1981 (12) TMI 169 - HC - Indian Laws

Summary

Issues Involved:

1. Whether the defendant Bank was a purchaser of the bills or merely a collecting agent.
2. Whether the defendant Bank was justified in reversing the credit entry without returning the documents.
3. Whether the plaintiff company gave specific instructions for the collection of bills through a particular agency.
4. Whether the necessary parties were included in the suit.

Issue-wise Detailed Analysis:

1. Whether the defendant Bank was a purchaser of the bills or merely a collecting agent:

The primary contention was whether the Bank, by accepting the relevant documents with endorsement in its favor and discounting the same by crediting the price to the plaintiff's account immediately, became a purchaser for value or was merely a collecting agent. The court referred to the Supreme Court judgment in Morvi Mercantile Bank Ltd. v. Union of India, AIR 1965 SC 1954, which established that transport receipts are documents of title to goods and their transfer for consideration constitutes constructive delivery of goods. The court further analyzed banking practices, distinguishing between "Bills for collection" and "Bills discounted." The evidence presented showed that the defendant Bank credited the plaintiff's account immediately upon receiving the documents, indicating that the Bank was a purchaser of the bills and not merely a collecting agent.

2. Whether the defendant Bank was justified in reversing the credit entry without returning the documents:

The plaintiff argued that the Bank had no right to reverse the credit entry unless the relevant documents or the goods covered by them were returned. The court agreed with this contention, noting that the Bank, having discounted the bills and credited the amount to the plaintiff's account, assumed the responsibility of collecting the amount from the drawee. If the drawee refused or the documents were dishonored, the Bank was required to return the documents to the drawer and collect the value either in cash or by debiting the same amount in the plaintiff's account. The Bank's action of reversing the credit entry without returning the documents was deemed unjustified.

3. Whether the plaintiff company gave specific instructions for the collection of bills through a particular agency:

The defendant Bank claimed that the plaintiff instructed it to send the bills and documents for collection through Canara Banking Corporation, Semapur. However, the court found the evidence regarding these instructions unsatisfactory and inconsistent. The application form (Ex. P-9) had a blank space for noting the agency, which was left vacant by the plaintiff. The court concluded that the Bank adopted its own mode and choice of agency, sending the documents through the post office by registered post, which were delivered to a wrong and unknown person who committed fraud. Thus, the plaintiff did not give specific instructions for the collection through a particular agency.

4. Whether the necessary parties were included in the suit:

The defendant Bank argued that Om Prakash, his Munim Mahadeo, Premchand, and the Ministry of Post and Telegraph Department were necessary parties to the suit. The trial court had earlier held that no other party or persons except the defendant Bank were necessary parties. The appellate court upheld this decision, finding no merit in the defendant's contention.

Conclusion:

The court dismissed the appeal, affirming the trial court's judgment that the defendant Bank was the purchaser of the bills and liable for the amount to the plaintiff. The Bank's reversal of the credit entry without returning the documents was unjustified, and the plaintiff did not give specific instructions for collection through a particular agency. The necessary parties were correctly included in the suit. The appeal was dismissed with costs, and counsel's fee was set at Rs. 600, if certified.