IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH AT HYDERABAD (SPECIAL ORIGINAL JURISDICTION) TUESDAY, THE TWENTY FIFTH DAY OF JANUARY TWO THOUSAND AND ELEVEN HON’BLE SRI JUSTICE N. RAVI SHANKAR C.C.C.A.No.109 of 1998 BETWEEN: Canara Bank … APPELLANT (S) And M/s.Nagarjuna Paper Mills Limited and another … RESPONDENT(S) THE HON’BLE SRI JUSTICE N. RAVI SHANKAR C.C.C.A.No.109 of 1998 JUDGMENT: Appellant which is Masab Tank branch of Canara Bank at Hyderabad is the plaintiff in O.S.No.405 of 1989 on the file of the Court of II Additional Judge, City Civil Court, Hyderabad (trial Court). It brought the said suit for recovery of a sum of Rs.98,650/- stated to be due towards principal and interest on a Hundi from both the respondents herein who are defendants 1 and 2 in the suit. The trial Court after a contest by its judgment and decree dated 23.03.1998 decreed the said suit only against the 1st defendant but dismissed it against the 2nd defendant. Aggrieved by the dismissal of the suit against the 2nd defendant, the appellant filed this appeal. 2. To state and decide the points that arise for determination in this appeal the respective cases of the parties should be noted and hereafterwards they shall be referred to as they are arrayed in the suit. 3. The case of the plaintiff is this. The 1st defendant - Nagarjuna Paper Mills Limited is in the business of manufacture and sale of paper. The plaintiff advanced several loans to it but they are not the subject matter of this suit and hence it is not necessary to go into the same. The 2nd defendant is a private limited company and it has its own business. The 1st defendant drew on 13.01.1987 on the 2nd defendant Ex.A.1 Hundi bearing No.44 for a sum of Rs.71,540/- payable thirty days from that date and negotiated it in plaintiff’s favour by delivering to it (plaintiff). On 19.01.1987 the plaintiff discounted it and paid a sum of Rs.53,655/- to the 1st defendant in the course of the bills discounting facility extended by it to the 1st defendant. Thereafter, the plaintiff Bank sent Ex.A.1 Hundi to the 2nd defendant and the latter accepted it on 28.01.1987 after receiving the bills and documents of title to the goods supplied or to be supplied by the plaintiff to it (1st defendant). Thereafter the 2nd defendant did not honour Ex.A.1 Hundi and it was returned from the concerned banker to the plaintiff on 26.03.1987. 4. The plaintiff’s case is that thereafter it got issued the original of Ex.A.2 lawyer’s noticed dated 24.12.1987 calling upon the 1st defendant to pay the amount and it filed Exs.A.3 and A.4 postal documents to show that the said notice was served on the 2nd defendant. Further version of the plaintiff is that subsequently the 2nd defendant sent Ex.A.5 reply dated 31.12.1987 to its (plaintiff) counsel admitting the acceptance of Hundi in connection with its purchase of goods from the 1st defendant but denied its liability on the ground that the goods were found to be of substandard quality and therefore they were returned to the 1st defendant and it also acknowledged the receipt of the goods. The version of the plaintiff is that having accepted Ex.A.1 Hundi it is not open for the 2nd defendant to refuse payment on any ground as the terms of acceptance do not indicate any exception or ground under which it can escape from its liability. Thus with the above pleas the plaintiff brought the suit against both the defendants i.e. the 1st defendant as the drawer of the Hundi and the 2nd defendant as the acceptor for the suit claim which is already mentioned supra. 5. The 1st defendant filed written statement which runs into 15 pages which is conspicuously silent about the drawl of Ex.A.1 Hundi. The various paras in the written statement would indicate that the 1st defendant became a sick unit and proceedings are pending before the BIFR for reviving it and therefore it is not answerable for the suit claim. It however admitted that it availed loan facilities from the plaintiff. In this connection it must be mentioned here that in the plaint itself the plaintiff has stated that the 1st defendant company was wound up on 28.09.1992 by an order of this Court made in R.C.C.No.6/1991. 6. The 2nd defendant also filed written statement resisting the suit. In substance its stand is that since the goods supplied to it by the 1st defendant were found to be of substandard quality, it returned the said goods to the 1st defendant and consequently it is not answerable for the Hundi amount. It must be mentioned here itself that in para-8 of its written statement, it admitted sending Ex.A.5 reply dated 31.12.1987 relied upon and filed by the plaintiff. 7. The particulars of the oral and documentary evidence let in by the plaintiff in support of its case in the trial are given in the appendix of evidence mentioned at the foot of the trial Court’s judgment. The said appendix of evidence shows that both the defendants did not lead any oral or documentary evidence from their side. 8. The trial Court after considering the respective cases of the parties has by its judgment under appeal held that since the 2nd defendant returned the goods to the 1st defendant and as Ex.A.1 Hundi was drawn in connection with the supply of those goods, the 2nd defendant is not liable for the suit claim. It then held that as the 1st defendant drew Ex.A.1 Hundi it is liable to pay the amount covered by it and since it did not pay the said amount, it proceeded to decree the suit only against the 1st defendant and dismiss it against the 2nd defendant. 9. The main contention of the plaintiff’s counsel is that since the 2nd defendant accepted Ex.A.1 Hundi it is answerable for the said Ex.A.1 amount plus interest according to the apparent tenor of Ex.A.1 under Section 32 of the Negotiable Instruments Act, 1881 (for short ‘the Act’), inasmuch as there is no contract to the contrary exonerating the 2nd defendant from liability on any ground whatsoever. The record shows that both defendants i.e. respondents 1 and 2 herein were served but they failed to appear and there is no representation for them. As the matter is of 1998, the plaintiff’s counsel was heard and the judgment has been reserved and it is being disposed of today. 10. POINTS: (i) Thus the first point that arises for determination in this appeal is whether the 2nd defendant is liable for Ex.A.1 Hundi amount having accepted it notwithstanding the fact that it returned the goods supplied by the 1st defendant on the ground that they were of substandard quality and though the 1st defendant received them back as contended by the 2nd defendant. (ii) The second point would be with respect to the relief to be granted in this appeal depending upon the decision on the first point. Point No.1: 11. The pleadings and the contention raised on behalf of the plaintiff regarding the first point have already been set out supra. It may be noted that a perusal of the written statement filed by the 2nd defendant, to repeat, in substance shows that it did not deny the acceptance of Ex.A.1 Hundi. On the other hand, in its written statement itself the 2nd defendant admitted that it gave Ex.A.5 reply dated 31.12.1987 to the plaintiff and this is filed by the plaintiff and it shows that the 2nd defendant admitted the acceptance of the Ex.A.1 Hundi for Rs.71,540/-. Now Section 32 of the Act deals with the liability of maker of a note and the acceptor of a Bill and it reads as follows. “In the absence of a contract to the contrary, the maker of a promissory note and the acceptor before maturity of a bill of exchange are bound to pay the amount thereof at maturity according to the apparent tenor of the note or acceptance respectively, and the acceptor of a bill of exchange at or after maturity is bound to pay the amount thereof to the holder on demand. In default of such payment as aforesaid, such maker or acceptor is bound to compensate any party to the note or bill for any loss or damage sustained by him and caused by such default.” 12. It should be noted now that the wording of Section 32 would show that the acceptor of a bill of exchange before its maturity is bound to pay the amount covered by it at maturity according to the apparent tenor of the bill unless there is a contract between the parties contrary to that stipulation. A perusal of Ex.A.1 Hundi which is admittedly a bill of exchange would show that it was drawn by the 1st defendant on 2nd defendant and delivered to the plaintiff on 13.01.1987 and it was payable 30 days from the said date. Further, Ex.A.1 shows that it was accepted by the 2nd defendant on 28.01.1987 i.e. before its maturity. Thus there is compliance in this case with the requirements of Section 32 extracted supra. 13. It may then be noted that a perusal of Ex.A.1 Hundi shows that there is nothing in it to indicate that the 2nd defendant accepted Ex.A.1 subject to any condition and in fact even if such a condition is imposed, Section 5 of the NI Act may make it void. The 2nd defendant did not lead any evidence in the trial Court and did not appear in this Court despite service of notice of this appeal and it failed to show that there was any other contract between it and the plaintiff to show that it would not pay the amount under Ex.A.1 Hundi in case the goods supplied by the 1st defendant were found to be defective. On the other hand, a perusal of Ex.A.5 reply notice dated 31.12.1987 of the 2nd defendant would show that it took delivery of the goods covered by Ex.A.1 Hundi and the lorry receipt mentioned in it and it further put them into use and found that during the trial production the goods were found to be substandard. In other words in the absence of any evidence from the side of the 2nd defendant it can be said that it has also in the first instance accepted the goods as contemplated under Section 42 of the Sale of Goods Act. 14. It may be that under the contract between the 1st and 2nd defendants, the 2nd defendant may have a right to return back the goods if they were of substandard quality and also claim compensation, but in the absence of a contract between the plaintiff and the 2nd defendant that it will not be liable under Ex.A.1 Hundi or under some other provision of law if the goods are found to be defective, the 2nd defendant cannot disown its liability for Ex.A.1 Hundi amount in the above circumstances on the ground that the goods supplied by the 1st defendant were defective and therefore it returned them. If there is a dispute between the 1st and 2nd defendants regarding the quality of the goods supplied and the rights of each other with respect to the same, that is a matter to be settled between them. Having regard to the object of the Act which provides for negotiation of bills of exchange to advance the cause of trade, the 2nd defendant in the circumstances of this case cannot escape from its liability in view of Section 32 of the NI Act. It is always open for the 2nd defendant to work out its remedies as against the 1st defendant even with respect to its present liability under Ex.A.1 Hundi. 15. In this connection it should also be noted that in Note 2 of the commentary under Section 32 of the Act at page 324 of Bhashyam and Adiga’s commentary on the Negotiable Instruments Act (1997 Edition) it is stated that the acceptor of a bill of exchange by accepting it engages that he will pay it according to the tenor of his acceptance and the effect of such acceptance is to make the acceptor primarily liable to pay the bill and to render the drawer and the endorsers liable as sureties in case of his default. It is also stated that the liability of the acceptor when once fixed cannot cease by reason of the bankruptcy or the death of the drawer or by any other change in the circumstances of the other party and this liability continues even if the goods are lost or destroyed at the time of presentment. The above propositions of law stated in the above commentary are based upon English authorities. Thus the above legal position shows that the 2nd defendant in the circumstances of this case cannot avoid its liability under Ex.A.1 Hundi. 16. It appears that the above legal position was not taken to the notice of the trial Court and consequently it non-suited the plaintiff as against the 2nd defendant on the ground that the latter returned the goods. Accordingly, this finding of the trial Court is reversed and this point is decided in favour of the plaintiff. Point No.2: 17. Then coming to this point the reliefs claimed should be noted. The plaintiff in all claimed a sum of Rs.73,992-40 ps as against the 1st defendant on the ground that it paid only Rs.53,655/- to it after discounting Ex.A.1 bill and therefore it is claiming only that amount towards principal and interest. Then with regard to the claim against the 2nd defendant, it claimed a sum of Rs.98,650-50 ps against it on the ground that it is claiming that amount on the full value of the Hundi i.e. Rs.71,540/- with interest thereon. The defendants did not file any cross-appeal or cross-objection regarding the rate of interest granted by the trial Court and also the period for which it is granted. Hence, the judgment of the trial Court on the said aspect has to be confirmed. 18. In the result, the judgment of the trial Court dismissing the suit against the 2nd defendant is reversed and this appeal is allowed with costs throughout and there shall be a decree against the 2nd defendant for Rs.98,650/- with interest as claimed by the plaintiff from the date of the suit to the date of realization as the transaction is a commercial transaction. ______________________ N. RAVI SHANKAR, J 25th January, 2011. CVRK