CHAVAN RISHI INTERNATIONAL LIMITED vs STATE BANK OF BIKANER and JAIPUR

BRIEFLY the facts are that on 7.5.91 the complainant paid a sum of Rs. 5. lacs to M/s. Shanti International vide cheque bearing No. 902370 drawn on the Punjab National Bank, Barakhamba Road, New Delhi. In lieu of the said payment M/s. Shanti International through Shri K.K. Kohli, proprietor issued/executed a ''Hundi'' pronote in favour of the complainant for a sum of Rs. 5 lacs, which was to mature on 6.8.91 i.e. after 3 months from the date of issuing of the cheque by the complainant. In order to ensure the due payment of the ''Hundi'' promissory note, the opposite party handed ever to the complainant a bank guarantee dated 7.5.91 issued by the State Bank of Bikaner and Jaipur respondent. According to the terms of the bank guarantee. The bank undertook to indemnify the complainant to the extent of Rs. 5 lacs in case Shri K.K. Kohli, Proprietor Shanti International made default in payment of the Hundi/promissory note. It was further provided that the claim under the guarantee could be lodged till 14.8.91.

IT is alleged that on 1.8.91, the complainant demanded the payment of Rs. 5. lacs from Shri K.K. Kohli. He was requested to make the payment by 6.8.91 and was told that if he failed to make the payment within the stipulated period they would invoked the bank guarantee by presenting the Hundi/Promissory note to the respondent/opposite party. Sh. K.K. Kohli failed to make the payment of Rs. 5 lacs and consequently the complainant invoked the bank guarantee vide letter dated 6.8.91 and requested the respondent to make the payment of the amount within 7 days as per terms of the bank guarantee. The respondent however, inspite of various letters did not make the payment of the amount. The complainant, has claimed interest on the amount of Rs. 5 lacs @ Rs. 24% p.a. from 6.8.91 till the date of filing the complaint, which comes to Rs. 30,000/-. They have further claimed damages to the tune of Rs. 2 lacs which are alleged to have been suffered by them on account of the failure of the respondent in making the payment of the bank guarantee. Thus the total amount of Rs. 7,30,000/- has been claimed by the complainant from the respondent alongwith the future interest from the date of filing the complaint till the date of recovery.

The complaint has been contested by the respondent. It is pleaded that there is no fault, imperfection or short-coming in the service of the respondent and consequently the complaint is not maintainable under the provision of Consumer Protection Act, hereinafter referred to as the Act. It is further pleaded that the complaint involves various intricate and disputed questions of law and fact, disposal of which requires a full trial.

ON merits the respondent admitted that M/s. Shanti International represented by Shri K.K. Kohli, executed a Hundi in favour of the complainant and that M/s. Shanti International is a constituent of the respondent Bank. They approached the Bank and informed them that the complainant had agreed to advance a loan of Rs. 5 lacs to Shri K.K. Kohli, Proprietor of M/s. Shanti International but they (complainant) required the Bank to furnish Bank Guarantee to the effect that if he failed to make the payment, the amount would be claimed from the Bank on or before 14th August, 1991. The Bank acceded to their request and furnished the guarantee. The Hundi it is alleged, is not properly stamped. It is next pleaded that the Hundi was not presented necessary. In view of the non-presentation of the Hundi, the respondent Bank stands discharged/absolved from the liability.

THE first question that requires determination is whether the complaint is entertainable by the State Commission. THE word ''Service'' has been defined in Section 2(1)(o) in the Act as follows : "Service" means of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, entertainment, amusement or the purveying a news or other information, but does not include the rendering of any service free of charge or under a contract of personal service ;" THE definition is not an exhaustive definition but inclusive or extensive one. It says that the service includes, service rendered in connection with Banking, financing, insurance, etc. On payment of certain charges. In the present case, the Bank after charging fee from Mr. K.K. Kohli, furnished guarantee for re-payment of the amount of Hundi executed by him to the complainant. In Banking business guarantees are issued by the Banks in order to promote trade and business and if it is not done the trade and business is likely to suffer. THErefore, I am of the opinion that the act of furnishing guarantee by the banks amounts to service as defined in the Act. THE result is that if a bank furnishes guarantee but fail to make the payment in accordance with the terms of the guarantee, the effected persons can file a complaint against the bank under the provisions of the Act. Consequently, argument is the fallacious and is, therefore, rejected. The next question that arises for determination is whether the Hundi/promissory note was presented to the drawee and if not with what effect. The complainant, in para 7 of the complaint stated that on 1st August, 1992, they demanded the repayment of Rs. 5 lacs by 6th August, 1991 from Mr. Kohli and told him that in case of his failure to make the payment within the stipulated period, they would invoke the guarantee by presenting the Hundi/Promissory note to the respondent Bank. Again in the rejoinder, similar allegation has been made by them. The promissory note became due for payment of 6th August, 1992. Under Section 64 of the Negotiable Instruments Act it could be presented after the date of maturity. However, in the present case a notices dated NIL was sent by the complainant to Shri K.K. Kohli informing him that the amount of the Hundi dated 7.5.91 was payable on 6th August, 1992 by him. A request, was made by them that the payment be made by 6th August, 1992. The notice was received on behalf of Shri K.K. Kohli by someone on 31st July, 1992. A copy of the notice was delivered to the Bank on 1st August 1992. No evidence has been led on behalf of the complainant showing that the Hundi was presented to Shri K.K. Kohli on or after 6th August, 1992. Service of notice for making payment of the amount of Hundi without presenting Hundi is not a presentment of the Hundi in the eyes of law. Therefore, I am of the view that the Hundi/promissory note was not properly presented to the drawee for payment. Now it is to be seen, what is the effect of non-presentation of the Hundi. Section 64 of the Negotiable Instruments Act provides that the notes/ bills of exchange and cheques must be presented for payment to the maker accepted or drawee thereof respectively, by or on behalf of the holder and in default of such presentment, the other parties thereto are not liable thereon to such holder. From a reading of the above Section it is clear that the promissory notes and bills of exchange should be presented for payment by or on behalf of the holder, to the maker or drawee thereof. However, Section 76 makes certain exceptions regarding, presentment of the negotiable instruments. Clause (d) of the said section says that no presentment for payment is necessary, and the instrument is dishonored at the due date for presentment as against the drawee, if the drawee could not suffer damage from the want of such presentment. In the present case the drawer and the drawee of the Hundi are the same person. It has not been shown that the drawer has suffered any injury for non-presentation of the negotiable instrument to him. Thus, the non-presentation of the Hundi/Promissory note will not make any difference. In the said view I am fortified by the decision of Oudh High Court is Chander DuttBaipa v. Chander Sen Dull Chandar, AIR 1934 Oudh 254. It was observed therein that in the Case of Hundis in which the drawer and the drawee is the same person, no presentation on due date is necessary as from the nature of the case, the drawer cannot suffer damages from the want of such presentation. This case was followed by a Division Bench of Rajasthan High Court provided over by Wanchoo C.J. as he then was in Kanahia Lal v. Ram Kumar & Others, AIR 1956 Rajasthan 129. It was held by the learned Bench that the rule of presentment for payment is subject to certain well recognised exceptions which are enumerated in Section 76 of the Act and one much exception is regarding drawer; where the drawer could not suffer damage from the want of such presentment. Similar view has taken by a Division Bench of the Lahore High Court, in Punjab Cooperative Bank Ltd. Lahore v. Mohammed Yusuf and Ors., AIR 1939 Lahore 225.

THE learned Counsel for the respondent has submitted that the presentment of a negotiable instrument under Section 64 of the Act is essential and if is not presented the drawer is discharged of his liability. He made reference to Jog Jivan Mavil Vithlarn v. Messrs Rancha Heddes Maghji, AIR 1954 SC 554 and Banaras Bank v. Hermsli Postonil, AIR 1930 Allahabad 648. In Jagjivan Mavil Vithalni''s case it was observed that the drawee of negotiable instrument is not liable on it to the payee, unless he has accepted it. Under Section 32 the liability of the drawee arises when he accepts the bill. In that, case the Hundi was drawn by the drawer on another person and not on himself. Similarly in Banaras Bank''s case (supra) the drawer and drawee were different persons. Thus the ratio in the said cases is not applicable to the facts of the present case.

AFTER taking into consideration all the facts and circumstances of the case and the law on the subject I am of the view that it did not make any difference if the negotiable instrument was not presented by the complainant to drawee. The learned Counsel for the respondent has further argued that the Hundi did not bear the requisite stamp and therefore it is inadmissible into evidence. On the other hand the learned Counsel for the complainant submits that the document in dispute was not a Hundi but a promissory note and it is properly stamped as such.

I have given my thoughtful consideration to the arguments and gone through the documents carefully. In the document Sh. Kohli has promised to pay on demand a sum of Rs. 5 lacs to the complainant for value received by cheque No. 902370 PNB dated 7.5.91 after three months i.e. 6.8.91. The date of execution of the document is not mentioned in it. However, it is specifically mentioned therein at the top that the document would become due on 6.8.91. The promissory note has been defined in the Act. The definition says that a promissory note is an instrument in writing (not being a bank note or a Currency note) containing an unconditional undertaking, signed by the maker to pay a certain sum of money only or to the order of, certain person, or to the bearer of the instrument. From the language of the document it is evident that the maker had given an unconditional undertaking to make payment of the amount to the complainant on demand. The document bears the signatures of the maker of the document. Thus the document, in my view is a promissory note. I held accordingly.

FACED with this situation the Counsel for the respondent has vehemently argued that the documents has been executed on a stamp paper meant for Hundi. Thus, the promissory note be deemed to be improperly stamped. This contention of the learned Counsel is fallacious. If the Hundi paper is used for the purpose of promissory note and it bears the stamp of proper denomination it will be deemed to be properly stamped. In Indian Stamp Act by Mulla 1990 Edition at page 90 the learned author observed that the use of Hundi/ paper is not limited to Hundis and promissory note and bill of Exchange may be engrossed on such paper. Therefore I reject this submission as well. It is next contended by the learned Counsel for the respondent that Sh. Kohli was a necessary party to the present case. I do not agree with this agreement. The complaint has been filed by the complainant on the basis of the guarantee issued by the opposite party in favour of the complainant. Consequently, I am of the view that Shri Kohli is not a necessary party to the complaint.

THE respondent in his guarantee dated 1.5.91 given to the complainant agreed that in case of default in payment of the promissory note by Sh. K.K. Kohli, the bank would indemnify the complainant to the extent of rupees five lacs. Sh. Kohli has not repaid the amount of rupees five lacs to the complainant, and there upon they (complainant) served a notice on the respondent to make payment of the amount. It is not disputed that the cheque issued by the complainant to Sh. Kohli was honoured. THE complainant, therefore, in accordance with the terms the guarantee became entitled to the amount from the respondent. THE respondent now cannot repudiate their liability on the pleas taken by them. It has been held in Punjab National Bank v. Durga Devi 1978 Rajdhani Law Reporter 25 that the insurance companies and other public institutions should honestly admit claim which are genuine instead of driving the citizens to law Courts for redress. THE respondent has failed to honour the guarantee given by them inspite of the fact that the debtor failed to pay the amount to the complainant. Consequently we are of the view that the complainant is entitled to recover the amount of rupees five lacs from the respondent. THEy are further entitled to interest on that amount, as they have been deprived of the use thereof. THEy have claimed interest @ 24% p.a. However we are of the opinion that the interest claimed is on the higher side. It would meet the ends of justice if interest is granted to them @12% p.a. THE amount of interest from 6.8.91 to 11.11.91 comes to Rs. 15,833/- say 15,800/-. For the aforesaid reasons we accept the complaint with cost and direct the respondent to pay an amount of Rs. 5,15,880/- with future interest @12% p.a. from 12th November, 1991 till the date of payment within a period of two months. Costs Rs. 2,000/-. Complaint accepted with cost.