1992 (12) TMI 233 - SC - Indian Laws

Summary

Issues Involved:
1. Whether the first respondent (CSC) is the drawer-acceptor of the impugned Bills of Exchange.
2. Interpretation of the Negotiable Instruments Act, 1881 regarding the definitions and liabilities of drawer, drawee, and acceptor.
3. Validity of the acceptance of the Bills of Exchange by CSC.
4. Discretionary power of the court under Section 34 of the Specific Relief Act, 1963 in granting declarations and injunctions.

Issue-wise Detailed Analysis:

1. Whether the first respondent (CSC) is the drawer-acceptor of the impugned Bills of Exchange:
The court examined whether CSC, the first respondent, was the drawer-acceptor of the Bills of Exchange. The facts revealed that CSC had obtained a license to import steel billets and approached MMTC for a letter of authority to import the goods. CSC opened an Irrevocable Letter of Credit in favor of the foreign supplier, M/s. Harlow & Jones Ltd. The Bills of Exchange were addressed to MMTC A/c CSC, and CSC endorsed its acceptance on the Bills of Exchange. When the appellant bank presented the Bills of Exchange for payment, CSC dishonored them, leading to a legal dispute. The court concluded that CSC, by accepting the Bills of Exchange, acted as the drawer-acceptor.

2. Interpretation of the Negotiable Instruments Act, 1881 regarding the definitions and liabilities of drawer, drawee, and acceptor:
Section 7 of the Negotiable Instruments Act, 1881 defines the roles of drawer, drawee, and acceptor. The court emphasized that the maker of a bill of exchange is the drawer, the person directed to pay is the drawee, and upon signing assent, the drawee becomes the acceptor. Section 32 outlines the acceptor's liability to pay the amount at maturity, while Section 33 restricts acceptance to the drawee or a person named in need or for honor. The court reiterated that the acceptor is personally liable unless they state they are acting for a disclosed principal.

3. Validity of the acceptance of the Bills of Exchange by CSC:
The court examined the acceptance of the Bills of Exchange by CSC. It was noted that CSC had opened letters of credit directly with the foreign supplier and had accepted the Bills of Exchange as drawee. The court referred to legal commentaries and precedents, emphasizing that acceptance must be on the bill itself and that the drawee must be named with reasonable certainty. The court found that CSC had validly accepted the Bills of Exchange as the drawee, and their acceptance was binding.

4. Discretionary power of the court under Section 34 of the Specific Relief Act, 1963 in granting declarations and injunctions:
The court discussed the discretionary power under Section 34 of the Specific Relief Act, 1963, which allows courts to grant declarations and injunctions. The court emphasized that such reliefs are discretionary and must be granted based on sound principles of law and justice. The court criticized the appellate court's decision to grant a declaration that the Bills of Exchange were illegal and void, stating that it impeded the free flow of capital and hindered mercantile business. The court held that the relief granted by the appellate court was unjust and illegal.

Conclusion:
The appeal was allowed, and the judgment and decree of the appellate court were reversed. The decree of the single Judge was restored, and the suit was dismissed with costs throughout. The court concluded that CSC was the drawer-acceptor of the Bills of Exchange and was liable for their payment. The discretionary relief granted by the appellate court was deemed unjust and illegal, and the court emphasized the importance of upholding commercial integrity and the efficacy of judicial adjudication.