Kerala High Court
Commercial Finances vs Thressia And Ors. on 4 April, 1990
Equivalent citations: [1990]68COMPCAS704(KER)
JUDGMENT M.M. Pareed Pillay, J.
1. The plaintiff is the appellant. The plaintiff discounted a cheque dated August 20, 1977, for Rs. 10,000 drawn by K.J. Mathai on Canara Bank, Kothamangalam, through the eighth defendant. The cheque was presented by the plaintiff to the Canara Bank on October 12, 1977. It was dishonoured. Defendants Nos. 1 to 7 are the legal representatives of Mathai. Additional defendants Nos. 9 to 12 are the legal representatives of the eighth defendant.
2. Defendants Nos. 1 to 7 contended, inter alia, that the plaintiff did not advance Rs. 10,000 to Mathai through the eighth defendant. All the findings by the trial court were in favour of the plaintiff except the one that the suit is not maintainable as no notice of dishonour under Section 93 of the Negotiable Instruments Act was given to the defendants.
3. The question that arises for consideration is as to whether a notice of dishonour is mandatory to the drawer of a cheque in a case where the cheque was dishonoured on presentation. The court below obviously overlooked Section 98(c) of the Negotiable Instruments Act. It is in evidence that the cheque when presented by the plaintiff was returned with the endorsement "refer to drawer". What is meant by "refer to drawer" is stated in Parthasarathy's Cheques in Law and Practice thus :
"This is used generally while returning cheques for want of funds in the drawer's account, or because of service of a garnishee order".
4. In Tannan's Banking Law and Practice, page 313 (18th edition), the meaning of "refer to drawer" is stated as below :
"It is generally meant to convey to the holder that he should refer to the drawer for payment, that is, the banker has not sufficient funds at his disposal to honour the cheque."
5. Exhibit A-3 cheque was returned with the endorsement "refer to drawer". Hence, it is obvious that there were no funds in the bank in the drawer's account for payment of the cheque. Section 98 of the Negotiable Instruments Act states the circumstances under which a notice of dishonour is dispensed with.
6. Section 98(c) of the Act provides that when the party charged could not suffer damage for want of notice, notice of dishonour is unnecessary. As exhibit A-3 cheque could not be encashed for want of funds, it cannot be said that defendants Nos. 1 to 7 who are the legal representatives of the drawer of the cheque had suffered any damage for want of notice. So far as the eighth defendant is concerned, the position is different. Under the provisions of the Act, the liability of an endorser is not that of a principal debtor and the liability of the endorser can arise only if a notice of dishonour is issued to him and not otherwise. (See John Chandy v. State Bank of Travancore [1973] KLJ 450). As the eighth defendant was not given the notice of dishonour, he cannot be held liable for the plaint claim.
7. Along with the plaint, exhibit A-3 cheque and the endorsement by the bank were produced. A document produced along with the plaint under Order 7, Rule 14, should be treated as part of the pleadings. In Janki Das v. Kuskalya Devi, AIR 1943 Lah 207, the court held that the list of documents mentioned in Order 7, Rule 14(2), should be treated as part of the plaint. Therefore, there is no force in the defence contention that there is lack of pleading regarding dispensing with notice of dishonour. As exhibit A-3 cheque with the endorsement showing that it was dishonoured was produced along with the plaint, there is no need for a further pleading that notice of dishonour is not necessary. As there is evidence in the case that exhibit A-3 cheque was returned without payment as there was no necessary funds to meet the cheque, it is a case where Section 98(c) applies and so no notice of dishonour is legally necessary.
8. So far as defendants Nos. 1 to 7 are concerned, it cannot be held that the suit against them is bad for want of notice of dishonour. So far as the eighth defendant is concerned, he being an endorser, notice of dishonour was necessary. That being the position, there cannot be a decree against the eighth defendant. The trial court was not justified in dismissing the suit as against defendants Nos. 1 to 7.
9. The judgment and decree of the trial court are set aside and the suit is decreed for Rs. 10,000 from the estate of deceased, K.J. Mathai, in the hands of defendants Nos. 1 to 7 with 6% interest per annum from date of suit tail-realisation.
10. The appeal is allowed as stated above with no order as to costs.