Case: Ramlal Onkarmal Firm Vs. Mohanlal Jogani Rice And Atta Mills

1. The appellants carrying on business at Raha in Nowgong District had dealings with the respondents, carrying on business at Gauhati. As a result of the said dealings, the appellants were indebted to the respondents in a sum of Rs. 9,447-4-9. In order to satisfy the dues of the respondents the appellants sent to the respondents a cheque for Rs. 9,461-4-0 dated August 31, 1948. The cheque was drawn by a third party, Messrs Nathuram Jaidayal of Sibsagar on the Tripura Modern Bank, Sibsagar Branch, in favour of the appellants, who endorsed it to the respondents. On September 4, 1948, the respondents sent the cheque to their bankers, the Calcutta Commercial Bank, Gauhati for collection. On the same day, the Calcutta Commercial Bank, Gauhati sent the cheque to the Tripura Modern Bank, Sibsagar for encashment. The Tripura Modern Bank, Sibsagar, debited the accounts of their constituents, Messrs Nathuram Jaidayal with the sum of Rs. 9,461-4-0, and after deducting Rs. 6-4-0 on account of commission charges, sent to the Calcutta Commercial Bank, Gauhati a draft for Rs. 9,455, dated September 14, 1948 towards payment of the cheque. The draft was drawn by the Tripura Modern Bank, Sibsagar on its Calcutta Head Office, and was marked current for three months from the date of the issue. On receipt of the draft, the Calcutta Commercial Bank, Gauhati sent it to their Head Office at Calcutta for collection. But the Calcutta Commercial Bank, never presented the draft to the Tripura Modern Bank, and made no attempts to collect the amount of the draft. In the meantime, the respondents wrote to the appellants informing them that cash payment far the cheque has not been received, and on September 18, 1948 the appellants replied asking the respondents to get back the cheque. But the cheque was never returned to the respondents. On September 17, 1948, the Calcutta Commercial Bank closed its business, and subsequently, it was ordered to be wound up. On October 16, 1948, the Tripura Modern Bank also closed its business, and in view of its inability to pay, its dues, was compelled to enter into a scheme of arrangement with its creditors.2. On November 19, 1948, the respondents requested the Tripura Modern Bank to pay the amount of the draft to them and not to the Calcutta Commercial Bank. But no payment was made by the Tripura Modern Bank either to the respondents or to the Calcutta Commercial Bank. On March 8, 1949, the respondents instituted the suit, out of which the appeal arises, claiming payment of their dues from the appellants on the footing that the cheque dated August 31, 1948 was received by the respondents as a conditional payment, and as the cheque was not cashed, the respondents were entitled to enforce their original claim. The Subordinate Judge, Lower Assam District, dismissed the suit. On appeal, the High Court reversed the judgment appealed from, and decreed the suit. The appellants now appeal to this Court by special leave.

Court's reasoning:
6. The High Court was in error in holding that the failure to obtain payment of the draft was not due to the laches of the respondents collecting agents. In one part of the judgment, the High Court wrongly assumed contrary to fact, that the Tripura Modern Bank had stopped business on September 16, 1948 and, therefore, the draft could not be cashed on presentation, whereas, in fact, the Tripura Modern Bank had stopped business a month later on October 16, 1948. Moreover, the High Court wrongly, assumed that the appellants did not suffer any loss on account of the delay in the presentation of the draft. There is clear evidence on the record that the draft would have been cashed, if it had been presented for payment before October 16, 1948.Now, in the instant case, the respondents accepted from their debtors, the appellants, a cheque drawn by a third party, on the Tripura Modern Bank and endorsed by the appellants. The respondents through their collecting agents, the Calcutta Commercial Bank, presented the cheque for collection to the Tripura Modern Bank, and instead of obtaining cash payment, received a draft drawn by the Sibsagar Branch of the Tripura Modern Bank on its Head Office. Having accepted this draft in course of collection of the cheque, the respondents vis-a-vis the appellants were in no better position than they, would have been, if they had accepted the draft from the appellants directly as conditional payment of the cheque. In the circumstances, the respondents owed a duty to the appellants to present the draft for payment within a reasonable time. The draft could be presented for payment at any time during the period of three months from the date of its issue. Instead of presenting the draft for payment, the respondents collecting agents kept it in their hands, and made no attempts to cash it. P. w. 3, an employee of the Calcutta Commercial Bank, said that the draft was sent by the Gauhati office of the Bank to its Head Office by registered post, but the Head Office had closed its business and the draft came back to the Gauhati office undelivered. The closure of the business of the collecting agents was not a lawful excuse for not obtaining delivery of the draft and not presenting it for payment within a reasonable time. P. W. 3 admitted that had the draft been presented for payment to the Tripura Modern Bank before October 16, 1948, it would have been paid on presentation, and the money could not be realised only because the Calcutta Commercial Bank had closed in the meantime. The Tripura Modern Bank closed its business on October 16, 1948. Because of its inability, to pay its debts, the Tripura Modern Bank is now working under a scheme of arrangement. The failure of the respondents and their agent to cash the draft within a reasonable time altered the position of the appellants for the worse, and caused prejudice to them. In the altered the respondents must be regarded as having kept the draft in absolute payment of the cheque. The cheque must be treated as duly paid and consequently, the original debt stood discharged.Mr. Chatterjee also contended that the respondents collecting agents must be deemed to have accepted the demand draft on September 14, 1948 as absolute payment of the cheque, and that the cheque was, in the eye of law, paid and discharged on that date. There is a lengthy discussion on this point in the judgment of the High Court, but we do not think it necessary to decide this question.