Gujarat High Court
Bank vs Anjali on 2 February, 2012
Author: Rajesh H.Shukla
Bench: Rajesh H.Shukla
Gujarat High Court Case Information System
Print
FA/1800/1994 9/ 9 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
FIRST
APPEAL No. 1800 of 1994
For
Approval and Signature:
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
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1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To
be referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
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BANK
OF INDIA
Versus
ANJALI
TEXTILES & 2
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Appearance :
MR
JT TRIVEDI for Appellant(s) : 1,
MR MIG MANSURI for Respondent(s)
: 1,
NOTICE SERVED for Respondent(s) : 2 -
3.
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CORAM
:
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
Date
: 2/02/2012
ORAL
JUDGMENT
The present First Appeal has been filed by the Appellant - Bank of India - Original Plaintiff being aggrieved by the impugned judgment and order passed in Summary Suit No.4175 of 1985 by the City Civil and Sessions Court, Ahmedbad dated 30.12.1993, by which the Suit filed by the Appellant - Bank of India - Original Plaintiff was dismissed. Therefore, the present First Appeal has been filed assailing the said impugned judgment and order on the grounds stated in the memo of Appeal inter alia that it is well settled that the bill of exchange is accepted unconditionally, the holder thereof is entitled to receive the payment despite there may be any interse dispute between the parties regarding the quality of the goods. It is therefore contended that non-acceptance of the goods and failure of consideration between the drawer and drawee is of no consequence when the bills have been discounted unconditionally and the Appellant - Bank of India is the holder in due course. It is therefore contended that the reasoning given by the court below that a person taking the bill or hundi without consideration cannot enforce, it has not appreciated the facts correctly. It is contended that the principle is unexceptionable and therefore the impugned judgment and order is erroneous. It is also contended that the learned City Civil and Sessions Judge has referred to the credit note (exh.39) to come to the conclusion that the goods were supplied and it is also stated that no delivery was given, and therefore, there is infirmity in the findings.
Learned Counsel Mr. J.T.Trivedi for the Appellant has referred to the impugned judgment and order and also other papers. He has submitted that exh.39 is the credit note which has been given by Sarangpur Mills and the said credit note has been given in response of the bills, for which the hundies were drawn. Learned Counsel Mr. Trivedi submitted that the present Appellant Bank is the holder in due course of the said bills / hundies and therefore is entitled for the payment as it has been accepted unconditionally. In support of this submission, learned counsel Mr. Trivedi has referred to the provisions of Section 43 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "the Act") and submitted that as provided in Section 43 of the Act that a Negotiable Instrument accepted unconditionally would be entitled to recover the amount. He referred to the exceptions also and submitted that it was for the Defendant to check the goods whether it was as per specifications or not. He referred to the impugned judgment, particularly paragraphs 8 and 9. Therefore he submitted that the impugned judgment and order be quashed and set aside and the present First Appeal may be allowed.
Learned Advocate Mr.M.I.G.Mansuri appearing for the Respondent submitted that infact as recorded in the impugned judgment, particularly paragraphs 8 and 9, originally the Sarangpur Mills had taken advance on different accounts and the credit note (exh.39) clearly suggest that the goods were supplied. He submitted that exh.39 is the document which clearly suggest that the hundi in question was accepted by the original defendant and the facility was extended to the Sarangpur Mills on the basis thereof. However, as the delivery of the goods was not given and as there was no consideration, the question of honouring the bill would not arise as the Bank had granted the facility of the bill, but when there is failure of consideration, then the Respondents - Original Defendants are not liable to pay and the Bank as the holder in due course cannot claim the amount or recover the amount in respect of the bills, for which there is failure of consideration as the transaction has not been completed. It is in these circumstances, the learned City Civil and Sessions Judge, after recording the evidence and on appreciation of all evidence including exh.39 - credit note, has dismissed the Suit. Learned Advocate Mr. Mansuri submitted that exh.39 - credit note itself suggest that the goods were not delivered, meaning thereby, as it is recorded therein specifically, for which the credit note is given that when the goods are not at all given, for which the question of payment would not arise, and therefore, the liability of the Defendant would not arise as there is a failure of consideration. Learned Advocate Mr. Mansuri therefore submitted that in the circumstances, the present First Appeal may not be entertained. He has specifically referred to exh.39 - credit note as well as other papers in support of his submission.
In view of this rival submissions, it is required to be considered whether the present First Appeal can be entertained or not.
Much emphasis is given by learned Counsel Mr. J.T.Trivedi for the Appellant - Bank of India referring to the provisions of Section 86 of the Act that when it has been accepted unconditionally, the Bank would be entitled for recovery of the same, require a close scrutiny. Infact as it is evident from the record and the facts, the advances were given by the Appellant Bank to the Sarangpur Mills and in order to provide such facility, the bills were discounted by the Appellant - Bank of India - Original Plaintiff in respect of the transaction which has not taken place as the delivery was not given and there was failure of consideration. It is in this background the submissions made by learned Counsel Mr. Trivedi referring to Section 86, particularly much emphasis on explanation that when the acceptance is not qualified, there is no question of avoiding any liability, is required to be considered. This provision of Section 86 of the Act is required to be read with provision of Section 43 of the Act. Provision of Section 43 provides:
"43. Negotiable instrument made, etc., without consideration. - A negotiable instrument made, drawn, accepted, indorsed, or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without indorsement 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.
Exception I. - No party for whose accommodation a negotiable instrument has been made, drawn, accepted or indorsed can, if he has paid the amount thereof, recover thereon such amount from any person who became a party to such instrument for his accommodation.
Exception II. -
No party to the instrument who has induced any other party to make, draw, accept, indorse or transfer the same to him for a consideration which he has failed to pay or perform in full shall recover therein an amount exceeding the value of the consideration (if any) which he has actually paid or performed."
Therefore, Exception II clearly provide that no party to the instrument who has induced the other party to accept the bill and who has failed to pay or perform shall recover the amount exceeding the value which he has paid.
In the facts of the present case therefore, as there was no transaction regarding the goods and there was no delivery of the goods and also there was a failure of consideration. Therefore, the Appellant Bank cannot claim recovery of the amount when there was no transaction at all on the ground that it was unqualified acceptance of the instrument / hundi and is entitled to recover the amount irrespective of the transaction between the parties, I.e. drawer and the drawee of the hundi.
Learned Advocate Mr. J.T.Trivedi has referred to and relied upon some of the judgments though are not applicable. He has referred to and relied upon the judgment in case of M/s. Madhya Bharat Khadi Sangh v. M/s. Bal Kishen Kapoor and others, AIR 1979 Allahanad 253. He has also referred to and relied upon the judgment in case of Canara Bank, New Delhi v. M/s. Sanjeev Enterprises and others, AIR 1988 Delhi 372 and submitted that such defence, which is taken, is self-contradictory. However, a close look at the judgment would make it clear that the observations made have to be read in context of the facts where Delhi High Court on facts of the case and evidence, clearly found that the goods were supplied and there was a consideration. In the facts of the present case, admittedly, there is no evidence with regard to any such transaction having actually taken place. Infact no evidence has been lead and much emphasis is given by the Appellant only on the unqualified acceptance. However, these submissions regarding unqualified acceptance has to be read in context of the provisions of the Act, and if one looks at the provisions of the Act, it is evident that exceptions have been specifically carved out even in Section 86 of the Act. Therefore, much emphasis given on provisions of Section 86 of the Act read with explanation has to be read in background of the facts and also it has to be read with provisions of Section 43 of the Act, which also provide for such an eventuality and lays down extent of liability. Section 43 of the Act referred to, "Negotiable instrument made without consideration". Therefore, reading Section 43 of the Act with explanation 2 and provisions of Section 86, clearly suggest that if the transaction itself has not taken place, there is no question of recovery based on any such instrument or the hundi on the ground that there is unqualified acceptance. The drawing of a bill or acceptance presupposes the transaction, and if there is total absence of any evidence with regard to any actual transaction, it cannot be claimed as unqualified acceptance for recovery. It is in these circumstances, the provisions of Section 43 has been providing for the consequences where such an instrument has been drawn or accepted without consideration or where the transaction has not taken place.
Therefore, there is no substance in the submissions made by learned Advocate Mr. J.T.Trivedi and the present First Appeal cannot be entertained.
This Court is in broadly agreement with the findings arrived at and the reasonings recorded by the learned City Civil and Sessions Judge, which does not call for any interference. The present First Appeal therefore deserves to be dismissed and accordingly stands dismissed.
(Rajesh H. Shukla,J) Jayanti* Top