Case: Seth Jagjivan Mavji Vithlani Vs. Messrs Ranchhoddas Meghji

1. The suit out of which this appeal arises, was instituted by the appellant on a hundi for Rs. 10,000 dated 4-12-1947, drawn in his favour by Haji Jethabhai Gokul and Co. of Basra on the respondent, who are merchants and commission agents in Bombay. The hundi was sent by registered post to the appellant in Bombay, and was actually received by one Parikh Vrajlal Narandas, who presented it to the respondents on 10-12-1947, and received paymentmay be mentioned that the appellant had been doing business in forward contracts through Vrajlal as his commission agent, and was actually residing at his Pedhi. On 12-1-1948the appellant sent a notice to the respondents repudiating the authority of Vrajlal to act for him and demanding the return of hundi, to which they sent a reply on 10-2-1948 denying their liability and stating that Vrajlal was the agent of the appellant, and that the amount was paid to him bona fide on his representation that he was authorised to receive the payment.On 9-12-1950 the appellant substituted the present suit in the Court of the City Civil Judge, Bombay. In the plaint he merely alleged that the payment to Vrajlal was not binding on him, and that "The defendant-drawee" remained liable on the hundi. The defendants, apart from relying on the authority of Vrajlal to grant discharge, also pleaded that the plaint did not disclose a cause of action against them, as there was no averment therein that the hundi had been accepted by them.3. As the trial the appellant gave evidence that Vrajlal had received the registered covered containing the hundi in his absence, and collected the amount due thereunder without his knowledge or authority. The learned City Civil Judge accepted this evidence, and held that Vrajlal had not been authorised to receive the amount of the Hundi. He also held that the plea of discharge put forward by the respondents implied that the hundi had been accepted by them. In the result, he decreed the suit.The defendants took up the matter in appeal to the High Court of Bombay, and that was heard by Chagla, C. J. and Shah, J., who held that the appellant would have a right of action on the hundi against the respondents only if it had been accepted by them, and that as the plaint did not allege that it had been accepted by them, there was no cause of action against them. They accordingly allowed the appeal, and dismissed the suit. The plaintiff prefers this appeal on special leave granted under Article 136 of the Constitution.

Court's reasoning:
The answer to this contention is firstly, that there was no valid presentment of the hundi for acceptance; and secondly that there was no acceptance of the same required by thea bill payable after sight, there are two distinct stages, firstly when it is presented for acceptance, and later when it is presented for payment. Section 61 deals with the former, and section 64, with the latter. As observed in --- Ram Ravji v. Pralhaddas Subkaran, 20 Bom 133 at p. 141 (B), "presentment for acceptance must always and in every case precede presentment for payment". But when the bill is payable on demand, both the stages synchronise, and there is only one presentment, which is both for acceptance and for payment. When the bill is paid, it involves an acceptance; but when it is not paid, it is really dishonoured for non-acceptance. But whether the bill is payable after sight or at sight or on demand acceptance by the drawee is necessary before he can be fixed with liability on it. It is acceptance that establishes privity on the instrument between the payee and the drawee, and we agree with the learned Judges of the High Court that unless there is such acceptance, no action on the bill is maintainable by the payee against theperson who present it to the defendants was Vrajlal ; and if he had no authority to act in the matter, it is difficult to see how he could be held to have acted on behalf of the plaintiff in presenting the hundi. There was only one single act, and that was the presentment of the hundi by Vrajlal and the receipt of the amount due thereunder. If he had no authority to receive the payment, he had no authority to present the bill for acceptance. It was argued that there was no provision in the Act requiring that bills payable at sight should be present for acceptance by the holder or on his behalf, and there was, for bill payable after sight, in Section 61.But, as already pointed out, in the case of a bill payable at sight, both the stages for presentment for acceptance and for payment are rolled up into one, and, therefore the person who his entitled to receive the payment under Section 78 of the Act is the person, who is entitled to present it for acceptance. Under Section 78, the payment must be to the holder of the instrument; and if Vrajlal had no authority to receive the amount on behalf of the plaintiff, there was no valid presentment of the hundi by him for acceptance7 of the Negotiable Instruments Act following the English law, provides that the drawee became an acceptor, when he has signed his assent upon bill. In view of these provisions, there cannot be, apart from any mercantile usage, an oral acceptance of the hundi, mush less an acceptance by conduct, where at least no question of estoppelthat the plea of discharge of a hundi implies an acknowledgement of liability thereunder --- an assumption which we find it difficult to accept. The question still remains whether that is sufficient in law to fasten a liability on the defendants on the hundi. What is requisite for fixing the drawees with liability under Section 32 is the acceptance by them of the acceptance by them of the instrument and not an acknowledgement of liability. As the law prescribes no particular form for acceptance, there should be no difficulty in construing an acknowledgement as an acceptance; but then, it must satisfy the requirements of Section 7, and must appear on the bill and be signed by the drawees. In the present case, the acknowledgement is neither in writing; nor is it signed by the defendants. It is a matter of implication arising from the discharge of the instrument. That is not sufficient to fix a liability on the defendants under SectionIn conclusion, we must hold that there was neither a valid presentment of the hundi for acceptance, nor a valid acceptance thereof