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TMI Blog1961 (1) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... the said resolution an account was opened with it on May 28, 1945. Twenty-eight cheques were drawn on this account aggregating the total amount of Rs. 28,882-13-0 during the-period between May 28, 1945, and July 31, 1945. These cheques were drawn by K. Poddar and M.J. Chacko in pursuance of the authority conferred on them by the company. On September 28, 1948, by its liquidator the company brought the present suit claiming to recover from the bank the said amount of Rs. 28,882-13-0. The case for the company as set out in the plaint was that the payment of the said amount had been made by the bank wrongfully and negligently and the amount drawn under the said cheques had been wrongfully debited to the company in its account kept by the bank. It appears that the resolution for winding up of the company was held by the court to be null and void, and so the plaint was subsequently amended whereby the name of the liquidator was struck out and the suit then purported to be one which was instituted by the company itself. The plea raised by the company that the cheques in question had been negligently and wrongfully honoured by the bank was seriously disputed by the bank in its statement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate on the company's account with the bank. The relevant resolution passed by the company provided that "the banking accounts of the company be opened with the bank and another bank and that the said banks be and hereby authorised to honour cheques, bills of exchange and promissory notes, drawn, accepted or made on behalf of the company by the managing agents, Messrs. Poddar Chacko & Co., by both the directors of the managing agents firm, namely, Mr. Keshavdeo Poddar and Mr. M.J. Chacko and to act on any instructions so given relating to the account whether the same be overdrawn or not or relating to the transactions of the company". The argument is that two conditions had to be satisfied before the bank could accept a cheque issued under this resolution ; the cheque had to be signed by both the directors of the managing agents firm, and it had to be drawn on behalf of the company. In point of fact, all the cheques have been signed by the two individuals without describing themselves as directors of the managing agents firm and without showing that they had drawn them on behalf of the company. These defects, it is urged, made the cheques irregular and inconsistent with the mandator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be deemed to empower a corporation to make, indorse or accept such instruments except in cases in which, under the law for the time being in force, they are so empowered." This section does not purport to make any provision of substantive or procedural law. The latter part of the section merely brings out that a company cannot claim authority to issue a cheque under its first part. The law in regard to the company's power to issue negotiable instruments has to be found in the relevant provisions of the Companies Act itself. We must, therefore, turn to section 89 of the said Act. Section 89 provides that "a bill of exchange, hundi or promissory note shall be deemed to have been made, drawn, accepted or endorsed on behalf of a company if made, drawn, accepted or endorsed in the name of, or by or on behalf of, or on account of, the company by any person acting under its authority express or implied." It is clear that in order that a company may be bound by a negotiable instrument purporting to have been issued on its behalf two conditions must be satisfied : the instrument must de drawn, made, accepted or endorsed in the name of or by or on behalf of or on account of the company, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but the principles enunciated in it apply with equal force to a negotiable instrument issued under section 89 of the Indian Companies Act. The inevitable consequence of this requirement is that wherever a negotiable instrument is issued without complying with the said requirement it would not bind the company and cannot be enforced against it. In The Bank of Bombay v. H.R. Cormack [1879] I.L.R. 4 Bom. 275 it was held by the Bombay High Court that in order to make a company liable on a bill or note it must appear on the face of such bill or note that it was intended to be drawn, accepted or made on behalf of the company, and no evidence dehors the bill or note is admissible under section 47 of the Indian Companies Act (X of 1866), equal to section 89 of the present Act. In support of this decision Sargent, C.J., has cited the observations of Lord Justice James in Miles' claim [1874] L.R. 9 Ch. App. 635, "that it is the law of this country, and always has been the law of this country, that nobody is liable upon a bill of exchange, unless his name, or the name of some partnership, or body of persons, of which he is one, appears either on the face or on the back of the bill." Thus th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of negotiable instrument against a company that the principle comes into play. It is, therefore, difficult to see how the principle enunciated in section 89 can be extended to a claim made by the company against the bank. In our opinion, therefore, the High Court was right in coming to the conclusion that section 89 cannot be invoked by the company against the bank in making the present claim. The decisions on which the company relied are all decisions in cases where a negotiable instrument was sought to be enforced against the company and had thus given rise to a cause of action. No case has been cited before us in which section 89 has been extended to a claim like the present. On the other hand, there is the authority of the House of Lords in support of the view which the High Court has taken in the present case. In Mahony v. East Holyford Mining Co. [1875] 7 H.L. cas. 869 a similar point arose for the decision of the House of Lords. One of the two points in that case had reference to eight cheques which had been defectively or irregularly drawn on behalf of the company and honoured by the bank. In rejecting the company's claim against the bank in respect of the amount covered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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