Bombay High Court
Road # 09-00 vs State Bank Of Hyderabad on 15 October, 2013
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
SUMMONS FOR JUDGMENT NO. 238 OF 2008
IN
SUMMARY SUIT NO. 1586 OF 2001
(UNDER ORDER XXXVII OF THE CODE OF CIVIL PROCEDURE, 1908)
Rabo Bank, a banking organization )
incorporated and validly existing under )
the laws of Nederland having their )
Singapore Branch Office at 77, Robinson )
068896
Road # 09-00, SIA Building, Singapore )
) ..... Plaintiffs
VERSUS
State Bank of Hyderabad, a banking )
Company having its Head Office at )
Gunfoundry, Hyderabad 500 001 )
interalia, carrying on business at Mumbai)
through its various branches including )
their Zonal office at Rachna Sansad, )
st
1 Floor, 278, S.G.Marg, Prabhadevi, )
Mumbai 400 025 ) ..... Defendants
Mr.Rahul Narichania, Mr.Vishal Muglikar, a/w. Ms.Pratiksha Avhad, Ms.Pooja
Kapadia, i/b. Mulla & Mulla for the Plaintiffs.
Mr.Hiralal Thakkar, Senior Advocate, a/w. Mr.A.R.Bhave, i/b. Bhave & CO. for
the Defendants.
CORAM : R.D. DHANUKA, J.
RESERVED ON : 3rd OCTOBER, 2013
PRONOUNCED ON : 15th OCTOBER, 2013
::: Downloaded on - 27/11/2013 20:26:51 :::
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JUDGMENT :
By this Summons for Judgment, plaintiffs seek that the judgment be entered
for the plaintiffs in this suit against the defendants for a sum of USD 1,931,627.89
as per particulars of claims with further interest thereon as per provisions of
Negotiable Instruments Act and/or under the Interest Act, and/or under the
provisions of Section 34 of the Civil Procedure Code, 1908 at the rate of 9.75%
per annum and/or at such other rate as the Hon'ble Court deem fit from the due
date till payment and/or realization and for the costs of the suit.
2.
Plaintiffs carries on business through its Singapore branch. Defendants are
also the banking company, interalia, carrying on business in Mumbai through its
various branches and has its registered office at Hyderabad. M/s.Gloland (Far
East) Pte.Ltd. was a constituent of the plaintiffs which constituent was carrying on
business of export of chick peas. The said constituent M/s.Gloland (Far East)
Pte.Ltd. had transactions with M/s.Kothari Global Ltd. and M/s.Marudhar Edible
Oils Ltd. It is the case of the plaintiffs that in respect of such cargo shipped by
constituent of the plaintiffs to M/s.Kothari Global Ltd. and M/s.Marudhar Edible
Oils Ltd., plaintiffs had sent documents on collection basis to the defendants who
were required to release the documents against payment. The plaintiffs have sent
documents in three sets on various dates stated in paragraphs 2(b) of the plaint.
The said documents were not released by the defendants for want of payment. It is
the case of the plaintiffs that the plaintiffs were informed through their constituent
subsequently that the defendants bank would be willing to accept the bills of
exchange which were payable after 170 days. The plaintiffs by their fax dated 9 th
September, 1998 referred to certain invoices/bills of exchanges drawn by the
plaintiffs' constituent on certain consignees in India and enquired from the
defendants as to whether they would be prepared to accept the bills of exchange
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(drafts) drawn upon the defendant bank payable after 170 days from 10 th
September, 1998. The defendants by their tested telex dated 12 th September, 1998
communicated their consent to accept the bills of exchange (drafts).
3. Alongwith covering letter dated 16th September, 1998, the plaintiffs
accordingly sent drafts (bills of exchange) in respect of three consignments. In the
said letter, it was provided that the collection tenor shall be 170 days from 10 th
September, 1998 and maturity date as 27th February, 1999. The plaintiffs
forwarded the said bills of exchange (drafts) for acceptance of the defendants and
requested to confirm their acceptance of the enclosed draft with maturity date to be
fixed on 27th February, 1999 by return tested telex/authenticated swift quoting the
reference of the plaintiffs.
4. Alongwith covering letter dated 16th September, 1998, the plaintiffs
forwarded to the defendants four bills of exchange drawn by the constituent of the
plaintiffs M/s.Gloland (Far East) Pte.Ltd. to the order of the plaintiffs bank drawn
on the defendants' bank at its Bura Bazar Branch, Calcutta Branch all dated 9 th
September, 1998. The said bills of exchange were for USD 202,725.60,
414,233.25, 81,385.15 and 120,855.35 respectively payable at 170 days from 10 th
September, 1998 i.e. 27th February, 1999. It is the case of the plaintiffs that the
said bills of exchange are in custody of the defendants.
5. Alongwith the covering letter dated 21st September, 1998, the plaintiffs sent
another set of documents alongwith bills of exchange drawn upon the defendants.
In the said letter various conditions/instructions were stipulated. It was mentioned
that the collection tenor shall be 170 days after the date of draft and the documents
to be delivered against acceptance and collection. The plaintiffs requested the
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defendants to advise acceptance and maturity date by tested telex or swift. The
plaintiffs also requested the defendants to inform their acceptance of drafts by
return tested telex.
6. The plaintiffs also sent to the defendants alongwith the said letter bills of
exchange drawn on the address to the defendants Bura Bazar Branch, Calcutta
Branch for a sum of USD 1,112,428.54 payable at 170 days from 10 th September,
1998 i.e. 27th February, 1999. It is the case of the plaintiffs that the said bill of
exchange is in custody of the defendants.
7.
By telex dated 30th September, 1998 sent by the plaintiffs, plaintiffs sent
'Urgent Tracer' whereby they referred to the letters dated 16 th September, 1998 and
21st September, 1998 and the drafts annexed thereto and requested the defendants
to confirm its acceptance by return tested telex or authenticated swift. Defendants
bank by its tested telex dated 6th October, 1998 confirmed the acceptance of the
said bills of exchange.
8. It is the case of the plaintiffs that in view of the acceptance by the
defendants to pay the said bills which were maturing for payment at 170 days from
10th September, 1998, the plaintiffs at the request of its constituent
discounted/purchased the said bills of exchange, without recourse and thereby
became the owners and/or holders in due course of the bills of exchange for
valuable consideration.
9. The plaintiffs by their tested telex dated 23rd October, 1998 instructed the
defendants that payment in respect of the said bills of exchange shall be made to
the plaintiffs account with their New York correspondent bank i.e. Bankers Trust
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Company on due date.
10. Vide telex dated 26th October, 1998 in response to the plaintiffs' telex of 23 rd
October, 1998, the defendants agreed to make payment to the plaintiffs on due date
of 27th February, 1999.
11. By telex dated 9th March, 1999, addressed to the defendants, the plaintiffs
referred to the said bills of exchange and placed on record that the drafts drawn on
the defendants had been accepted by the defendants as per their tested telex dated
6th October, 1998 to the plaintiffs to mature on 27 th February, 1999 and remained
unpaid on the date of sending such telex and called upon the defendants to remit
proceeds plus late payment interest from due date to the date of payment at interest
rate of 9.75% per annum.
12. By reply to the said telex dated 9th March, 1999, the defendants by their
telex dated 4th March, 1999 alleged that the manner and mode in which the
transactions had taken place and the reported co-acceptance given by their Bura
Bazar Branch appeared to be out of ordinary course of business and had been
carried out in total disregard to the procedures in vogue in Banks. It was further
alleged that the defendants had sufficient grounds to infer that a well planned
conspiracy has been hatched to defraud the bank. Hence, the matter had been
entrusted to the Central Bureau of Investigation for thorough investigation. The
defendants informed that the defendants would be in a position to finally respond
to the plaintiffs only on receipt of the findings of the Central Bureau of
Investigation and requested the plaintiffs to bear with the defendants.
13. In reply to the telex dated 9th March, 1999 of the defendants, the plaintiffs
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sent letter by telefax on 12th March, 1999 to the defendants and informed that the
plaintiffs had discounted those bills of exchange accepted by the defendants which
remained overdue and unpaid from 27 th February, 1999 onwards and what is stated
by the defendants in their fax message dated 9 th March, 1999 did not alter in any
way the position of those bills of exchange remaining overdue. It was also stated
that the matter stated by the defendants in their facsimile was their internal matter
and it was for the defendants as to how they deal with it. The plaintiffs clarified
that the liability of the defendants under the said bills continued and the plaintiffs
would like their confirmation of their prompt payment including any delayed
interest to be calculated at 9.75% per annum.
14. The defendants by their letter dated 25th May, 1999, contended that they had
not received complete set of original bills of lading and/or that the bills of lading
were returned to the plaintiffs at their request and/or that delivery of goods had
been taken, though the bills of lading were still and always had been in the hands
of the defendants.
15. The plaintiffs vide their advocates' letter dated 7 th March, 2000 addressed to
the Chairman cum Managing Director of defendants' called upon the defendants to
pay the amount of the said bills of exchange with interest. By letter dated 28 th
March, 2000, the plaintiffs through their advocates once again demanded payment
with interest. On 30th March, 2001, the plaintiffs filed this suit inter-alia praying
for recovery of US $ 1,931,627.89 being the principal amount with further interest
thereon under the provisions of Negotiable Instruments Act, and/or under the
Interest Act, 1978 and/or under the provisions of Section 34 of the Civil Procedure
Code, 1908 at the rate of 9.75% per annum or at such rate as this court deem fit.
Defendants have filed affidavit in reply to the summons for judgment.
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16. Mr.Narichania, learned counsel appearing for the plaintiffs invited my
attention to the defence raised in the affidavit in reply filed by the defendants.
Learned counsel submits that as stated in paragraph (9) of the plaint, present suit
arise out of the bills of exchange accepted by the defendants by their tested telex
and/or arises out of an agreement whereby defendants agreed and confirmed their
liability to pay the amounts on maturity and/or arises out of defendants obligation
to pay ascertained sum of money payable on per-determined date.
17. I will deal with the arguments advanced by the learned senior counsel
appearing for the defendants and the reply given by the plaintiffs.
18. Mr.Thakkar, learned senior counsel appearing on behalf of the defendants
submit that the suit is based on the bills of exchange which were never accepted by
the defendants. It is submitted that the bills of exchange are neither signed by the
defendants nor accepted. It is submitted that under section 7 of the Negotiable
Instruments Act, unless acceptance of the bills by the drawee/acceptor is endorsed
upon the bills itself, it would not amount to such acceptance and drawee/acceptor
would not be liable to make any payment. Learned counsel placed reliance on the
definition of the 'acceptor' defined under section 7 which is extract as under :-
Section 7 in The Negotiable Instruments Act, 1881
7. Drawer, Drawee. The maker of a bill of exchange or
cheque is called the drawer"; the person thereby directed to
pay is called the" drawee". Drawee in case of need. When in
the bill or in any endorsement thereon the name of any
person is given in addition to the drawee to be resorted to in
case of need, such person is called a" drawee in case of
need". Acceptor. After the drawee of a bill has signed his
assent upon the bill, or, if there are more parts thereof than
one, upon one of such parts, and delivered the same, or given
notice of such signing to the holder or to some person on his
behalf, he is called the" acceptor". Acceptor for honour.
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1[ When a bill of exchange has been noted or protested for
nonacceptance or for better security,] and any person accepts
it supra protest for honour of the drawer or of any one of the
endorsers, such person is called an" acceptor for honour".
Payee. The person named in the instrument, to whom or to
whose order the money is by the instrument directed to be
paid, is called the" payee".
19. Learned counsel submits that till the bills of exchange was signed by the
drawee/acceptor, there was no acceptance and defendants could not be treated as
acceptors of such bills of exchange. None of the bills of exchange in question
were accepted by the defendants. Learned senior counsel invited my attention to
the documents annexed at Ex.E-1 to E-4 to the additional affidavit in reply in
support of his submission and would submit that rubber stamp on the left side of
the bill of exchange which can be noticed are not of the defendants but are signed
by the other party. Learned senior counsel submits that original of such bills of
exchange are now not with the defendants but are lying with the Central Bureau of
Investigation who is conducting an investigation in the allegations of fraud made
by the defendants. It is submitted that letters addressed by the defendants are
outside the bills of exchange and would not amount to acceptance of bills of
exchange in law. Reliance is placed by the learned senior counsel on section 32 of
the Negotiable Instruments Act and would submit that since there was no
acceptance of bills of exchange, the defendants are not bound to honour any such
bills of exchange. Section 32 of the Negotiable Instruments Act, 1881 reads thus :-
Section 32 in The Negotiable Instruments Act, 1881
32. Liability of maker of note and acceptor of bill.
In the absence of a contract to the contrary, the maker
of a promissory note and the acceptor before maturity
of a bill of exchange are bound to pay the amount
thereof at maturity according to the apparent tenor of
the note or acceptance respectively, and the acceptor of
a bill of exchange at or after maturity is bound to pay
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the amount thereof to the holder on demand. In default
of such payment as aforesaid, such maker or acceptor
is bound to compensate any party to the note or bill for
any loss or damage sustained by him and caused by
such default.
20. Learned senior counsel placed reliance on the judgment of the Supreme
Court in case of Jagjivan Mavji Vithlani vs. M/s. Ranchhoddas Meghji reported
in AIR 1954 SC 554 and submits that acceptance must appear on the bill itself and
has to be signed by the drawee. There cannot be any oral acceptance of the bills of
exchange much less acceptance by the conduct. It is submitted that under section
32 of the Negotiable Instruments Act, liability of the drawee arises only when he
accepts the bills and not otherwise. Reliance is placed on paragraphs 8, 9 and 10
of the said judgment which reads as under :-
8. On the question of the presentment of the Hindu
for acceptance, the position stands thus : The
person who presented it to the defendants was
Vrajlal; and if he had no authority to act in the
matter, it is difficult to see how he could be held to
have acted on behalf of the plaintiff in presenting
the hundi. There was only one single act, and that
was the presentment of the hundi by Vrajlal and
the receipt of the amount due thereunder. If he had
no authority to receive the payment, he had no
authority to present the bill for acceptance. It was
argued that there was no provision in the Act
requiring that bills payable at sight should be
presented for acceptance by the holder or on his
behalf, as there was, for bills payable after sight,
in section 61. But, as already pointed out, in the
case of a bill payable at sight, both the stages for
presentment for acceptance and for payment are
rolled up into one, and, therefore, the person who
is entitled to receive the payment under section 78
of the Act is the person, who is entitled to present
it for acceptance. Under section 78, the payment
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must be to the holder of the instrument; and if
Vrajlal had no authority to receive the amount on
behalf of the plaintiff, there was no valid
presentment of the hundi by him for acceptance
either.
9. It has next to be considered whether, assuming
that there was a proper presentment of the hundi
for acceptance, there was a valid acceptance
thereof. The argument of the appellant was that as
the hundi had got into the hands of the defendants
and was produced by them, the very fact of its
possession would be sufficient to constitute
acceptance. Under the common law of England,
even a verbal acceptance was valid. Vide the
observations of Baron Parke in Bank of England v.
Archer ((1843) 11 M. & W. 383 at pp. 389, 390; ,
855). It was accordingly held that such acceptance
could be implied when there was undue retention
of the bill by the drawee (Vide Note to Harvey v.
Martin (; 170 E.R. 1009)). But the law was altered
in England by section 17(2) of the Bills of
Exchange Act, 1882, which enacted that an
acceptance was invalid, unless it was written on
the bill and signed by the drawee. Section 7 of the
Negotiable Instruments Act, following the English
law, provides that the drawee becomes an
acceptor, when he has signed his assent upon the
bill. In view of these provisions, there cannot be
apart from any mercantile usage, an oral
acceptance of the hundi, much less an acceptance
by conduct, where at least no question of estoppel
arises.
10. But then, it was argued that the possession of
the hundi was not the only circumstance from
which acceptance could be inferred; that there was
the plea of the defendants that they had discharged
the hundi; and that that clearly imported an
acknowledgment of liability on the bill, and was
sufficient to clothe the plaintiff with a right of
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action thereon. Assume that the plea of discharge
of a hundi implies an acknowledgment of liability
thereunder - an assumption which we find it
difficult to accept. The question still remains
whether that is sufficient in law to fasten a liability
on the defendants on the hundi. What is requisite
for fixing the drawees with liability under section
32 is the acceptance by them of the instrument and
not an acknowledgment of liability. As the law
prescribes no particular form for acceptance, there
should be no difficulty in construing an
acknowledgment as an acceptance; but then, it
must satisfy the requirements of section 7, and
must appear on the bill and be signed by the
drawees. In the present case, the acknowledgment
is neither in writing; nor is it signed by the
defendants. It is a matter of implication arising
from the discharge of the instrument. That is not
sufficient to fix a liability on the defendants under
section 32. In conclusion, we must hold that there
was neither a valid presentment of the hundi for
acceptance, nor a valid acceptance thereof.
21. Mr.Thakkar, learned senior counsel placed reliance on the judgment of the
Supreme Court in case of American Express Bank Ltd. vs. Calcutta Steel Co. and
others reported in (1993) 2 SCC 199 in support of his submission that acceptance
should be on the bill itself otherwise it is mere nullity. Paragraphs 9, 10, 14 and 16
of the said judgment which are relevant for the purpose of deciding this matter
reads as under :-
9. Law Merchant always insists that a negotiable
instrument must bear no veil but reveal its true
character on its face. A party that takes a negotiable
instrument makes his contract with all the parties
who appear on its face to be bound for its payment.
Therefore, the Act insists that a Bill of Exchange
makes the acceptor personally liable unless the
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acceptor states on the face of the bill that he
subscribes for a disclosed principal. The usual mode
of accepting bills of exchange is for the drawee to
write, 'accepted' across the face of the bill and then
to sign his or its name underneath. The acceptance
need not necessarily be on the face of the bill and an
acceptance on its back is also sufficient. In all cases
it is essential that the acceptance should be on the
bill itself otherwise it is a mere nullity.
10. Bhashyam & Adiga in their Negotiable
Instruments Act, 15th Edition at page 362 stated that
a bill of exchange, being in its nature a letter of
request from the maker to a particular person, no one
can be made liable on it but the person to whom it is
addressed as the person to accept the bill. As has
been stated, the acceptance of a bill is the
signification by the drawee of his assent to the
request of the drawer and such acceptance must be in
writing on the bill and signed by the drawee. At page
363, Bhashyam stated that if there is no drawee
named in the bill and a person accepts such
instrument, such acceptance must be regarded as
acknowledging that he is the drawee. At page 365 it
was further stated that a drawee is under no
obligation to the holder to accept a bill drawn on
him, even though such refusal may be in breach of a
contract between the drawee and drawer. Such
contract will, however, entitle the drawer to sue the
drawee on breach of contract.
14. "Acceptance" in regard to a bill of exchange is a
technical term. It does not mean "taking" or
"receiving." Acceptance of a bill of exchange is the
signification by the drawee of his assent to the order
of the drawer. It is the act by which the drawee
evinces his consent to comply with, and be bound
by, the request contained in a bill of exchange
directed to him, and is the drawee's agreement to pay
the bill when it falls due. In Commercial parlance
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acceptance of a bill of exchange is the drawee's
signed engagement to honour the draft as presented.
The contract of the acceptor is a new and
independent one. It comes within the rules as to
consideration for a contract on a negotiable
instrument, and, like every contract on a negotiable
instrument, is incomplete and revocable until
delivery of the instrument for the purpose of giving
effect thereto. Acceptance, generally speaking, is
therefore, necessary to render a drawee liable upon a
bill of exchange and until he accepts it the drawee is
not liable on the bill. As between a drawer and a
drawee, the latter is to be under an obligation to
accept a bill of exchange drawn by the former. Thus
it is a well-settled rule of commercial law that no
one but the person upon whom it is drawn, or his
duly authorised agent, can accept a bill except for
need or honour. We have, therefore, no hesitation to
hold that no person accept as drawee of a bill of
exchange can bind himself by acceptance. The
drawee of the bill of exchange, in the absence of any
contract to the contrary, on acceptance is the
acceptor before maturity by the bill of exchange and
is bound to pay the amount thereof at maturity to the
holder on demand. When the drawee does accept he
undertakes that he will pay the bill according to the
tenor of the acceptance and he remains primarily
liable on the bill of exchange as acceptor.
16. From this perspective the further contention of
Sri Sen is that the bill of exchange being a
negotiable instrument the court has to look to the
tenor of the document on its face and no extraneous
evidence oral or documentary is admissible in
evidence nor is it permissible for the court to
traverse behind the instrument to look to the
intention of the parties, contracting or varying the
terms of the instrument offending Section 92 of the
Evidence Act. The proposition of law is
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unexceptionable since in the commercial world the
negotiable instrument should receive acceptation on
the tenor of the instrument on its face and generally
it is impermissible to traverse behind it unless parties
inter se are at ad idem to the contract in writing or by
conduct preceding or succeeding the execution of the
instrument or acted upon, as an aid to cull out their
intention. In Deo v. Rias , Tindal, C.J. held that "we
are to look at the words of the instrument and to the
acts of the parties to ascertain what their intention
was; if the words of the instrument be ambiguous,
we may call in the aid of the acts done under it as a
clue to the intention of the parties. In Chapman v.
Bluck , Park J. held that the intention of the parties
may be collected from the language of the
instrument and may be elucidated by the conduct
they have pursued. Odgers in his Construction of
Deeds and Statutes, 5th Edn. by Dworkin at p. 53
stated that in the case of an ambiguity, judicial notice
will be taken of the way in which the parties
themselves have interpreted their rights and duties
under the document. In the light of the facts and the
conduct of CSC as discussed above it is clear that
CSC authorised Harlow & Jones Ltd. to draw bills of
exchange to its account for acceptance of the bills of
exchange on its Account at its address. CSC,
therefore, is the drawee and it validly accepted the
bills of exchange as acceptor.
22. Learned senior counsel submits that case of the plaintiffs is based on the
alleged acceptance of bill of exchange which are not accepted by defendants. It is
submitted that the documents annexed at Exs.E-1 to E-4 i.e. copies of the bills of
exchange are not disputed by the plaintiffs. Learned senior counsel then submits
that officer of the defendants in collusion and conspiracy with the representative of
M/s.Kothari Global Ltd. and M/s.Marudhar Edible Oils Ltd. have played fraud on
the defendants for which acts, such officers of the defendants have been suspended
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and the defendants have initiated disciplinary proceedings against them. The
matter is being investigated by the Central Vigilance Commission and also by the
Central Bureau of Investigation.
23. Learned senior counsel submits that alleged acceptance of bills of exchange
was not under the guidelines issued by the Reserve Bank of India and internal
policy of the defendants bank. No officer of the defendants had any authority
either express or implied to address telex of the nature as sought to be done by
telex dated 6th October, 1998. Learned senior counsel submits that as per policy of
the defendants bank and as per guidelines issued by the Reserve Bank of India, bill
cannot be co-accepted in any manner by the defendants. Officials of the
defendants bank were not authorised to co-accept the bills in any manner.
Defendants bank were appointed as collecting agent in respect of certain bills
which were drawn by M/s.Gloland (Far East) Pte.Ltd. on M/s.Kothari Global Ltd.
and M/s.Marudhar Edible Oils Ltd. during the period from February 1998 to
October 1998.
24. It is submitted that as per instructions of the plaintiffs, the said documents
were handed over to the drawee M/s.Kothari Global Ltd. against the payment of
the bills. However, the said bills were not honoured by the drawee and thus the
said documents were not released by the defendants as per instructions of the
plaintiffs bank. Learned senior counsel submits that the bills were accepted by
M/s.Kothari Global Ltd. and M/s.Marudhar Edible Oils Ltd. and the said bills had
been endorsed in favour of the defendants bank thereby constituting the
defendants as holder in due course.
25. Learned senior counsel then submits that the telexes dated 12th September,
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1999 and 6th October, 1998 were not authenticated tele-transmission and plaintiffs.
Bank was required to verify the authenticity of the telexes before discount. It is
submitted that bills are without consideration. Learned counsel submits that bills
were not stamped and are thus inadmissible in evidence.
26. Mr.Rahul Narichania, learned counsel appearing on behalf of the plaintiffs
submit that the original bills of exchange are not produced by the defendants for
inspection and are in custody of the defendants. It is submitted that all the bills of
exchange were duly accepted by the defendants as confirmed in the letters
exchanged between the parties. Based on such acceptance of bills of exchange
duly confirmed by the telex letters sent by the defendants the plaintiffs discounted
such bills of exchange in favour of the drawee. Defendants having accepted the
bills of exchange are thus liable to pay the plaintiffs under such bills of exchange.
It is submitted that in any event, since the defendants had confirmed the
acceptance in the letters addressed to the plaintiffs sent by telex and based on such
contract, plaintiffs had discounted those bills of exchange, defendants cannot be
permitted to take such plea that there was no acceptance of bills of exchange or
that the defendants were not liable to make any payment to the plaintiffs based on
such bills of exchange or the telexes. Learned counsel submits that whether
officers of the defendants who had sent such telexes were authorised or not by the
defendants or had exceeded their authority, it was an internal matter for which the
plaintiffs were not responsible. The plaintiffs have acted upon the acceptance of
such liability by the defendants and defendants thus cannot resile from their
obligation to honour those bills of exchange or in any event based on the contract
arrived at.
27. Mr. Narichania invited my attention to the correspondence exchanged
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between the parties. It is vehemently submitted that though at one stage
defendants had acted as collecting agent the plaintiffs and defendants arrived at a
contract by which defendants accepted the bills of exchange or in any event
admitted acknowledged and agreed to pay to the plaintiffs. It is submitted that by
telex dated 9th September, 1998 sent to the defendants, the plaintiffs had referred to
four bills of exchange and had requested the defendants to advise whether
defendants were prepared to accept the drafts drawn on them for 170 days from
10th September, 1998 and making it clear that upon receipt of their tested telex
confirming their agreement to accept such drafts drawn on the defendants,
plaintiffs shall forward the respective drafts/documents to the defendants by
courier. Plaintiffs requested the defendants to revert urgently. In reply to the said
telex dated 9th September, 1998, which refers to the four bills, the defendants vide
telex dated 12th September, 1998 after referring to the telex of the plaintiffs dated
9th September, 1998 conveyed their undertaking to accept the bills as mentioned in
the telex message 9th September, 1998 amounting to USD 1888699.35 to be paid
on or before 27th February, 1999. The defendants requested the plaintiffs to
dispatch the drafts/documents by courier. By letter dated 16th September, 1998 the
plaintiffs enclosed four drafts for acceptance of the defendants. Plaintiffs
requested the defendants to confirm their acceptance of the enclosed drafts to be
fixed by return tested telex/authenticated swift quoting reference of the plaintiffs
and requested to remit the proceeds of due date as per instructions of the plaintiffs
to their Account No.04-057-477 CHIPS UID 253420 with Bankers Trust Co., New
York. By another telex dated 21st September, 1998, addressed to the defendants,
plaintiffs enclosed one bill for collection.
28. By telex dated 30th September, 1998 addressed to the defendants, plaintiffs
once again referred four bills and placed on record that documents had been sent to
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the defendants via courier dated 21st September, 1998 and requested to confirm
their acceptance of the said draft with maturity date to be fixed on 27 th February,
1999 by return tested telex/authenticated swift to the plaintiffs quoting their
references. By telex dated 6th October, 1998 from the defendants to the plaintiffs,
the defendants referred to the telex dated 30th September, 1998 and four bills
which were referred in the telex of the plaintiffs and conveyed that the defendants
confirmed acceptance of the drafts referred to therein on or before 27 th February,
1999 as required by the plaintiffs.
29. Plaintiffs by telex dated 23rd October, 1998 to the defendants after referring
to the four bills once again requested the defendants to advise that the said four
bills had been accepted by the defendants to mature on 27 th February, 1999.
Plaintiffs conveyed that the plaintiffs had discounted the said bills to drawer,
M/s.Gloland (Far East) Pte.Ltd. and the defendants were to ensure that at maturity,
proceeds would be remitted telegraphically to credit of plaintiffs' Account No.04-
057-477 CHIPS VID 253420 with Bankers Trust Co., New York under their tested
telex confirmation to the plaintiffs quoting their reference failing which the
plaintiffs reserve the right to claim late payment interest from the defendants from
maturity date to final date of payment.
30. Defendants by their telex dated 27th October, 1998 after referring to the telex
of the plaintiffs dated 23rd October, 1998 confirmed that the the defendants had
noted to make the payment on due date i.e. 27th February, 1999 as advised in the
telex message of the plaintiffs.
31. Defendants however for the first time by their letter dated 9 th March, 1999
alleged that the reported co-acceptance given by Bura Bazar Branch appears to be
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out of ordinary course of business and had been carried out in total disregard to the
procedures in vogue in banks. The defendants submitted that there were sufficient
grounds to infer that a well planned conspiracy has been hatched to defraud the
bank and the matter has been entrusted to the Central Bureau of Investigation for a
thorough investigation. By the said letter, the defendants informed that the
defendants would be in a position to finally respond to the plaintiffs only on
receipt of the findings of the Central Bureau of Investigation and requested to bear
with them.
32. Learned counsel thus submits that the defendants had agreed and conveyed
their acceptance in various telexes and had agreed to pay the amount under four
bills on due dates. It is submitted that even if there is no endorsement of
acceptance as claimed by the defendants, there was acceptance by letters and in
any event there was a contract arrived at between the plaintiffs and the defendants
by which the defendants had agreed to pay the liquidated sum to the plaintiffs on
due dates.
33. Mr.Narichania distinguishes two judgments of the Supreme Court relied
upon by the defendants on the ground that the fact before the Supreme Court in
those two judgments were different than the facts in this case. There was no
contract entered into between the parties in writing acknowledging liability and
promising to pay. Learned counsel also submits that if the officers of the
defendants have committed any fraud or were not authorised to send such telexes
as alleged by the defendants, it was their internal matter and the defendants cannot
refuse to pay their liability based on such alleged collusion between the officers of
the defendants and the third party. It is submitted that the suit is based not only on
the bills of exchange but also on the basis of agreement whereby the defendants
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agreed and confirmed their liability to pay on maturity or arising out of defendants'
obligation to pay liquidated sum of money payment of predetermined date.
Reliance is placed on the Order 37 Rule 1 of the Code of Civil Procedure in
support of the submission that summary suit is maintainable based on the debt of
liquidated demand arising out of a written contract.
34. In so far as submission of Mr.Thakkar, learned senior counsel appearing on
behalf of the defendants that bills of exchange were not duly stamped and were
inadmissible and summary suit is not maintainable is concerned, it is submitted by
Mr. Narichania that even if the said plea of the defendants is accepted, defendants
are not entitled to unconditional leave to defend since defendants had
acknowledged and admitted their liability and had agreed to pay the amount due to
the plaintiffs under those four bills, hence summary suit is maintainable and
plaintiffs are entitled to be granted relief as prayed in the summons for judgment.
35. On perusal of the affidavit in reply filed by the defendants, it is noticed that
it is the case of the defendants that the original of this bills of exchange were either
with the defendants or with the Central Bureau of Investigation which are not
produced for perusal of this court. Defendants have annexed photocopies of these
four bills of exchange. In affidavit in rejoinder filed by the plaintiffs on 18 th
September, 2012, the plaintiffs have denied that the suit bills were not accepted by
the defendants or that M/s.Kothari Global Ltd. and M/s.Marudhar Edible Oils Ltd.
had accepted the bills. Mr.Thakkar, learned senior counsel did not dispute that the
defendants were drawees of the bills of exchange.
36. Supreme Court in case of Jagjivan Mavji Vithlani (supra) has held that in
view of section 7 of the Negotiable Instruments Act, the drawee becomes an
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acceptor, when he has signed his assent upon the bill and in view of these
provisions, there cannot be apart from any mercantile usage, an oral acceptance of
the hundi, much less an acceptance by conduct, where at least no question of
estoppel arises. It is held that the question still remains whether that is sufficient in
law to fasten a liability on the defendants on the hundi. What is requisite for
fixing the drawees with liability under section 32 is the acceptance by them of the
instrument and not an acknowledgment of liability. It is held that as the law
prescribes no particular form for acceptance, there should be no difficulty in
construing an acknowledgment as an acceptance; but then, it must satisfy the
requirements of section 7, and must appear on the bill and be signed by the
drawees. On perusal of the judgment of the Supreme Court in case of Jagjivan
Mavji Vithlani (supra) it is clear that in the plaint there was no averments made by
the plaintiffs that the hundi was accepted by the defendants and based on such
facts for consideration, Supreme Court upheld the finding recorded by the High
Court and dismissed the Special Leave Petition filed by the plaintiffs.
37. In as far as judgment of the Supreme Court in case of American Express
Bank Ltd. (supra) relied upon by Mr.Thakkar, learned senior counsel is
concerned, paragraph (16) of the judgment of the Supreme Court would be
relevant. It is held by the Supreme Court that proposition of law that the bills of
exchange being a negotiable instrument the court has to look to the tenor of the
document on its face and no extraneous evidence oral or documentary is
admissible in evidence nor is it permissible for the court to traverse behind the
instrument to look to the intention of the parties, contracting or varying the terms
of the instrument offending Section 92 of the Evidence Act is unexceptionable
since in the commercial world the negotiable instrument should receive
acceptation on the tenor of the instrument on its face and generally it is
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impermissible to traverse behind. Supreme Court has however carved out an
exception that such situation would not apply if parties inter se are at ad idem to
the contract in writing or by conduct preceding or succeeding the execution of the
instrument or acted upon, as an aid to cull out their intention.
38. It is not in dispute that the plaintiffs bank is carrying on business at
Singapore and its branches at Singapore. The defendants bank is carrying on
business at Mumbai and has its branches at various place in India. The drawer of
the bills of exchange M/s.Gloland (Far East) Pte.Ltd. is also from other country.
Though at one stage, the defendants had agreed to act as collecting agent,
correspondence referred to aforesaid would indicate that the defendants had
accepted to honour bills of exchange and had agreed to make payment based on
such bills of exchange to the plaintiffs on due dates. Both parties were ad- idem to
the contract arrived at between the parties that on due date defendants would make
payment to the plaintiffs arising out of those bills of exchange and based on such
agreement arrived at, plaintiffs acted upon such agreement and discounted those
bills. Since both parties were ad-idem that bills were accepted by the defendants
and had acted upon the same, in my view the judgment of the Supreme Court
relied upon by the learned senior counsel Mr.Thakkar for the defendants would not
assist the defendants. In my view facts before the Supreme Court were totally
different. It is not the case of the plaintiffs that defendants had accepted bills of
exchange orally.
39. On application of section 32 of the Negotiable Instruments Act, it is clear
that the defendants had agreed to pay the plaintiffs the amount under the said bills
of exchange on due date and had accepted their liability, they are liable to make
payment to the plaintiffs.
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40. As far as allegations of the defendants that the suit is based only on bills of
exchange which are not accepted and thus summary suit is not maintainable, in my
view, there is no substance in the submission made by the learned senior counsel.
On perusal of paragraph (9) of the plaint, it is clear that suit is not based only on
bills of exchange but also based on the contract and/or writing arrived at between
the parties by which the defendants had agreed to pay liquidated sum to the
plaintiffs on the due date under Order 37 Rule 2. Summary suit is thus
maintainable if it is for recovery of debt or liquidated amount based on written
contract. In my view even if arguments of the defendants is accepted that
acceptance on the bill itself was mandatory for the purpose of fastening any
liability on the defendants, since contract was arrived at between the parties by
which defendants agreed to pay liquidated sum to the plaintiffs on the due date,
defendants in my view cannot escape their liability to pay the plaintiffs based on
such contract. It is not in dispute that such telex were sent by the defendants. It is
not in dispute that letters sent by the plaintiffs alongwith documents were received
by the defendants. Signature on telex sent by the defendants exist or not would be
of no significance.
41. In so far as defence of the defendants that bills of exchange is not properly
stamped is concerned, since this court has taken a view that summary suit is
maintainable based on the contract under Order 37 Rule 2, whether bills of
exchange were duly stamped or not, is of no significance.
42. As far as defence of the defendants that there were collusion between the
staff members of the defendants and the third party is concerned, or their officers
were not authorised to accept such bills or to send such telex to the plaintiffs is
concerned, if there is any such collusion or their officers had exceeded their power,
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defendants cannot deny their liability based on such collusion and/or based on
their officers allegedly exceeding their power and/or authority which shall be their
internal matter for which the defendants have already initiated action. There is no
other defence raised by the defendants and/or canvassed before this court at the
time of oral submission. In my view, each of the defence raised by the defendants
is frivolous and moon-shine.
43. I, therefore, pass the following order :-
(a) Summons for Judgment is made absolute.
(b) Plaintiffs would be also entitled to interest
at the rate of 9.75% per annum w.e.f. 27 th
February, 1999 till realisation on the principal
amount and for cost of the suit.
(c) Suit is decreed in the aforesaid terms.
(d) Refund of court fees as per rules.
[R.D. DHANUKA, J.]
