2001 (3) TMI 1080 - HC - Indian Laws

Summary

Issues Involved:
1. Entitlement to interest on Bills of Exchange.
2. Admissibility of unstamped Bills of Exchange.
3. Cause of action against Defendants despite negotiation of Bills.
4. Proper noting and protesting of Bills of Exchange.
5. Conditional leave to defend based on deposit.

Analysis of Judgment:

1. Entitlement to Interest on Bills of Exchange:
The Plaintiff claimed interest at the rate of 18% per annum on the principal amount under the provisions of Section 80 of the Negotiable Instruments Act, 1881. The court held that the Plaintiff is clearly entitled to this interest rate, rejecting the Defendants' contention that the Bills of Exchange did not provide for payment of any interest.

2. Admissibility of Unstamped Bills of Exchange:
The Defendants argued that the Bills of Exchange were inadmissible as they were not properly stamped. The Plaintiff countered by submitting the Bills for adjudication and stamping, paying the required duty. The court examined the provisions of the Indian Stamp Act, 1899, particularly Sections 33, 35, 38, and 40, and concluded that the subsequent adjudication and payment of stamp duty cured the initial defect, rendering the Bills admissible in evidence. The court also noted that the first two Bills were payable at sight and thus considered "Bills of Exchange payable on demand," which are exempt from stamp duty under the Indian Stamp Act, 1899.

3. Cause of Action Against Defendants Despite Negotiation of Bills:
The Defendants contended that the Plaintiff had no cause of action since the Bills were negotiated in favor of Bombay Mercantile Bank Ltd. The court rejected this argument, clarifying that the Bills of Exchange were negotiated only for collection, not for transfer of ownership, thus maintaining the Plaintiff's cause of action against the Defendants.

4. Proper Noting and Protesting of Bills of Exchange:
The Defendants claimed that the Bills were not properly noted and protested. The court found no substance in this contention, noting that the Bills were duly noted and protested. It was also observed that these submissions were not pressed during the hearing.

5. Conditional Leave to Defend Based on Deposit:
Given the almost complete absence of any denial on the merits of the claim by the Defendants, the court granted conditional leave to defend the suit. The Defendants were required to deposit an amount equivalent to Pound Sterling 77,940/- within 8 weeks. This decision was based on the principles enunciated by the Supreme Court in Mechalec Engineering and Manufacturers v. Basic Equipment Corporation, which allows conditional leave to defend when the defense is deemed illusory or sham.

Conclusion:
The court disposed of the Summons for Judgment by granting conditional leave to defend, requiring the Defendants to deposit the specified amount. The suit was transferred to the list of Commercial Causes, with instructions for filing the Written Statement and completing inspection and discovery within stipulated timeframes. The Prothonotary & Senior Master was directed to deposit the amount in a Nationalized Bank initially for one year and subsequently for equal successive periods until the disposal of the suit. The court provided liberty to the Plaintiffs to apply for further orders in case of failure to deposit the amount. No costs were awarded.