1958 (1) TMI 43 - HC - Indian Laws

Court rules notice of dishonour essential; unreasonable delays void sales; cross-objections rejected; parties to bear own costs.

The court dismissed the appeal, ruling that a notice of dishonour was required and not provided promptly, relieving the drawer of liability. The sales of ... Notice of dishonour - hundi payable at sight - presentment for acceptance and presentment for payment - reasonableness of notice under Section 106 - mode of giving notice as provided in Sections 93-94 - liability of drawer under Section 30 - pawnee's power of sale and discretion to retain pledged goods - exception to notice when no damage is suffered (Section 98(c))Notice of dishonour - hundi payable at sight - presentment for acceptance and presentment for payment - liability of drawer under Section 30 - Necessity of notice of dishonour to the drawer where a hundi payable at sight was presented and dishonoured. - HELD THAT: - The Court held that where a bill (hundi) payable at sight is presented and dishonoured a notice of dishonour to the drawer is necessary to fasten liability. A bill payable at sight may, at the holder's option, be presented for acceptance; if so presented and dishonoured by non-acceptance, Sections 91 and 93 apply. Even where the holder presents a bill payable at sight for payment, Section 30 (liability of the drawer) operates in commercial sense: dishonour by the drawee on being duly required to pay renders the instrument dishonoured for purposes of Sections 30 and 35 and makes notice necessary. The phrase 'as hereinafter provided' in Section 30 does not confine notice-requirement only to cases falling under Sections 91-93; it refers to the manner or mode of giving notice laid down subsequently in the Act. The statutory scheme (including Sections 93-94, 98 and 106) governs who is to be notified, how and within what time. On these grounds the Court concluded that notice was necessary in the present case. [Paras 6, 18, 19]A notice of dishonour to the drawer was necessary where the hundi presented was dishonoured; omission to give such notice disentitled the holder to hold the drawer liable.Notice of dishonour - oral notice - pleadings and evidence - Whether an oral notice of dishonour was given prior to the written notice relied upon in the plaint. - HELD THAT: - The plaintiffs pleaded and relied upon a written notice dated 1-10-1943; there was no plea of a prior oral notice in the plaint. The Court found no admissible evidence establishing any earlier oral notice apart from bald statements by the plaintiffs, and held that the pleaded reliance on the written notice negated any claim of a prior oral notice. Consequently the asserted oral notice was rejected. [Paras 7]No oral notice of dishonour prior to the written notice was proved or relied upon; the oral-notice plea was rejected.Reasonableness of notice under Section 106 - time for giving notice where parties carry on business at same place - exception to notice when no damage is suffered (Section 98(c)) - Whether the written notice dated 1-10-1943 was given within a reasonable time under Section 106, and whether the plaintiffs could rely on the exception that the drawer suffered no damage. - HELD THAT: - Section 106 prescribes that where the holder and the party to be notified carry on business in the same place, notice is reasonable only if despatched so as to reach the recipient on the day next after dishonour. The hundi was dishonoured on 2-9-1943 and the first written notice was despatched on 1-10-1943; the Court found this 28-day delay unreasonable under Section 106. The appellants also sought to invoke Section 98(c) (no notice necessary where the drawer cannot suffer damage), but no such exception had been pleaded or proved at trial; allowing it at the second appeal would unfairly take the respondent by surprise and would require factual enquiry. Accordingly the exception could not be invoked. [Paras 8, 9]The written notice dated 1-10-1943 was not given within a reasonable time under Section 106 and the plaintiffs could not successfully rely on the Section 98(c) exception which was neither pleaded nor proved.Pawnee's power of sale and discretion to retain pledged goods - Section 176, Indian Contract Act - assessment of damages for wrongful sale/conversion - Validity of the delayed sale of pledged goods and whether defendants proved loss from belated sale. - HELD THAT: - The Court accepted that a pawnee holding goods as security may, at his option, retain the goods as security or sell them after serving notice on the pawner; the law does not compel immediate sale within a fixed time. Thus the pawnee's power of sale is for his benefit and discretionary; mere prior notice of intended sale does not compel sale at any particular time. Although Section 176 requires notice for sale and failure to give notice may amount to conversion entitling the pledgor to damages, in the present case the defendants failed to produce evidence of market rates or of actual loss resulting from the sales effected in 1945 and 1946. Having failed to prove damages, the defendants could not succeed on that ground. [Paras 11, 12]The pawnee was not legally obliged to effect sale within a particular time; however, where sale is wrongful for lack of notice conversion/damages could follow, but here defendants failed to prove any loss from the belated sales.Final Conclusion: The appeal is dismissed. The Court concluded that notice of dishonour was necessary in the circumstances, no prior oral notice was proved, the written notice was belated and unreasonable under Section 106, and although delayed sale by a pawnee is not per se wrongful, the defendants failed to prove loss from the belated sales; consequently the plaintiffs' suit was rightly dismissed and parties are left to bear their own costs. Issues Involved:1. Necessity of notice of dishonour for the hundi.2. Validity of oral notice of dishonour.3. Compliance of the written notice with legal requirements.4. Timeliness of the sale of goods.5. Binding nature of the sale on the defendants.6. Proof of damages by the defendants due to belated sale.Detailed Analysis:1. Necessity of Notice of Dishonour for the Hundi:The primary issue was whether a notice of dishonour was necessary when the hundi was dishonoured. The court examined Sections 91, 92, and 93 of the Negotiable Instruments Act. It was argued that these sections applied only to hundis payable after sight and not at sight. The court concluded that a bill of exchange payable at sight, when presented for acceptance and dishonoured, requires a notice of dishonour as per Sections 91 and 93. The court also discussed the interpretation of Section 30, concluding it is not a complete code and must be read in conjunction with Sections 91, 92, and 93.2. Validity of Oral Notice of Dishonour:The plaintiffs contended that an oral notice of dishonour was given in September 1943. However, the court found no evidence supporting this claim. The plaint relied solely on a written notice dated 1st October 1943, negating any previous oral notice.3. Compliance of the Written Notice with Legal Requirements:The written notice of dishonour was given on 1st October 1943, while the hundi was dishonoured on 2nd September 1943. Section 106 of the Negotiable Instruments Act requires the notice to be given within a reasonable time, which was not met in this case. The court found the notice given after 28 days to be unreasonable and not in compliance with Section 106. The plaintiffs' argument under Section 98(c) was dismissed as it was not pleaded in the trial court.4. Timeliness of the Sale of Goods:The court examined whether the sale of goods (matra and arhar) was conducted within a reasonable time. The goods were delivered on 12th September 1943, but the sales occurred in 1945 and 1946. The court found that the plaintiffs should have effected the sale within a reasonable time after the notice was given on 1st October 1943. The belated sales were not binding on the defendants.5. Binding Nature of the Sale on the Defendants:The court acknowledged that a pawnee is not required by law to sell pledged goods within a specific time. However, if the pawnee chooses to sell, it must be done within a reasonable time after notice. The court held that the plaintiffs' sales in 1945 and 1946 were not binding on the defendants due to the unreasonable delay.6. Proof of Damages by the Defendants Due to Belated Sale:The defendants did not provide evidence of the market rates for matra and arhar in 1945 and 1946. The court noted that without such evidence, the defendants could not prove the damages suffered due to the belated sale. Consequently, the court dismissed the argument regarding the necessity of a fresh notice for the sale in 1945 and 1946.Conclusion:The court dismissed the appeal, finding that the notice of dishonour was necessary and not given within a reasonable time, absolving the drawer of liability. The sales of matra and arhar were not binding on the defendants due to the unreasonable delay. The cross-objections were also dismissed, and each party was ordered to bear their own costs.