TUKARAM BAPUJI NIKAM Vs. BELGAUM BANK LIMITED

JUDGEMENT

(1.) This is a Civil Revision Application filed by the original plaintiff to set aside the order of the learned Civil Judge, Senior Division, Kolhapur, dismissing the plaintiff's suit with costs. The facts necessary for the purpose disposing of this Revision Application are simple, but it raises an interesting point of law of some importance to the business community which, as far as the learned advocates before us were able to ding out, is not covered by any decision of this Court. One Dundage, who carried on business at Shankeshwar, had purchased some gram dal from the plaintiff who carried on business at Kolhapur which, the evidence shows, is at a distance of 38 miles from Shankeshwar. The agree price of the said goods was Rs. 863. 94 P. out of which Dundage had already made a part payment of Rs. 130/- on the 17th of August 1965. On that date, the goods in question were loaded in a truck, but were looted at Kolhapur in the course of some disturbances there, and the balance of Rs. 683.94 P. remained to be paid by Dundage to the plaintiff towards the price of the said goods. On the 19th of August, 1965 Dundage purchased a draft for the said balance of Rs. 683. 94 P. from the Shankeshwar Brach of the Belgaum Bank, and it is common ground that it was despatched by him by post to the plaintiff on that very day. The evidence of the plaintiff's son shows that the plaintiff's shop was closed throughout the 20th of August 1965, and the draft came to the plaintiff's hands on the night of the 20th of August 1965. The evidence of Karnik, the Agent of the Kolhapur Branch of the Defendant Bank shows that between 11 a. m. and 12 noon on the 20th of August 1965 instructions were received from Dundage to stop payment of the said draft to the plaintiff. Dundage has stated in his evidence that he issued those instructions because he had come to know on the evening of 19th August 1965 at Shankeshwar from some motor drivers that there had been some commotion at Kolhapur, and grain shops and trucks carrying grains had been looted there. The said draft was presented for encashment to the Kolhapur Branch of the Defendant Bank on the 22nd of August 1965 or on 24th of August 1965. The controversy in regard to the date of presentment is however, not material for the purpose of deciding the present Revision Application. The Defendant Bank declined to make payment of the said draft to the plaintiff by reason of the instructions given by Dundage to stop payment thereof, and after a formal notice, the plaintiff, therefore, filed the present suit to recover the amount of that draft from the Defendant Bank.

(2.) The interesting and important question that arises in this case is, whether the purchaser of a draft from a Bank, which has been made out in favour of a third party, has any right to stop payment of that draft, and if so, till what stage can he do so. Before referring to the authorities, I would prefer to deal with the relevant provisions of the Negotiable Instruments Act. Section 85A of the Negotiable Instruments Act, 1881, is in the following terms:-

(3.) It is the contention of Mr. Joshi on behalf of the Defendant Bank that his clients were justified in refusing payment of the draft because, in view of the express instructions of Dundage who was the purchaser of the demand draft from their Shankeshwar Branch, the Defendant Bank has reasonable ground for believing that the plaintiff was not entitled to receive payment of the amount of the draft and, under those circumstances, if the Defendant Bank was to make payment in spite of those instructions from Dundage, it could not avail itself of the provisions of Section 85A of the Act and be discharged from liability by reason thereof.