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TMI Blog2022 (6) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... . Based on such request, the Plaintiff supplied TMT bars to the first Defendant from time to time and received payments in respect thereof. Upon receipt of the proforma invoice dated 22.05.2017 from the Plaintiff offering to supply TMT bars at Rs.38.20 per kg., the first Defendant issued the purchase order dated 23.05.2017 (PO No.006-5/170523/05-006/M-AJAY/TMT). The purchase order mandated that the payment for the consignment was to be made on a bill of exchange payable 90 days after the date of acceptance(at sight) by the first Defendant's banker, the second Defendant herein. Pursuant thereto, the goods were dispatched and delivered to the first Defendant under Invoice Nos.139 to 150 for an aggregate sum of Rs.1,02,49,709/-. According to the Plaintiff, the bill of exchange dated 24.05.2017 was also accepted for payment by the first Defendant and co-accepted by his banker, the second Defendant herein, albeit without making endorsements thereon. The Plaintiff had discounted the bill with his banker, the third Defendant herein and, therefore, the third Defendant, by a collection bill dated 24.05.2017, requested the second Defendant to convey its acceptance through the Structured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ager of Indian Bank(the third Defendant), Anna Nagar Branch, was examined as C.W.1 for the limited purpose of producing a letter dated 31.07.2018, which was exhibited as Ex.C1. Thereafter, pursuant to order dated 17.10.2019 in Application No.7750 of 2019, Mr.K.V.S.Prakash Rao, the retired AGM of Indian Bank, was examined as C.W.2. 7. Oral submissions on behalf of the Plaintiff were advanced by Mr.Sharath Chandran, learned counsel; on behalf of the first Defendant by Mr.J.Manikandan, learned counsel; on behalf of the second Defendant by Mr.E.Om Prakash, learned senior counsel; and on behalf of the third Defendant by Mr.V.Kalyanaraman, learned counsel. 8. Learned counsel for the Plaintiff submitted that the suit is for recovery of amounts due and payable to the Plaintiff for the supply of TMT bars to the first Defendant. Such supply was effected pursuant to the proforma invoice dated 22.05.2017(Ex.P2), the purchase order dated 23.05.2017 (Ex.P3) and the bill of exchange dated 24.05.2017(Ex.P4). By drawing reference to Ex.P3, it was submitted that the payment terms are indicated in the purchase order. The said purchase order discloses the particulars of the first Defendant's ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to the second Defendant, it acted as a collection agent for the first Defendant. In the absence of a bank guarantee or letter of credit, the second Defendant contended that it is not liable to make payment for supply of goods by the Plaintiff to the first Defendant. In this regard, the second Defendant referred to the cross examination of P.W.1 and pointed out that the answers of P.W.1 indicate that the transaction was between the Plaintiff and the first Defendant and that the second Defendant is not referred to in the bill of exchange. 12. The first Defendant submitted that it is not liable to make payments in view of the supply of defective goods by the Plaintiff. The first Defendant further stated that the said defective goods were returned to the Plaintiff. According to the first Defendant, by communication dated 22.08.2017(Ex.P9), the first Defendant had requested for an extension of 30 days to make payment because the first Defendant was unaware about the supply of defective goods at that point of time. The third Defendant explained the object and purpose of SFMS as a messaging system and produced RBI circulars in respect thereof. 13. Upon consideration of the content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l acceptance, and the acceptor are, in the absence of a contract to the contrary, respectively liable thereon as principal debtors, and the other parties thereto are liable thereon as sureties for the maker, drawer or acceptor, as the case may be.'' (emphasis added) Section 7 of the NI Act defines drawer and drawee as follows: ''7. ''Drawer'', ''Drawee''.__ The maker of a bill of exchange or cheque is called the ''drawer'', the person thereby directed to pay is called the ''drawee''. The expression acceptor is also defined in Section 7 as follows: ''Acceptor''.__ After the drawee of a bill has signed his assent upon the bill, or, if there are more parts thereof than one, upon one of such parts, and delivered the same, or given notice of such signing to the holder or to some person on his behalf, he is called the ''acceptor''. Section 7 also defines the expression payee as follows: ''Payee''.___ The person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid, is called the ''payee'& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoices, transport documents, etc. and called upon the second Defendant to communicate its acceptance to the third Defendant through SFMS. In response thereto, emails were exchanged between the second and third Defendants. The first email in the exchange is the email of 31.05.2017 from the third Defendant to the second Defendant, with a copy to the first Defendant. Significantly, all the emails, including this email, specify the subject as ''confirmation of bills co-accepted in IFN 754''. By this email, the third Defendant informed the second Defendant that it was awaiting the second Defendant's reply regarding the acceptance of the bill. Upon receipt of a further email on 05.06.2017 from the third Defendant, by email of 06.06.2017, the second Defendant stated as under: ''Dear sir, With regards to below bills we are confirming that payment will be effected on due date as per below mentioned; Hence acceptance will be released with the Narration of ''payment will be effected on due date'' for upcoming transaction. 1.bill no 010 for Rs.1,01,63,531.00(your sfms dated 10.05.2017) Due date 30.07.2017. 2.bill no 011 for Rs.1,00,57,549. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are the laws specified by RBI and must be followed by all member banks. 18. Several questions flow from the above evidence. Whether the collection schedule read with the emails qualify as a contract in relation to payment of amounts due under the bill of exchange? If so, between whom is the contract? Does this contract have the effect of varying the prescription under Section 37 of the NI Act by imposing the obligation on the second Defendant as principal debtor? If it is a contract between the two banks, can the Plaintiff sustain this action on the basis of the said contract? These questions are addressed next. 19. Section 37 of the NI Act does not prescribe any requirements for a contract to the contrary, whether with regard to form, parties, etc. In The Bank of Hindustan Limited, Madras v. N. Govindarajulu Naidu, 1933- 23-L.W.961, a Division Bench of this Court recognised that the prescription under Section 37 of the NI Act marks a departure from English law inasmuch as it does away with the distinction between an accommodation bill and other bills and that "the only method of changing the position of the parties is by a contract to the contrary." The admitted position, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the expression "subject to a contract to the contrary" is typical in statutes like the Sale of Goods Act, 1930, the Transfer of Property Act, 1882 and the Indian Contract Act, 1872. Besides, private law statutes have consistently been construed as nonexhaustive with even fairly common forms of security such as hypothecation of movables not being dealt with by statute. 22. The only issue that remains is whether the Plaintiff is entitled to enforce this contract. The Plaintiff pleaded that the third Defendant, after discounting the bill, demanded and received payment, including penal interest, from the Plaintiff/drawer of the bill. As such, the Plaintiff is the beneficiary under the contract by which the second Defendant agreed to pay the bill as co-acceptor. The said contract was entered into both on behalf of and for the benefit of the Plaintiff. Hence, the Plaintiff is entitled to enforce the contract. 23. Before concluding, another aspect should be noticed. On earlier occasions, payments were made by the second Defendant to the third Defendant as regards bills of exchange drawn by the Plaintiff on the first Defendant and sent to the second Defendant for acceptance. Ex.C1, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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