Sh. Vijay Singh & Ors vs Smt. Manali Malik & Ors
2009 Latest Caselaw 1862 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                  IA No.6459/2008 in CS(OS) No.930/2007

%                            Date of decision: 5th May, 2009

SH. VIJAY SINGH & ORS.                   .......               Plaintiffs
                         Through:-       Mr. Satinder Gulati & Mr.
                                         Kamaldeep Gulati, Advocates.

                                 Versus

SMT. MANALI MALIK & ORS. .......                          Defendants
                         Through:        Mr. L.K. Singh, Advocate

CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?       Yes

2.    To be referred to the reporter or not?        Yes

3.    Whether the judgment should be reported
      in the Digest?                                       Yes


RAJIV SAHAI ENDLAW, J.

1. Does a cheque presented for payment to the bank after the

death of the drawer and returned unpaid for the reason of death,

ceases to be a cheque for a suit under Order 37 CPC to be

maintainable thereon. This question inter-alia arises for

consideration in this application for leave to defendant.

2. The three plaintiffs instituted the suit under Order 37 of the

CPC for recovery of the total principal sum of Rs.22,65,000/-

together with pre-institution interest at 18% per annum amounting

to Rs.71,720/-, total Rs.23,36,721/- and further together with

pendente lite and future interest at 18% per annum against the three

defendants on the basis of three dishonoured cheques. The plaintiffs

No.1&2 are pleaded to be the sons of the plaintiff No.3. It is the

case in the plaint (i) that the plaintiffs were having friendly relations

with Shri Anil Kumar Malik the deceased husband of the defendant

No.1 and father of the minor defendants No.2&3; (ii) that the said

Shri Anil Kumar Malik was working as Development Officer with LIC

and had got agency of LIC in the name of the wife of the plaintiff

No.2 also; (iii) that during the long relationship of twenty years

between the parties both were helping each other financially as and

when need arose; (iv) that the deceased Anil Kumar Malik owed an

amount of Rs.8,00,000/- to the plaintiff No.3 against which he had

issued a cheque; (v) that Sh. Anil Kumar Malik was in need of money

and had approached plaintiffs No.1 & 2 to arrange money; (vi)

plaintiff No.1 had arranged a sum of Rs.8,50,000/- and paid the same

to the deceased Anil Kumar Malik against which he issued a cheque

for the said amount in favour of the plaintiff No.1; (vii) plaintiff No.2

paid a sum of Rs.6,15,000/- to the deceased Anil Kumar Malik and

against which the deceased issued a post dated cheque for

Rs.6,15,000/- in the name of the plaintiff No.2; (viii) that all the said

amounts were paid by the plaintiffs to the deceased by way of

friendly loan; (ix) that the deceased used to make entries in the

record of the amount received from the plaintiffs in the name of the

plaintiff No.1 only; (x) Shri Anil Kumar Malik expired untimely on 1st

February, 2007 in a train accident; (xi) the plaintiffs presented their

respective cheques for encashment after the demise of Sh. Anil

Kumar Malik on or about 6th February, 2007 and all the said cheques

were returned dishonoured with the remarks "withdrawal stopped

owing to death"; (xii) that the plaintiffs approached defendant No.1

being the widow of Sh. Anil Kumar Malik, she though admitted the

monies owed to the plaintiffs had been non committal and evasive

and did not make the payment inspite of repeated reminders; (xiii)

that the defendants being the legal heirs of Sh. Anil Kumar Malik

who owed monies to the plaintiffs are liable to re-pay the monies to

the plaintiffs along with interest; (xiv) that a legal notice dated 10th

March, 2007 was issued which was avoided by the defendant No.1.

3. The defendant No.1 for herself and for her minor children

defendants No.2&3 has sought leave to defend on the

grounds (i) of mis-joinder of plaintiffs and causes of action;

it is averred that the transactions pleaded with each of the

plaintiffs being separate, they are not entitled to join in a

single suit; (ii) that the suit under Order 37 is not

maintainable against the defendants who are neither

authors of the cheques nor have issued the cheques on the

basis whereof the suit has been filed, that a suit on the

basis of an instrument can be filed under Order 37 of the

CPC only against the person issuing the instruments; (iii)

that the plaintiffs have not given any details as to when

and in what manner each of the plaintiffs had advanced

monies to Sh. Anil Kumar Malik and thus there was

nothing to show that the cheques had been issued towards

discharge of any alleged loan; (iv) the signatures on the

cheques were admitted to be that of Sh. Anil Kumar Malik

but the writing on the remaining portion of the cheque

either in words of in figures was denied to be of said Sh.

Anil Kumar Malik; (v) it is averred that there was nothing

to show that the cheques had been issued by Sh. Anil

Kumar Malik to the plaintiffs in discharge of any alleged

loan; (vi) that a presumption of liability from signatures

could be made only against the signatory and not against

the heirs of the signatory; (vii) that the defendants have

no knowledge about any loan advanced by the plaintiffs to

Sh. Anil Kumar Malik or of any cheques issued by him to

the plaintiffs; (viii) that the plaintiff No.1 was employed

with Indian Overseas Bank where Sh. Anil Kumar Malik

was having his account and was thus aware of the demise

of Sh. Anil Kumar Malik and of the account being frozen

by the bank but still the cheques were presented for

payment; (ix) that the defendant No.1 had never seen Sh.

Anil Kumar Malik giving blank cheques to anyone; (x) that

the plaintiffs were trying to illegally enrich themselves

and had concocted the story of loan.

4. The plaintiffs filed a reply to the application for leave to defend

and denied that the defendants had raised any triable issue. It was

further alleged that the defendants had inherited lot of movable and

immovable properties from Sh. Anil Kumar Malik and were the

custodian of his estate and were thus liable for repayment of the

amount due from Sh. Anil Kumar Malik to the plaintiffs. It was

further pleaded that Sh. Anil Kumar Malik by issuing the cheques to

the plaintiffs had admitted his liability to the plaintiffs and the

defendants having admitted the signatures of Sh. Anil Kumar Malik

on the cheques, the plaintiffs were entitled to a decree forthwith. It

was also denied that the accounts were frozen by the bank owing to

the death of Sh. Anil Kumar Malik; the accounts were in the joint

name of Sh. Anil Kumar Malik and the defendant No.1 and the

defendant No.1 had stopped payment from the said accounts. It is

also denied that the plaintiff No.1 had worked with the branch of the

Indian Overseas Bank in which Sh. Anil Kumar Malik had an

account. It was further pleaded that the defendant No.1 was a

director in several companies of Sh. Anil Kumar Malik and was thus

fully involved in his business and had knowledge of the transactions

of Sh. Anil Kumar Malik with the plaintiffs. Significantly, inspite of

objection being taken in the leave to defendant, the plaintiffs in the

reply also did not give any further particulars as to how the monies

were advanced by each of them to Sh. Anil Kumar Malik and in

repayment whereof the cheques subject matter of the suit were

stated to be issued.

5. The plaintiffs have filed the original cheques and the cheque

returning memos in the court. The reason given in each of the

cheque returning memo is "withdrawal stopped owing to death".

The counsel for the defendants in his submissions relied upon

Section 118 of the Negotiable Instruments Act and the judgment

reported in Sarla Devi Vs Daya Ram 57 (1995) DLT 126 to contend

that a suit under Order 37 is not maintainable against heirs of a

signatory to an instrument. The counsel for the plaintiffs relied upon

(A) Sarla Devi Vs. Daya Ram 60 (1995) DLT 3 (DB) overruling the

above and in which the suit under Order 37 of the CPC for recovery

of advance sale consideration paid under an agreement to sell in

writing and refundable in terms thereof was held to be maintainable

against the legal heirs. The reasoning given was that under Section

37 & 40 of the Indian Contract Act the contract can be enforced by

or against the parties and their legal heirs unless contrary intention

appears.

(B) Raghubir Singh Vs. Sarla Devi 59 (1995) DLT 830 (DB) merely

reiterating the aforesaid judgment.

(C) Bharat Barrel & Drum Manufacturing Co. Vs. Amin Chand

Pyarelal (1999) 3 SCC 35 on the importance of cheques in the

commercial world.

(D) Mallavarapu Kasivisweswara Rao Vs. Thadikonda Ramulu

Firm (2008) 7 SCC 655 on the presumption under Section 118 (a)

of the Negotiable Instruments Act. It was contended that the

defendants had in their leave to defend not pleaded anything to

rebut the said presumption.

(E) Ravi Chopra Vs. State 2008 (102) DRJ 147 holding that if the

signatures on the cheques are shown to be of much prior to the date

of filling up of the materials/particulars, it does not probabalize the

defence in a case under Section 138 of the Negotiable Instruments

Act.

6. The counsel for the plaintiffs emphasized that the defendants

had not denied the signatures on the cheque, had not disputed

inheriting the estate from the defendants, had not denied the

consideration for the cheques and thus it was contended that the

defence of the defendants was a moonshine within the meaning

Mechalee Engineers Vs Basic Equipment Corporation AIR 1977

SC 577. It was further contended that pleading that there was no

evidence of consideration was not the same as pleading that there

was no consideration for the cheques.

7. Before proceeding further, I may notice that the suit though

filed under Order 37 of the CPC, does not comply with the

requirement of it being stated in the body of the plaint that the suit

is filed under Order 37 of the CPC and that no relief falling outside

the ambit of the said order had been claimed in the plaint.

8. I do not find any merit in the ground taken by the defendants

of mis-joinder of parties. The averments in the plaint show sufficient

material for the right of relief of the plaintiffs arising out of the same

series of acts or transactions and for their joinder. Even otherwise

under Order 1 Rule 9 of the CPC no suit can be defeated for the

reason of mis-joinder.

9. The aforesaid state of pleadings and submissions would show

that the question posed by me at the outset, though staring one in

the face has not been pleaded or argued so. The two judgments of

the Division Bench of this court relied upon by the counsel for the

plaintiffs also do not apply to the facts of the case. A suit under

order 37 of CPC on a written contract and which has been held to be

maintainable against the legal representatives of the signatories

stands on a different footing than a suit under Order 37 of the CPC

on the basis of a cheque. If it were to be held that on the death of

the drawer prior to the presentment of the cheque, the cheque

ceases to be a cheque, then axiomatically the suit under Order 37

would not be maintainable thereon. That is the question to be

adjudicated in the present case. My research does not show any

precedent thereon.

10. The relevant provisions of the Negotiable Instruments Act

relating to a cheque have been perused. Section 6 defines the

cheque as a bill of exchange drawn on a specified banker and not

expressed to be payable otherwise than on demand. Normally

cheques are issued on the banks holding the monies of the drawer of

the cheque. The bank is in the position of the debtor of the drawer

of the cheque. The cheque is thus an order of the drawer thereof as

creditor, to the bank who is his debtor, to pay to the payee of the

cheque on the date of presentment the amount thereof. The

relationship between the drawer of the cheque and his banker is

contractual.

11. Under Section 31, the liability of the bank as drawee of the

cheque is, subject to having sufficient funds of the drawer in its

hands properly applicable to the payment of such cheque, to pay the

cheque when duly required so to do. It is only when the bank

defaults in such payment that it becomes personally liable to

compensate the drawer for any loss or damage caused by such

default. Else, bank as a drawee of the cheque is not liable

personally for default in payment thereof. The text book on the

Negotiable Instruments Act by Bhashyam & Adiga (17th Edition)

under Section 31 thereof states that at the instant of the death of the

drawer, the title to the balance vests in his legal representative and

his own order is not competent to withdraw any part of that which is

no longer his property. It is further stated that on death of a

customer, the order of the customer comes to an end and only if the

banker pays the cheque before notice of death, is it valid. It would

thus appear that the death of customer terminates his authority to

order payment and operates as a countermand of the outstanding

cheque.

12. Section 30 also requires due notice of dishonour to be given to

the drawer of the cheque for maintaining a claim for compensation

on account of dishonour of the cheque. Thus, the dishonour of the

cheque is actionable under Order 37 of the CPC only if notice of

dishonour has been given to the drawer. If the drawer is dead on

the date of dishonour or even on the date of presentment, no notice

can possibly be given to him. That also leads to the inevitable

conclusion that in such a eventuality no suit under Order 37 of the

CPC is maintainable on the basis of a cheque.

13. It is to be noted that the drawing of a cheque does not by itself

operate as an assignment of the monies in the hands of the banker in

favour of the payee. The holder of a cheque has no right to enforce

payment from the bank unless the banker has contracted with the

holder to honour. The banker is only liable to the order of the

drawer and thus if there is no order of the drawer on the banker, on

the date of the presentment owing to the death of the drawer, the

bank is not liable to pay. Section 57 provides that the legal

representatives of a deceased person cannot negotiate by delivery

only a cheque payable to order and endorsed by the deceased but

not delivered. This is on the ground that the legal representative is

not the agent of deceased. Upon demise, the estate including the

amounts with the bank vest in the legal representatives or nominee

and it requires a fresh act on the part of the legal representative or

nominee to transfer the money, if any. Only if the cheque had been

signed by the legal representative, at the instance of holder thereof

does the legal representative becomes personally liable thereunder,

under Section 29 of the Act.

14. Sir Ernest Pollock M.R. speaking for the court of Appeal in Re

Swinburne; Sutton Vs. Featherley 1926 (134) Law Times 121 held

that a cheque is clearly not an assignment of money in the hands of

a banker; Lord Romilly in Hewitt Vs. Kaye L. Reports 6 E.Q. 198

was quoted :

"A cheque is nothing more than an order to obtain a certain sum of money, and it makes no difference whether the money is at the banker or anywhere else. It is an order to deliver the money and if the order is not acted

upon in the lifetime of the person who gives it, it is worth nothing."

It was further held that it is merely a mandate or authority in the

hands of the holder of the cheque to go to the bank and get the

money from it. Warington L.J. in the same judgment held that a

cheque is nothing more than an order directed to the person who

has the custody of the money, requiring him to pay so much to the

person in whose favour the cheque is drawn.

15. The House of Lords in London Joint Stock Bank Limited

Vs. Mac. Millan Arthur 1918 LR (HL) 777 speaking through Lord

Finlay L.C. so described the relationship between the banker and the

customer:-

"The relation between banker and customer is that of debtor and creditor, with a super added obligation on the part of the banker to honour the customers' cheques if the account is in credit. A cheque drawn by a customer is in point of law a mandate to the banker to pay the amount according to the tenor of the cheque."

The said mandate, on demise of customer, ceases to be a

mandate. On the moment of demise of customer, the bank, in terms

of its contract, is holding the money not to the order of the deceased

customer, but to the order of his nominees or legal representatives.

The bank cannot thus act on the order of the deceased customer.

The cheque, which has been held to be merely an order, thus, on

demise of drawer, ceases to be a cheque.

16. Closer home, in Canara Bank Vs. Canara Sales

Corporation MANU/SC/0904/1987 it has been held that a cheque

on which the signatures of the account holder are forged is not

cheque in as much as it is no order/mandate of the drawer to the

banker to pay the money. To the same effect is Bihta Co-operative

Development Cane Marketing Union Ltd. and Anr. v. The Bank

of Bihar AIR 1967 SC 389.

17. I, therefore, reach a conclusion that the cheques on the basis

of which the present suit has been filed, since not presented for

payment in the lifetime of the drawer, ceased to be a cheque on the

demise of the drawer in as much as they ceased to be the order of a

person entitled to make an order to the bank to pay the money

thereupon and thus the suit under order 37 of the CPC would not be

maintainable on the same.

18. Be that as it may, the matter is considered on other aspects

also.

19. Under the provisions of the Negotiable Instruments Act, the

cheque only raises rebuttable presumption of having been issued for

consideration. Thus at the stage of grant to leave to defend, it has to

be seen, in which case an opportunity for rebutting the presumption

is to be given. Merely because the suit is filed against the legal

representatives of the drawer, is no ground for grant of leave to

defend, if otherwise the court is convinced that no case for giving an

opportunity for rebutting the presumption is made out. The

contention of the counsel for the defendant that, whenever the suit

is against legal representatives, leave has to be granted, thus cannot

be accepted.

20. The position with respect to the three cheques in the present

case is as under:-

         In favour of               Dated            Cheque Number


        Plaintiff No.1         30th January, 2007      196235


        Plaintiff No.2         27th January, 2007      636299


        Plaintiff No.3         29th January, 2007      187146

The drawer of the aforesaid cheques died on 1st February,

2007.

21. What strikes one immediately is that the three cheques though

bearing dates of a few days apart appear to be drawn from three

different cheque books. The case of the plaintiffs is of the cheque in

favour of plaintiff No.2 only to be post dated. It is not stated that the

cheques in favour of the other plaintiffs were post dated. The plaint

is conspicuously quite as to the dates on which the cheques were

issued. The plea of the defendants is that the plaintiff No.1 is an

employee of the bank on which the cheques have been issued; while

the defendants contend him to be employee of the same branch

where the account was, the plaintiffs contend he was in another

branch. That can only be adjudicated after trial.

22. The plaintiffs besides the cheques have not filed any document

whatsoever to show any financial transactions with the predecessor

of the defendants. Though, it is claimed that besides transactions

subject matter of the suit, in the past also there were financial

dealings between the parties but no instance/particulars thereof are

also given. I had during the course of hearing inquired whether the

plaintiffs in their income tax returns had shown the alleged loan to

the predecessor of the defendants. No reply was given thereto. The

plaintiffs have not even placed any documents to show that they

were possessed of the monies which are alleged to have been loaned

to the predecessor of the defendants. The plaintiff No.1 is

admittedly employed with the bank and the vocation of the other

plaintiffs has not been stated. No case has been made out of the

plaintiffs, in the course of their business or other affairs being

possessed of the sums of money alleged to have been loaned to the

predecessor of defendants. Not only are the plaintiffs quite in the

plaint in this regard but inspite of the said questions being raised in

the application for leave to defend also, in the reply thereto nothing

further was stated.

23. In view of plaintiff No.1 being an employee of same bank

where the account of the deceased was and the averments of the

plaintiffs themselves of relationship with the deceased, it is not

improbable that the plaintiffs could be in possession of the cheques

signed by the deceased, without any money being due from

deceased to plaintiffs. Mere possession of a cheque does not entitle

the holder thereof to monies thereunder when challenged. In the

present case an opportunity for trial ought to be given. In the event

of the plaintiffs being unable to prove that the cheques on the basis

whereof the suit has been instituted are for consideration, plaintiffs

would not be entitled to a decree. It would be unjust to in these

circumstances deny leave to defend which would result in a decree.

24. Though no arguments have been addressed on the aspect of

security but the plaintiffs along with the suit had filed an application

for restraining the defendants from selling the immovable property

of the deceased. An ex-parte order exists in favour of the plaintiffs.

The plaintiffs have also applied under Order 38 Rule 5 CPC. In the

circumstances, it is not deemed necessary to discuss and the need is

not felt to grant to leave to defendants subject to any condition of

furnishing security or otherwise. Also, since the suit has been held

to be not maintainable under Order 37, the question of at this stage

imposing any condition does not arise.

25. The defendants are therefore found entitled to leave to

contest.

The application is allowed.

RAJIV SAHAI ENDLAW (JUDGE) May 5, 2009 PP