JWALA BANK LTD Vs. HABIB AHMED

JUDGEMENT

(1.) The sole point for decision in this appeal is whether leave to defend a suit for the recovery of money based on a negotiable instrument should be allowed under Order XXXVII, Rule 3, Civil P. C.

(2.) The plaintiff Habib Ahmed brought a suit against the Jwala Bank Ltd., Agra, the Jwala Bank Ltd., Jhansi, and Haji Mohd. Zakria for the recovery of Rs. 80,309/- on the basis of two demand drafts. These drafts were delivered by defendant No. 2 to defendant No. 3 Mohd. Zakria and were endorsed in favour of the plaintiff. The drafts were presented and dishonoured. The plaintiff then brought the present suit for the recovery of Rs. 80,000/- representing the two drafts and Rs. 309/- representing the interest accruing up to the date of the suit. The suit was brought under Order XXXVII, rule 2, and the question arose whether the defendants should be allowed to defend the suit under rule 3. In the written statements put in by the defendants five distinct pleas were raised. The defendants' story was that Mohd. Essa son of Mohd. Zakria defendant No. 3 went to the Jwala Bank Ltd., Jhansi, and handed over two cheques for Rs. 40,000/- each on the Bharat Bank Ltd., Jhansi, and requested the Bank' to issue two drafts of Rs. 40,000/- each. The Jwala Bank Ltd., declined to issue the drafts, but Mohd. Essa's father Mohd. Zakria defendant No. 3 then came and assured the Bank that the cheques handed over were good cheques and that if the cheques were not honoured the payment of the drafts could be stopped. On this representation, the drafts were issued and handed over to Mohd. Zakria. A little later Mohd. Essa came back to the Bank and told them that the drafts had been lost and asked the Bank to stop payment. The drafts had in reality been sent on to the plaintiff and the story of their having been lost was a complete fabrication. The plaintiff presented the drafts, but as instructions stopping payment had been issued the drafts were dishonoured. It was also pleaded by the Bank that Mohd. Zakria had no funds in the Bharat Bank Ltd., and that the two cheques for Rs. 40,000/- each handed over by him could not have been honour- ed at any time. It was also pleaded that the endorsement in favour of the plaintiff was a forgery and had not been made at Amritsar.

(3.) On these pleadings, five distinct lines of defence were open to the defendants, namely. (I) Defendant No. 3 had contracted with the Bank that if the cheques drawn on the Bharat Bank Limited were not honoured payment of the drafts could be stopped and it was in accordance with the terms of this contract that payment was stopped. (2) Defendant No. 3 had himself requested the Bank to stop payment of the drafts and the Bank thereupon informed the drawee and then the negotiable instrument ceased to exist. (3) A fraud was practised upon the Bank inasmuch as a false representation was made that there were funds available in the Bharat Bank Limited and secondly that the drafts had been lost when, in fact, they had been sent to the plaintiff. (4) The plaintiff was not a 'bona fide' holder in due course, because the endorsement in his favour was fictitious and also he was a party to the fraud. (5) The endorsement was not made at Amritsar and therefore the Amritsar Courts had no jurisdiction to hear the suit.