A. K. Ganguly, J
1. This appeal arises out of the judgment and decree dated 12th December, 1990 passed by the learned trial Judge in Suit No. 780 of 1983.
2. The claim of the respondent-plaintiff, Britannia industries Ltd. (hereinafter called. Britannia) is based on a bill of exchange purported to be dated 15.02.1983, for a sum of Rs. 1,00,000,00/- (Rupees one crore only). The said bill of exchange has been annexed to the plaint and marked A.
3. As per the version in the plaint, the said bill of exchange was drawn by the defendant No.2, Metropolitan Construction (hereinafter referred to as Metropolitan) and was accepted by the defendant No.1 the Punjab National Bank (hereinafter called, PNB). But this is contrary to the endorsement on the bill of exchange itself.
4. However, further case in the plaint is that the said bill of exchange is duly endorsed by Metropolitan in favour of Britannia and is delivered to Britannia who thus becomes the endorsee and the holder of the said bill of exchange.
5. In paragraph 5 of plaint the averment is that the said bill of exchange was duly presented by Britannia for payment but was dishonoured by nonpayment. Significantly enough the plaint is silent about the party to whom the said bill of exchange was presented for payment.
6. In paragraph 7 of the plaint it has been stated that despite repeated demands defendants have failed to pay Britannia the said sum of Rs. 1,00,000,00/- or any part thereof or any interest statutorily payable thereon.
7. In paragraph 8 of the plaint it has been made clear that the suit has been filed under Order XXXVII of the CPC. Admittedly leave under Order XXXV11 was not granted.
8. In paragraph 9 of the plaint the following averment has been made which is of some importance in the decision of this case and the same is set out verbatim as follows :
'The plaintiff is also entitled to claim on the said Bill of Exchange against one Lgee Enterprises, carrying on business at Bombay. This Hon'ble Court however has no jurisdiction to entertain a claim against the said Lgee Enterprises. The plaintiff accordingly prays for leave under Order 2 Rule 2 of the Code of Civil Procedure.'
9. The bill of Exchange in issue in this suit (hereinafter call the said bill) is also set out The first page of the bill runs thus :
METROPOLITAN CONSTRUCTION Principal Office : Branch Office:8. Kings Acres, Plot No.75 28, Creak Lane,Calcutta-700 014Saraswatl Road, Place: Bombay.Santa Cruz (West) No. 1 /83Bombay - 400 064 Date 15.02.83Rs. 1,00,000,00/-180 Days after date (Inclusive of grace) pay toM/s. Metropolitan Construction ..... or Order at Bombay,the sum of Rupees One Crore only for value received.M/s. Lgee Enterprises,Plot No, R-154, Juhu Tara Road,Bombay - 400049 For MetropolitanConstruction,Sd/- Amit DuttSd/- Raghu Nath DattaAccepted to pay on due date. Partner.For Lgee EnterprisesPartnerSignature of DRAWEEPunjab National BankStamp - illegible16.2.83.Zakaria Street Branch, Co-acceptedCalcutta.For PUNJAB NATIONAL BANKB.O. Zakaria Street.Calcutta-700 00Sd/- A. B. DasManager' (4188)The second page of the bill runs thus:Pay to Britannia industries Limited or orderFor 'METROPOLITAN CONSTRUCTIONSd/- Amit DuttSd/- Radhu Nath DuttaPARTNERPay to Punjab National Bank or orderFOR BRITANNIA INDUSTRIES LIMITEDSd/- illegibleAUTHORISED SIGNATORY'
10. It is clear that the acceptor of the said bill is one Lgee Enterprise which is not impleaded in the suit. PNB is alleged to be the co-acceptor of the said bill. In the instant suit PNB is the defendant No.1 and the suit is contested by PNB only. The drawer of the said bill Metropolitan is the defendant No.2. Defendant Nos.3 and 4 are the partners of defendant No.2. Neither defendant Nos. 2. 3 or 4 contested the suft at any stage. The admitted position is that summons were not served on those defendants.
11. The plaint case that PNB is the acceptor of the said bill (para 3) has been denied in the written statement filed by PNB sometime in July, 1984 in which it is stated that PNB was never the acceptor of the said bill. ThenBritannia sought to amend the plaint by filing an application for amendment almost after a year in July, 1985.
12. In the said application for amendment Britannia wanted to introducethe following amendment as set out below :
'..... In any event by the custom and/or practice and/or usage ofmerchant and Banker a Bank or financial institution or other party by co-accepting a Bill of Exchange adds its credit to that of the drawee and represents to all holders in due course or intending holder in due course or persons dealing with such bill (intending such representation to be acted upon) that such Bank or Financial institution or party though not named as drawee on such bill may be treated as if it or he had been named as drawee and had accepted such bill and further undertakes an obligation to make payment of the amount of such bill on it being presented for payment at maturity.'
13. The said application for amendment was opposed by PN8 and ultimately a learned Judge of this Court by a Judgment and order dated 1st October. 1985 dismissed the said application for amendment.
14. While opposing the said application for amendment it was contended on behalf of PNB that by the said amendment application Britannia 'has given a go by to its original case in the plaint and in fact an entirely new case has been sought to be introduced against the defendant No. 1 by theproposed amendment.'
Accepting the said stand of PNB. the learned Judge while refusing to allow the amendment held:
'The proposed amendment seeks to introduce an entirely new cause of action which were not to be found within the four corners of the original plaint. This is not a case where the pleading was defective because of ignorance or negligence or inexperience of the learned lawyer. By the proposed amendments the plaintiff is trying to make the plaint filed in this suit entirely a new plaint with entirely new causes of action and inconsistent with or contrary to the pleadings in the original plaint. In any view such amendments cannot be allowed.'
15. Being aggrieved by the said order, an appeal was filed by Britannia and the appellate Court also by an order dated 7th December, 1987 agreed with the reasoning of the learned trial Judge and while dismissing the appeal held :
'By the proposed amendments the plaintiff seeks to introduce entirely now causes of action which are not to be found within the four corners of the existing plaint and is trying to make an entirely new plaint which is contrary to or inconsistent with the plaint as it now stands.'
16. A Special Leave petition was also filed against the Judgment of the Division Bench and the same was dismissed by the Hon'ble Supreme Court by an order dated 28.11.1988. But the learned Judges of the Hon'ble Supreme Court while rejecting the SLP were pleased to record the submission of the learned counsel for Britannia. The text of Hon'ble Supreme Court's order dated 28.11.1988. as corrected by order dated 10.03.1989, is set out below :
'The Special leave petition is dismissed. Dr. Ghosh wants us to indicate in our order that in the event of the appeal being filed against the orderto the Division Bench, it would be open to the petitioner to agitate this aspect of the matter.'
17. This Court finds that Hon'ble Supreme Court has merely recorded the submission of the learned counsel for Britannia but did not pass any order or record any finding on such submission. Thus the operative order of Hon'ble Supreme Court is one of dismissal of special leave petition. Therefore, the reasons in support of the findings of the learned single Judge as affirmed by the Division Bench of this Court in refusing Britannia's prayer for amendment have become final.
18. Learned counsel for Britannia has however urged that the prayer for amendment which has been rejected by all the Courts was unnecessary. It is open to Britannia to contend that the co-acceptance of the said bill by PNB amounts to acceptance and this fact has been proved by materials and evidence on record and also by the Reserve Bank circulars.
In the instant case PNB after entering appearance applied for leave to defend and by an order dated 20th June, 1984 such application wasallowed.
19. In the written statement PNB denied the case made out in the plaint. The specific stand is that the said bill was not drawn on PNB and was not accepted by it. It was also stated that A.B. Das was not authorized to accept the said bill on behalf of PNB. It was also stated that alleged co-acceptance by A.B. Das (hereinafter called, ABD) was fraudulent and not binding on PNB and such co-acceptance of the said Bill in Bombay by ABD was not in discharge of his official duty as a Branch Manager of the Zakaria Street branch, Calcutta.
20. It was also stated in the written statement that there is no provision for co-acceptance of a negotiable instrument under the Negotiable instrument Act. It is also denied that the High Court has no Jurisdiction to entertain the claim of the plaintiff against Lgee Enterprise.
21. In para 10 of the written statement PNB's stand has been stated in detail and particulars of its case that the said Bill is fraudulent has been stated and it has been stated that the said bill being No. 1/83 annexed to the plaint is an alleged document.
It is also stated in paragraph 10(f) of the written statement that ABD was arrested by the West Bengal Bureau of investigation relating to his involvement in connection with M/s. Sanchita investment and then on 8th November, 1983 ABD was again arrested by CBI and various investigationsare pending against ABD.
22. It has also been stated to the written statement that the Metropolitan Construction is a non-existent firm and never had any place of business at A-18 Kings Acres Plot No.-75, Saraswati Road, Santacruze (West) at Bombay-400054 or at 29, Creek Lane, Calcutta-700014. The telephone number given in the said purported bill is in the name of M/g. Jayadas and Co. whose proprietress is M/s. Jayashree Das, the wife of ABD's brother. The acceptor, Lgee Enterprise is also a non-existing firm and hasno office at plot No.R-154, Juhu Tara Road, Bombay-400049. The same is the address of one Sunlight film, an associate of Sanchlta investments.
23. The allegation of fraud directly against Britannia is contained in sub-paragraph(h) of paragraph 11 of the written statement. The satd sub-paragraph is set out below :
'The said purported Bill of Exchange was not drawn on Punjab National Bank, this defendant and the said Mr. A.B. Das fraudulently in collusion and conspiracy with the plaintiff and/or its Authorized Officer and/or officers purportedly put a remark thereon as 'Co-accepted'. The purported remark 'co-accepted' was put on the said Bill of Exchange in collusion and conspiracy with the plaintiff and/or its duly authorized officers and is illegal, invalid and not binding on this defendant. There was no acceptances of the said purported Bill by this defendant.'
24. On the aforesaid state of pleadings between the parties, the following issues were framed :
'ISSUES
1. Is the alleged Bill of Exchange relied on by the plaintiff, a negotiable instrument?
2. Was Mr. A.B. Das not authorized on behalf of the defendant No. 1 to accept the alleged document?
2(a). Was the alleged acceptance by A.B. Das otherwise than in the usual course of business of the defendant No.1 or is not binding on the defendant No.1 as alleged in the written statement?
3. Was the alleged bill of Exchange presented by the plaintiff to the defendant No.1 for payment?
4. Was the alleged Bill of Exchange fraudulent and brought into existence by collusion and conspiracy between A.B. Das and the plaintiff and/or its officers and alleged drawers or Lgee Enterprise as alleged in paragraph 10 of the written statement?
5. Does the plaint disclose any cause of action on the alleged Bill of Exchange against the defendant No.1?
6. To what relief, if any, is the plaintiff entitled?'
25. In support of their respective cases, both Britannia and PNB examined four witnesses each and various documents were exhibited.
26. On the first issue the learned trial Judge held that the said bill of exchange is a negotiable instrument. In coming to the said conclusion the learned Judge considered the provision of section 5 of Negotiable instrument Act (hereinafter called N.I. Act) as also section 13 of N.I. Act. The learned Judge also held that the bill of exchange satisfies all the requirements laid down under section 5. The learned Judge further held that since the document is payable 'to order'. It also satisfies the requirements of section 13(1) of the N.I. Act.
27. On issue No.2 and 2(a) which were taken up together, the learned Judge held in respect of issue No.2 that A.B.D. had the authority and was authorized on behalf of the defendant No. 1 to co-accept the said bill relied on by Britannia and so far as issue No.2(a) is concerned the learned Judgeheld that PNB had failed to satisfy the Court that ADD waa acting otherwise than in the usual course of business on behalf of PNB.
28. So far as issue No.3 is concerned, the learned Judge held that the bill of exchange was duly presented by the plaintiff, the Britannia to the defendant No. 1 the PNB. for payment and as such the issue was answered in the affirmative. In so far as issue No.4 is concerned the same was answered in the negative and the learned Judge held that the defendant No.1 PNB had failed to satisfy the Court that Britannia, the plaintiff and/ or its officers were in collusion and in conspiracy with any one or was a party to any fraud. In so far as issued No.5 is concerned, the learned Judge held that the plaint had disclosed a cause of action on the alleged bill of exchange and the same was answered in the affirmative. In so far as issue No.6 is concerned, the learned Judge held that the Britannia, the plaintiff, is entitled to a decree for Rs.1,00,000,00/- with interest thereon @ 6% per annum on and from 14th August, 1983 till 29th December, 1968 and a further decree for a further interest on an from 30th December, 1988 on the said sum of Rs. 1,00,000,00/- @ 18% per annum and for further interest on judgment and on the said sum of Rs. 1,00,000,00/- @ 18% per annum till the realization of the decreed amount.
29. Assailing the said Judgment and decree, the learned counsel for the PNB, the appellant, has urged various points. The learned counsel has submitted that from the admitted facts and circumstances appearing in the case. It is clear that the said hill was brought into existence under totally suspicious circumstances. The learned counsel further submitted that Britannia, the plaintiff/respondent has sufficient experience in such transactions as it is admittedly engaged in such transactions for some time. But the said bill is the first transaction between Britannia and Metropolitan and the amount of transaction was also the highest. Therefore, the learned counsel submitted that it was expected that Britannia would act as a business organisation of ordinary prudence and would make such enquires which are obvious and most likely to be made in the facts of the case. The learned counsel further submitted that Britannia was parting with almost one crore of rupees in favour of Metropolitan Construction, which is not A company nor a party with any known track record nor an organization of repute in the corporate sector and more so when in the instant case the bill of exchange is not backed by any invoice or by any trade document. Apart from that there 19 nothing known about Lgee Enterprises which is the acceptor. Britannia had never dealt before either with Lgee Enterprises or with Metropolitan. The only person who came to Britannia in connection with the said bill was one Ntitin Joshi. a broker to ascertain whether Britannia was interested to discount a bill of Rs. 1,00,000,00/-. This happened some time in the last week of December, 1982. Then again Nitin Joshl the said broker came with ABD, Manager, PNB, Zakaria Street, Calcutta Branch. It is alleged that this time Am it Dutta and Raghunath Dutta, the defendant Nos. 3 & 4 came and they met Mr. D.B. Joshi and Mr. Venkatraman two officers of Britannia and certain discussions took place. At this stage, the bill was not in existence. Initially. Britannia wanted the bill to be drawn in their format but later on there is no evidence to show that the bill was drawn in the format suggested by Britannia. It has also been urged by the learned counsel that before payment Britannia did notmake any enquires about ext D on the basis of which Britannia appears to have parted with the money. The said document at exhibit D is set out below :
'Punjab National Bank,
Zakaria Street Branch,
Calcutta - 700013
Britannia industries Ltd.. Ref : CC/MC/Corr/83
Maker Tower. 'E' Block, Date : 15/2/1983
19th Floor.
Cuffe Parade.
Bombay.
Dear Sirs.
This is to confirm that the undersigned has adequate power to co-accept the bill drawn by M/s. Metropolitan Construction and accepted by Lgee Enterptrses, Bombay, for a sum of Rs. 1 crore (Rupees one crore only).
We enclose a copy of the Power of Attorney in this regard.
The bill may be presented to us a few days in advance of the due date for payment it will be remitted to you through Demand Draft payable at Bombay. For your information the bill has been co-accepted by us against properties/assets mortgaged to us as under:
1. Theatre with land at Barasat [West Bengal] named 'Lall' valued at approx.Rs. 80,00,000/-2. Theatre with land at Jassore Road, Calcutta named 'Shelly' valued at approx.Rs. 1,10,00,000/-3. Land at VIP Road. Calcutta measuring about 25 bighas valued approx.Rs. 70,00,000/-4. Deposits etc. at BankRs.50,00,000/-Rs. 3,10,00,000/-(RUPEES THREE CRORES AND TEN LAKHS ONLY
[RUPEES THREE CRORES AND TEN LAKHS ONLY]
Yours faithfully,
For Punjab National Bank
Sd/-'
30. Referring to the said document the learned counsel urged that admittedly ABD was in Bombay on 15th February, 1983 but the said document which is exhibit 'D' dated 15th February, 1983 shows the stamp of PNB, Zakaria Street, Calcutta. This shows that the plaintiff was aware that even though ABD was in Bombay on 15.2.83, he is executing a document dated 15.2.83 with the stamp of a branch of PNB, Calcutta. The said document also refers to the power of attorney on the basis of which ABD allegedly co-accepted the said bill inasmuch as it appears from a perusal of exhibit D that the said power of attorney was enclosed. From exhibit 'D' it appears Britannia was informed that the said bill was 'co-accepted by us against properties, assets, mortgage to us as under'.
31. The learned counsel submitted that the so called description of the property given in ext. D is absolutely vague and devoid of any particulars. No address of the properties were even mentioned. There is no address of the theatre named 'Lali'. There is no address either of property of the theatre named 'Shelly'. There is no address even of the land given at VIP Road allegedly measuring about 25 kottas. There is absolute no particular of the deposits with the bank.
32. The learned counsel submitted that unless Britannia, or its officers are in collusion and fraud with ABD, who by the way is one of the dishonest officer of the bank and against whom several proceedings were initiated by the West Bengal Bureau of investigation and CBI, no business organization exercising ordinary prudence will agree to part with Rs. 91,56,146.86p. on the basis of exhibit 'D'. The learned counsel further submitted that the power of attorney on the basis of which ABD allegedly co-accepted the bill of exchange also does not empower the said ABD to co-accept any bill on be half of the said bank. The learned counsel also submitted that in Bombay there are several branches of PNB. In fact, about 49 branches. The plaintiff, Britannia has its main office in Bombay. The drawer of the bill. Metropolitan, defendant No. 2 has also its principal office in Bombay. Lgee Enterprises is also an organization in Bombay. Therefore, it is very unusual for a Branch Manager of Zakaria Street Branch, Calcutta, a 'C' class Branch to go all the way from Calcutta to Bombay for the purpose of negotiating the transactions. The learned counsel submitted that if Britannia wanted the bill to be co-accepted by PNB. the normal thing would have been to have the bill co-accepted by any one of the several branches of PNB which are located in Bombay. This is consistent with normal business transactions.
33. The learned counsel also submitted that suspicion in this case would further rise from the fact that even before the said bill was completed in all respects namely its registration, Britannia instructed its banker to prepare a draft for Rs. 91,56,146.86p. for discounting the said bill and pursuant to that direction the bank draft was made ready even before the said bill was completed and made ready. This shows unusual anxiety on the part of some of the officers of Britannia to part with the said amount for a bill which was still not in existence on the date when the demand draft was made. Thus Britannia suffers a loss of interest for those days inasmuch as immediately on its instructions, the bankers have debited that amount of Rs. 91,56,146.86p. from the account of Britannia. So Britannia started loosing interest on the said amount from 15th February, 1983. The learned counsel submitted that this is also not consistent with normal business transactions.
34. The learned counsel for the appellant further submitted that the power of attorney (exhibit. A) did not authorize ABD to co-accept the bill of exchange. It has also been stated that the power of attorney holder can only be authorized to act in furtherance of the interest of PNB. In the instant case, by allegedly co-accepting the said bill, the interest of PNB has not at all been served. In fact, the interest of Metropolitan has been served. It has further stated that at the point of time when the entire negotiation took place between ABD and the officers of Britannia,Metropolitan was not even a customer of PNB. Admittedly Metropolitan became its customer on 16th February. 1983. The negotiation in respect of the said bill took place in Bombay and was completed on or before 15th February, 1983. This according to the learned counsel was a very unusual state of affairs. It is further stated that the said power of attorney was given to ABD to act for and on behalf of the said bank. But in the instant case, it is clear that ABD acted for and on behalf of Metropolitan and carried on the negotiation with Britannia by virtually representing Metropolitan Construction for most part of the negotiation. The defendant Nos. 3 and 4, the two alleged partners of Metropolitan were kept out of such negotiation and were asked to wait at ihe reception. Furthermore, the said power was given to ABD to act as true and lawful attorney of PNB at any place or places in india or in any foreign country or state where the said bank may have established its own offices or agencies to which ABD may from lime to time or any time be appointed by the said bank or where the bank has interest or business to protect, or business, to do banking for and in the name and on behalf of the said Bank. The learned counsel submits that the power on behalf of the said Bank is confined to any place or places in or out side india where such attorney may be appointed by the said bank. In the instant case, ABD has not been appointed in any of the branches in Bombay. He was admittedly appointed in Zakarla Street. Branch, Calcutta. Therefore, it was argued that his alleged co-acceptance in favour of Britania in Bombay is a act which is outside his authority and the bank is not bound by that. The relevant clause of the power of attorney on which reliance has been placed by the learned counsel in support of his contention is set out below:
'Now this Deed witnesses that is the said Shri C.L. Madhok AssistantGeneral Manager of the said Bank acting for and on behalf of the saidBank, do hereby nominate, constitute and appoint the said ShrtAmalendu Bikas Das at present in the service of the Bank to be trueand lawful attorney of the said Bank at any place or places in india oroutside india in any foreign country or State where the said Bank mayhave established its own offices or agencies to which he may from timeto time or any time be appointed to which he may from time to time orany time be appointed by the said Bank or where the Bank has interestto protect, or business, to do banking for and in the name and on behalfof ihe said Bank.' (Underlined for emphasis)
35. In other words the counsel submitted that the said bank has several branches all over the india and in many of the branches, the accountants or Branch Managers are having such powers of attorney. That does not mean that a Branch Manager of Cuffe Parade Branch in Bombay or of Nariman Point Branch in Bombay can act on behalf of the branch of the bank in Zakarla Street. In order to prevent such anomalous position, it has been made clear in the power of attorney that such power can be exercised by the power of attorney holder in respect of the places where the banks may have established its offices or agencies or to which persons holding such power of attorney may have been appointed. The learned counsel further stated that clause 1(j) of the said power of attorney authorizes a person to accept cheques, drafts, hundis or bill of exchange and other negotiable instruments in the name and on behalf of the said bank. Butin the instant case, admittedly the ADD has co-accepted the said bill of exchange. The learned counsel submits that co-acceptance is not acceptance and there is nothing known as co-acceptance under the N.I. Act. Therefore, co-acceptance of the satd bill by ABD is wholly unauthorized.
36. The learned counsel further submitted that from the trend of evidence adduced in the case by the witnesses of Britannia, it is clear that the said co-acceptance has been treated by Britannia by way of a guarantee to be furnished by FNB. Such power of giving guarantee on behalf of the said bank can only be exercised with another power of attorney holder of the said bank and this is clear from clause 2 of the said power of attorney. So the purported acts of ABD as the sole power of attorney holder is totally illegal and cannot bind PNB, The learned counsel further submitted that the power of attorney in this case must be construed strictly and if the power of attorney is so strictly construed, the acts of ABD, in this case namely carrying on negotiation on behalf of Metropolitan with Britannia and in allegedly co-accepting the said bill is outside the purported authority conferred on ABD under the satd power of attorney and as such the action of ABD cannot bind PNB.
37. The learned counsel further submitted that the aforesaid facts taken together would suggest that Britannia is not a bona fide purchaser of the said bill without notice of conspiracy or fraud. It was not certain about the validity of the said bill of exchange and that was the reason why Britannia kept on visiting Mr. Jalfalker at the Buena Vista Branch of PNB in Bombay and such visits took place even after the said bill was handed over to Britannia.
38. In trying to answer all these submissions, the learned counsel for Britannia submitted that since in the instant case, discounting of bill 13 in issue, these factual assertions raised by the appellant are wholly irrelevant. The learned counsel submitted that when such a bill is bought for a sum less than its face value, the difference between the face value and the value for which such a bill is bought is the discount which la actually the interest charged by the purchaser of the bill for the period in question. It has been urged by the counsel for the appellant that since such bill discounting business is the life-blood of trade and commerce such bill discounting takes place largely in commercial transactions where the beneficiary of the bill need money immediately and cannot wait till the date of maturity. In such a situation, Britannia, who is the holder of the said bill in due course, is not required to make any inquiry on the factum of transactions between Metropolitan and Lgee Enterprises nor is it called upon to make any enquiry whether consideration passed between Metropolitan and Legee. It is also not required to enquire about the existence and signature of the drawer, accepter or any other prior party. The learned counsel supported the said submission by relying on the provisions of section 118(a)(g) and section 122 of N.I. Act. Apart from referring to these legal questions, the learned counsel further submitted on facts that it is clear from the record that the two Duttas, defendant Nos. 3 and 4 carried on business under the name and style of Metropolitan Construction as a partnership firm. It was also urged that since an account was opened in PNB in favour of the said partnership firm namely Metropolitan Construction and the said account was regularly operated and various transactionstook place, it is clear that defendant No. 2, Metropolitan is an existing firm. The further stand taken on facts is that non-existence of Metropolitan or Lgee has not been proved by appellant from the materials on record. It is further urged that in any event both the firms existed at least between 15.2.83 and 18.2.83 and its subsequent non-existence, is of no consequence. It has been also stated that an account was opened in favour of Metropolitan on 16.2.83 in the Zakarta Street Branch, Calcutta of PNB and ABD introduced the said firm on that date. Therefore, it is clear that the said firm existed as on 16.2.83.
39. While refuting the allegation of the appellant that the Britannia got the bank draft of Rs. 91,56,146.86p ready on 15.2.83 when the said bill was not finalized, the learned counsel for Britannia submitted that on 15.2.83 ABD promised that he would come back within a day or two after having the said bill registered in the books of the bank. Nobody's case is that Metropolitan received the bank draft on 15.2.83 even though the same was made ready. The same was made over only on 18.2.83 when the said bill was handed over by ABD with the registration mark of the bank. The learned counsel submitted that the loss of interest of Britannia for those few days namely between 15.2.83 and 18.2.83, is a business loss which is a part of such transactions.
40. In so far as other allegation made by the appellant on the bill discounting register maintained by Britannia, the submission on behalf of Britannia is that the bill discounting register was made exhibit 'N' and in the particular page the entry about the said bill is against entry No. 16A dated 15.2.83. The learned counsel submitted that nothing can be made out of such entry in the bill register and such entry does not affect the main controversy in the suit. The learned counsel further submitted that the learned trial Judge also came to this finding and this finding on fact has not been challenged in the ground of appeal. Therefore, it is not open to the learned counsel for the appellant to assail such finding.
41. On the question of fraud and conspiracy against Britannia, the learned counsel submitted that there is no direct allegation of fraud against Britannia. The learned counsel for the appellant argued that there are circumstantial evidence on the basis of which fraud or at least constructive fraud can be established against Britannia. But the learned counsel for Britannia submitted that the allegations made in paragraph 10 of the written s tat merit, even if admitted, do not make out any case of fraud, collusion and conspiracy against Britannia. It has also been stated that not even any over act was complained against Britannia in the written statement. Learned counsel further submitted that in such cases onus is always cast upon the defendant to prove its case of fraud and in the instant case the said onus has not been discharged. The learned counsel further submitted that fraud in such cases must by clearly established and it must also be established that the circumstances are not only fraudulent but Britannia against whom such fraud is alleged, must also have the knowledge of that fraud. Mere suspicion or doubt cannot be taken as proof of fraud. Mere lack of enquiry is not sufficient to make out any case for fraud. The learned counsel however admitted if it is proved that an organization with clear knowledge of suspicious circumstances did deliberately shut its eyesand made no further enquiry lest such enquiry will unearth fraudulent circumstances, it is only in such a situation, one can assume the existence of fraud, but mere carelessness or negligence does not constitute fraud.
42. The learned counsel for the appellant urged that in so far as the power of attorney is concerned the same must be read subject to the chart of financial power under which the Branch Manager, Zakaria Street Branch, Calcutta, a 'C' class branch, cannot under any event co-accept a bill of exchange of Rs. 1 crore. According to the learned counsel the limit of financial power of ABD is Rs. 20,000/-, The learned counsel further submits that even the Managing Director of PNB cannot on his authority co-accept of the alleged bill amounting to Rs. 1 crore.
43. The learned counsel for Britannia however, urged that the power chart relating to financial power is an internal document of the bank. Assuming such power chart exists, a third party can have no notice of such power chart and such third parties are not bound by the internal circulars of the power chart issued by PNB. Apart from that, the learned counsel submitted that the said power chart has not been acted upon by PNB inasmuch as admittedly ABD is found competent to accept fixed deposit to the extent of Rs. 35 lakhs from Birla Trusts. The said amount of Rs. 35 lakhs is far in excess of the financial limit of Rs. 20,000/- of ABD. It is contended by the learned counsel for Britannia that PNB has never implemented such power chart, assuming such a chart exists. This has been contradicted by the learned counsel of PNB by contending that accepting fixed deposit on behalf of the bank has nothing to do with the said power chart. The said power chart comes into operation only when the bank has to accept liability on the bank by granting loan or by allegedly accepting any liability under a bill of exchange. The learned counsel for PNB further submitted that acceptance of fixed deposit in the bank and accepting liability under the said bill of exchange stand on completely different footing and one cannot be equated with the other. The learned counsel further submitted that in the facts of this case, ABD was not acting in the interest of the bank inasmuch as the demand draft of Rs. 91,56,146.86p. was not issued in favour of the bank but the said was issued in the name of the bank for the account of Metropolitan and the said amount had to be deposited in the account of Metropolitan which was opened with Rs. 500/-on 16.02.83. As the bank ledger would substantiate, the said money, after being deposited in the account of Metropolitan, was withdrawn in the course of a few weeks from the said bank.
44. The learned counsel for the appellant further submitted that in the instant case the entire cause of action of Britannia is based on the bill of exchange in question. The said bill of exchange has not been proved. The said bill of exchange has been made an exhibit under objection and the said objection was throughout maintained. The learned counsel submitted that nobody has seen the execution of the said bill of exchange. Nobody has seen anyone signing on behalf of the Metropolitan to the said bill of exchange nor anyone has seen anyone signing on behalf of the Lgee Enterplrse to the said bill of exchange. This is admittedly the nature of evidence. So the contention is that since the bill of exchange has not been proved, the suit must fall.
45. The learned counsel for the Britannia however, further submitted that the bill of exchange has been annexed as a part of the plaint. Therefore, the whole of the bill of exchange must be deemed to a part of the plaint. According to him the plaint must be read as if the whole of the said bill has been set out in the plaint. In that view of the matter the bill of exchange need not be proved separately.
46. Counsel for the appellant further urged that admittedly the said bill has not been presented for acceptance by Britannia before the acceptor, the Lgee Enterprise. But under section 64 of N.I. Act, presentment of the bill of exchange to the acceptor is a must. So there is a total non-compliance with the requirements of section 64 of the N.I. Act. The learned counsel appearing for Britannia on the other hand contended that presentment is unnecessary in view of the provision of section 76(b) of the N.I. Act Jt has further been argued that in default of presentment of the said bill to Lgee Enterplrse, the suit against PNB must fail. The learned counsel for Britannia however, suggested that there is no issue to that effect that the said bill was not presented for payment to Lgee Enterprise nor any ground has been taken that the suit should have been dismissed for non-presentment of the said bill to Lgee Enterprise. Factually the assertion of the counsel for Britannia is that vide letter dated 9.8.83 which is exhibit 'H', it had presented the bill for payment to PNB and to such letter PNB has also replied vide its letter dated 17.8.83 which is exhibit 1. It has further been stated that in the facts of this case, presentment of the bill was not necessary to be made to Lgee Enterprise because by the letter dated 19.8.83 written on behalf of the PNB (exhibit 'G'). It agreed to pay notwithstanding the mm-presement of the bill.
47. These are mostly the contentions made on behalf of the contestingparties.
48. It is clear from the aforesaid narration that the document which assumes most cardinal importance in the context of rival contention is the said bill referred to above.
49. The learned counsel for the appellant has very seriously urged that the said bill has not been proved. The said bill was tendered by D.B. Joshi who was employed in Britannia at the material time as Assistant Finance Manager. While the examination-in-chief of D.B. Joshi was going on in the trial Court, the Court asked him whether his evidence is that none of the signature 'on the face of documents were put in your presence'. The witness answered 'that is so' (Q. 189). It is, therefore, clear that none of the signatures purported to have been put at the time of allegedly drawing the said bill were put in his presence. The said witness was further asked by Court about the left hand side bottom seal of'the first page of the said bill and he was asked whether the said seal was put in his presence, to that also Mr. Joshl answered 'not in his presence' (Q. 190). In view of the aforesaid evidence of the witness the said document was 'tendered and marked Exhibit E' but the same was tendered 'subject to objection'.
50. Mr. R. Venkataraman who was the vice-president of Britannia was cross-examined before the Court and was also confronted with the said bill at Exhibit E. He was asked in cross-examination about the execution of thesaid document at Exhibit E and in answer, the said witness stated 'I do not know whether it was execcuted, but it was a complete document-when it was brought on 15th February, 1983' (question No. 493). In cross-examination, the said wit-ness was further asked whether he knew whether the said document was executed in Bombay. The witness answered 'I do not know where it was executed, but it was a complete document when it was brought on 15th February, 1983', He was further asked whether the stamp impression on the document was there. To that the witness answered 'No' (Qs. 493 and 494). On being further questioned on that document, the witness replied That has been the normal practice in the market We believe the document (Q. 502)) when the witness was further asked whether any enquiries were made by him about its genuineness, the witness replied 'we had no suspicion' (Q.504). About acceptance of the said bill when the said witness was questioned about any enquiry being made, the witness answered 'No I did not make. It seems to be the truth given by them for this acceptance' (Q.507).
51. Relying on this evidence, the learned counsel for the appellant submits that none of the appellant's witnesses has proved the said document inasmuch as none of the witnesses has seen that the document was signed when it was initially made either on behalf of Metropolitan Construction or accepted on behalf of M/s. Lgee Enterprises.
52. Legal position in this respect is rather well settled. Section 61 of Evidence Act says that contents of the documents may be proved either by primary or by secondary evidence. Section 62 says that 'primary evidence means the document itself produced for the inspection of the Court'. In the instant case, the document has been produced as primary evidence. But it will have to be proved in the manner laid down in section 67 to 73 of the Evidence Act.
53. It is clear that the genuineness of the documents is to be proved in accordance with the provisions under section 67 to 73 of the Evidence Act. It is well known that mere production of the document which is purported to have been signed or written by certain persons is no evidence of its authorship or genulneeness. Therefore, proof has to be given of the handwriting and the execution of the document. In the instant case, none of the witnesses for the plaintiff has deposed that the document in question was signed in their presence. Therefore, the signature of the drawer and acceptor on the document has not been proved.
54. The mere fact that the document has been marked as exhibit 'E' does not dispense with requirement of its proof (see the decision of Supreme Court in Sail Tarq/ee Khimchand. & Anr. v. Yelamatt Satyam and Ors., reported in : AIR1971SC1865 ).
55. The learned counsel for Britannia tried to counter this submission by urging that the said bill has been annexed to the plaint so its further proof is not required. In support of the aforesaid contention, the learned counsel relied on two decisions, the first of which was in the case of Padam Tea. Co. Ltd. reported in 1973 Taxation law Reports, page 1923. The said decision of a learned single Judge of this Court arose out of Company Application No. 64 of 1971. In the said Judgment, the question of proof ofa document was not in issue and the learned Judge in the said case was merely to see whether a prima facie case was made out by the creditor for investigation in the winding up proceedings and the learned Judge took the view that the creditor has made out such a prlma facie case. While taking the said view the learned Judge observed in para 22 of the said Judgment in Podam. Tea (supra) that an application for directing a company to be wound up is not a suit. In the said decision, the question of proof of a document was not an issue, so the passing observations made by the learned Judge to the effect that annexure to the pleadings are part of the pleadings does not answer the question with which the Court is concerned in the present case. Those observations cannot be said to be an authority for the proposition that if any document is annexed to the plaint that operates as a waiver of proof of the document in question and especially when its proof has been seriously questioned.
56. The next case cited in this connection is also another single bench Judgment of Rajasthan High Court in the case of Bhagaban Das v. Goswami Brijesh Kumnrji and Ors. In that case, the learned Judge was faced with the question under Order 7, Rule 11 Clause(a) of Civil Procedure Code namely whether a plaint discloses a cause of action. In that context, the learned Judge observed that in a case where the plaint is based on a document, the said document can be considered alongwith the plaint for deciding whether the plaint discloses any cause of action or not. The learned Judge however immediately added that such question has to be considered by looking at the 'face value' of the contents of the plaint and the document but 'the validity or the invalidity of the documents in question cannot be considered at the stage of the deciding an application under Order 7, Rule 11 of CPC'.
57. This Court respectfully agrees with the said observation of the learned Judge of Rajasthan High Court in Bhagaban Das (supra). It is well known that at the stage of considering objection under Order 7 of Rule 11 of the Code, the Court has to proceed by accepting the contents of the statement made in the plaint and the documents if any annexed with the same. At that stage, the genuineness of the document is not and cannot be an issue. So none of these decisions is of any relevance to the question with which we are concerned, namely genuineness of the said bill of exchange.
58. In the instant case, the bill of exchange is the most vital document and the entire cause of action of Britannia is based on this. So it was incumbent upon Britannia to prove it. Having regard to the evidence on the alleged proof of the bill of exchange, this Court is constrained to hold that the said bill of exchange has not been proved and the suit cannot succeed.
59. Since the signature on behalf of Metropolitan, the maker of the bill has not been proved, the said purported bill does not satisfy the requirement of a bill of exchange as given in section 5 of N.I. Act which mandatorily requires bill to be signed by the maker. So the finding of the learned trial Judge that the said bill is a valid bill of exchange is erroneous and contrary to the evidence on record.
60. The learned counsel for Britannia has urged that this point has not been taken by the appellant in the Court below.
61. This Court finds that in the written statement in paragraph 10(b) it has been clearly stated that the said bill of exchange annexed to the plaint is an alleged document brought into existence by practicing fraud and collusion and the same is not valid and binding on the defendant. This stand has been repeatedly taken throughout in the written statement. In view of the aforesaid pleading, it is incumbent upon Britannia to prove the said bill of exchange.
62. In the instant case the onus of proving the genuineness of the said bill lies squarely on Britannia and this Court holds that the said onus is not discharged by merely producing the bill of exchange or making it an annexure to the plaint or an exhibit in the case.
63. The principle of section 67 of the Evidence Act is very clear on thispoint.
64. Section 67, shorn off unnecessary details, in this context runs thus:
'If a document is alleged to be signed ..... by any person, the signature,as is alleged to be in that person's handwriting must be proved to be in this handwriting'.
65. Reference in this connection may be made to an old decision in the case of Stamper versus Griffin. 1856, 20 Ga 312 at 320 in which Justice Bennlng said 'A writing of itself is not evidence of one thing or the other. A writing of itself is evidence of nothing, and therefore. Is not, unless accompanied by proof of some sort, admissible as evidence'.
66. The aforesaid passage has been expressly approved as illustrating the principle expressed in section 67 Sarkar On Evidence (15th Edition. 1114).
67. It has not been, as it obviously could not be, contended on behalf of Britannia that the said bill is a public document within the meaning of Evidence Act. Since it is a private document, its 'mere production' will not suffice. 'Something more than production is required in the case of private document. The Court will require to be satisfied by evidence that it was duly executed ..... The due execution of a private document is provedby showing it was signed by the person by whom it purports to have been signed', (see Cross on Evidence, 7th Edition, Butterworths, 690).
68. This Court also finds that grounds have been specifically taken by PNB in the grounds of appeal and those grounds are set out below :
'CXI. For that the learned Judge erred in admitting the Bill of Exchange in evidence as the contents and the execution thereof were not proved.
CXII. For that the learned Judge failed to appreciate that the said document being exhibit 'E' was not admissible in evidence.'
69. So ihe objection of Britannia that no such ground has been taken by PNB is without any substance.
70. With the proof of execution of the document is connected the validity of the pleas taken by the learned counsel for Britannia on the basis of section 118 of N.I. Act.
71. Section 118 of N.I. Act deals with certain presumptions. Of course they are rebuttable even though imperative in terms. This section unmistakablyshows that the general principles or con tract are not applicable to negotiable instruments. The reason for this presumption is dictated possibly by the requirement to highlight the negotiable nature of the instrument which may pass from hand to hand on endorsement and in such transactions the passing of consideration is presumed. So the principle behind this section owes its existence to the rule of equity, justice and good conscience which is an inbuilt content of common law principles known as Law Merchant in England. There are almost similar provisions in English Law. See sections 30(1), 13(1). 36(4), 32(5) and 30(2) of the Bills of Exchange Act 1982 corresponding to Clauses (a), (b), (c) (d), (e) and (g) of section 118 of N.I Act.
72. But while considering the effect of presumption under aection 118 of N.I. Act, it must be taken note of that there is no presumption of the execution of the document. So the presumption under section 118 would arise only when the execution is proved. If the execution has not been proved, as in instant case, the claim of presumption under section 118 would be of no avail.
73. Reference in this connection may be made to the Judgment of Supreme Court in the case of Kundan Lal Rallaram v. Custodian Evacuee Property, Bombay, reported in AIR 1961 SC 1316. Justice Subba Rao (as His Lordship then was) speaking for the Court and while considering the provision of section 118 of N.I. Act held that initially the burden rests on the plaintiff to prove that the promissory note was executed by the defendant. His Lordship held 'as soon as the execution of promissory note is proved the rule of presumption laid down in section 118 of Negotiable instrument Act helps him (meaning the plaintiff) to shift the burden to the other side'.
74. The said principle has been followed subsequently also by Allahabad High Court in the decision in Ch. Birbal Slngh v. Harphool Khan reported in : AIR1976All23 . In paragraph 7 of the Judgment the learned Judge held that in a case based on promissory note, the initial burden lies on the plaintiff to prove the execution of the promissory note. When this burden is discharged, it is only then that the Court shall raise a presumption in favour of the plaintiff by holding that the promissory note was for consideration and it is for the defendant to rebute the presumption.
75. In view of the aforesaid discussion, this Court is of the opinion that having regard to the facts of this case, Britannia is not entitled to the benefit of presumption under section 118 of N.I. Act.
76. In this context the submissions made on behalf of PNB that Britannia did not make sufficient enquiries about the drawee and acceptor before discounting the said bill becomes relevant. In the course of submissions certain circumstances have been pointed out which this Court finds as highly suspicious to invite enquiry from any experienced business house like Britannia which is carrying on the business of bill discounting for a long time and is expected to act with the prudence of a person with average business acumen. Those circumstances are indicated below:
1. This is the first transaction between Britannia and Metropolitan. As a party Metropolitan has no impressive track record and is unknown to Britannia.
2. The transaction in question is the highest in the sense that this transaction involves a bill of Rs. 1 crore whereas the next highest bill discounting transaction as it appeared from the register produced by Britannia is in the range of Rs. 50 lakhs and odd.
3. it is the evidence of Britannia that initially only Nitin Joshi a broker came to Britannia to ask whether it would discount a bill of Rs. 1 crore. At that stage Britannia wanted that the bin should be in its format.
4. The safd bill is not in the format of the bills disclosed by Britannia vide exhibit 'K' series.
5. With the said bill there is no invoice or the trade bill attached evidencing any transaction between drawer and acceptor of the bill and the said bill is totally unlike the bills disclosed in exhibit 'K' series.
6. By 15.2.83 Britannia decided to discount the said bill but it had made no enquiries about the existence of Lgee Enterprise, though both Lgee and Britannia are carrying on business in Bombay.
7. There is no evidence of any worthwhile interaction between Britannia and alleged partners of Metropolitan (namely the Duttas) about the nature of business carried on by Metropolitan whose main office is also in Bombay. Most of the time in the course of negotiation, Duttas were kept out and were in the reception in Britannia's office.
8. it is highly suspicious on the part of Britannia to part with the amount of Rs. 91,56,146.86p. on the basis of alleged securities of the drawer mentioned in the letter signed by ABD on 15.2.83--Exhibit D.
9. Exhibit D dated 15.02.83 does not give any particulars of the properties which are said to be offered as alleged securities and alleged to be pledged with PNB by the drawer, even though on 15.2.83 the drawer admittedly was not even a customer of PNB. But even then Britannia did not make any enquiries about exhibit 'D'.
10. Even though the said bill was not completed and ready on 15.2.83, but on Britannia's instruction a bank draft of Rs. 91,56,146.86p. was made ready on 15.02.83 by its banker, Syndicate Bank and was debited from Britannia's account Thus Britannia acted with undue haste to part with the money on a transation in which time was never the essence and thus unnecessarily sustained a loss of interest on the aforesaid amount for a couple of days. This is not consistent with normal business transaction by an experienced business house like Britannia.
77. The question is what should be the attitude of the Court in such a situation? Whether the Court should accept Britannia as an innocent purchaser of the bill without any notice of 'vice' in the bill and the absence of enquiry by Britannia would be considered by Court as a case of 'honest blundering' or as a case where enquiry was deliberately avoided, as Britannia had the knowledge, or means of knowledge, that such an enquiry, if made, may unearth the Vice' in the bill.
78. How the conscience of the Court shall be satisfied in such a situation is very lucidly stated by Lord Blackburn in the decision of the House ofLords in the case of Jesse Jones and John Gordon reported in 2 Appeal Cases, 616.
79. In a speech of remarkable elegance the learned Judge has pointed out 'I should be unwilling to say precisely whether it shifts the onus upon him (in this case Britannia) to show that he gave value bonafide so that, although he (In this case Britannia) gave value he must give some affirmative evidence to show that he was doing it honestly, or whether the onus that he is dishonest, or that he had notice of things that were dishonest, remains on the other side, although he is bound to prove value.' (Page 628 of the report).
80. The learned Judge elaborated this principle further 'it is necessary to show that when the person who gave value for the bill, whether the value given be great or small was affected with notice that there was something wrong about it when he took it. I do not think it is necessary that he should have notice of what the particular wrong was. If a man. knowing that a bill was in the hands of a person who had no right to it. should happen to think that perhaps the man had stolen it, when if he had known the real truth he would have found, not that the man had stolen it, but he had obtained it by false pretences, I think that would not make any difference if he knew that there was something wrong about it and he took it. If he takes it in that way he takes it at his peril'. (Page 628 of the report)
81. The learned Judge further explained by saying if the was honestlyblundering and careless and so took a bill of exchange or a bank note whenhe ought not to have taken it still he would be entitled to recover. But ifhe facts or circumstances are such that the Jury, or whoever has to try thequestion, came to the conclusion that he was not honestly blundering andcareless, but he must have had a suspicion that there was something wrong.and he refrained from asking question, 'not because he was an honestblunderer or a stupid man, but because he thought in his own secret mind-- I suspect there is something wrong and if I ask question and make furtherenquiry, it will no longer be my suspecting it but my knowing it, and thenhe shall not be able to recover, I think that is dishonestly'. (Page 629 ofthe report)(Underlined for emphasis)
82. The learned Judge reached those general conclusions by relying on good sense and reason.
Another learned Judge. Lord O'Hagan delivering his speech in Jeese Jones (supra) at page 621 of the report observed that there are two substantial questions which fell for consideration in that case. His Lordship formulated the first point is whether the circumstances under which the bills were drawn and accepted tainted them with fraud and secondly whether the person discounting the bill with such notice is entitled to recover. Factually these are also the basic questions in this case. In such a situation Lord O'Hagan. pointed out what tests should be followed. In the following words:
'Could any man of intelligence,--any commercial man,--any man conversant with bill transactions.--have failed to believe that the offer of such terms was clouded with suspicion and suggestive of fraud? Could any honest trader, disposed to realize advantage only from Just and opendealing, have failed to inquire as to the motives which suggested such a strange proposal, and to seek some explanation that might reconcileit with fair play to all concerned?' (Page 624 of the report)
83. Posing those questions the learned Judge answered the them as follows:
'The law upon the subject is clear, and in full accordance with soundpolicy and common sense. It is thus stated in a work of very highauthority: 'A willful and fraudulent absence of inquiry into the circumstances, when they are known to be such is to invite inquiry, will amountto general or implied notice.' (1). And Lord Wensleydale has said: 'Noticeand knowledge mean not merely express notice, but knowledge, or themeans of knowledge, to which the party fully shuts his eyes'.' (Page 625of the report) (Underlined for emphasis)
84. These principles have been further elaborated by the learned Judgeas follows:
'Mere negligence might not disentitle him (In this case Britannia) to recover. Mere inadequacy of consideration might not. In certain circumstances, bar his claim. In spite of both, he might have proved the integrity of his motives and the purity of his conduct. But, without disregard to undisputed facts, (which seem to me to made it palpable that his ignorance was willful. If it was not, as I believe it was only simulated.) this transaction cannot be allowed to stand.' (Page 626 of the report).
85. Going by those principles and mainly relying on good sense, reason and sound policy, this Court finds that the facts of this case as pointed out above show a total lack of enquiry by Britannia against either the drawer of the bill, Metropolitan and the acceptor namely Lgee Enterprise and this is not a case of foolishness or honest blundering on the part of Britannia--a corporate house with sufficient experience of bill discounting business over the years.
86. The most striking absence of enquiry is in respect of Exhibit 'D'. The said exhibit is dated 15.02.83 and had the alleged stamp of PNB, Zakaria Street Branch, Calcutta whereas the officers of Britannia knew that ABD the Branch Manager of PNB of Zakarla Street Branch, Calcutta was in Bombay on that day. This should have immediately struck the officers of Britannia, an experienced business house. Apart from that, the properties which are mentioned as securities and against which the bill has been allegedly co-accepted by PNB cannot be accepted as securities by any person of ordinary commercial prudence. The properties are without any particulars and there is no whisper about Metropolitan's title over those properties. It is a mere paper security or even worse than that. It may also be mentioned that on 15.02.83 neither Metropolitan nor Lgee was even a customer of Zakaria Street Branch of PNB.
87. In view of these undisputed facts, this Court has no hesitation to hold that total absence of enquiry about Exhibit 'D' and the parting of Rs. 91,86,146.56p. on that very day i.e. 15.02.83 by Britannia in a hurry, coupled with other admitted facts mentioned above clearly demonstratedishonesty on the part of Britannia and by taking the said bill under those circumstances. Britannia had taken it 'at its peril'.
88. In trying to wriggle out of such tainted circumstances, learned counsel of Britannia urged that there is no case of fraud made out against Britannia tn the written statement of PNB. But this Court finds that in paragraph 10 of the written statement detailed reference to these suspicious circumstances has been given and in paragraph 11(h) there are direct allegations of fraud against Britannia, the plaintiff.
89. But the learned counsel further urged that in a case of fraud the standard of proof must be of a very high degree and relied on the decision in the case of Federal Bank Ltd. v. V. M. Jag Engineering Ltd, and others. reported in JT 2000 (suppl. 1) SC 317 in support this contention.
90. Facts in the case of Federal Bank (supra) are entirely different. In that case. Federal Bank at Bombay, appealed to the Hon'ble Supreme Court against the order of the High Court by which the Bank's appeal against the order of trial Court confirming the exparte interim injunction was rejected and the Bank's application to vacate the interim injunction was turned down. In that case the Uniform Customs and Practices for Documentary Credits (UCP) issued by international Chambers of Commerce came under consideration. In the transaction which was the subject matter of litigation in that case the Federal Bank was the negotiating Bank. The negotiating bank was asked by the seller to discount bills and pay the proceeds and then the negotiating bank sent the letter of credit and the documents sent by the seller to the issuing bank which certified the signatures and assured the negotiating bank of reimbursement on the due date. Then the bill wag discounted and payment made. Thereafter the issuing bank found on scrutiny that certain documents were not furnished and the buyer informed the issuing bank of forgery by some person. The buyer filed a suit, without praying for any relief against the negotiating bank but a prayer for an injunction against the issuing bank from releasing payment was made and injunction was obtained.
91. On those facts, the Hon'ble Supreme Court, allowing the appeal of the negotiating bank, held that the issuing bank lg bound to reimburse.
92. In that case the question of'fraud' came up for consideration in the context of Articles 15 and 16 of UCP which were incorporated in the letters of credit between the parties. Article 15 enjoins on the bank to take reasonable care. Once 'reasonable care' has been taken by the bank, it has to be reimbursed by party who has given such authority. The learned Judges also held that the concept of reasonable care is a Common Law principle.
93. Thus stating the law on the subject, the learned Judges in paragraph 55 of Federal Bank (supra) held that Court ought not to grant injunction to restrain encashment of bank guarantee or loss of credit except in two situations namely (a) in case of fraud and (b) in case of irretrievable damage. In that context, fraud means a clear case of fraud of which banks also have notice. This principle, after discussion the case law on the point, has been elaborated by the learned Judges in paragraph 57 of the Judgment to the extent that it is not only enough to allege fraud but it must be clearly established and the evidence must be clear both on the factum of fraudand also on the bank's clear knowledge of such fraud. Those observations have been made by the Hon'ble Supreme Court after noting in para 3 of the Judgment that there is no allegation of fraud/forgery against the negotiating bank. But in the present case, paragraphs 10 and 11 of the written statement contain the allegations of fraud and forgery.
94. Those principles given in a different state of pleading and fact situation are not at all attracted to the facts of this case. In the case of Federal Bank (supra) there were regular commercial transactions between the parties and the documents were examined by the bank and released for the negotiating bank to pay and thereafter the commission of fraud was allegedly discovered.
95. But in the instant case, the initial drawing of the said bill is covered under suspicious circumstances mentioned above and those circumstances are so tainted as to put on notice any business organization on the necessity of an enquiry and especially Britannia which is an experienced business house in bill discounting transaction. Therefore, in the instant case the principles decided in Jessee Jones (supra) discussed above are clearly attracted.
96. In this connection the reliance placed by the learned counsel of the appellant on Kerr on Fraud and Mistake is, quite appropriate. The learned counsel submitted, and the Court thinks rightly, that the facts of this case attract the doctrine of constructive notice. Reliance was placed on a passage by Kerr [7th edition, 1st indian reprint]. Excerpts from page 252 of Kerr are set out below:
'Whatever is notice enough to excite the attention of a man of ordinary prudence and call for further inquiry is. In equity, notice of all facts to the knowledge of which an inquiry suggested by such notice, and prosecuted with due and reasonable diligence, would have led. Notice of this sort is called constructive notice, or. as Lord Chelmsford called it, imputed notice, that is. evidence of notice the presumption of which is so strong that the Court will not allow of its being controverted. Constructive notice, as distinguished from actual notice, is a legal inference from established facts, and like other legal presumptions, does not admit of dispute.'
97. In that context, the learned author further observed that if a man of ordinary prudence has actual notice of circumstances sufficient to put him on an enquiry the knowledge which he might, by exercise of due diligence and enquiry, have obtained will be imputed to him by Court and such presumption of the existence of knowledge is so strong that it cannot be allowed to be rebutted [see the speech of Lord Chelmsford in 2 Appeal Cases, page 632].
98. This doctrine has further been developed by Kerr to the extent that this doctrine of constructive notice is applied with considerable force where the Court is satisfied that the person who can be legitimately put to such notice has abstained from inquiry for the purpose of avoiding knowledge. This position has been explained by the learned author in the following words:
'It may be that inquiry might not have brought out the truth; but a man who abstains from inquiry where inquiry ought to have been made, cannot be heard to say so and to rely on his ignorance.' [Kerr, page 254]
99. In such a situation, the evidence, which will prove fraud, can be circumstantial. This has also been explained by the learned author by observing 'if suspicion is aroused and no inquiries are made for fear of learning the truth fraud may be presumed' and this doctrine has been further elaborated by the same learned author at page 672 of the treatise as follows:
'It is not, however, necessary, in order to establish fraud, that direct affirmative or positive proof of fraud be given. Circumstantial evidence Is not only sufficient, but in many cases It is the only proof that can be adduced. In matters that regard the conduct of men the certainty of mathematical demonstration cannot be expected or required. Like much of human knowledge on all subjects, fraud may be inferred from facts that are established. Care must be taken not to draw the conclusion hastily from premises that will not warrant it; but a rational belief should not be discarded because it is not conclusively made out If the facts established afford a sufficient and reasonable ground for drawing the Inference of fraud, the conclusion to which the proof tends must. In the absence of explanation, or contradiction, be adopted. It Is enough If from the conduct of a party the Court Is satisfied that it can draw a reasonable Inference of fraud, or If facts be established, from which It would be Impossible, upon a fair and reasonable conclusion, to conclude but that there must have been fraud.'
100. These propositions are quite In tune with the principles enunciated by Lord O'Hagan and Lord Blackburn, celebrated authorities on bills of exchange, in their speeches in Juesse (supra) and this Court Is in respectful agreement with them.
101. Similarly the ratio of the decision in Union of India v. M/s. Chaturbhat M. Patel, reported in : [1976]2SCR902 is not applicable here. In that case the Court was considering the test of fraud In the case of fraud committed in a railway consignment and it was held in paragraph 7 that fraud like any other criminal charge Is to be proved beyond reasonable doubt and suspicion and doubts cannot take the place of proof.
102. This Court is humbly of the opinion that the learned Judges did not, as obviously they could not, lay down a general proposition about the tests to prove fraud. Their observations must be read in the context of the case. But the propositions laid down in Jesse (supra) and Illustrated by Kerr have a much greater contextual relevance to this case and since those formulations are entitled to highest respect, the Court respectfully follows the same in the facts of this case. Here the conscience of the Court Is more disturbed by the apparent dishonesty in the tainted transaction between the drawer, acceptor and the holder. So it is not so much a case of fraud as IS understood In the case of Chaturbhat Patel (supra).
103. The learned counsel for Britannia also relied on a Judgment of the Supreme Court in the case of Bharat Barrel and Drum Manufacturing Company v. Amin Chandra Payarelal. reported In : [1999]1SCR704 . Reliance was placed on that Judgment for the purpose of showing how the Court should Interpret the provisions of section 118(a) of N.I. Act and consider the purpose and intent of provision of the said Act In Its correctperspective. The facts in Bharat Barrel(supra) are also totally different In that case the parties to the litigation had regular business dealings and transactions with regard to Import of steel. There was an offer and acceptance for Import of 10.160 metric tones of steel drum sheets from U.S.A. The total price of the goods to be Imported under the Import license was about Rs.55,33,000/-. The plaintiff represented through its director that until and unless any assurance and guarantee Is given that the delivery of the said steel would be given In time, the letter of credit will not be opened by the plaintiff. So the plaintiff Insisted that defendant should either give a guarantee or provide some security for due performance by the defendant of Its obligations and it was suggested that defendant should execute a promissory note for a sum of Rs.6,20,000/- by way of collateral security for payment to the plaintiff of damages, in the event of plaintiff suffering such damages as a consequence of non-supply of goods. The defendant executed a promissory note for the aforesaid amount. Then on the defendant's failure to pay the amount, the plaintiff filed a suit under Order XXXVII of the Code of Civil Procedure. The learned trial Judge held that the promissory note was not executed by way of collateral security as alleged by the defendant and dismissed the suit holding that the presumption under section 118 of N.I. Act Is not available to the plaintiff.
104. An appeal was preferred against the said judgment and the appeal Court referred the matter to a larger bench In view of the Importance of the question involved and before the larger bench also the plaintiff did not get any relief. While overruling the Judgment of the Calcutta High Court and allowing the suit of Bharat Barrel and Drum for recovery of Rs.6,51,900/-, the learned Judges were pleased to make certain observations on the scope of section 118 of N.I. Act.
105. It has been made clear by the learned Judge that once the execution of the promissory note Is admitted, the presumption under section 116(a) of N.I. Act would arise that the promissory note Is supported by consideration. Of course, the learned Judges observed that such a presumption Is rebutable and the defendant can prove the non-existence of consideration by rising a probable defense. If the defendant does demonstrate by showing that the existence of consideration was Improbable or doubtful or the same was illegal, the onus should then shift to the plaintiff who will be obliged to prove Its case on the Instrument.
106. There can be no doubt of the aforesaid principle, but as Is noted above, those provisions are attracted in a case where the execution of the promissory note Is admitted. In the case of Bharat Barrel (supra) the execution of the promissory note was admitted but the same is not the position In this case. The execution of the promissory note has not been proved here. Therefore, this Court Is of Ihe opinion that the ratio In the case of Bharat Barrel (supra) is not applicable to the facts of this case.
107. The learned counsel for Britannia has, however, argued that in any event PNB as an Indorser Is bound to accept Its liability under the said bill and In support of the said contention the learned counsel has relied on another decision of the House of Lords In the case of Steele and Ors. v. M'kinlay reported in 5 Appeal Cases, 754. The facts of that case are set out below:
'In 1874, William and Thomas M'Kinlay commenced business as timber-merchants at Strabane, Ireland, under the name of W. & T. M'Kinlay. Requiring funds, they commissioned their father, the late James M'Klnlay, horse-dealer in Glasgow, to obtain them an advance of 1000. He entered into communication with John E. Walker, coach proprietor in Glasgow, the result being that Mr. Walker signed as drawer a bill bearing date the 25th of May, 1874. for 1000 at twelve months, addressed to 'Messrs. Wm. & Thos. M'Kinlay. wood-merchants, Strabane,' which he handed to James M'Klnlay,. The latter sent it to his sons in Ireland, who returned it duly accepted in their firm's name. James M'Klnlay then wrote his own signature across the back of the bill, and handed it to Mr. Walker, who remitted its amount, less discount, to the drawees. In March, 1875, Mr. Walker discounted the bill with the National Bank of Scotland, but W. & T. M'Kinlay falling to pay It when due, he retired it.
James M'Kinlay died In September, 1874, and his representative is the Respondent Alexander M'Kinlay. J.E. Walker died in September, 1875, and the Appellants are his trustees. Several questions arose between the parties In Scotland, and there was an action and a counter-action, which were heard together. But the sole question In this appeal was whether the Appellants, the trustees, could recover from the Respondent, as representing his father, the sum of 1000, the amount of the bill of exchange.'
108. The learned counsel for Britannia relied on the following speech of Lord Blackburn in the said Judgment in order to contend that by making an endorsement on the bill, PNB has come under an obligation as an acceptor to all subsequent holders, namely Britannia. The said passage is at page 769 of the report and Is set out below:
'By the general law of merchant adopted with some modifications, Ibelieve, In every civilized country, and certainly In both England andScotland, the acceptor of a bill of exchange comes under an obligationto any one who becomes the holder to pay him, and the drawer comesunder an obligation to the holder to pay him. If the person on whomthe bill Is drawn does not accept and pay the drawer has due notice ofthe dishonour. And any one who indorses that ill comes under anobligation to all subsequent holders of the bill precisely similar to thatof the drawer, but he does not come under any such obligation to priorparties to the bill.' (Underlined for emphasis)
109. But in the said Judgment, Lord Blackburn has explained what is meant by acceptance. Referring to the facts of this case. Lord Blackburn explained In Steele (supra) the bill was drawn by J.E. Walker on William and Thomas M'Kinlay and accepted by them. Thereafter, J. M'Kinlay wrote his name on Its back. Recording those facts the learned Judge posed the question: 'Can he (meaning J. M'Klnlay) be treated as the acceptor?' The learned Judge answered II by saying even If he had expressly written 'Accepted, J. M'Klnlay, he could not have been so treated according to English Law. (Page 770 of the report)
110. In support of the said proposition, the learned Judge has referred to another old English case, namely In the case of Jackson v. Hadson which has been cited by the learned counsel for the appellant in this case.
111. In Jockson v. Hadson, Lord Ellenborough satd 'the acceptance of the defendant is contrary to the usage and custom of merchants. A bill must be accepted by the drawee or falling him by someone for the honour of thedrawer'.
112. These are also the principles enunciated under section 33 of the N.I. Act.
113. The learned Judge has thereafter explained what Is meant by an endorsement. The said concept has been explained by Lord Blackburn* Inpage 772 of the report where the learned Judge has held :
'An Indorsement In general Is a transfer In writing by the holder of the bill to a new holder on whom the property Is thereby conferred; and It Is clear that J. M'Klnlay was not such an Indorser.'
114. Lord Watson, another member of the Bench In the said decision also expressed the same view about indorsement and Indorser at page 782 of the report and the same is set out below:
'No doubt a proper Indorsement can only be made by one who has a right to the bill, and who thereby transmits the right, and also Incurs certain well-known and well-defined liabilities. But it Is perfectly consistent with the principles of the law merchant that a person who writes an Indorsement with Intent to become party to a bill, shall be held--notwithstanding he has not and therefore cannot give any right to its contents--I fail to see upon what principle James M'Klnlay can be interpolated as a party to the bill In question between the drawer and the acceptor. To hold that a stranger to the bill who writes his name across the back of it, before it has passed out of the hands of the drawer. thereby becomes liable to the drawer, failing payment by the drawees, appears to me to be as Inconsistent with the principles of the law merchant as to hold that there may be a drawer other than the original drawer and payee, or that there may be an acceptor other than the drawee or one who accepts as his agent or for his honour.'
115. US. So PNB cannot be called an Indorser. Section 15 of N.I. Act is virtually based on the aforesaid principles.
116. Reference In this connection may be made to section 15 of N.I. Act. Section 15 Is set out below:
'Indorsement.--When the maker or holder of a negotiable Instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper Intended to be completed as a negotiable Instrument, he Is said to Indorse the same, and Is called 'Indorser'.'
117. In the Instant case, the bank Is never the maker or the holder of the bill In question. It Is the case of Britannia that the maker ts Metropolitan and the alleged holder Is Britannia itself. Therefore, no liability can be fastened on PNB as an Indorser In the alleged capacity of a co-acceptor.
118. In a Full Bench Judgment of Alahabad High Court, In the case of Rat Ram Kishore and others and Ram Prasad Mishir, reported In : AIR1952All245 . the Court held In 'For an endorsement to bind the payeeor the holder of a promissory note, it must be made either by the payee or the holder himself or by a duly authorized agent acting In his name under section 27 of the Negotiable Instrument Act' (Para 2, page 246).
119. In this case PNB is admittedly neither the payee nor the holder of the said bill and there is no evidence that PNB was duly authorized either by Metropolitan. Elgee or Britannia to act as its agent.
120. It may be mentioned that the finding of the learned trial Judge that PNB was acting as the agent of Metropolitan and Elgee is not based on any evidence and is totally unsustainable. That is not even the case made out by Britannia either in the plaint or in the course of evidence.
121. The learned counsel also sought to rely on the second part of section 43 of N.I. Act In order to urge that PNB is liable to Britannia in respect of the said bill.
122. Section 43 of the said Act Is In the following terms:
'Negotiable Instrument made, etc., without consideration.--A negotiable instrument made, drawn, accepted, Indorsed, or transferred without consideration, or for a consideration, which fails, create no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without endorsement to a holder for consideration, such Holder, and every subsequent holder deriving title from him may recover the amount due on such instrument from the transferor for consideration or any prior party thereto.'
123. A perusal of the second part of section 43 after omitting the irrelevant parts, would mean: when any party to a negotiable instrument has transferred the instrument with endorsement to a holder for consideration, such holder or every subsequent holder deriving title from him may recover the amount due on such instrument from the transferor for consideration or any prior party thereto.
124. Learned counsel for Britannia submits any prior party thereto would include PNB. This cannot be accepted by this Court.
125. Under no circumstances PNB is the prior party, as in this case, the maker of the instrument namely the drawer is Metropolitan and it has received the consideration of Rs.9I,86.146.56p. from Britannia. The later part of section 43 alms at fully protecting bona fide transferees for value. That being the legislative intent, the maker of the instrument, whether with or without consideration, is liable to the holder In due course or to the holder for value. The maker being admittedly a party to the Instrument comes within the expression 'any prior party thereto'. So that expression will include Metropolitan and not PNB. A similar view has been taken In Kanhyalal Upadhaya and Shree Nand Dubey, reported In Indian Law Reports. Calcutta Series, Vol.1, 1954. 134 at 138.
126. In the facts of the instant case, it cannot be urged by Britannia that any consideraUon passed between Britannia and PNB. The amount of money which was parted by Britannia on the basis of said bill was not given to PNG. It may be the cheque was drawn in the name of PNB but It was earmaked for the account of Metropolitan. Therefore, consideration, if any has passed on this bilt. Is between Britannia and Metropolitan and not Infavour of PNB. It Is nobody's case that PNB had any Hen or right over the demand draft issued by Britannia for the account of Metropolitan and it Is In evidence that the said demand draft was encashed by Metropolitan in Its own account. So on the basis of section 43 of N.I. Act, if Britannia has any cause of action to recover the amount, it can sue Metropolitan and not the PNB. It may be mentioned that the suit of Britannia against Metropolitan being Title Suit Number 780 of 1983 was not proceeded with by Britannia and had been dismissed. This has been taken specifically as a ground of appeal [ground No.21] In this appeal by the PNB.
127. Now coming back to the contention raised by the learned counsel for Britannia that co-acceptance by PNB shall be treated as acceptance docs not find favour with this Court for various reasons. Even though the learned trial Judge, accepted the aforesaid contention advanced on behalf of Britannia, it Is contrary to the case made in the plaint. The plaint case Is that PNB is the acceptor. After receiving the written statement filed by PNB, Britannia wanted to Introduce (he case of co-acceptance by PNB. It has already been noted above that the case of co-acceptance which Britannia wanted to Introduce by way of amendment has not been allowed by the Courts right up to Supreme Court. But unfortunately, the learned trial Judge has delivered his Judgment by accepting the case of Britannia that co-acceptance by PNB amounts to acceptance. This error has been committed by the learned trial Judge despite the fact that the said case has not been made out In the plaint and when the said was case sought to be introduced by the amendment that has also been rejected by all the Courts throughout holding that Britannia is trying to make out a completely new case.
128. Reference in this connection may be made to the Judgment of the Supreme Court In the case of M/s. Trojan & Company v. RM. N.N, Nagappa Chettiar, reported in : [1953]4SCR789 . In paragraph 22 of the Judgment the learned Judges of the Supreme Court were pleased to lay down 'It is well settled that a decision of a case cannot be based on grounds outside the pleadings of the parties and it Is the case pleaded that has to be found'.
129. In that case, the learned Judges held that without an amendment of the plaint, the Court is not entitled to grant the relief not prayed for in the original plaint. In the Instant case, as noted above, amendment of the plaint has been expressly rejected. Therefore, Ignoring the said rejection, the learned trial Judge has granted relief by accepting the plea of Britannia which Is sought to Introduce by way of amendment but failed. The learned trial Judge was thus unfortunately in error by accepting Britannia's case outside the plaint and granting relief on that basis.
130. Apart from that, in the instant case, in the said bill there is a named acceptor but the said acceptor has not been made a party for no Justifiable reason.
131. Reference in this connection may be made to section 33 of N.I, Act which Is to the following effect:
'Only drawee can be acceptor except In need or for honour.--Noperson except the drawee of a bill of exchange, or all or some of several drawees, or a person named therein as a drawee In case of need, or an acceptor for honour, can bind himself by an acceptance.'
132. A perusal of the said section makes It clear no one except the drawee of a bill of exchange or a person named therein as a drawee In case of need, or a acceptor for honour, can bind himself by an acceptance. In the Instant case, PNB is neither a drawee in case of need nor Is It an acceptor for honour. Therefore, by fastening liability on It by its Judgment, the learned trial Judge of the Court has unfortunately overlooked the provisions of section 33 of the said Act. Reference In this connection be made to the Judgment cited by the learned counsel for the appellant In the case of Jackson and Hudson, reported In 170 English Report page 1213. In that case the Lord Ellengborough held 'I know of no custom or usage of merchants, according to which. If a bill be drawn upon one man, it may be accepted by two'. The learned Judge further held 'a bill must be accepted by the drawee, or falling him, by some one for the honour of the drawer'. Section 33 of the N.I. Act quoted above is based on this principle.
133. It may be noted here that the aforesaid decision in Jackson and Hudson has been followed and approved In 5 Appeal Cases. 616 notedabove.
134. Reliance was also placed on another Judgment in the case of Dauls and Henry John Clarke, reported In 115 English Report, 6. In that case. Lord Denman, Chief Justice held that there Is no authority either in the English Law or the General Law Merchant for holding a party to be liable as acceptor upon a bill addressed to another. While saying so, the learned Chief Justice relied on the principles formulated in Jackson and Hudson.
135. In this connection, reference may be made to the provisions of section 117 of Evidence Act. The relevant portion of the section is to the following effect: 'No acceptor of a bill of exchange shall be permitted to deny that the drawer had the authority to draw such bill or to Indorse It'. In the instant suit, the acceptor who is fastened with a statutory estoppel has not even been made A party. So the attempt made by Britannia to put PNB in the shose of the named acceptor in the bill Is wholly contrary to the aforesaid principles enunciated under section 117 of the Evidence Act. The estoppel created under section 117 of the Evidence Act has a purpose. It amounts to an undertaking by the acceptor to pay to the order of the drawer. The acceptor, who Is the principal debtor. Is thus precluded from denying to a holder in due course or a holder for consideration that the drawer had the authority to draw or endorse the bill, Britannia's suit in the absence of the acceptor is not properly framed and is not maintainable.
136. The plea advanced by Britannia that the acceptor could not be made a party as it carries on business In Bombay Is a specious plea. It is well known, that for filing a suit In the Original Jurisdiction of this High Court against a party who allegedly carries on business outside the territorial limits of this Court, leave under Clause 12 of the Letters Patent can be obtained. Order 2 Rule 2 of Code of Civil Procedure has no manner of application in such a situation. Order 2 Rule 2 of the Code enjoins that every suit shall include the whole of the claim that the plaintiff Is entitled to urge in respect of the cause of action. But a plaintiff may relinquish a portion of the claim in order to bring the suit within the Jurisdiction of any Court. This Court has been Informed that the Britannia has not filed anysuit against the acceptor to the bill namely, Lgee Enterprise in any other Court. By relinquishing the claim against the acceptor named In the bill, Britannia In my Judgment, cannot succeed In recovering its alleged claim from PNB. The suit, as framed, must fall.
137. The learned counsel for Britannia has urged that co-acceptance of bill of exchange is a prevalent mercantile practice even though there is no provision of co-acceptance In N.I. Act.
138. It Is well known that the said Act has been framed in order to assimilate and recognize the mercantile trade practice, prevalent as the Law Merchant In England and therefore It may be said any usage contrary to the provision of the said Act may not be upheld by Court. In this connection, the Court recalls the observation of Sir Mckenzle Chalmers, while speaking about the state of English Law before the Bills of Exchange Act. 1882. The observation was 'mercantile usage is the raw material, mercantile law Is the manufactured article'. So when this law was codified, It is presumed that it has taken into account all the prevalent mercantile usage and any usage contrary to the provision of the Act cannot be given effect to In a Court of Law.
139. Factually also no case has been made out by Britannia that the said bill has been validty co-accepted by PNB. In support of Its case, that the alleged co-acceptance Is an established practice, Britannia disclosed certain documents namely Exhibit 'K' series. But a perusal of those documents would show that they are all trade bills and particulars of invoices have been given there. But the said bill is devoid of all such particulars.
140. Curiously enough none of the banks, namely Bank of Baroda, Honkong and Shanghai Banking Corporation. Bank of Maharashtra were called to depose on the so called practice of co-acceptance. If Britannia wanted to establish the practice of co-acceptance by bank, it should have cited witnesses from those banks to establish such practice. The bill discounting register of Britannia Exhibit 'M' shows a very large member of bills but they are all trade bills without an exception. But In case of instant bill why a departure has been made has not been explained by any of the witnesses of Britannia.
141. V.S. Gopalan, the only witness produced by Britannia to depose of the practice of co-acceptance of bills by bank has adduced evidence which has virtually contradicted the case of Britannia. Gopalan, who retired from Chartered Bank In 1987, deposed that before co-accepting bills of customers, bankers invariably fix credit limits of such customers for various facilities of which co-acceptance of bill Is one and bill amount must be within that credit limit (Answer to Q. No. 8 and 12). But In this case before Metropolitan became the customer of Zakarla Street Branch of PNB on 16.2.83 by opening an account of only Rs. 500/- and there was alleged co-acceptance of a bill of Rs. 1 crore by its Branch Manager on 15.2.83. No person of ordinary prudence with any commercial or banking experience would call It an honest transaction.
142. Gopalan repeatedly Insisted that long relationship with customer and the standing of the customer are factors which may prompt the bankto co-accept (Q.77). Gopalan further deposed normally when bills are accepted by one bank, they are co-accepted by another. He could not precisely remember a single Instance where a bill, not drawn on a bank, has been co-accepted by Chartered Bank (9-66 and 70).
143. So on the evidence of Gopalan who gave evidence on the request of Britannia (Q.68) the alleged co-acceptance of the said bill becomes highly suspect inasmuch as there is (i) no credit limit fixed (11) It Is not a case of long relationship between the banker and customer and (111) the bill wasnot accepted by another bank. These aspects of the alleged transaction would normally put on the alert any commercial organization of some standing. Thus Britannia acted 'at its peril' by parting with money on such a transaction and cannot recover it now from PNB after relinquishing Its claim against the acceptor who Is the principal debtor.
(Underlined for emphasis)
144. Further question which remains to be considered by this Court is whether PNB is bound by the acts of co-acceptance of the bill by ABD onthe basis of the power of attorney, it gave in favour of ABD.
145. It goes without saying that the said power of attorney Is a general power of attorney as it appeared from Exhibit 'A' itself. From clause 1(1) of the clause in the said power of attorney. It is clear that the power of attorney holder can, apart from doing various other things 'accept* bills of exchange and other negotiable Instruments in the name and on behalf of the said bank. But in the Instant case, admittedly ABD has not accepted the bill in question. But he has allegedly co-accepted the same. Co-acceptance is not a known concept under N.I. Act. In any event, acceptance and co-acceptance cannot be equated as has been discussed above and since ABD has not been authorized to co-accept the so called co-acceptance by ABD on behalf of the power of attorney dated 1st November, 1976 Is not valid.
146. It may be mentioned here that In 1976 when the power of attorney was granted in favour of ABD by PNB, the so called undesirable practice of co-acceptance was noticed by RBI and in Its circular dated 20.1.76 (Exhibit 3) and RBI found that such transactions are 'In the nature of guarantee executed by banks' and such practice should not continue. Therefore, alleged co-acceptance by ABD Is certainly not acceptance permitted under clause 1(1) of the power of attorney. But if it Is guarantee on behalf of the bank in that case for giving such guarantee, ABD cannot act singly. In this connection the learned counsel for the appellant has urged that power of attorney calls for a strict construction. In support of the said submission, the learned counsel has relied on Halsbury's Laws of England. (4th Edition) para 730 and 731. The relevant portion from the said paragraph is set out below:
'A power of attorney is construed strictly by the Courts, according to well-recognised rules, regard first being had to any recitals which, showing the general object, control the general terms In the operative part of the deed.'
147. The aforesaid principle has been further illustrated In Halsbury as follows:
'Thus a power granted to the donee to manage certain property,followed by general words giving him full power to do all lawful actsrelating to the donor's business and affairs, of what nature or kindso ever, does not necessarily include authority to indorese bills, forthe general words are construed as having reference to managing thedonor's property, for which indorsing bills may not be incidental ornecessary.' (Underlined for emphasis)
148. The elaboration on the said principle further appears from Halsbury as follows:
'There must be strict adherence to the authority conferred by power of attorney. If the agent In the pretended exercise of his authority acts in excess of and outside the reasonable scope of its special powers, the third party will be unable to make the principal liable. Thus, where an Instrument gives authority to sign contracts, acceptances and other documents, it gives power to sell or purchase negotiable Instruments, but it docs not give power to pledge them.'(Underlined for emphasis)
149. Thus power to accept bills cannot be converted Into a power to co-accept bills which, according to RBI circular and also the stand of both the parties, is nothing but a guarantee. This is specially so when for executing guarantee a totally different requirement is mentioned In para 2(h) of the power of attorney.
150. The learned counsel for the appellant has also relied on a judgment in support of the contention that the power of attorney should be strictly construed and In support of that, placed reliance on the judgment of House of Lords in the case of Bryant, Powis, and Bryant, Limited and La Banque Du Peulle and another reported in 1893 appeal cases page 170. In the Judgment of Bryant (supra) their lordships quoted with approval the observation in the case of Stagg and Elliot reported in 12 CB (NS) 373 at 381. The said proposition was elaborated by Lord Macnghten by holding that powers of attorney are to be construed strictly. That is to say, where the act purporting to be done under a. power of attorney is challenged as having been done in excess of authority conferred by the power, it Is necessary to show that on a fair construction of the whole instrument that the authority in question is to be found within the four corners of the instrument either in express terms or by necessary implication (page 177 of the report).
151. Therefore, going by those standards, this Court finds that It Is difficult for the Court to hold that on the basis of the said power of attorney Issued In 1976, ABD could co-accept the said bill and specially, when co-acceptance is an unknown term under N.I. Act.
152. Apart from that in the instant case, it has been contended by the learned counsel for both the parties that co-acceptance of the said bill for and on behalf of PNB would amount to a guarantee. This would also appear from the Reserve Bank of India's circular dated 30th January, 1975 referred to above.
153. But It is clear from the said power of attorney that such guaranteecannot be given by person Individually and the same can only be done bythe said authorized attorney jointly with another power of attorney holderof the said bank. When ABD acts with another power of attorney holderJointly, then only he can give guarantee and execute Indemnity on behalfof and In the name of bank In accordance with clause 2(h) of the said powerof attorney (exhibit 'A'). (Underlined for emphasis)
154. Admittedly in the Instant case, ABD has allegedly acted alone and has not acted Jointly with another power of attorney holder. Therefore, the alleged co-acceptance by ABD alone Is In excess of his authority conferred on him under the satd power of attorney and specially regard being had to the well settled legal position that such power of attorney calls for a strict construction. Therefore, this Court Is bound to hold that by allegedly giving such guarantee under the guise of co-acceptance of the bill, ABD acted In excess of his authority and such acts on his part cannot and do not bind PNB.
155. In order to counter this position, the learned counsel for Britannia relied on clause 3 of the power of attorney which la set out below:
'General:- The said attorney, by virtue of these presents shall have the power to do generally everything requisite for all or any of the aforesaid purposes and also for other general banking business, usually done by Joint stock and other banks and sign generally on behalf and In the name of the said Bank In the usual and ordinary course of business.'
156. The learned counsel further relied on Bowstead on Agency, 15th Edition. Reliance has been placed on the following passage at page 98-99. The passage Is set out below:
'Powers of attorney are strictly construed and are interpreted as giving only such authority as they confer expressly or by necessary Implication. The following are the most important rules of construction:
(a) The operative part of a deed Is controlled by the recitals where there Is ambiguity.
(b) Where authority Is given to do particular acts, followed by general words, the general words are restricted to what Is necessary for the proper performance of the particular acts.
(c) General words do not confer general powers, but are limited to the purpose for which the authority Is given, and are construed as enlarging the special powers only when necessary for that purpose.
(d) The deed must be construed so as to include all incidental powers necessary for its effective execution.'
157. On the basis of the aforesaid clause and the passage from Bowstead, the learned counsel submitted since there Is the aforesaid general power, the alleged giving of guarantee by ABD alone by allegedly co-accepting the bill is a mere irregularity and does not vitiate his act and specially, when he has the power to do It Jointly.
158. This Court Is unable to accept this contention for the various reasons.
159. A power to do something Jointly with another person Is an express and specific power and power of a totally different character. This cannot be termed as power Incidental to a power by which a person can do something singly. To hold otherwise would amount to altering the Intention of the donor of the power. Thus no Court can do by an Interpretative process. The passage from Bowstead also does not suggest such a construction. Such a construction of equating sole power with Joint power overriding specific provisions is contrary to all cannons of construction.
160. Apart from that such a construction Is contrary to the express provision of 27 of N.I. Act which Is set out below:
'A general authority to transact business and to receive and discharge debts does not confer upon an agent the power of acceptlng or Indorsing bills of exchange so as to bind his principal.
An authority to draw bills of exchange does not of Itself import anauthority to Indorse.' (Underlined for emphasis)
161. In view of the aforesaid provision under section 27 of N.I. Act, the contention of the learned counsel for Britannia that clause 3 of the power of attorney condones the irregularity on the part of ABD of solely giving guarantee on behalf of the bank under the guise of co acceptance is an unsound contention and not acceptable to this Court.
162. The finding of the learned trial Judge accepting the aforesaid contention on behalf of Britannia Is erroneous both on law and on precedent.
163. The next question raised In the case Is the consequences on non-presentment of the bill In terms of section 64 of N.I. Act. section 64 Is set out below:
'Presentment for payment--Promissory notes, bills of exchange and cheques must be presented for payment to the maker, acceptor or drawee thereof respectively, by or on behalf of the holder as hereinafter provided. In default of such presentment, the other parties thereto are not liable thereon to such holder.
Where authorised by agreement or usage, a presentment through the post office by means of a registered letter Is sufficient.
Exception.-Where a promissory note is payable on demand and is not payable at a specified place, no present is necessary In order to charge the maker thereof.'
164. The statutory requirement of presentation for payment Is mandatory and the legislative intent Is expressed by the words 'must be'. The consequence of non-presentment has also been made clear namely a non-presentment will absolve the liability of any of 'other parties thereto*. It is also clear that in the case of a bill of exchange It must be presented for payment to the 'acceptor'. In this case, admittedly the bill has not been presented to Lgee, the named acceptor In the bill. The consequence Is 'other parties thereto' will be totally absolved of their liability and In the case of a bill of exchange 'other parties thereto' will be any party other than the named acceptor. A Division Bench of Calcutta High Court In deciding thecase of Manik Ratan Guin and Prakash Chandra (reported in : AIR1955Cal338 ) construed the expression 'other parties thereto' in section 64 of N.I. Act to the above effect, see para 8 of the judgment. In 1988, a learned single Judge of Delhi High Court followed the Division Bench Judgment of Calcutta High Court in Manik Ratan (supra). The Delhi High Court Judgment is reported in : AIR1988Delhi372 .
165. The mandatory nature of the requirement of presentation of the bill of exchange was considered in an old Judgment of the Division Bench of Calcutta High Court In the case of Sagar Mal v. Bhudan Sahu, reported In 19 Indian cases (1913) page 251. In that case the plaintiff even without proving presentment got a decree against endorser and drawer. Against such decree only Indorser filed an appeal, the drawer did not file an appeal. But the Appellate Court dismissed the whole suit against both the endorser and drawer.
166. On an appeal to the High Court, It was held that as proof of presentment was essential to the plaintiffs case before he could recover Judgment, the first appellate Court rightly dismissed the whole suit against both drawer and endorser notwithstanding the fact that the drawer did not file an appeal against the judgment.
167. To counter this position, learned counsel for Britannia relied on section 76(b) of the N.I. Act. Section 76(b) of the N.I. Act Is set out below:
'When presentment unnecessary.--No presentment for payment is necessary, and the instrument Is dishonoured at the due date for presentment, in any of the following cases:
(b) As against any parry sought to be charged therewith, If he has engaged to pay notwithstanding non-presentment;'
168. The learned counsel further relied on a letter dated 19.3.83 written by ABD to Britannia In order to contend that presentment is not necessary. The letter Is to the following effect:
'Dear Sirs,
With reference to above, we would like to Inform you that the bills drawn by Metropolitan Construction on M/s. Lgce Enterprises and co-accepted by us will be honoured on Its due date, I.e. on 14/8/83 on its presentation to this office.
Thanking you.
Yours faithfully.
For PUNJAB NATIONAL BANK
8/9, Zakaria St. Cal.-700073.
Sd/-
Manager.'
169. This Court has already held, for reasons given above, that the acts of ABD cannot bind PNB. Therefore, the said letter of ABD is of no consequence. Apart from that It must be first established that the party allegedly waiving presentment Is liable under the Instrument. It may do so as an indorser. But In this case PNB is not even an indorser. So non-presentment In this case Is fatal to the action of Britannia. This goes tothe root of the whole thing and such a point can be urged before the Court of appeal even for the first time assuming it was not urged before the learned trial Judge. In order to appreciate this point, the Court is not required to take Into account any new question of fact.
17O. The learned trial Judge while delivering his Judgment relied on a single Bench decision of another learned Judge of this Court in Suit No.290of 1986 (Method Trading & Investment Ltd. and another v. Sri Ambica Jute Mills). On an appeal being filed against the said Judgment by PNB, the Judgment of the learned single Judge was set aside and the appeal was allowed by the learned Division Bench by the Judgment and order dated 10.01.1991. Apart from that the learned trial Judge has relied on surmises and conjectures in various parts of his Judgment and the finding of the learned Judge that PNB acted as the agent of both Metropolitan and Elgee Is also based on no evidence. The provision of section 28 of N.I. Act also has no manner of application to the fact of the case and the learned Judge erred by relying on the same.
For the reasons and discussions aforesaid, this Court allows the appeal and dismisses the suit. The Judgment and decree passed by the learned trial Judge Is set aside.
There will be, however, no order as to costs.
P. K. Chattopadhyay. J.--I agree.
171. Appeal allowed
Later:
After pronouncement of the judgment, learned counsel for the respondent prays for stay of operation of the decree and has drawn our attention to an interim order 27th March, 1991. We have perused the said order but we are not inclined to grant any stay having regard to the fact that the appellant before us Is a Nationalised Bank.
Therefore, the prayer for stay is rejected.
Xerox certified copy of the Judgment, if applied for, may be delivered expeditiously.