9911796707
TMI Blog2022 (6) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... eby the bill should be noted or protested for non-acceptance or better security were also not satisfied - As regards the second Defendant, such contract may even impose liability as primary obligor or principal debtor and not only as surety. With this background, the evidence on acceptance should be examined. Section 37 of the NI Act does not prescribe any requirements for a contract to the contrary, whether with regard to form, parties, etc. - The admitted position, in this case, is that second Defendant was the buyer/first Defendant's bank and the third Defendant was the seller/Plaintiff's bank. As the seller's bank, the third Defendant discounted the bill. Subsequently, in correspondence between the seller's bank and the buyer's bank, which were copied to the buyer, the buyer's bank, on being called upon, agreed categorically that it will pay amounts due under the bill of exchange to the seller's bank. In my view, this qualifies as a contract under which the buyer's bank agreed to co-accept the bill for payment as a principal debtor and not as surety in the event of default by the buyer. Thus, it is evident that the first Defendant/Buyer acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Defendants shall also pay the plaintiff a sum of Rs.3,00,000/- as costs, which includes the court fee of Rs.1,18,629/-, lawyer's fees and other expenses - Application disposed off. - Civil Suit ( Comm.Div ) No. 591 of 2018 - - - Dated:- 9-6-2022 - THE HON'BLE MR. JUSTICE SENTHILKUMAR RAMAMOORTHY For the Plaintiff : Mr.Sharath Chandran for M/s.Govind Chandrasekar For the Defendants : M/s.J.Manikandan for D1 Mr.E.OM.Prakash Senior Advocate for M/s.Ramalingam Associates for D-2 Mr.V.Kalyanaraman for M/s.Aiyar and Dolia for D-3 JUDGMENT The suit was filed by a seller of goods to the first Defendant seeking to recover the sum of Rs.1,15,09,628/-, jointly and severally, from the first and second Defendants together with interest at 18% per annum on the principal sum of Rs.1,06,33,863/- from the date of plaint till the date of realization. 2. The Plaintiff is a proprietary concern, represented by Mr.Sivakumar, Proprietor. The Plaintiff is engaged in the business of selling construction materials, including ferrous and non-ferrous metal products, wood scrap, rubber waste, etc. The first Defendant requested the Plaintiff to supply thermo-mechanically t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.1,02,49,709/- along with penal interest (until 06.11.2017) of Rs.3,84,154/-. Thus, the Plaintiff stated that it had to pay the third Defendant for goods sold by it to the first Defendant. 4. The Plaintiff alleged that the first Defendant repeatedly engaged in fraudulent activities by taking delivery of goods and not paying for the same. In such circumstances, the Plaintiff had previously filed C.S.No.69 of 2018 before this Court. The Plaintiff also stated that the second Defendant's obligation to pay for the goods flows from its unconditional acceptance of the bill of exchange. The suit claim arose in the above mentioned facts and circumstances. 5. In spite of receipt of suit summons, none of the Defendants filed a written statement within the stipulated time and, therefore, forfeited their right to file the same. 6. The Plaintiff adduced oral evidence through Mrs.Shanmugadevi, the Finance Officer of the Plaintiff, who was examined as P.W.1. In course of the examination in chief of P.W.1, 12 documents were exhibited as Exs.P1 to P12. P.W.1 was cross examined on behalf of the first and second Defendants. Pursuant to summons issued in Application No.7749 of 2019, Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... email correspondence. In particular, the Plaintiff referred to the email of 31.05.2017 from the third Defendant to the second Defendant and concluded by referring to the email of 06.06.2017 from the second Defendant to the third Defendant confirming that payment would be effected against three bills, including bill No.12 for Rs.1,02,49,709/- (collectively Ex.P7). 10. By relying on Section 37 of the Negotiable Instruments Act,1882(the NI Act), the Plaintiff contended that the acceptor of a bill of exchange is liable as a principal debtor in the absence of a contract to the contrary. By drawing reference to the acceptance of the bill of exchange by the second Defendant under Ex.P7, the Plaintiff pointed out that the second Defendant is liable to make payments. 11. The second Defendant, on the contrary, denied its liability for the suit claim. By drawing reference to Ex.P4, the second Defendant submitted that it is not the drawer, drawee or acceptor in respect of the bill of exchange. With reference to Exs.P5 and P7, the second Defendant submitted that Ex.P5 provides for protest in case of non payment, thereby indicating that this transaction was not supported either by a lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the invoice date. The document also enumerates the 12 invoices(Invoice Nos.139 to 150) and the date and value of each invoice. As correctly contended by the second Defendant, the bill of exchange does not indicate the acceptance thereof for payment by the second Defendant. Indeed, Ex.P4 does not bear any indication of acceptance of the bill of exchange even by the drawee/first Defendant. Therefore, the rest of the evidence should be examined in such regard. It should be noticed that a bill of exchange is a negotiable instrument as per Section 13 of the NI Act. Consequently, before examining the evidence, it is necessary to refer to the provisions of the NI Act, including Section 37 thereof, which was relied upon by the Plaintiff. 14. A bill of exchange is defined in Section 5 of the NI Act as follows: ''an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.'' Section 37 of the NI Act is as under: ''37. Maker, drawer and acceptor principals.__ The maker of a promissory note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-acceptance or better security were also not satisfied. Indeed, the bill does not indicate acceptance by the first Defendant in the manner prescribed by Section 7. In the absence of acceptance, the first Defendant may still be liable albeit for failure to accept the bill, but the liability of the first and second Defendants to make payment as per the bill of exchange is dependent on proof of a contract under which liability is fastened on them. As regards the second Defendant, such contract may even impose liability as primary obligor or principal debtor and not only as surety. With this background, the evidence on acceptance should be examined. 16. As regards the first Defendant, upon receipt of the proforma invoice, he issued the purchase order (Ex.P3). The purchase order indicated the name of the buyer's bank and also the buyer's consent to pay within 90 days from the date of the bill of exchange. The goods were supplied in response thereto under Invoice Nos.139 to 150 for an aggregate sum of Rs.1,02,49,709/-. As the buyer of goods, the first Defendant is liable even de hors the bill of exchange. Turning to the liability of the second Defendant, under Ex.P5, as sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we have sent to the second Defendant and second Defendant has duly sent S.F.M.S. 754 duly admitting the the bill and confirmed the payment on due date. Subsequently,the Defendant Bank confirmed the payment by mail also. Usually in the banking terminology S.F.M.S. 754 messages is deemed for the confirmation of payment only and it was mentioned that we had transaction between Indian Bank, Anna Nagar with second Defendant. We are not directly dealing with the drawee, the first Defendant. In spite of our repeated reminders also we have not received the payments. Question:Will any Bank accept a bill issuing IFN 754 that it is local collection? Answer : 7 series is exclusive to LC. A bank will give a 754 acceptance if it is backed by some limits like OD/OCC limits. The all the transactions in serial No.1 to 7 in Ex.C-1 was made using IFN 754 acceptance. In all above seven bill payments was received by Indian Bank from Indus Ind Bank. Question: According to you, per banking norms who is responsible to make payment for a bill accepted under 754? Answer : In Banking Industries whether it is private bank or Government Bank if 754 message given for a specific bill, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;' On the basis of the above communication, it is evident that the first Defendant/Buyer accepted the bill in September 2017 and sought an extension of 30 days to honour the bill. Although such acceptance was not by making an endorsement on the bill as prescribed in Section 7 of the NI Act, for reasons set out earlier, the liability of the first Defendant as the buyer of goods is not contingent on valid acceptance of the bill. 20. When the evidence on record is considered cumulatively, it may be concluded that there is a contract that has the effect of varying the prescription in Section 37 read with Section 33 of the NI Act as regards acceptance of liability as a primary obligor by a person other than the drawee or drawee in need or acceptor for honour. On the facts of this case, however, it does not make a material difference whether the second Defendant's obligation is as principal debtor under a contract to the contrary or as surety because the first Defendant failed or refused to pay for goods received, thereby triggering the liability of the second Defendant even if considered as a surety. 21. As an aside, it is pertinent to note that, in the realm of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of the Plaintiff so as to close Bill No.0012. By the same communication, the Plaintiff was also informed about the debiting of a sum of Rs.3,84,154/- as penal interest since the bill was over due from 28.08.2017 till 06.11.2017. Therefore, the Plaintiff has established that the debiting of this amount is directly attributable to the default by the first and second Defendants in making payment for goods purchased, including by not honouring the bill of exchange on the due date. As regards the interest on the suit claim from the date of claim, the Plaintiff has claimed interest at the rate of 18% per annum. By taking into account the interest rate prevailing from November 2017 till date, interest is awarded at the rate of 9% per annum on the suit claim. In accordance with the loser pays principle, the first and second Defendants are liable to pay costs to the Plaintiff. By taking into account the sum of Rs.1,18,629/-, which was paid as court fee, reasonable lawyer's fee and other expenses, the first and second Defendants are directed to pay a sum of Rs.3,00,000/- as costs to the Plaintiff. 25. In the result, the suit is decreed by directing the first and second Defend ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
