State Bank of India vs Union of India and Others

Gh. Hasnain Massodi, Judge

The Civil First Appeal is directed against Judgment and decree dated 18th April, 2001 passed by Learned 1st Additional Judge, Jammu in Civil

Original Suit titled Union of India v. Kumar Traders and Anrs., whereby the learned trial judge has decreed the plaintiff/respondent no. 1's suit and

held the plaintiff/respondent no. 1 entitled to an amount of Rs. 94,092.60/- along with interest @ 10% per annum for the date of payment i.e. 27th

August, 1990 till realization of the decretal amount. The appeal arises against the following backdrop:-

The respondent no. 2 pursuant to supply order dated 8th June, 1988 agreed to supply MS Pipes 300 mm Dia to respondent no. 1 through

Garrison Engineer, Nagrota, on payment of an amount of Rs. 94,093/-. The goods supplied by the respondent no. 2 were found not in accordance

with the agreed specifications. However, the respondent no. 1 before the delivered goods were inspected, handed over a cheque drawn on

appellant-bank for an amount of Rs. 94,093/- to respondent no. 2. Later when it was realized that the goods supplied did not answer description,

the respondent no. 1 addressed a letter to the appellant, asking the appellant-bank not to make the payment on the cheque drawn in favour of the

respondent no. 2. The appellant-bank is said to have, nonetheless, made payment on the cheque to respondent no. 2, constraining the respondent

no. 1 to bring a recovery suit against the appellant-bank for an amount of Rs. 94,093/-. The plaintiff/respondent No.1's case in brief is that the

appellant-bank had disobeyed its direction as a banker and made the payment on the cheque issued to respondent no. 2 despite a clear direction

from the plaintiff/respondent no. 1 not to make the payment and thus made itself liable to pay the amount, wrongly paid to the respondent no. 2, to

the plaintiff/respondent no. 1.

The plaintiff/respondent no. 1 joined/impleaded the contractor i.e. respondent no. 2 as a defendant in the suit alleging breach of contract against

the respondent no. 2 and asked for the same relief against the respondent no. 2 as sought against the appellant-bank.

The respondent no. 2 -- Defendant No. 1 in the suit did not appear and contest the suit despite registered summons. The appellant-bank

opposed the suit on the grounds that there was no privity of contract between the appellant and the respondent no. 1 and thus the appellant-bank

had nothing to do with the transaction between the appellant and the respondent no. 2. The appellant-bank denied to have received any

instructions from the respondent no. 1 stopping payment on the cheque issued by the respondent no. 1 in favour of the respondent no. 2. The

appellant-bank further pleaded that the respondent no. 1 was itself responsible for making wrong payment to the respondent no. 2 in as much as

the respondent no. 1 by its own admission failed to verify the goods before the cheque was drawn.

The trial court on perusal of pleadings settled following issues:-

Whether the suit is not maintainable against the defendant no. 2 for want of privity of contract?

Whether the suit of the plaintiff is time barred?

Whether the defendant No. 1 agreed to supply pipe MS-300 as per the supply order dated 8th June, 1990 against the mentioned specification

valuing Rs. 94,092.60?

Whether the defendant no. 1 made the supply of the pipes not confirming to the specification as thus liable to replace them with the pipes of

specified specification?

Whether the plaintiff called upon the defendant no. 1 to replace the pipes supplied by him with pipes confirming to the agreed specifications?

Whether consequent upon the non-replacement of the pipes by the defendant no. 1 and the plaintiff direction to defendant no. 2 to withhold the

payments of the cheque No. E-961122 dated 21.08.1990 for the suit amount to the defendant no. 1 and defendant no. 2, despite said direction

made the payment?

Whether the plaintiff is entitled to the recovery of the suit amount from the defendants?

Relief.

The parties led evidence to prove the issues, burden whereof was respectively put on the parties. The respondent no. 1 examined two witnesses

namely Shri Jasbir Singh Sodhi, AGE (Stores) and T.S. K. Chopra, GE574, an official of Garrison Engineer to substantiate its case. The

appellant-bank on the other hand examined S/Shri Anil Kumar Malhotra, Assistant Accounts and PR. Abrol, Deputy Managed in Hari Market

Branch of the appellant-bank. The trial court after evaluating the evidence led by the parties decided all the issues in favour of the plaintiff and held

the appellant-bank and respondent no. 2 jointly and severely liable to pay Rs. 94,092.60/- i.e. cost of MS Pipes delivered by respondent no. 2 to

plaintiff and found not confirming to specifications. The appellant-bank and respondent no. 2 were also held liable to interest@ 10% per anmumon

the decretal amount from the date of payment i.e. 27th August, 1990 till its realization. The judgment and decree dated 18th April, 2001 are

assailed by the appellant-bank--Defendant no. 2 in the suit, on the grounds that the judgment is contrary to law and the facts; that suit is not

maintainable and also barred by limitation. The trial court is said to have omitted to frame issues emerging from the pleadings and to have mis-

appreciated the evidence. The appellant-bank also proposed to wriggle out of the responsibility to pay the decretal amount to respondent no.1 on

the ground that there was no privity of contract between the parties.

I have gone through the judgment and decree impugned in the appeal as also the trial court record.

I have heard learned counsel for the parties.

The trial court has held the respondent no. 2 i.e. defendant no. 1 in the suit, liable to pay the decretal amount to the respondent no. 1 on the

ground that the good supplied by the respondent no. 2 to the respondent no. 1 did not answer the description and conform to the specifications

agreed upon by the parties. Liability to pay the decretal amount, is fastened on the appellant-bank on the ground that the appellant-bank ignoring

instructions from respondent no. 1 made the payment on the cheque drawn in favour of the respondent no. 2 and thus helped the respondent no. 2

to get the amount, reflecting cost of MS Pipes, though the supplied goods did not answer the description.

The respondent no. 1 in order to prove its case against the appellant-bank was required to prove that instructions to the appellant-bank were

issued and conveyed to the appellant-bank before payment on the cheque in question was made. The case set up by the respondent no. 1 before

the trial court was that a written communication was addressed on 25th August/1990 to the Manager Hari Market Branch of the appellant-bank

asking the manager to stop payment on cheque in question and that the officers of the appellant-bank despite having received the communication

made payment on the cheque on 27th August, 1990. The appellant no. 1 to successfully discharged onus to prove issue no. 6 reflecting the

controversy, was required to prove not only that the letter was scribed on 25th August, 1990 but also that the letter requiring the appellant-bank to

stop payment on cheque was delivered to the appellant-bank before payment on the cheque was made. The respondent no. 1 to discharge the

burden, proposed to rely on two documents EXPW JS-1 and EXPW JS-2. EXPW JS-1 is a communication dated 8th September, 1990

addressed by PW J.S. Sodhi to Manager State Bank of India, Jammu (appellant-bank). The communication makes reference to Garrison Engineer

Office letter No. Nil dated 25th August, 1990 and as also letter No. 3002/DGS&D/C/524/E3 dated 29th August, 1990, and asks the Manager,

State Bank of India to confirm whether payment on cheque No. E-961122 dated 21st August, 1990 for Rs. 94,093/- -- had been stopped.

EXPW JS-2 is a communication dated 29th August, 1990 referring to Garrison Engineer Office letter No. Nil dated 25th August, 1990 delivered

in person by Major D. R. Gurung, GE (P) G355 on 25th August, 1990 A.N and asks the Manager to confirm whether the payment on the cheque

in question was withheld. PW J.S. Sodhi has admitted to have authored of the letters EXPW JS-1 and EXPW JS-2. However, the witness has not

claimed to have authored the original letter No. Nil dated 25th August, 1990 whereby Manager, Hari Market Branch of the appellant-bank was

asked to stop payment on the cheque. The witness in his cross examination has admitted not to have sent any letter to the appellant-bank for

withholding payment on the cheque. The appellant-bank has neither placed on file copy of the letter No. Nil dated 25th August, 1990 whereby the

appellant-bank was asked to stop payment on the cheque in question nor proved such letter to lend support to its case. The case set up by the

respondent no. 1 before the trial court was that the letter no. Nil dated 25th August, 1990 was delivered by hand by its Officer/Official to

Manager, Hari Market Branch of the appellant-bank. The official/officer of the Garrison Engineer Office, who handed over the letter, has not been

examined as witness by the respondent no. 1.

The learned trial judge without having before him the communication whereby the appellant-bank were asked to stop payment on the cheque or

testimony of the official of the Garrison Engineer Office who had delivered, by hand, the communication, has placed reliance on EXPW JS-1 and

EXPW JS-2 and rushed to hold the appellant-bank to have received the communication no. Nil dated 25th August, 1990, and to have made the

payment despite having been, instructed non-payment by the respondent no, 1, Learned trial judge has placed exclusive reliance on a document

not proved by the respondent no. 1 and thus not admitted in evidence. Reliance by the appellant-bank on a document not part of the evidence,

ought not to have persuaded the trial court to hold the respondent no. 1 to have successfully discharged burden of proving issue no. 6. It needs no

emphasis that burden to prove issue no. 6 was placed on then respondent no. 1 and it was the respondent no. 1 who had to prove by cogent and

convincing evidence that the communication instructing the appellant-bank to stop payment on the cheque in question was delivered to the

appellant-bank prior to payment on the cheque was made.

Learned trial judge surprisingly expected the appellant-bank to prove that it had not received such communication from the respondent no. 1.

It is apt to mention that the officers of the appellant-bank posted at the relevant time in Hari Market Branch of the appellant-bank have

emphatically denied to have received any communication on 25th August, 1990 from the respondent no. 1, requiring them to stop payment on the

cheque in question.

However, learned trial court expecting the appellant-bank to prove that it had not received the communication No. Nil dated 25th August,

1990 from the respondent no. 1 observed that ""bank has not produced the ledger and even no other record has been produced by the petitioner

to bank"" as to whether letter stopping payment on the cheque in question, addressed to it by the plaintiff was not received by them. The

observation is made unmindful of the fact that it was for the respondent no. 1 to prove that the communication in question was delivered to the

appellant-bank and not the appellant bank to prove that it had not received any communication.

It may be reiterated at the cost of repetition that the documents EXPW JS-1 and EXPW JS-2 relied upon by the trial court to conclude that

the letter no. Nil dated 25th August, 1990 instructing stoppage of payment on the cheque in question, was delivered to the appellant-bank, do not

lead to such an inference and even author of the two letters has not been able to state, whether these were ever received by the appellant-bank.

So viewed, learned trial judge has not made proper appreciation, of the evidence brought on the file and has rushed to the conclusion when

neither the letter No. Nil dated 25th August, 1990 was proved by respondent no. 1 nor its author or the officer who delivered it at Hari Market

Branch of the appellant-bank was made to appear in the witness box.

For the reasons discussed, finding returned on issue no. 6 is over-set and issue no. 6 decided in favour of the appellant-bank and against the

respondent no. 1.

Resultantly, the respondent no. 1 is held not to have been able to prove that the communication No. Nil dated 25th August, 1990 instructing

the appellant-bank not to make payment on the cheque No. E-961122 in question was received at Hari Market Branch of the appellant-bank,

before the payment on the cheque was issued. The appellant-bank, in the circumstances, is not to be held liable to pay the decretal amount --

reflecting price of the goods supplied by respondent no. 2 to the respondent no. 1.

The respondent no. 2, as already observed, has been held liable to pay the decretal amount to the respondent no. 1 on account of breach of

contract and failure to supply goods as per the agreed specifications. The respondent no. 2 has not questioned the judgment and decree, which

renders it un-necessary to comment on liability of respondent no.2 to pay the decretal amount with the interest awarded, to the respondent no. 1.

The outcome of appeal preferred by the appellant-bank is not to effect the judgment and decree as against the respondent no. 2, for the reason,

that liability of the appellant-bank and respondent no. 2 in the suit is based on two distinct causes. However, it needs to be stated that in a case

where the goods delivered do not answer the description, the right course for the aggrieved party is to ask for damages and not return of the price

paid for goods supplied. The court, before which an action for damages complaining breach of contract is brought, is expected to assess damages

taking into account the value of the goods supplied and not direct return/payment of the price of goods. The trial court of course has to award

damages, resulting as a natural and ordinary consequence of breach of contract in supplying goods of inferior quality or not conforming to the

agreed specifications.

For the reasons discussed, the appeal is allowed and judgment and decree dated 18th April 2001, to the extent it relates to the appellant-bank

is set aside. Decree sheet be drawn up. The appeal file shall go to record. The trial court record be send down. Allowed.