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Baijnath Agarwal Vs. Ram Kumar Agarwalla and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKolkata High Court
Decided On
Case NumberSuit No. 1666 of 1968
Judge
Reported inAIR1975Cal286
ActsNegotiable Instruments Act, 1881 - Section 30; ;Code of Civil Procedure (CPC) , 1908 - Order 2, Rule 2
AppellantBaijnath Agarwal
RespondentRam Kumar Agarwalla and ors.
Cases ReferredMetcalfe v. Richardson
Excerpt:
- .....the rate of 40 per cent, was in arrears for tie earlier hundis and at the time of execution of the hundi in suit it was agreed by and between the plaintiff and the defendants that the plaintiff would first exhaust his remedies for the loan of rs. 40,500/- by enforcing the mortgages. the defendant no. 1's case is that the said hundi executed on the 7th may, 1965 is not enforceable. the plaintiff is to exhaust his remedies under the equitable mortgage. the acceptance of the hundi by the defendant no. 2 is denied. the suit according to the defendant no. 1 was premature and the plaintiff had no cause of action against the defendants or any of them. it was further pleaded that this court had no jurisdiction to entertain, try or determine the suit. 3. the defendant no. 2, sayeed jabbar has.....
Judgment:

Sudhamay Basu, J.

1. This is a suit for leave under Order 2, Rule 2; a decree for Rupees 88,362.50 interim and further interest and costs. The plaintiff's case, as a appears from the plaint, is that on or about the 7th of May, 1965 the plaintiff lent and advanced to the defendant No. 1 for the purpose of his business a sum of Rs. 75,000/- at 113A, Monohar-das Chowk, Calcutta, payable 60 days from the date. The defendant No. 1, Ram Kumar Agarwal, on the same day made and drew a Hundi in favour of the plaintiff upon the defendant No. 2 for the said sum payable 60 days from the said date. The defendant No. 2 duly accepted the same. To create a further security for the due payment of the said sum the defendant No. 1 deposited certain title deeds with the plaintiff. On maturity the Hundi was presented to the defendant No, 2 for payment but the same was dishonoured by non-payment to the knowledge of the defendant No. I. The plaintiff claims interest at the rate of 6 per cent, per annum from the 6th July, 1965 upto 24th June, 1968. The total claim amounting to RE. 88,362.50.

2. Written statements were filed on behalf of both the defendants. The defendant No. I's case is that the defendant had dealings and transactions with the plaintiff in course of which the total sum of Rs. 40,500/-was lent and advanced to the defendant against equitable mortgage of properties. The defendant gave some details of the money that had been lent and advanced to the defendant prior to the transaction of the suit. Several Hundis, according to the defendant No. 1, had teen executed. As to the transactions in suit the defendants stated that on or about the 7th of May, 1965 the plaintiff represented that interest at the rate of 40 per cent, was in arrears for tie earlier Hundis and at the time of execution of the Hundi in suit it was agreed by and between the plaintiff and the defendants that the plaintiff would first exhaust his remedies for the loan of Rs. 40,500/- by enforcing the mortgages. The defendant No. 1's case is that the said Hundi executed on the 7th May, 1965 is not enforceable. The plaintiff is to exhaust his remedies under the equitable mortgage. The acceptance of the Hundi by the defendant No. 2 is denied. The suit according to the defendant No. 1 was premature and the plaintiff had no cause of action against the defendants or any of them. It was further pleaded that this Court had no jurisdiction to entertain, try or determine the suit.

3. The defendant No. 2, Sayeed Jabbar has stated inter alia, in the written statement that he has no knowledge of what amount if any that was lent or advanced by the plaintiff to the defendant No. 1. According to this defendant it is agreed by and between the plaintiff and the defendants that the defendant No. 1 would execute a proper mortgage deed of his properties which were situated at Calcutta and at Jalpaiguri and that the plaintiff agreed to grant the defendant No. 1 necessary time for execution of the mortgage if the laintiff's loan was secured by a Hundi to be accepted by the defendant No. 2 on the distinct understanding that the said Hundi would be treated as cancelled as soon as the defendant No. 1 executed the promised mortgage. The defendant No. 2 believed the said representation and thereupon accepted the Hundi which had no consideration. As the promised mortgage had been created the Hundi accepted by the defendant No. 2 was cancelled. The defendant No. 2 moreover denied that the Hundi was presented to him. The plaintiff, according to this defendant had no cause of action against him. The suit is alleged to be not maintainable.

4. On the basis of the aforesaid pleadings the following issues were raised :

(1) Did the plaintiff on the 7th of May, 1965 lend and advance to the defendant No. 1 a sum of Rs. 75,000/- as alleged in paragraph 1 of the plaint?

(2) Was the Hindi executed by the defendant No. 2 under the circumstances mentioned in paragraph 2 of the written statement?

(3) Was the Hundi in suit presented to the defendant No. 2 as alleged in paragraph 5 of the plaint?

(4) Does the plaint disclose any cause of action as against the defendant No. I?

(5) What relief, if any, is the plaintiff entitled to?

5. Altogether two witnesses were examined in this case. On behalf of the plaintiff Baijnath Agarwal examined himself. He said that he lent and advanced a sum of Rs. 75,000/- to the defendant Ram Kumar Agarwal in cash on the 7th of May, 1965. He withdrew Rs. 45,000/- from his account in the New Alipore Branch of the United Commercial Bank and Rs. 28,500/- from the Eastern Bank, Dalhousie Square on the same day. The entries in the relevant pass Books were marked Exhibits Al and Bl respectively. The plaintiff further said that the defendants told him earlier on the 6th of May that they wanted Rs. 85,000/- in all. He had Rupees 10,000/- in cash with him. The Hundi was executed on the same day, i. e., the 7th of May, 1965 by Ram Kumar Agarwal and the same was accepted by the defendant Jabbar. The Hundi was marked Ext. C. The amount was payable 60 days after sight. The plaintiff thereafter produced his cash books for the year 1965 and encircled the entry relating to the payment of Rs. 75,000/- to the defendant No. 1 on the 7th of May, 1965. It was marked Ext. D. The plaintiff also tendered an entry in the ledger showing an advance of Rs. 75,000/- to the defendant No. 1 on the 7th of May, 1965. The same was marked Ext. E. Thereafter the plaintiff made demands on the 5th July, 1965 but Mr. Jabbar asked him to go to defendant No, 1 but the latter wanted time. Thereafter he made demands repeatedly but could not get the money. He caused notice to be sent by his solicitor Messrs. B. N. Basu which was dated the 19th of June, 1968 and marked Ext. F. The plaintiff claimed Rs. 83,620.50 being the amount of the loan together with interests thereon at 6 per cent, per annum. In cross-examination to Mr. H. M. Dutt for defendant No. 1 he said that he made payments at about 4 or 4.30 P. M. at bis office at 6, Monohardas Chowk. He said that at the request of Mr. Jabbar he advanced the money. Mr. Jabbar said he would stand as guarantor. They also gave security for the amount. He denied the suggestion that only Rs. 40,500/- was paid by him to the defendant. He also denied that the Hundi in suit was renewal of some old Hundis. He denied to have received two letters dated the 8th September, 1964. Cross-examined on the point of presentment of the Hundi the witness said that he went to Mr. Jabbar with the Hundi and asked for payment. Thereafter he was asked to go to Ram Kumar Babu. He said he repeatedly made demands from both the defendants. Eventually notice was given by his solicitor. He waited as the defendants were promising from time to time that they would make payment. The witness further said that certain documents of title were deposited with him but he could not say if there was any memorandum to the effect that the documents had been deposited with him. The witness said that acceptance of the hundi meant a guarantee for the loan.

6. In further cross-examination to Mr. Mitra appearing on behalf of the defendant No. 2 he said that he had known the defendant No. 2 Jabbar Sahib since 1964-65. Jabbar had a tea garden and had shares in others. The defendant No. 2 used to do work for the Companies of defendant No. 1. He used to purchase and sell goods. The witness had business connexion with Mr. Jabbar after 1965. The witness had at first said that books of accounts would show the same but later on he said that he had dealings with Mr. Jabbar's firm such as Sinabad, Fatmabad tea estates. He presented hundi on the 5th of July, 1965 to Mr. Jabbar. Thereafter he had been to Mr. Jabbar's place on many occasions. He denied the suggestion that Jabbar had no consideration for the hundi. For that there was a condition that as soon as the mortgage would be executed by the first defendant the hundi would stand cancelled. He further denied that the hundi stood cancelled because the mortgage was executed. He denied that the letter of demand was not served on Jabbar. In re-examination the witness proved the signature of Mr. Jabbar acknowledging receipt of the notice in a peon book of Messrs. B. N. Basu & Co.

7. Sri Ram Kumar Agarwalla was examined. He said that several hundis wero executed from time to time by him and the loan amount due was Rs. 75,000/-. He said that he borrowed in all Rs. 40,500/- from the plaintiff against deposit of title deeds. Ho tendered two letters marked Ext. 1. The witness said that he knew nothing about the nonpayment or dishonour of hundi by Mr. Jabbar. He never assured the plaintiff payment after Mr. Jabbar's refusal to pay. He admitted that he made no payment in respect of hundi before the letter of demand was received from Messrs. B. N. Basu. In cross-examination to Mr. P. K. Mullick the witness said that the hundi was duly signed by him. His attention was drawn to the language of the hundi. He said that whenever a hundi was executed it was written in that fashion. He said he never saw a hundi before coming in contact with the plaintiff. He purchased the property at Mahanirvan Road for Rs. 19,000/- in 1963 and the other properties in Jalpaiguri in or about that year for Rs. 23,000. The witness further said that at the time of renewing the new hundi the old hundis were destroyed by Baijnath Babu and about 7 or 8 hundis were thus destroyed. The witness had only one hundi but that too was lost by him. By 1964 all the other hundis had been destroyed. The one that remained with him was also misplaced. The witness was then confronted with the affidavit of documents which he signed on the 7th of June, 1971. According to that affidavit the witness declared that he had in his possession a bundle of hundis. The witness tried to fence by saying that by bundle he meant other documents. Apparently the witness deposed in this respect rather recklessly without any regard for truth. He was also cross-examined with regard to the letters marked Ext. 1. According to the witness such letters were usually written whenever hundis were executed and the witness agreed that he never repaid any money to Baijnath Babu. He also conceded that money that was due to the plaintiff would appear from the documents and books of accounts. Asked as to why he did not disclose books of accounts the witness said that that was so because he was not asked to do so.

8. Mr. H. M. Dutt, learned counsel appearing on behalf of defendant No. 1 raised a number of contentions. On issue No. 4 he contended that the plaint did not disclose any cause of action as against the defendant No. 1. He contended that no notice of dishonour was given to the drawer nor was it pleaded properly. According to him the notice of dishonour must not only be given but should be pleaded. He drew the attention of the court to Section 30, Sections 93, 94 and 98 of the Negotiable Instruments Act. Under Section 30 liability of the drawer accrues after the receipt of the due notice of dishonour. Section 93 prescribes by and to whom the notice should be given of the dishonour of the instruments. The holder is to give notice of dishonour to all parties whom he wants to make liable. The drawee or acceptor could not be given notice. Section 94 prescribes the mode of giving notice which may be either oral or in writing. Section 98 provides cases where notice of dishonour is unnecessary. Mr. Dutt pointed to paragraph 5 of the plaint. He submitted that what was actually pleaded was 'the same was dishonoured by non-payment to the knowledge of defendant No. 1.' According to him mere knowledge was not enough. Mr. Dutt further emphasised that if exemption was sought under Section 98 the same also has to be pleaded specifically. Mr. Dutt then relied on a number of cases to substantiate his arguments. The first case that he relied on is the case of Burgh v. Legge, reported in (1839) 151 ER 177. In that case the plaintiff proved that the defendant told him that he knew that the bill would not be paid and that it would be of no use sending him a postcard to give the notice of dishonour. It was held in that case that the same was not evidence of notice of dishonour. It may be said, however, that the said case is no authority as to how the notice of dishonour is to be pleaded. The Court went into the evidence and dealt with the question of proof and no-t with the pleadings. Moreover, the evidence tendered shows that the defendant even before the bill was dishonoured presumed knowledge that the bill would not be honoured. Therefore, it was held that that was not evidence of notice of dishonour but of dispensation of it.

9. The next case cited by Mr. Dutta was that of Amiruddin v. Bahadur Khan, reported in (1903) ILR 30 Cal 977. It was held in that case that in order to make the drawer of a Hundi liable in case of dishonour by the drawee or acceptor thereof, it is necessary for the plaintiff to show that due notice of dishonour was given to the drawer. On the facts of that case it was found that no notice of dishonour was given. In any event as Mr. Mullick points out this case is also not an authority as to how the pleading has to be made about a notice of dishonour. The next case cited was that of Bahadur Chand v. Gulab Roy, reported in AIR 1929 Lah 577 in which it was held that a notice of dishonour should be given as soon as a bill is dishonoured. It is the duty of the holder to prove that due notice was given and if not given, he was excused from doing so for any of the reasons specified in Section 98. That again is also no authority on how pleading is to be made. Mr. Dutta next relies on the case of J. Chetti v. P. Chettiar, reported in (1903) ILR 26 Mad 526. In that case the Court was unable to accede to the contention that inasmuch as the drawee did not accepi the bills and the first defendant the drawer therefore was primarily liable, the plaintiff was under no obligation to give notice of dishonour to the first defendant. It was held further that notice of dishonour was not given either in express terms or by reasonable inlendment by informing the first defendant that he would be liable thereon. It was also held that if the plaintiff relied upon any of the exceptions to the general rule as to the necessity of giving notice of dishonour he ought to have made the necessary averments in the pleadings and establish the same. The propositions laid down in the said case were not disputed by Mr. Mullick either. He only pointed out that notice of dishonour was in fact given verbally as proved by his client and there was positive averment about the said notice in paragraph 5 of the plaint. The case next relied on by Mr. Dutta was that of Mohd. Siddiq v. Mohd. Akbar, : AIR1951Cal466 . It was held in that case that where the plaintiff sues on the ground that a Hundi has been dishonoured presentment for payment must be pleaded and proved. It was a case dealing with presentment and not notice of dishonour. Moreover in that case no issue was raised as to whether the Hundi was presented or not though evidence was sought to be adduced. Having regard to the fact that no issue was raised and having regard to the evidence and allegations in the plaint the Court held that the plaint did not disclose any cause of action. None of these cases, therefore, seems to be helpful in upholding the contention raised by Mr. Dutt. None of these cases is an authority as to how notice of dishonour is to be pleaded. It has also been noted that in paragraph 5 the pleading is that the hundi was presented to the defendant No. 2 for payment but the same was dishonoured by non-payment to the knowledge of defendant No. 1. The question is whether the averment 'to the knowledge of the defendant No. 1' is sufficient compliance with the requirements of the statute. Instead of stating that notice of dishonour was given to defendant No. 1 it is stated that defendant No. 1 had knowledge of the dishonour by non-payment. The purpose of notice, however, is to make a person aware of a fact. In that view of the matter the difference in the expressions seems to be of little consequence. Again it is to be noted that the defendant No. 1 while dealing with paragraph 5 of the plaint nowhere has challenged this assertion by the plaintiff. It is not denied in paragraph 10 of the written statement which deals with paragraph 5 of the plaint that the defendant No. 1 had no knowledge of the dishonour by non-payment. In fact it is because the averment was not traversed that no issue was raised. Mr. Dutt, however, was entitled to argue, if he could that in the absence of the essential pleadings the suit was bound to fail. But what the argument amounts to is that the pleading to the knowledge of the defendant No. 1 is not the same thing as giving notice to defendant No. 1. A suit certainly should not fail or be defeated by such narrow technicalities. The plaintiff should not be prejudiced merely because the facts are imperfectly stated in some respects. I may quote with respect the observations of Jenkins, L. J, in the case of Vine v. National Dock Labour Board, reported in (1956) 1 All ER 1 (at p. 10). 'It would be a sad day if litigants were bound hand and foot by every ill-advised phrase or argument or submission, that may find its way into their pleadings as settled by counsel.' The contentions of Mr. Dutt, therefore must fail.

10. Mr. Dntt's next contention was that if the suit is held to be based on the original consideration the same is firstly barred by limitation and secondly, it is unenforceable because the plaintiff has not exhausted his security in the shape of the mortgage.

11. So far as the first aspect of this contention is concerned it may be stated ait once that the pleading makes it clear that although the sum of Rs. 75,000/- was lent and advanced on the 7th May, 1965, the sum was payable 60 days from the said date. The suit, it appears, was filed on the 1st of July, 1968. In his evidence the plaintiff has also stated that the amount was payable 60 days after the sum was paid. In that view of the matter the contention as to limitation must fail.

12. As for the other aspect Mr. Dutt relied on the case of Nityananda v. R. C. R. Cinema Limited, reported in : AIR1953Cal208 .

13. Mr. Dutta urged that when the defendant No. 1 admittedly executed a mortgage in favour of the plaintiff the latter could not proceed with the hundi or even on the original cause of action. The occasion for the aforesaid judgment, however, was an application made under Section 68 Sub-section (ii) of the Transfer of Property Act to stay the suit and all proceedings until the plaintiff had exhausted all his available remedies against the mortgaged property or until he abandoned his mortgage security. The suit was filed in that case against the defendant company as drawer of the promissory note and the same was not based on mortgage. It was held that the promissory note was a distinct cause of action independent of and apart from the mortgage. It was made clear by P. B. Mukharji, J. that had the suit been to recover the money on equitable mortgage then the argument made on behalf of the applicant for stay might have prevailed. The suit was not one in which the mortgagee was suing qua mortgagee for his mortgage money. In that circumstance Section 68, Sub-section (I-A) of the Transfer of Property Act was not applicable. The principle behind the statutory provision was law's reluctance to make the mortgagor personally liable so long as security was there to answer for his debt. It was made amply clear in that decision that if the mortgagor chooses to create a personal liability by independent transaction like a promissory note or cheque or other independent engagement completely dissociated from the mortgage, then he is not within the meaning of Section 68, Sub-section (1-A), T. P. Act, as I construe it nor within the principle that security should be called up first before personal liability is enforced.' Therefore, I am unable to accept Mr. Dutt's contention on the basis of this authority. In the present case the defendant No. 1 chose to create an independent liability by entering into a separate transaction and executed a hundi. It is not therefore, possible to accept the contention that the plaintiff cannot sue on the hundi or even on the original consideration on the circumstances of the present case. Mr. Dutt also relied on a judgment of Madras High Court, reported in (1903) ILR 26 Mad 526 for this aspect of his argument. In that case the hundi was accepted in discharge of the original claim arising out of sale of some goods. It was held that under the circumstances of that case the plaintiff could not proceed on the original consideration. It would appear that the facts and circumstances of that case were different. In that case the plaintiff accepted a bill in complete discharge of his liability. In this respect Mr. Mullick appearing on behalf of the plaintiff rightly pointed out that if in repayment of the dues of a businessman a person chooses to accept a cheque but LATER on if the cheque happen to be dishonoured he cannot certainly sue for the price of the goods sold and delivered. His remedy is to proceed on the basis of the dishonoured cheque. Similarly, in the Madras case there was unequivocal acceptance of the bill in payment of his liability. Therefore, the said case cannot be accepted as an authority for the proposition that the right of the person to proceed on the basis of original consideration necessarily merges in the bill of exchange if the latter is executed by way of collateral security. The contention of Mr. putt, therefore, fails. So far as the pleading is concerned the court holds that it cannot be said that it does not disclose any cause of action against the defendant No. 1.

14. It must, however, be made clear that the proposition of law enunciated in some of the cases cited by Mr. Dutt viz, that the notice of honour has to be given and pleaded are certainly unexceptionable. But in the present case the pleading in paragraph 5 as already alluded to seems to satisfy the requirements. The court does not want to defeat the pleadings by placing undue importance on technicalities. So far as evidence is concerned the plaintiff clearly stated that immediately after the presentation of the hundi to the defendant No. 2 he made repeated demands from the defendant No. 1 as well. He stated that he made demand from both of them repeatedly and over a considerable period. The letter, Ext. F, if it is to be construed to be first notice certainly is out of time as it cannot be regarded as a notice within a reasonable time but notice can be given orally as well as in writing. In this connection the court's attention was drawn to a decision of Metcalfe v. Richardson, reported in (1852) 138 ER 776. In that case on the day after a bill became due, the holder's clerk called upon the drawer, and told him that the bill had been duly presented and that the acceptor could not pay it to which the drawer replied that he would see the holder about it. It was held that it could be inferred that the drawer had due notice of dishonour. The verbal notice of dishonour was not to be construed with the same strictness as is the written notice. The court respectfully agrees with the same and holds that the suit on the basis of the hundi is also maintainable.

15. To turn to the issues, now, so far as issue No. 1 is concerned the evidence of the plaintiff has already been noted earlier. Not only he said that he lent and advanced Rs. 75,000/- on the 7th May, 1965 but he also produced books of account, Exts. A-1 and B, the cash book and the ledger entries have also been tendered and marked Exts. D and E. The final demand, Ext. F, which is the letter from Messrs. B. N. Basu & Co. also supported the plaintiff's case. The hundi which has been proved and marked Ext. C also supports the same. As against that the evidence of the defendant No. 1 Ram Kumar is that he never repaid any money. His case was that from time to time he incurred loan which would total Rs. 40,500/- only. He said that several hundis had been executed but he does not produce any. He said that the hundis were destroyed but at the same time he has solemnly affirmed an affidavit of document clearly stating that he had a bundle of hundis in his possession. Thus his oral evidence viz., that the hundis had been destroyed contradicts his averment in the said affidavit of documents. Moreover, he has not chosen to produce his books of accounts although he says that he is a businessman and has got the books of accounts. The inference, therefore, is clearly in favour of the plaintiff and I decide the issue No. 1 in favour of the plaintiff without any hesitation.

16. As to issue No. 2, the onus is on the defendant No. 2, he has, however, not chosen to give any evidence. There is nothing to support the contention raised in paragraph 2 of the written statement. The plaintiff's evidence is against it. Moreover, the version of the defendant No. 1 in his written statement is also not the same as the version in paragraph 2 of the written statement by defendant No. 2. I, therefore, answer this issue in the negative and in favour of the plaintiff.

17. Issue No. 3 is answered in the affirmative and in favour of the plaintiff. So also is issue No. 4.

18. As to the reliefs I have held that the suit is maintainable on the hundi and as evidence has proved inter alia the liability of both the defendants the plaintiff is entitled to have reliefs against both.

19. There will, therefore, be a decree against both the defendants in terms of prayers (a) and (b). Interim interest and interest on judgment at 6 per cent, and costs.


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