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Sukhlall Chandanmull Vs. the Eastern Bank, Ltd. - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtKolkata
Decided On
Judge
Reported in(1919)ILR46Cal584,58Ind.Cas.641
AppellantSukhlall Chandanmull
RespondentThe Eastern Bank, Ltd.
Excerpt:
bills of exchange - foreign bills--'dishonour' what constitutes--notice of dishonour--acceptance--drawees' obligation to accept--drawrs right to notice--custom and trade usage--effect of war on performance of contract--negotiable instruments act (xxvi of 1881), section 135--bills of exchange act, 1882 (45 & 46 vict. clause 61) sections 42, 50(2) clause (iv). - sanderson, c.j.1. this is an appeal by the defendants from the judgment of chaudhuri j., by which he gave judgment for the plaintiffs in respect of the amount of certain bills of exchange and interest.2. the plaintiff bank is a company incorporated under the english companies acts and has a branch office in calcutta, and the defendants carry on business in calcutta.3. the bills sued on were 20 in number, 19 were drawn by the defendants to the order of themselves upon messrs. w.f. malcolm & co., london, and were payable three months after sight, and one bill was drawn by the defendants to the order of themselves upon messrs. c.j. hambro & son, london, six months after sight. the bills were drawn against bales of jute which were shipped before the outbreak of war, but the goods were carried.....
Judgment:

Sanderson, C.J.

1. This is an appeal by the defendants from the judgment of Chaudhuri J., by which he gave judgment for the plaintiffs in respect of the amount of certain bills of exchange and interest.

2. The plaintiff Bank is a company incorporated under the English Companies Acts and has a branch office in Calcutta, and the defendants carry on business in Calcutta.

3. The bills sued on were 20 in number, 19 were drawn by the defendants to the order of themselves upon Messrs. W.F. Malcolm & Co., London, and were payable three months after sight, and one bill was drawn by the defendants to the order of themselves upon Messrs. C.J. Hambro & Son, London, six months after sight. The bills were drawn against bales of jute which were shipped before the outbreak of war, but the goods were carried in ships and were destined to ports, which, it was assumed on the hearing of the appeal, became after the outbreak of war on the 4th August, 1914, enemy ships and enemy ports and the goods were covered by German policies.

4. The defendants endorsed the bills to the plaintiffs who discounted the bills in Calcutta and received the shipping documents, which together with the bills were in due course transmitted by them to their office in London.

5. The bills were drawn by the defendants upon Malcolm & Co. in pursuance of a contract whereby according to the evidence of Mr. Morley, the defendants were under a liability to insure against war risks.

6. As regards the bill drawn upon Messrs. Hambro & Son, the position is not clear. There appears to have been a letter of credit from the Bochmische Bank, Prague, in favour of Malcolm & Co. in London for a sum of 2,970 on six months sight for the account of Mr. Joseph Etrick of Jaromer (see Mr. Bagster's evidence, p. 53): there was no other letter of credit except this which would entitle the defendants to draw on Hambro & Son, and inasmuch as the letter was in favour of Malcolm & Co., and not in favour of Hambro & Son, there is nothing in the evidence to show that Hambro & Son, were under any obligation to accept or pay the bill.

7. On the 1st August, 1914, i.e., before the outbreak of War, the plaintiffs in Calcutta wrote to the defendants and asked for confirmation that the goods had been fully covered against war risk. The defendants sent no answer, and it was only in reply to a further letter of the 5th August, 1914, that the defendants wrote on the 5th:

FromSukh Lall Chandanmull.ToThe Eastern Bank, Ld.5th August, 1914.Dear Sirs.When our cargo was shipped there was no talk of war, so we have not taken out any war risk, and now the insurance agents refuse to take any war risk on Western ports. We expect only a very small quantity of drafts remain unaccepted. Possibly in the Sections 'Wcstmark' which steamer is likely to be detained this side of the canal. As regards c and V sales, we can give you no information, but think all drafts have been accepted. Yours faithfully, Sukh Lall Chandanmull.

8. It was not therein alleged that the insurance could not have been effected if steps had been taken on or about the 1st August, 1914. In this connection it is material to refer to the letter of defendants' solicitors of the 27th August, 1914, in which they write 'with reference to our senior's interview with you on the 25th instant, the drafts would appear to have been refused acceptance as the consignments were not covered by war risk. We have now before us the contracts under which these goods were shipped, and as they are C.I.F. contracts the consignee was presumably justified in refusing acceptance under the circumstances'. So that it was apparently admitted that in respect of all the bills the consignees were justified in refusing acceptance on the ground that the goods were not covered by war risk. The bill drawn on Hambro & Son arrived in London on the 4th August, 1914. That day and the 5th and 6th were Bank holidays and the bill was presented by the plaintiffs for acceptance on the 7th, and, according to Mr. Bagster's evidence, perhaps on the 7th but at all events on the 8th, it had been noted by Hambro & Son that acceptance was refused. It was not, however, returned to the plaintiffs until the 20th August. It was noted on the 21st and notice of dishonour was given to the defendants on the 21st August, 1914.

9. The bills drawn on Malcolm & Co. arrived in London on the 14th August. They were presented by the plaintiffs for acceptance on the same day and they were returned to the plaintiffs dishonoured on the 18th August. They were noted on that day, and notice of dishonour was given to the defendants on the 21st August.

10. Meanwhile, on the 12th August, 1914, there was an interview in Calcutta between Mr. Jones and Mr. Andrews, representing the Bank, and Sukhlall, at which Mr. Jones asked if Sukhlall had covered the war risk. He said he had not, but that the bills would be accepted by his friends in London, and if not he would remit the money to secure acceptance.

11. No such remittance, however, was made and on the 14th August, 1914, the plaintiffs wrote as follows:

Exhibit A.--contd.).'Eastertide' 14th August, 1914.Messrs. Sukhlall Chandanmull,Calcutta.Dear Sirs,War risk on goods Is shipped by German and Austrian steamers relative to bills negotiated by us per mails of 16th and 23rd July 1914.

With reference to our conversation of the 12th instant, since you have not covered the above shipments against war risk as requested in our letters of 1st and 5th instant, we shall be glad if you will repay us the amount of the bills. We may say that our other clients at our request have taken the precaution of covering their shipments en route against war risk and we therefore feel we have no option but to ask you to repay us the amount of the bills in question. A detailed statement is enclosed. Yours faithfully, Manager.

12. To this no reply was forthcoming. All the bills were protested on the 25th September, 1914, and on the 29th October, 1914, the bills were presented to the defendants for payment together with full sets of documents: which documents obviously included the bills of lading and invoices, as appears from the letter of plaintiffs' solicitors of 6th February, 1915. Payments of the bills has not been made.

13. The first point which was relied upon by the appellants was that the provisions of the Negotiable Instruments Act, 1881, applied to this case, and that as the plaintiffs had allowed the drawees more than 24 hours, exclusive of public holidays, to consider whether they would accept the bills, the appellants were discharged from liability to the plaintiffs in respect thereof under the provisions of Section 83. On the other hand, it was contended for the plaintiffs that the bills were foreign bills and were made payable in London and that by reason of Section 135 of the Negotiable Instruments Act the law of England determines what constitutes dishonour and what notice of dishonour is sufficient, and, further, that there was a custom in London by which in the case of such bills as those in question, known as 'jute bills,' a longer time than the customary 24 hours was allowed for acceptance. Apparently no definite time was alleged, but it was stated that 'jute bills' were in some cases allowed to remain for acceptance from 2 to 7 days, or, in exceptional cases, even more. The bills were drawn and endorsed in Calcutta: the drawees' address is given in the bills as London: they were consequently foreign instruments and they were, in my judgment, made payable in a different place from that in which they were made and endorsed. Section 135 of the Negotiable Instruments Act, therefore, applies, and the law of England determines what constitutes dishonour and what notice of dishonour is sufficient.

14. As to the alleged custom, it is to be noted that no such custom or trade usage was pleaded; but in view of the 3rd. issue raised by the plaintiffs at the trial, this matter was investigated and the learned Judge decided in the plaintiffs' favour on this point.

15. In my judgment, in the first place, the alleged practice is too indefinite and uncertain to be accepted as a custom or trade usage, and in the second place the evidence is by no means sufficient to establish it: and, therefore, even if the law of England as to dishonour and notice of dishonour is to be considered as applicable to this case, the customary period of 24 hours would apply. As to the conditions prevailing in England immediately after the outbreak of war, the evidence of Mr. Martin Holland shows that there was no custom in the sense of established practice during that time. In the case of all the bills the abovementioned customary period was greatly exceeded, and if the matter rested there, this would afford an answer to the plaintiffs' claim, inasmuch as the claim is based upon the bills of exchange only, and no claim has been included for money had and received by or for money paid to the defendants.

16. The matter, however, does not rest there, for an issue was raised at the trial as to whether the drawees of the bills in suit, or of any of them, were under any liability to accept them.

17. As already mentioned, the defendants' solicitors in the letter of the 27th August, 1914, appear to have assumed that the drawees were justified in refusing acceptance, the contracts being C.I.F. contracts, by reason of the goods not being covered against war risks.

18. There remains the further question, whether, having regard to the outbreak of war and the King's Proclamation against trading with the enemy, and having regard to the nature of the contracts in question, the drawees were under any obligation to the drawers to accept the bills.

19. The facts as to the position of the ships and their destination at the outbreak of war were not clearly proved, nor was it proved what happened to the ships and goods thereafter; but it was assumed for the purpose of the argument in this Court that after the outbreak of war the goods were in enemy ships and destined for enemy ports.

20. It was conceded by Sir B.C. Mitter, for the appellants, that the drawees could not receive the goods or the documents of title to the goods by reason of the outbreak of war, and I think this must be so, for, apart from the question as to the contract of affreightment being dissolved or determined by the outbreak of war, the goods being in enemy ships and destined for enemy ports, a dealing in such goods would have involved a trading with the enemy, and consequently the further performance of the contract became impossible.

21. The learned Counsel, however, argued that it would not have been illegal for the drawees to have accepted the bills.

22. In my judgment any further step in the performance of the contract was rendered impossible by the outbreak of war, and further it might also be said that acceptance of the bills by the drawees, under the circumstances of this case, would have amounted to a trading in goods destined for enemy ports and would come within the meaning of the prohibition of the Proclamation, for the acceptance would in. effect have been an undertaking to pay for the goods destined to enemy ports. The drawees, therefore, were under no obligation to the appellants, the drawers, to accept the bills.

23. It was contended, however, on behalf of the appellants, that Section 42 of the Bills of Exchange Act, 1882, applies to this case, and that inasmuch as the bills were not accepted within the customary time, viz., 24 hours, the plaintiffs were bound to treat the bills as dishonoured by non-acceptance; that the plaintiffs did not treat the bills as dishonoured and that they consequently lost their right of recourse against the appellants who were the drawers of the bills. By Section 50 (2)(iv) of the Bills of Exchange Act, 1882, notice of dishonour is dispensed with as regards the drawer where the drawee is, as between himself and the drawer, under no obligation to accept the bill. Consequently in this case the further performance of the contract having become impossible and there being no obligation on the drawees to accept, the plaintiffs were not bound to give notice of dishonour.

24. But it was contended on behalf of the appellants that even if the drawees were under no obligation to accept the bills and if the plaintiffs were not obliged to give notice of dishonour, still the plaintiffs were debarred from recovering on the bills, inasmuch as, by leaving the bills with the drawees for more than the customary lime of 24 hours, they had not treated them as dishonoured and had thus lost their right of recourse against the appellants.

25. In my judgment, if we were to adopt this argument, it would be to put an unreasonable construction on the Section: the giving of notice of dishonour is an important part of the 'treatment' referred to in Section 42, and in the circumstances of this case, where such notice of dishonour became unnecessary, the mere fact that the bills were left with drawees more than the customary time cannot debar the plaintiffs from recovering on the bills. The Section in my judgment, assumes that the bill is capable of being accepted or dishonoured by the drawees and does not cover the bills in this case.

26. For these reasons, the plaintiffs were, in my judgment, entitled to succeed in their claim on the bills, subject to the question next to be considered.

27. It was urged on behalf of the appellants that the plaintiffs could not recover on the bills without returning the goods which had not been dealt with by the plaintiffs or the documents of title to the goods and/o without rendering an account of the goods which had been dealt with by the plaintiffs.

28. As regards the first of these points, the documents of title to the goods were tendered to the appellants when the bills were presented to them for payment. Payment was then refused, and consequently the documents of title remained with the plaintiffs. In my judgment, it is not open to the appellants now to rely on the fact that the plaintiffs had not returned the goods or the documents of title, as a defence to the suit.

29. As regards the question of the account, it appears that the dealings with the goods by the plaintiffs were in accordance with the letter of the 8th February, 1915, and other correspondence between the respective solicitors since the institution of the suit, and the Advocate-General, during the course of the hearing of the appeal, offered on behalf of the plaintiffs to render an account of the goods dealt with by the plaintiffs.

30. Under these circumstances the rights of the parties must, in my judgment, be dealt with as they existed at the date of the institution of the suit, viz., the 30th November, 1914. The bills were presented for payment on the 29th October, 1914, together with the full sets of documents; these the appellants then refused to take and the plaintiffs were only prevented from handing them over at the date of the decree by reason of the arrangements made subsequently to the institution of the suit.

31. If an account is not rendered, as offered by the Advocate-General, it is not disputed that the appellants would be entitled to obtain such an account by means of a suit.

32. It was further alleged by the appellants that the plaintiffs had been paid wholly or in part in respect of the bills by reason of the realisation of some of the goods in question.

33. The learned Judge seems to have thought that the evidence showed that a small portion of the goods had realised 1,691-19-7, as against which the plaintiffs claimed 3,418-14-7 by way of costs and expenses.

34. With respect to the learned Judge, I think this is a mistake. The account at pages 174 and 175, together with the evidence of Mr. Andrews, shows that the sum of 1,691-19-7 is the net balance after deducting the sum of 3,418-14-7.

35. With regard to this allegation of payment, the same answer applies to this as to the question of accounts. If this sum of 1,691-19-7 is in the hands of the plaintiffs, it is by reason of the arrangement made after the institution of the suit and already referred to, and it must, if necessary, be the subject of a separate account.

36. In conclusion, I think it necessary to mention that considerable difficulty was caused to us by matters having been raised in the suit, which were not referred to in the pleadings, and no amendment of the pleadings was made. The parties were asked in this Court whether they wished to apply for a remand for any further evidence or consideration Both parties, however, declined a remand, and asked for a decision upon the materials which were before this Court.

37. For the abovementioned reasons, the appeal should in my judgment, be dismissed with costs.

Woodrloffe, J.

38. Before the outbreak of the present war the defendant firm drew one bill of exchange on a London firm, Messrs. Hambro & Son and nineteen bills on the London firm of Messrs. Malcolm & Co. The bills were secured by bills of lading relating to certain jute said to have been sold by the defendant firm to the drawers. The defendant firm discounted the bills with the plaintiff Bank, endorsed the bills and received cash and made over the documents of title covering the goods. By agreement with the latter, the defendant firm was bound to cover the consignments against war risk. The goods were shipped by enemy vessels. Both before and after the outbreak of war the defendants were called upon to insure, but they did not do so. It is said that at one time the defendants could not get a policy, but however this may be, the answer does not apply to requests made before them on the 1st August. In consequence of the failure of the defendants to do what they had agreed to do, they are now in the position which they find themselves. War broke out. Malcolm & Co. refused to accept on the ground that the goods, in respect of which the bills were given, were not insured. Messrs. Hambro refused to accept because the bill drawn on them was not in order. There is no evidence that they were under any liability to accept. The uncontradicted evidence is, that the defendant firm on the 12th August, when asked whether they had covered war risk, replied that they had not done so, but gave their word to the Bank that the bills would be accepted by their friends in London and, if not, they would remit the money to secure acceptance. This they have not done. The drafts were not accepted and on the 27th August the defendants' solicitor wrote that the consignees were presumably justified in refusing acceptance as the consignments were not covered by war risk in accordance with the terms of the contract with Messrs. Malcolm & Co. As regards the bill against Messrs. Hambro & Son, it does not appear what the relations between the defendants and that firm were so as to make it incumbent on the latter to accept bills drawn on them. The letter of credit given by the Bohmische Escompte Bank on Hambro & Son in favour of Malcolm & Co. says that insurance will be attended to by the shippers, but nothing is said about war risk. The goods in this case were, however, covered by a German policy and carried in a German vessel. The Hambro bill reached London on the 4th August, 1914, the date the war broke out. This and the two following days, the 5th and 6th, were Bank holidays. The bill was presented on the 7th. From the evidence of Mr. Bagster on behalf of Hambro & Son it appears that so far as that firm was concerned, it had refused to accept on the 8th; but the bill was left with them and the plaint says that the plaintiffs treated it as dishonoured on the 20th August when the holders got back the bill, which was noted, and of which notice of dishonour was given on the 21st August.

39. The other bills reached London on the 14th August, were presented on the same day, and were, according to the plaint, returned or taken, back dishonoured on the 18th August. It was noted the same day and notice of dishonour was given on the 21st August. All bills were protested on the 25th of the month following. It will be observed that in each case the period of 24 hours is surpassed, in the latter case by three, and in the former case by twelve days.

40. On the 29th October, 1914, the plaintiff Bank wrote to the defendant firm presenting for payment the dishonoured bills and full sets of documents. These were not taken back, nor was the sum claimed paid. At an earlier period the defendants' solicitor had asked the Bank to take steps to secure the goods over which they had a lien. There have been some dealings with the goods, and the defendant firm alleges that the plaintiff Bank has received full or partial satisfaction of the amount of the bills through such dealings.

41. The plaint sues upon the dishonoured bills. The written statement pleads that the defendants are discharged because the Bank allowed the drawees more than 24 hours to consider whether they would accept the bills. It further pleads that there was no due notice of dishonour and that by the usage of business in Calcutta, and according to the understanding of the parties, the plaintiff Bank was not entitled to sue for the full amount on the bills' but only for the deficiency, if any, after realising the value of the goods, which, it was further contended, could not be recovered in this suit.

42. Some difficulty arises owing to the form of the plaint which does not raise any question as to the liability to accept either by reason of the goods not being covered by insurance, or by reason of the fact that the goods were being carried in enemy vessels destined for enemy ports. It states only a case of presentment, dishonour and notice; and the dishonour being stated to have occurred after 24 hours, it was sought on the evidence to excuse the delay on the ground that business was in confusion on account of the outbreak of war and that more than 24 hours were allowed in respect of this class of jute bills arriving from abroad. No custom or usage was, however, pleaded. On the other hand, whilst the written statement alleges a full or partial satisfaction of the bills, it does not ask for an account, but that the suit should be dismissed. On the other hand, an issue was raised at the trial by the plaintiffs whether there was any liability to accept the bills, and though the learned Judge does not find as to the liability to accept the bills he holds that the war having broken out before the documents were tendered, the drawees would have been justified in refusing acceptance of goods destined to enemy ports. As both the bills and the goods were connected, this necessarily implies a finding as to the bills also. He has found against the plaintiffs on the question of insurance, but I think, erroneously. There is an admitted obligation to insure against war risks as regards the Malcolm Bills and goods, and if after the outbreak of war there was a difficulty in getting such insurance, the defendant firm were asked to insure in terms of their agreement before that. He has, I think, rightly decided against the contention raised in issues 5, 6 and 7. The defendants have given no evidence in support of the case raised in paragraph 6 of the written statement. The provision in the general deed of hypothecation was meant to meet such objection. On the other hand, the defendants were permitted to raise issue 8, 'whether the defendant was entitled to credit for the amount realised by sale of the goods.' It has been contended before us by learned Counsel for the appellants that the plaintiffs should not have been allowed on their pleadings to enter into the question of liability to accept. However this may be, it is too late to take such an objection. No such objection was taken at the trial. If it had been, and if it had been sustained, the plaintiffs might have asked to amend. Further, the question of insurance and carriage in enemy vessels was known to the parties, was alluded to in the evidence, and the defendants solicitor's letter before action admitted that non-insurance justified non-acceptance by the consignees. On the other hand, no objection was taken to the raising of issue 8 by the plaintiffs who, however, contended that they were entitled to a decree on the bills without bringing in the goods. This may be; but nevertheless in a suit on the bills the defendants might plead that the plaintiffs had been paid, in whole or in part, the value of the bills by sale of the goods securing them, of which they are mortgagees in possession and against whom there might be an account. In my opinion, both parties are, having regard to the issues, entitled to raise their respective contentions abovementioned. Whether the defendants are entitled to the relief asked is discussed later.

43. The question then is, were the defendants discharged from liability on the bills by reason of the delay and grounds stated in the written statement and whether, if so, the suit should be dismissed, for it is a suit on the bills only without any alternative claim for relief on the ground of money paid to the defendants. Secondly, in the event of the plaintiffs claim as endorsees of the note being maintainable, whether the defendants are entitled to the account which they claim as regards dealings with the security for the bills, the subject of the action. Neither party asked for a remand, but a decision on the facts on the record.

44. The bills were, in my opinion, made payable in London. The rule is that no more than 24 hours should be given to the acceptor to determine whether he will accept a bill, however that 21 hours be calculated. In the present case the delay was much over 24 hours. In this matter we are not concerned with equitable considerations, but with the question what is the law. The period is well established. I am unable to agree with Chaudhuri J.S finding and the grounds therefor on this point. No special trade-usage is pleaded or proved. The result is, that the bills were left with the acceptor for such a time as would have discharged the defendants if there were nothing more. But in the present case there is the question of the non-liability of the drawees to accept the bills both by reason of the outbreak of war and the other reasons mentioned. The argument however, is that Section 42 of the Bills of Exchange Act applies to discharge the defendants from all liability on the bills (whatever other cause of action the plaintiffs may have) because the bills were not treated as dishonoured within the customary period of 24 hours, even if there were no obligation to accept them and to give notice of dishonour. To hold this would be, I think, to take a view of this section of the English Act contrary to common sense seeing that notice of dishonour is part of 'treatment' and such notice is not necessary where there is no liability to accept. Moreover, the effect of the proclamation of war was to render the further performance of the contract evidenced by the bills impossible, and Section 42 must presuppose a bill capable of being both accepted and rejected; and the provisions relating to treatment of a bill as dishonoured assume, I think, such a bill. In my opinion, the plaintiff Bank are, under the circumstances, entitled to recover as endorsees against the drawers.

45. The last question is, whether the defendants are entitled to an. account in this suit of the plaintiffs' dealings with the goods. The written statement does not ask for such an account, but, nevertheless, if the application could be supported on other grounds, I would not have considered this omission in the way, for as in the case of the plaintiffs on another point, the omission is remedied by the issues. There are, however, practical difficulties in the way. Thus, though the defendants' solicitor applied for the Bank's assistance before institution of the suit, the arrangements under which the plaintiff Bank appears to be now dealing with the goods are contained in correspondence passed since the institution of the suit. Nor is it clear that it is possible, on the materials now available, to take such an account, seeing, amongst other things, that no communication is possible with enemy countries, nor is it feasible to get other material information at present. There is the less necessity for a decree directing an account in that the Advocate-General on behalf of the Bank has offered to give it, so far as the information received by the Bank allows it to do so. It is further conceded that if an account is not given, the defendants have their remedy to enforce such an account by suit. Had the decree not been executed, this would, I think, have been a case in which the decree on the bills should be stayed pending an account on the security. But this is not necessary as the defendants have already paid the Bank the money due on the bills.

46. I am of opinion, therefore, that the plaintiffs are entitled to a decree on the bills, and that unless the parties can agree on the question of an account as to the security, that matter should be the subject of a separate suit. On these grounds I hold that the appeal should be dismissed with costs.


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