Case: Punjab &amp; Sind Bank Vs. Vinkar Sahakari Bank Ltd.

as bills of exchange as defined in Section 3 of the Bills of Exchange Act, although a holder may sue the bank upon them, and treat them either as bills of exchange or as promissory notes." 14. The said observation was followed by a Division Bench of the Patna High Court in Bibi Kazmi Begum v. Lachman Lal Sao and ors., AIR 1930 Patna 239. In that case, the trial Court took the view that when the drawer and the drawee are the same person the instrument drawn would not become a Bill of Exchange. The Patna High Court held that even though such an instrument might not become a bill of exchange between the drawer and the drawee when both were the same person "it is well established that the holder of the instrument may treat it as a bill of exchange." 15. Later, a Division Bench of the Calcutta High Court in Birbhum Central Co-operative Bank Ltd. v. Pioneer Bank Ltd., AIR 1956 Calcutta 615, even without reference to the aforementioned observations, adopted the same view. Chakravartti, C.J., speaking for the Division Bench has stated thus : "It is well settled that a bankers draft is a bill of exchange and as such it is a negotiable instrument. The issue of a draft is regarded in banking practice as a matter of purchase and ordinarily the relationship between the holder of a Demand Draft and the bank issuing it is that of debtor and creditor. The holder of the draft is a creditor and his remedy is on the draft." 16. In the matter of the Palai Central Bank Ltd., AIR 1962 Kerala 210, P.T. Raman Nayar, J. (as the learned Chief Justice then was) made a survey of the relevant provisions and the case law and then made the following observations : "However that might be, there is no denying that a demand draft is nothing more or less than a negotiable instrument governed by the provisions of the Negotiable Instruments Act; and on the face of it, the obligations it creates are nothing more than ordinary debts." 17. We are of the opinion that the High Courts have taken the correct view in the above decisions. However, Mr. Shekhar Naphde, learned senior counsel for the respondents, invited our attention to the decision of a single Judge of the Bombay High Court in Maturi Sanyasilingam v. The Exchange Bank of India and Africa Ltd., AIR 1946 Bombay 1, wherein it was held that the demand draft issued by the branch of a bank to its head office or vice-versa is not a cheque nor a bill of exchange. But learned Single Judge expressed the opinion that a demand draft may be a bill of exchange if it is issued by one bank drawn on another. The said observation was made in the wake of the contention that the collecting bank could claim protection under Section 131 of the Act. The said decision of the Bombay High Court cannot hold good because the Negotiable Instruments Act was amended by incorporating Section 131A in the said Act. 18. That apart, learned Single Judge while relying on the decisions of the House of Lords in Capital and Counties Bank v. Gordon (supra), restricted himself to the former limb of the observation therein. It is in the latter limb that the House of Lords said that when the draft is in possession of a holder the instrument can be treated as bill of exchange. 19. We therefore dissent from the view adopted by the learned Single Judge in the impugned judgment that the pay order is not a cheque. 20. The second premise of the learned Single Judge that since the pay order was a crossed instrument the complainant-Bank could have only collected the amount and remitted the proceeds to the account of the payee. The said view could not be supported by the learned counsel for the respondents. Hence it is unnecessary for us to dwell into that. 21. The third ground for quashing the complaint is that the complainant was not "a holder in due course" in the absence of an endorsement made on the instrument in the manner prescribed under Section 50 of the Act. This ground was adopted by the learned Single Judge without regard to certain relevant provisions of the Act. 22. Section 142 of the Act envisages a complaint to be made in writing "either by the payee or the holder in due course of the cheque, as the case may be". Section 8 of the Act defines "holder" as any person entitled in his own name to the possession of the cheque and to receive or recover the amount due thereon from the parties thereto. We have no doubt that complainant-Bank was well within its right to possess the cheque and to receive or recover the amount covered by the instrument. "Holder in due course" means a person who for consideration became the possessor of a cheque if payable to bearer before the amount became payable. (Vide Section 9). 23. In this context reference has to be made to Section 118(g) of the Act which contains a mandate that until the contrary is proved the holder of a negotiable instrument shall be presumed to be a holder in due course. Thus there is no escape for the court from drawing such presumption. 24. It is undisputed that the complainant-company is the holder of the instrument on its own right. As such it could be a holder in due course also until the concerned party adduce evidence to rebut the presumption. It is of course open to the respondents to rebut the presumption in the trial but till the High Court could not say that the complainant is not a holder in due course at all. 25. For the aforesaid reasons we allow this appeal and set aside the impugned judgment. The trial shall now proceed to reach the final judgment without any more delay.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]17. We are of the opinion that the High Courts have taken the correct view in the above decisions. However, Mr. Shekhar Naphde, learned senior counsel for the respondents, invited our attention to the decision of a single Judge of the Bombay High Court in Maturi Sanyasilingam v. The Exchange Bank of India and Africa Ltd., AIR 1946 Bombay 1, wherein it was held that the demand draft issued by the branch of a bank to its head office or vice-versa is not a cheque nor a bill of exchange. But learned Single Judge expressed the opinion that a demand draft may be a bill of exchange if it is issued by one bank drawn on another. The said observation was made in the wake of the contention that the collecting bank could claim protection under Section 131 of the Act. The said decision of the Bombay High Court cannot hold good because the Negotiable Instruments Act was amended by incorporating Section 131A in the said Act.That apart, learned Single Judge while relying on the decisions of the House of Lords in Capital and Counties Bank v. Gordon (supra), restricted himself to the former limb of the observation therein. It is in the latter limb that the House of Lords said that when the draft is in possession of a holder the instrument can be treated as bill of exchange.We therefore dissent from the view adopted by the learned Single Judge in the impugned judgment that the pay order is not a cheque.The second premise of the learned Single Judge that since the pay order was a crossed instrument the complainant-Bank could have only collected the amount and remitted the proceeds to the account of the payee. The said view could not be supported by the learned counsel for the respondents. Hence it is unnecessary for us to dwell into that.The third ground for quashing the complaint is that the complainant was not "a holder in due course" in the absence of an endorsement made on the instrument in the manner prescribed under Section 50 of the Act. This ground was adopted by the learned Single Judge without regard to certain relevant provisions of the Act.Section 142 of the Act envisages a complaint to be made in writing "either by the payee or the holder in due course of the cheque, as the case may be". Section 8 of the Act defines "holder" as any person entitled in his own name to the possession of the cheque and to receive or recover the amount due thereon from the parties thereto. We have no doubt that complainant-Bank was well within its right to possess the cheque and to receive or recover the amount covered by the instrument. "Holder in due course" means a person who for consideration became the possessor of a cheque if payable to bearer before the amount became payable. (Vide Section 9).In this context reference has to be made to Section 118(g) of the Act which contains a mandate that until the contrary is proved the holder of a negotiable instrument shall be presumed to be a holder in due course. Thus there is no escape for the court from drawing such presumption.It is undisputed that the complainant-company is the holder of the instrument on its own right. As such it could be a holder in due course also until the concerned party adduce evidence to rebut the presumption. It is of course open to the respondents to rebut the presumption in the trial but till the High Court could not say that the complainant is not a holder in due course at all.