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TMI Blog1992 (12) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... MMTC for letter of authority to import the goods and by letter dated November 18, 1986, copy addressed to M/s. Harlow and Jones Ltd., London, the supplier, the latter permitted CSC to draw draft on "MMTC A/c. Calcutta Steel Co. Ltd., 20, Hemanta Basu Sarani, Calcutta 700001" for a sum not exceeding US $ 1,456,000 (US Dollar one million four hundred fifty six thousand only...), payable to the beneficiary on presentation of a separate draft...at 180 days from the date of bill of lading drawn for 100% of the invoice value and accompanied by.... It was further stated that the material imported was as per the requirement of the end user and sold to them on high seas basis against back to back letter of credit established by end user. In order to reduce the financial burden of the end user it had been decided that the end user would open letter of credit directly in favour of the foreign suppliers with the condition that its name as opener of the letter of credit by the end user in favour of the foreign suppliers will be shown as MMTC. It had expressed no objection to open letter of credit by CSC (End user) in favour of M/s. Harlow & Jones Ltd. strictly as per proforma enclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted and appropriated the same. On June 29, 1987 on maturity when the appellant presented the three Bills of Exchange to the respondent for payment they were dishonoured. The CSC filed Suit No. 781/87 on the Original Side of the Calcutta High Court against M/s. Harlow and Jones Ltd. and Ors. for a declaration that the said three bills of exchange were illegal, null and void, invalid, inoperative and of no effect nor binding on the plaintiff (CSC) and for delivery, of the said Bills of Exchange for cancellation and permanent injunction restraining the appellant and the respondents Nos. 2 and 3 from giving effect or enforcing the said bills of exchange. The learned Trial Judge dismissed the suit. On appeal the division bench by judgment dated February 25, 1992 in Appeal No. 1134/88 allowed the appeal and decreed the suit. Thus this appeal under Article 136. 6. Section 7 of the Negotiable Instruments Act, 1881 for short 'the Act' defines drawer, drawee and acceptor thus: (1) The maker of a bills of exchange or cheque is called the "drawer"; (2) The person thereby directed to pay is called the "drawee"; (3) After the drawee of a bill has signed his a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on their face alone are entitled to be dealt with and no other parties to a bill independently could act upon unless it is a case of agency which is not the case of the appellant or of the MMTC. MMTC is the Principal drawee; for the purpose of receiving the goods Letters of Credit were opened by CSC as per the authority dated November 18, 1986 and the Bills of Exchange were addressed to MMTC A/c of CSC. The sale of goods having been taken place on high seas and the Bill of Lading made to the order of MMTC, bills of exchange having been drawn in favour of MMTC, it alone is the drawee in relation to Harlow and Jones Ltd. and seller vis-a-vis the first respondent, CSC being not an agent of the MMTC, the acceptance by CSC is void. The declaration granted by the High Court is, therefore, legal and being a discretionary relief no interference under Article 136 is warranted. 11. Law Merchant always insists that a negotiable instrument must bear no veil but reveal its true character on its face. A party that takes a negotiable instrument makes his contract with all the parties who appear on its face to be bound for its payment. Therefore, the Act insists that a Bill of Exchange makes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder no obligation to accept a bill. In paragraph 354 it was stated that the party primarily liable on a bill of exchange is the acceptor. The acceptor is the person to whom the order to pay is addressed. He is on the face of the bill as drawn, the drawee; but as such he is not, apart from special contract, by English law under any obligation to accept the bill. The drawee who does not accept is not, therefore, liable on the bill. In paragraph 356 it was stated that in the case of a bill of exchange, when the drawee does accept, he undertakes that he will pay the bill according to the tenor of the acceptance, but, where the drawee declines to accept, the drawer must bear all the losses and expenses incurred as well by reason of the non-acceptance as of the non-payment. In paragraph 357 it was further elucidated that wherever a bill is accepted the acceptor is and remains the party primarily liable on the bill whatever may happen to the other parties and whether any of the other parties are discharged or not. Should an endorser have to pay the bill, the acceptor by the fact of his acceptance is liable to indemnify him. 15. In the case of a bill drawn for the accommodation of anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y seen that MMTC as a canalising agent and with a view to reduce financial burden to the end user (CSC) authorised CSC to directly open irrevocable letter of credit with a foreign supplier with prior intimation and CSC undertook to accept the liability under the bill and pursuant thereto MMTC stood absolved of its liability. CSC thus accepted to be the Principal importer of the steel billets from M/s. Harlow & Jones Ltd.; took irrevocable letters of credit and thereby had undertaken the liability to the foreign suppliers; on receipt of the cargo on bill of lading and the bills of exchange of drawer. M/s. Harlow Jones Ltd. had accepted the bills of exchange as drawee and had endorsement from MMTC on the bill of lading in its favour; and thereafter had and appropriated the goods. These admitted facts unmistakably show that CSC accepted the bills of exchange as drawee. 18. From this perspective the further contention of Sri Sen is that the bill of exchange being a negotiable instrument the court has to look to the tenor of the document on its face and no extraneous evidence oral or documentary is admissible in evidence nor is it permissible for the court to traverse behind the instru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t" means "in his behalf and at his expenses." In Collins English Dictionary at page 9 'on account of in item 16, it is stated, 'because of; by reason of, In Black's Law Dictionary, sixth edn. relating to commercial transactions it is stated at page 18 thus "a statement of pecuniary transactions; a record or course of business dealings between parties....accounts payable...." In Ramanatha Aiyer's, the Law Lexicon, Reprint Edn. 1987, 'account for' is defined at page 17 thus "in respect of moneys" 'to render an account of and 'to be responsible for'. In Radhakrishna Sivadutta Rai and Ors. v. Tayeballi Dawoodbhai [1962] Su(l). 1 SCR 81 though as rightly pointed out by Sri Sen did not relate to negotiable instrument', this Court considered the meaning 'on account of in relation to bought and sold notes in connection with jute goods through a broker. It reads thus: "To Radhakrishna Sivadutta Rai, A/c Khetan & Sons Ltd., Shewpur, Banaras', the bought and sold note, was addressed to the seller as "we confirm having sold on your account and risk, the undernoted goods, to M/s. Radhakrishan Shiv Dutt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? The bill of exchange was in the following form: Stamp 10s. "Due 28th May, 1975 1000 pounds stg. "Glasgow, 25th May, 1874. Twelve months after date pay to me or my order at the National Bank of Scotland's office, Queen Street, Glasgow, the sum of one thousand pounds sterling, value received. John E. Walker, W. & T.M. Kinlay. To Messers. William & Thomas M. Kinlay, Wood merchants, Strabane. The bill was indorsed on back as follows:- James M. Kinlay, John E. Walker. On those facts, House of Lords held that James M, Kinlay was not acceptor and the action does not lie on bill of exchange. Lord Watson held at p. 777 that "it is necessary to distinguish between the liabilities which the law merchant attaches to a person who, by signing, has become party to a bill, and those liabilities which may arise out of an understanding or agreement of parties extrinsic of the bill. In some cases the precise character and consequent liabilities of parties to a bill are conclusively fixed by the tenor of the document. The person who draws a bill of exchange, and his addressee who accepts it, can never, according to the principles of the law merchant, be liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubt whether the decision was intended to go so far as the report states." At page 785 he stated that" being of opinion that James M. Kinlay was not, as a party to the bill, under any obligation to the drawer, and that there is no competent or sufficient evidence of his agreement to undertake such an obligation, I think the appeal ought to be dismissed. In the light of those facts it was held that James M. Kinlay was not an acceptor within the meaning of Section 11 of the Bill of Exchange. 21. The ratio in Sitaram Krishna Padhye v. Chimandas Fatehchand AIR 1928 Bom 516 relied on by Sri Sen is also of little assistance to the facts in this case. The Hundi therein was in the following term: "Fifty six days after date I promised to pay Seth Chimandas Fatehchand or order the sum of ₹ 600 only for value received in cash. G.V. Athale, Managing Proprietor, Gangadhar and B. Friends, Sandhurst Road, Bombay No. 4. It was held that the person liable on the Hundi was Athale and not any alleged firm passing under the name of Gangadhar and B. Friends. 22. In the light of the above law and the facts of the case we unhesitatingly hold that the plaintiff, CSC is the drawee ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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