UNION BANK OF INDIA Vs. SWASTIKA MOTOR

JUDGEMENT

(1.) Union Bank of India, Plaintiff, the payee sucs Swastika Motors, defendant No. 1, the drawee and Prestolite of India Ltd., defendant No. 2, the drawer of hundis to recover Rs. 4,21,103.68P, besides costs, interest pendente lite and future interest on the allegations that the bank had provided commercial credit to Prestolite of India Ltd., the manufacturer, on the discounting of the bills by means of purchase of hundis, drawn by it on Swastika Motors, one of its dealers and that the bank had delivered the documents of title to the goods intended for delivery to Swastika Motors on the acceptance of the hundis by Swastika Motors. The hundis are said to have been drawn between the period September, 1973 to November, 1973 and between January to March, 1974. It is alleged that the drawee duly accepted the hundis and the documents were delivered to the drawee but the drawee has failed to honour the hundis after acceptance thereby rendering the drawer and the drawee jointly and severally liable to the bank for the amount. The bank claims that the hundis had been presented for acceptance by Swastika through the latter's bank and the Swastika had duly accepted the hundis and that the notice of dishonour was duly given to Prestolite.

(2.) Suit is resisted by Swastika, inter alia, on the ground that as a distributor Swastika had made deposit of Rs, 2,50,000.00 with Prestolile and Swastika was also entitled to interest on the amount as also to over-riding commission, bonus, etc. in terms of the dealership agreement and that the goods represented by the documents of title delivered to Swastika through its bank were supplied against the aforesaid entitlement and that the Swastika at no stage signified its acceptance of the hundis and, therefore, never accepted any liability either to Prestolite or to the bank and that, therefore, the suit against Swastika was misconceived. A plea was also raised that the suit had not been instituted by a competent person. It was further alleged that the hundis had been transferred or endorsed to the collecting banker and as such, the bank had no locus standi to maintain the suit. The suit was resisted on behalf of Prestolite, inter alia, on the grounds that on the acceptance of the hundis by Swastika, the liability of Prestolite to the bank was extinguished and Swastika Motors alone were liable to the bank. The claim of Swastika that the goods had been supplied to it against the deposits and other entitlement of Swastika from Prestolite was denied. In the replication, the bank has, by and large, reiterated the averments made in the plaint. It is pointed out that the bank had "endorsed" the hundis in favour of the collecting banker "for realisation" and that did not prevent the bank from maintaining the suit.

(3.) On the pleadings of the parties, following issues were framed on September, 29,1976 :-