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Manik Ratan GuIn and anr. Vs. Prakash Chandra and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKolkata High Court
Decided On
Case NumberA.F.O.D. Nos. 136 of 1937 of 1949
Judge
Reported inAIR1955Cal338
ActsCompanies Act, 1913 - Section 231; ;Provincial Insolvency Act, 1920 - Section 54; ;Negotiable Instruments Act, 1881 - Sections 64, 76 and 80; ;Evidence Act, 1872 - Sections 101, 103, 106 and 115
AppellantManik Ratan GuIn and anr.
RespondentPrakash Chandra and ors.
Appellant AdvocateSarat Chandra Jana, ;Mrityunjoy De and ;Arun Kumar Jana, Advs.
Respondent AdvocatePannalal Chatterjee, ; Sambhu Nath Banerjee, ;Manindra Krishna Ghosh, ;Sushil Kumar Biswas, ;Manishi Kumar Das and ;Rabindra Nath Mitra, Advs.
Cases ReferredPremlal Sen v. Radhaballav
Excerpt:
- .....becomes unnecessary under section 76(c), it has to be further established that manick ratan at the date of payment bad knowledge that there had been no presentment of the bill. this rule that manick ratan must have had knowledge though there was no presentment before he can be saddled with liability is merely an application of the ordinary rule that there could be no waiver unless the person against whom the waiver is claimed had full knowledge of his rights (vide -- 'dhankukdhari' singh v nathuni sahu', 6 cal lj 62 (c)). that case further laid down that the burden of proof of knowledge of these matters is on one who relies upon a waiver and such knowledge must be plainly made to appear. in view of this provision of law i do not think it possible for the respondents to have any benefits.....
Judgment:

K.C. Das Gupta, J.

1. These two appeals are by the defendants in two suits against whom the claim of the holder of two hundis in whose favour they had been endorsed by the payee of hundi, the Midnapur Branch of the Bank of Calcutta, for the amount due on the hundi with interest had been allowed.

2. In Appeal No. 136 of 1949 the appellants Manick Ratan Guin and Nakul Ratan Guin were the drawees, of the hundi, the drawer being Krishna Charan Guin. They were accepted by Manick Ratan and Nakul Ratan on the very date the hundi was drawn and it was transferred by the payee hank on 18-4-1947. In Appeal No. 137 of 1949 Manick Ratan is the drawer of the hundi while the other appellant Prosanta Kumar Sen Gupta is the drawee who accepted it on the same date. This also was transferred by the Bank on 24-5-1947. The transfer in both the cases was by wav of adjustment against dues of the transferees against the Bank on account of several deposits.

Of the several defences taken, we are concerned with only a few now. The first of these is that thetransfer was altogether void as it was against the order of the High Court in proceedings before the Original Side of the Court. The second defence is that in any case this amounted to fraudulent preference in favour of some of the debtors and so was invalid under Section 231, Companies Act. Thirdly, it was contended that there having been no presentation of the bills to the acceptors in accordance with the provisions of Section 64, Negotiable Instruments Act, the consequence of the provision in that section is that neither the drawer nor the acceptor is liable. Lastly, it was contended that no interest is payable as there was no presentation.

3. It has been contended before us on behalf of the appellant that this Court by its order dated 27-3-1947 directed the Bank of Calcutta not to pay off more than 60 per cent of the due of any creditor, whether by way of adjustment or otherwise.

The relevant portion of the order is in these words:

'It is ordered that the two applications under Sections 277N and 162, Companies Act, 1913-36 be and the same are hereby adjourned for three months from the date hereof and it is further ordered that the interim moratorium already be and same is hereby extended by three, months from the date hereof on the same terms and conditions as mentioned in the said orders dated the twenty-sixth day of November one thousand nine hundred and forty-six except that liberty is given to the said Company to make payments to its creditors upto 60 per cent, of their, respective claims as appearing in the books of the said Company on the said twenty-sixth day of November one thousand and nine hundred and forty-six within the said period of three months without any remuneration as to the maximum amount of Rupees five thousand as formerly provided in the said order dated 26th day of November one thousand nine hundred and forty six and it is further ordered that the said Company do carry out the directions given by the Registrar of Joint Stock Companies Bengal in this letter dated the 14th day of March instant which is annexed to the said affidavit and it is further ordered that the said Company be at liberty to make such payments to its creditors or to satisfy their respective claims by adjustment against dues of the said Company from its debtors or otherwise.'

4. It has been contended on behalf of the appellant that the result of his order was that payments either in cash or by way of adjustment could be made only upto 60 per cent of a creditor's dues. In my judgment, this is not a correct interpretation of the order. It seems clear to me that a distinction was being made in the order between payments of dues of creditors and adjustment of dues of creditors and while as regards the payment of the claims of creditors it was being allowed upto only 60 per cent, satisfaction of claims by adjustment against dues of the Company from its debtors was being permitted without any limitation. I can find no justification in reading the words of limitation upto 60 per cent. in that part of the order where liberty is given to the Company 'to satisfy their respective claims by adjustment against dues of the said Company from its debtors or otherwise'. In my judgment, this contention ofthe defendants has rightly been rejected by theCourt below.

5.. As regards the contention that there was fraudulent preference by the Bank, reliance was placed by the learned Advocate for the appellant on facts showing intimacy between the local Manager of the Bank and one of the plaintiffs. Assuming that there was such intimacy and that by this transfer the Bank intended to give the plaintiff some help which it was not giving to others, that would not, in my judgment, amount to fraudulent preference within the meaning of Section 231, Companies Act. Section 231 is in these words ;

'Any transfer, delivery of goods, payment, execution or other act relating to property which would, if made or done by or against an individual, be deemed in his insolvency a fraudulent preference, shall, if made or done by or against a company, be deemed, in the event of its being wound up, a fraudulent preference of its creditors, and be invalid accordingly.'

6. Clearly therefore before any transfer or payment can be held to be invalid under this section, it must first be found if it had been done by an individual and it would then be deemed in his insolvency a fraudulent preference.

Turning to Sections 53 and 54, Provincial Insolvency Act, we find that whereas under the earlier section any transfer of property not being a transfer made before and in consideration of marriage or made in favour of a purchaser or incumbrancer in good faith and for valuable consideration shall he voidable as against the receiver in case of the transferor's adjudication as insolvent within two years after the date of transfer, Section 54 speaks of preference being given 'by the transferor and it provides that

'every transfer of property, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own money in favour of any creditor, with a view of giving that creditor a preference over the other creditors, shall, if such person is adjudged insolvent on a petition presented within three months after the date thereof, be deemed fraudulent and void as against the receiver, and shall be annulled by the Court.'

Clearly, it is payments which fall within the mischief of Section 54, Insolvency Act, that are being referred to as 'fraudulent preferences' in Section 231, Companies Act. As in the present cases, neither of the transfers was within three months preceding the date of winding up application, there is no scope for the operation of provision of Section 231, Companies Act.

7. Next it is necessary to consider the objection that under Section 64, Negotiable Instruments Act neither the drawer, nor the acceptor, are liable to the holder of a bill of exchange which has not been presented in accordance with the provisions therewith. Section 64 is in these words:

'Promissory notes, bills of exchange and chequesmust be presented for payment to the maker, acceptor or drawee thereof respectively, by or onbehalf of the holder as hereinafter provided. Indefault of such presentment, the other parties thereto are not liable thereon to such holder.'

8. We are not aware of any case in our Court where the words 'other parties thereto' have been interpreted. If however we examine the words with some care, there seems to me to be little difficulty in the interpretation of these words. It is to be noticed first that the first sentence of the section provides for presentment of the three classes of negotiable instrument to three parties. Promissory notes must be presented for payment to the maker; bills of exchange must be presented for payment to the acceptor, while cheques must be presented for payment to the drawee. It seems to me to necessarily 'follow therefrom that, the ether parties in the case of a promissory note will be parties other than the maker; in the case of a bill of exchange, it will be all parties other than! the acceptor while in the case of a cheque other parties must be parties other than the drawee.

9. This view was taken by the Allahabad High Court in -- 'Banares Bank Ltd. v. Hormusji Pestonji : AIR1930All648 . A different view appears to have been taken by a single Judge in Oudh Judicial Commissioner's Court in -- 'Oudh Commercial Bank Ltd., Lucknow v. Gur Din', AIR 1920 Oudh 191 (B). The learned Judge has dealt with the matter in these words:

'The respondents' construction is the only possible construction if the latter portion of the section is to have any meaning at all. The last paragraph of the section consists of an exception and is worded thus :

'Exception : Where a promissory note is payable on demand and is not payable at a specified place, no presentment is necessary in order to charge the maker thereof'.

If the exception is that in one particular cast presentment is not necessary to charge the maker of a promissory note the general rule must be that presentment is necessary. If, however, 'other parties' in the first part of the section means 'parties other than the maker of a promissory note or the acceptor of a bill' presentment is never necessary in order to charge them and it is immaterial whether the note is payable on demand or at a specified place or otherwise. The exception is no exception at all but an illustration of the rule, and an illustration which serves no useful purpose but merely tends to confuse the mind of the reader. In order to make it an exception, the rule must be that in other cases presentment for payment is necessary in order to charge the maker of the note. In short, according to this construction, the rule to be deduced from the first part of the section is that presentment of a promissory note is only necessary in the case of persons other than the maker; the rule to be deduced from the second part is that presentment is necessary to charge the maker except in one particular case which is stated as an exception.

This argument seems to me conclusive. A construction of the earlier part of the section which makes nonsense of the later part cannot be correct. But the maker of a note and the acceptor of a bill stand precisely on the samefooling. If 'other parties' has reference to the persons mentioned in the first sentence of the section, it includes them both.

The inclusion of cheques in the section furnishes a further argument in favour of the respondents' view. It can hardly have been the intention of the Legislature that the banker on whom a cheque is drawn should be bound to pay it without its being presented to him for payment.'

10. With great respect to the learned Judge I can see no difficulty in the Exception to Section 64 providing that in certain cases no presentment is necessary at all. Nor can I see any reason for imputing to the Legislature intention that a banker will have no liability to pay a cheque if it is not presented. If such liability can be avoided under other provisions of the law, the banker will be able to avoid that. The plain meaning of the words used in Section 64 however afford him no such immunity from liability. In my judgment, the Oudh Commissioner's Court took a wrong view of the law.

11. In Appeal No. 137 of 1949, as has been already stated Manick Ratan was the drawer. As there was no presentation of the bill, he would on the above interpretation of Section 64 be free from any liability. This position is sought to be avoided by the respondents on the ground that provision of Section 76(e), Negotiable Instruments Act applies and no presentment is necessary because a part payment was made by the drawer Manick Ratan on 6-1-1947. The fact of such payment is not disputed. Before however presentment becomes unnecessary under Section 76(c), it has to be further established that Manick Ratan at the date of payment bad knowledge that there had been no presentment of the bill. This rule that Manick Ratan must have had knowledge though there was no presentment before he can be saddled with liability is merely an application of the ordinary rule that there could be no waiver unless the person against whom the waiver is claimed had full knowledge of his rights (Vide -- 'Dhankukdhari' Singh v Nathuni Sahu', 6 Cal LJ 62 (C)). That case further laid down that the burden of proof of knowledge of these matters is on one who relies upon a waiver and such knowledge must be plainly made to appear. In view of this provision of law I do not think it possible for the respondents to have any benefits of the provision of Section 106, Evidence Act that when a fact is within the special knowledge of a party, the burden of proof is upon him. That section would apply only after some foundation had been laid by the plaintiff for holding that prima facie the drawer had knowledge, that the note had been presented. My conclusion therefore is that the Suit No. 17 of 1948 which is under Appeal No. 137 of 1949 must fail as against Manick Ratan Guin.

12. There remains for consideration the question of interest. The learned Subordinate Judge has allowed interest on the sum due under the bill from the date of maturity. It has been contended before us that under Section 80, Negotiable Instruments Act no interest is payable at least before the date of the demand notice. Section 80 provides that: 'when no rate of interest is specified in the instrument, interest on the amount due thereon shall,notwithstanding any agreement relating to interest between any parties to the instrument, be calculated at the rate of six per centum per annum, from the date at which the same ought to have been paid by the party charged, until tender or realization of the amount due, thereon, or until such a date after the institution of a suit to recover such amount as the Court directs.' The section itself does not say anything as regards the date from which interest will be allowed except that this should be the date at which interest ought to have been paid. In -- 'Premlal Sen v. Radhaballav : AIR1931Cal140 , Lort Williams J. interpreted the same to mean interest. The position therefore is that from the date interest ought to have been paid, interest 6 per cent, per annum will, be allowed by the Court . When the amount itself is payable on demand there can be no question of interest becoming payable before that date. Where however the amount is payable under the instrument on the expiry of a certain period of time, the amount becomes payable at once so that where the amount is not being paid, it seems proper to allow interest by way of damages. My conclusion therefore is that interest has rightly been, allowed by the learned Subordinate Judge from the date of maturity.

13. In view of the fact that the dates fixed forthe instalments have already passed, I would modify the decree in both the suits to this extent, namely,that the amount still remaining due shall be paidin two equal instalments, the first to be payableby the last date of Ashar 1361 and the second by'the last day of Ashar 1362. In default of paymentof any of the instalments, the entire amount willfall due.

14. The appeal No. 137 of 1949 is allowed and the judgment and decree passed by the learned Subordinate Judge as against Manick Ratan Guin is set aside and the suit dismissed against them, and the decree passed against the other appellant is affirmed subject to the directions as regards instalments, mentioned above.

15. The Appeal No. 136 of 1949 is dismissed with costs, subject to the directions as regards instalments mentioned above.

16. In Appeal No. 137 of 1949 the respondent will get his costs from the appellant Prasanta Kumar Sengupta.

17. The cross-objections are not pressed and they are accordingly, dismissed without any order as to costs.

Debabrata Mookerjee, J.

18. I agree.


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