IN THE SUPREME COURT OF INDIA
Civil Appeal No. 5432 of 1992
Decided On: 18.12.1992
American Express Bank Ltd.
Calcutta Steel Co. and Ors.
Coram:A.M. Ahmadi, M.M. Punchhi and K. Ramaswamy, JJ.
Citation:(1993) 2 SCC199
In this connection, please note that our name will be shown as openers of the proposed L/C to meet the requirements of exchange control only, and we are not in any way responsible for the failure of the endures to comply with the requirements of the L/C. This L/C is required to be established at the expense and L/C limit of the endures viz. M/s. Calcutta Steel Company Ltd. who would accept the draft(s) and make payment on due date at Calcutta.
< div>MMTC of India Ltd.,
A/C M/s. Calcutta Steel Co. Ltd.,
20, Hemanta Basu Sarani,
Calcutta – 700001.
4. The cargo sent under bill of lading reached at Calcutta port in the month of February, 1987 and were presented to CSC, who received the documents, executed a trust receipt in favour of the appellant and endorsed its acceptance on the said three usance Bills of Exchange duly accepting with the following crucial endorsements :
Drawn under Irrevocable Letter of Credit No. 166/86 dated December 18, 1986;
MMTC of India Ltd. for and on behalf of Harlow and Jones Ltd.
Accepted by Calcutta Steel Company Ltd.” signature and stamp of the company were put on them.
We enclose herewith Bill of Lading No. 1 dated 31st December, 1986 in respect of shipment of 6965.950 M.T. of billets from Gilon. You are requested to kindly endorse the Bill of Lading in our favour so that we can take delivery of the goods. We confirm that the Usance draft has been accepted by us and documents released from our Bankers.” CSC had delivery of the goods imported 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.
(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 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”.
6(1) The drawee must be named or otherwise indicated in a bill with reasonable certainty.
A bill of exchange, being its original letter, should be properly addressed to the drawee. Where a bill was made payable ‘at No. 1, Wilmot Street, opposite the Lamb, Bethnal Green, London’, without mentioning the drawee’s name, and the defendant accepted it, he was not allowed to make the objection. A bill cannot be addressed to one man and accepted by another.
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 otherwise than in their respective characters of drawer and acceptor”. At p. 778 the learned law lord further stated that “in other cases the character and liability of parties to a bill cannot be ascertained without the aid of proof, as, for instance, when a dispute arises in regard to the order of time in which endorsements were made upon a bill. But such proof, when it is admissible, must be strictly limited to facts and circumstances attendant upon the making, issue, or indorsement of the bill.(emphasis supplied)
This leads me to consider whether the late James M. Kinlay, as a party to the bill in the sense of the law merchant, was under obligation, failing payment by his two sons or their firm, to pay the contents to Mr. Walker; and in so doing, I assume as legitimate materials for inference all those facts connected with the making, issuing, and discounting of the bill to which I have already adverted…. The tenor of the bill is, in my opinion, conclusive against the view that James M. Kinlay was an acceptor. Save in the case of acceptance for honour or per procuration, no one can become a party to a bill qua acceptor who is not a proper drawee, or, in other words, an addressee”. At p. 782 he stated that “I am of opinion that the character in which James M. Kinlay did become a party to the bill was, both in fact and law, that of an endorser; and that in determining the legal position the circumstance that M. Kinlay indorsement was written before the bill was delivered to the drawer and the money advanced by him is quite immaterial. No doubt a proper indorsement can only be made by one who has a right to the bill, and who thereby transmits the rights and also incurs certain well-known and well-defined liabilities. (emphasis supplied) I fail to see upon what principle James M. Kinlay can be interpolated as a party to the bill in question between the drawer and the acceptor”. At p. 785 he further stated that “I should have had less difficulty in holding that James M. Kinlay, as party to the bill, was an endorser, and therefore not liable to pay to Mr. Walker, the drawer, when it was dishonoured by the acceptors, had it not been that the point seems to have been otherwise decided by the Court of Queen’s Bench in Mathews v. Bloxsome, 33. L.J. (Q.B.) 209. The report of the case is not satisfactory, and leaves room for doubt 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.