which was decided by Mr. Justice N. H. Bhatt. The learned single Judge considered the merits of the case, upheld the conclusion recorded by the trial Court and dismissed the appeal. R is that appellate decree, which is challenged by the Bank in this Letters Patent Appeal.

5. Mr. Chhatrapati who appears on behalf of the Bank has raised before us several arguments. His first argument is that the plaintiff has proved a case, which it did not plead, and that the plaintiff could not have done so. On going through the judgments of the trial Court and the Appellate Court and on going through the evidence, we find that what the plaintiff has proved is that it had enjoyed in overdraft facility. In plaint the p1l'aintiff pleaded that when the Geeta Mandir Branch of the Bank was opened in March 1965 there was a talk between the plaintiff's partner and the Agent of the Bank and that in pursuance of that talk the Bank's agent assured him of overdraft facility, initially to the extent of Rs. 2500/- which was later on raised to Rs. 50001-. It cannot be gainsaid that the plaintiff has failed to prove that there was some such talk between the then agent of the Bank and the plaintiff's partner. The plaintiff has, however, pleaded in the plaint that right until the cheque in question was dishonoured on February 11, 1970 it had continuously enjoyed the overdraft facility with - the Bank. This part of its pleadings has been proved.

The learned trial Judge as well as the learned single Judge have held that the plaintiff has proved the later part though it has failed to prove that there was any talk with the, agent of the Bank when Geeta Mandir Branch of the Bank was opened. in our opinion failure to prove the first part of its pleadings is not inconsistent with the subsequent part of its pleadings which it has proved, The document produced by the Bank shows that the Bank started honouring overdrafts from the plaintiff from February 20, ~ 1966.. This facility continued right until the Bank dishonoured the cheque in question on February 11, 1970. In other words, overdraft dealings between the Bank on one hand and the plaintiff on the other hand during a period of four years - from February 19, 1966 to February 11, 1970 - clearly leads to an interference that there was a contract between the plaintiff and the Bank in respect of over-daft facility. The uninterrupted enjoyment of this facility could not have been terminated by the Bank unilaterally, If the Bank wanted to terminate it, the Bank ought to, have given notice of its intention to do so in which case the plaintiff would not have issued a cheque for the amount exceeding the cash balance in its account. We have no doubt in our minds that the Bank acted wrongly in terminating the facility unilaterally which the plaintiff enjoyed continuously for a period of four years.

6. It has been argued by Mr. Chhatrapati that the over-draft transactions between the plaintiff and the Bank clearly show that it was a facility and not a contract. When two businessmen entered into this sort of relationship for their own interests, it is difficult to imagine that it was personal grace shown by the agent of the Bank. The bank grants over-draft facility in order to earn interest. Its constituents enjoy the overdraft facility in order to develop their business. Therefore, both are deeply interested in such an arrangement. Such an arrangement - euphemistically called by Mr. Chhatrapati as facility - is nothing but a contract, the contract, it is well settled, can be inferred from the conduct of the parties. The enjoyment of over-draft facility for a period of four years unfailingly points to the conduct of the Bank.

7. It has been argued by Mr. Chhatrapati that the overdraft transactions between the plaintiff and the Bank were really not between the plaintiff and the Bank but that they were a result of personal arrangement with the agent of the Bank Stretching his argument further Mr. Chhatrapati has submitted that a personal arrangement with the agent of the Bank does not lead to a contract binding upon the Bank. From the facts on record, we are unable to come to the conclusion that it was a personal arrangement. Merely because the plaintiff was not required to execute any document for this temporary over-draft facility, it cannot necessarily be said that it was a personal arrangement between the agent of the bank on one hand and the plaintiff on the other hand. It appears that there was a change of agent during' the four years during which the plaintiff enjoyed the temporary over-draft facility. If it were a personal arrangement between a particular agent and the plaintiff, the plaintiff would have bee4 required to square up its account as soon as the agent with whom the plaintiff had entered into the personal arrangement was transferred. The evidence Points out to the contrary. It shows that irrespective of whether one person was 'agent or another person was agent the plaintiff continued the enjoyment of temporary over-draft facility. This fact leads to the inescapable inference that there was continuity of overdraft facility between the Bank and plaintiff and that that continuity indicated that whatever arrangement was entered into between the plaintiff and the agent of the Bank was the arrangement between the Plaintiff and the Bank. We are, therefore, unable to accept on -facts the argument advanced by Mr. Chhatrapati that the plaintiff arranged for an over-draft facility afresh with the change of the agent.

8. The next argument winch has been advanced by Mr. Chhafrapati is that in any case what the Bank had granted to the plaintiff was a temporary over-draft facility and nothing more. A temporary over-draft facility is not one, which can be terminated unilaterally and at the sweet will of the Bank without giving its constituent a notice thereof. It is -temporary because it is not intended to be a permanent and everlasting arrangement. Sometimes a constituent is required to square up his account 'at the end of every half financial year - June 30,and December 31. Merely because the over-draft is called temporary over-draft it does not militate against the plaintiff drawing a cheque upon the Bank M1favour of its constituent and in getting it honoured by the Bank.

9. The last argument, which has been advanced by Mr. Chhatrapati, is that in any case the plaintiff was not required to furnish security for enjoying over-draft facility by the Bank. Whether a person who is granted over-draft facility by the Bank should furnish, security depends upon his creditworthiness. If there is a financially sound party, the Bank may not demand security from him. Therefore, merely because the Bank had not demanded security from the plaintiff it does not mean that it was an act of grace. It is well known that those persons*who do not furnish security pay higher rate of interest than those who furnish security. We are, therefore, unable to uphold any of the arguments, which Mr. Chhatrapati has raised before us in this appeal. This is not a case in which we can interfere with the judgment and decree passed by the learned single Judge.

10. These are the only arguments, which Mr. Chhatrapati has advanced before us. He has advanced no more arguments. Since none of the arguments advanced by Mr. Chhatrapati succeeds, the appeal fails and is dismissed with no order as to costs.

11. Appeal dismissed.


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