Silchar Bank Ltd. vs Pioneer Bank Ltd. and Others

Thadani, C.J.—This is a First Appeal from the judgment & decree of the learned Subordinate Judge of Cachar, dated 30-9-48, by which he decreed the suit with costs against one Sudhir Ch. Datta impleaded as the fourth deft, in the suit, but dismissed the suit with costs against the remaining defts.

The plff, the Silchar Bank Ltd., brought a suit against (1) The Pioneer Bank Ltd. (2) D.N. Bhattacharjee, (3) P.K. Das, (4) Sudhir Ch. Datta, for the recovery of a sum of Rs. 6380/- in the following circumstances:

On 20-3-1945, deft. 2 drew a cheque, being cheque No. 51448, on deft. 1 in favour of deft. 4. The following day, 21-3-1945, deft. 4 presented the cheque for payment to deft. 1. Deft. 1 endorsed the cheque stating that the cheque would be honoured after payment of the bill for the supply order No. LP/63/45/877, dated 28-2-1945, was received from the Deputy Director of Supply (Procurement). Deft 4 thereupon negotiated the cheque so endorsed with the pltf. bank & received the full amount of the cheque. On 11-4-1945, the plff. bank presented the cheque to deft. 1 Bank, which returned the cheque stating "We again refer to the previous Memo, dated 21-3-1945". The plff. bank again presented the cheque on 26-5-1945, but deft. 1 dishonoured the cheque stating that the payment had been stopped by the drawer.

It is not necessary to refer to the defence of deft. 1 bank, as the plff. bank has withdrawn she suit against it. Deft. 3 denied that he was acting in collusion with deft. 1. Deft. 2 admitted that he drew the cheque in favour of deft. 4 & also admitted having stopped payment, but alleged that he stopped payment at the instance of deft. 5 who was subsequently made a party. He denied that the plff. bank was a holder-in-due-course. Deft. 4 supported the plff.''s case.

Upon the pleadings, the Trial Court framed the following issues:

Is the suit maintainable in its present form?

Is the suit bad for defect of parties?

Did defts. 1 & 3 guarantee payment of cheque No. 51448, as alleged in the plaint?

Are any of the defts. liable to the plff? If so, for what amount?

To what relief, if any, is the plff. entitled? Additional issues:

Is the suit barred by limitation?

Did deft. 1 make any representation certifying cheque No. 51448, & did the plff. become holder-in-due-course of the said cheque?

Did the representation constitute marking of cheque?

Mr. Ghose for the appellant, besides giving up the claim against deft. 1 it having gone into liquidation, has not pressed the claim against defts. 3 & 5. Against deft. 4 the Trial Court has already passed a decree. The only question which remains for our consideration is whether--deft. 2 the drawer of the cheque, is also liable to the off bank.

Mr. Datta for defit. 2 has contended that the claim against deft. 2 is unsustainable in view of the judgment of the ''Calcutta High Court'', in a case which came up before it in ''First Appeal No. 217 of 1946,'' in which deft. 1 had instituted an inter-pleader suit against the plff. bank & deft. 2 in the present suit. The contention was negative by the Trial Court under issue No. 1. Manifestly, in the inter-pleader suit, the question of the liability of deft. 2 as drawer of the cheque was not in issue. The question of the liability of deft 2 as drawer of the cheque in relation to the plff. bank has arisen for the first time in the present suit & is to be decided in accordance with the provisions of the Negotiable Instruments Act.

It is not denied that deft. 2 is the drawer of the cheque. His liability is denied on the allegation that the plff. bank is not a holder in due-course. It is true, the Trial Court has stated in the judgment that the plff. bank is not a holder in due-course. But the finding is clearly erroneous for the short reason that it has decreed the claim of the plff. bank against deft. 4 a decree against which no appeal has been preferred by deft. 4. Moreover, on the evidence of the Secretary of the plff. bank, which we accept there is no doubt that the plff. bank is a holder in due-course.

Mr. Datta for deft. 2, however, contended that assuming that the plff. bank paid the amount of the cheque to deft. 4 the plff. bank became the possessor of the cheque after the cheque had been endorsed by deft, 1 bank--an endorsement which, according to Mr. Datta, amounts in law to dishonour, & the possession of the cheque by the plff. bank was not the possession of a holder-in-due-course. In support of his contention, Mr. Datta relied upon Section 92 of the Negotiable Instruments Act. But, in the language of Section 92 of the N.I. Act, a cheque is dishonoured only when the drawer of the cheque makes default in payment ''on being duly required to pay the sum.'' In the present case, when the cheque was first presented on 21-3-45 by deft. 4 deft. 1 bank did not say that it would not make payment; on the contrary, it said that it would make payment; after it had received the amount from the Deputy Director, Supply. It was only on 26-5-1945, that for the first time deft. 1 bank declined to pay the amount on the ground that the drawer had stopped payment. The plff. bank had already become the holder-in-due-course of the cheque on 21-3-45 after deft. 1 bank had endorsed the cheque to the effect that it would make payment on collection of the assets of the drawer.

Mr. Datta next contended that there was only a qualified acceptance by deft. 1 within the meaning of Section 86, Negotiable Instruments Act Section 86 has no application to a cheque; it applies, only to a bill of exchange. It is true that a cheque is a bill of exchange, but it is a bill of exchange to be drawn on a specified banker, & not expressed to be payable otherwise then on demand. From the contents of Chap. VII of the Negotiable Instruments Act, which deals with the subject of discharge from liability on notes, bills & cheques, it is clear that the terms of Section 86 are confined to their application to bills of exchange, & have no application to cheques. Indeed there is no such thing as an acceptance of a cheque.

Their Lordships of the Privy Council in AIR 1944 58 (Privy Council) have observed:

Marking or certification of a cheque by the drawee bank does not constitute acceptance within the meaning of Section 7, Negotiable Instruments Act, or the English Bills of Exchange Act or the common law so as to make such bank liable to the drawer or holder by reason of such marking or certification.... "Cheques are not the proper subject of acceptance or at least a cheque is not intended to be accepted & there is no known instance in England or in India of a cheque being accepted by a banker for the purpose of making himself liable to the drawer or holder or a banker being held liable or even sued as the acceptor of a cheque drawn upon him.

The liability of the drawer of a cheque is governed by Section 30, Negotiable Instruments Act, which is in these terms:

The drawer of a bill of exchange or cheque is bound, in case of dishonour by the drawee or acceptor thereof, to compensate the holder provided due notice of dishonour has been given to or received by the drawer as hereinafter provided.

In this case, the drawee bank deft. 1 dishonoured the cheque after the drawer, deft. 2, had stopped payment. The question, therefore, of the notice of dishonour does not arise. The drawer 1 is liable to compensate the holder, namely, the plff. bank.

The result is that, in addition to a decree I passed by the Trial Court against deft. 4, there will be a decree against deft. 2 with costs throughout. The claim against deft. 1 has been given up. The suit against deft. 1, is dismissed with no order as to costs. Defts. 3 & 4 are not parties to the cheque. The claim against them is dismissed with no order as to costs.

The appeal is allowed to the extent indicated.

Ram Labhaya, J.

I agree.