Case: American Express Bank Limited Vs. Calcutta Steel Company, and Others

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 endorsements of the billThis 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 MKinlay was an acceptor. Save in the case of acceptance for honour or per procuration, on 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 MKinlay 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 MKinlay 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, an who thereby transmits the rights and also incurs certain well known and well-defined liabilities, . I fail to see upon what principle James MKinlay 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 MKinlay, 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 Queens Bench in Matthews v. Bloxsome 33 LJ(QB) 209). The report of the case is not satisfactory, and leaves room for doubt whether the decisions was intended to go so far as the report states" * At p. 785 he stated that "[B]eing of opinion that James MKinlay 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 MKinlay was not an acceptor within the meaning of Section 11 of the Bill of Exchange." * 20. The ratio in Sitaram Krishna Padhye v. Chimandas Fatehchand 1928 AIR(Bom) 516), relied on by Shri 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 promise to pay Seth Chimandas Fatehchand or order the sum of Rs. 600 only or value received in cash. G. V. Athale, Managing Proprietor, Gangadhar & 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 & B. Friends21. In the light of the above law and the facts of the case we unhesitatingly hold that the plaintiff, CSC is the drawee-acceptor. In a suit based on the letter of credit laid by M/s Harlow & Jones Ltd., CSC and the appellant suffered a decree in London Court which the appellant discharged and became a holder in due course. Based thereon the appellant filed Civil Suit No. 479 of 1990 under order 37 of the Code of Civil procedure against CSC which is pending in the High Court. Therefore, we do not therefore propose to express any opinion on merits of the liability of CSC. 22. Undoubtedly declaration of the rights or status is one of discretion of the court under Section 34 of the Specific Relief Act, 1963. Equally the grant or refusal of the relief of declaration and injunction under the provision of the Act is discretionary. The plaintiff cannot claim the relief as to right. It has to be granted according to sound principles of law and ex debito justitiae. The court cannot convert itself into an instrument of injustice or vehicle of oppression. While exercising its discretionary power, the court must keep in its mind the well-settled principles of justice and fair play and the discretion would be exercised keeping in view the ends of justice since justice is the hallmark and it cannot be administered in vacuum. Grant of declaration and injunction relating to commercial transactions tend to aid dishonesty and perfidy. Conversely, refusal to grant relief generally encourages candor in business behavior, facilitates free flow of capital, prompt compliance with covenants, sustained growth of commerce and above all inculcates respect for the efficacy of judicial adjudication., Before granting or refusing to grant relief of declaration or injunction or both the court must weigh pros and cons in each case, consider the facts and circumstances in their proper perspective and exercise discretion with circumspection to further the ends of justice. From the backdrop fact-situation we have no hesitation to hold that the relief of declaration granted is unjust and illegal. It tended to impede free flow of capital, thwarted the growth of mercantile business and deflected the course of justice.

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

Explanation:
1[ds]7. It would thus be clear that the maker of a bill of exchange is the drawer; the person thereby directed to pay is called the drawee; after the drawee has signed his assent upon the bill he is called the acceptor. In the absence of any contract to the contrary, the acceptor, before maturity of a bill of exchange, is bound to pay the amount thereof at maturity according to the acceptance to the holder on demand. No person except the drawee of the bill of exchange, in case of numerical drawees one or all drawees or the person named thereon as a drawee in case of need or honour can bind himself by anHaving given our anxious and careful consideration to the facts and circumstances of the case, we find no merit in the contentions of Shri A. K. Sen, the learned senior counsel for the first respondent which runs thus : That the liability of CSC on the basis of the bills of exchange being commercial instruments would aries only if CSC is the drawee and acceptor thereof. Since the acceptance creates a technical contract between the acceptor and the drawer, the parties to the instruments 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 & Jones Ltd. and sellerthe 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 isLaw 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 make 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 acceptor personally liable unless the acceptor states on the face of the bill that he subscribes for a disclosed principal. The usual mode of accepting bills of exchange is for the drawee to write, accepted across the face of the bill and then to sign his or its name underneath. The acceptance need not necessarily be on the face of the bill and an acceptance on its back is also sufficient. In all cases it is essential that the acceptance should be on the bill itself otherwise it is a mereBhashyam and Adiga in their Negotiable Instruments Act, 15th edn. at page 362 stated that a bill of exchange, being in its nature a letter of request from the maker to a particular person, no one can be made liable on it but the person to whom it is addressed as the person to accept the bill. As it has been stated, the acceptance of a bill is the signification by the drawee of his assent to the request of the drawer and such acceptance must be in writing on the bill and signed by the drawee. At page 363, Bhashyam stated that if there is no drawee named in the bill and a person accepts such instruments, such acceptance must be regarded as acknowledging that he is the drawee. At page 365 it was further stated that a drawee is under no obligation to the holder to accept a bill drawn on him, even though such refusal may be in breach of a contract between the drawee and drawer. Such contract will, however, entitle the drawer to sue the drawee on breach ofThe ratio in Sitaram Krishna Padhye v. Chimandas Fatehchand 1928 AIR(Bom) 516), relied on by Shri Sen is also of little assistance to the facts in this case. The Hundi therein was in the following term :days after date I promise to pay Seth Chimandas Fatehchand or order the sum of Rs. 600 only or value received in cash. G. V. Athale, Managing Proprietor, Gangadhar & 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 & B. Friends21. In the light of the above law and the facts of the case we unhesitatingly hold that the plaintiff, CSC is theIn a suit based on the letter of credit laid by M/s Harlow & Jones Ltd., CSC and the appellant suffered a decree in London Court which the appellant discharged and became a holder in due course. Based thereon the appellant filed Civil Suit No. 479 of 1990 under order 37 of the Code of Civil procedure against CSC which is pending in the High Court. Therefore, we do not therefore propose to express any opinion on merits of the liability ofUndoubtedly declaration of the rights or status is one of discretion of the court under Section 34 of the Specific Relief Act, 1963. Equally the grant or refusal of the relief of declaration and injunction under the provision of the Act is discretionary. The plaintiff cannot claim the relief as to right. It has to be granted according to sound principles of law and ex debito justitiae. The court cannot convert itself into an instrument of injustice or vehicle of oppression. While exercising its discretionary power, the court must keep in its mind theprinciples of justice and fair play and the discretion would be exercised keeping in view the ends of justice since justice is the hallmark and it cannot be administered in vacuum. Grant of declaration and injunction relating to commercial transactions tend to aid dishonesty and perfidy. Conversely, refusal to grant relief generally encourages candor in business behavior, facilitates free flow of capital, prompt compliance with covenants, sustained growth of commerce and above all inculcates respect for the efficacy of judicial adjudication., Before granting or refusing to grant relief of declaration or injunction or both the court must weigh pros and cons in each case, consider the facts and circumstances in their proper perspective and exercise discretion with circumspection to further the ends of justice. From the backdropwe have no hesitation to hold that the relief of declaration granted is unjust and illegal. It tended to impede free flow of capital, thwarted the growth of mercantile business and deflected the course of justice