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(a) Negotiable Instruments Act (XXVI of 1881)-

=-- S. 31-Cheque-Cheque returned with remarks "refer to drawer"- Expression "refer to drawer"-Held, means "dishonor of cheque".- [Words and phrases].

Plunkett and another v. Barclays Bank Limited (19361 2 K B 107 ref.

(b) Contract Act (IX of 1872)

--- S. 171-Lien--Neither any balance outstanding against client in his account with Bank nor any 'goods bailed over which Bank could claim lien-Provisions of S. 171, held, not applicable in such case.

(c) Negotiable Instruments Act (XXVI of 1881)

-- S. 31-Cheque-Bank, in absence of a contract to contrary or any statutory provision or banking usage or practice, bound to honour cheque even if balance in account equal to amount of cheque-Duty of Banker to see that his client's credit should not suffer on such ground and if it does, he becomes liable to him for damages-Cheque found to have been wrongfully dishonored-Held, client entitled to special damages notwithstanding fact that he did not plead and prove any special damages.-[Damages].

Hart's Law of Banking, 4th Edn., Vol. 1, p. 443 ; Paget's Law of Banking, 5th Edn., p. 173 ; Wilson v. United Counties Bank Limited and another 1920 A C 102 ; Gibbons v. Westminster Bank Limited (1939) 3 All E R 577 ; Davidson v. Barclays Bank Ltd. 1940 All E R 316 ; Jogendranath Chalravarti v. New Bengal Bank Ltd. A I R 1939 Cal. 63 ; .Messrs New Central Hall v. United Commercial Bank Ltd. A I R 1959 Mad. 153 and S. K. C. C. Bank Ltd., Amalaparam v. Vissapraqada Subrahmanyam A I R 1963 Andh. Pra. 250 ref.

Jan Muhammad Dawood for Plaintiff.

Naseem Farooqui for Defendant No. 1.

Dates of hearing : 9th and 10th October, 1979.

JUDGEMENT

The plaintiff who is the sole proprietor of Yasmeen Plastic Industries, and had an account with the Eastern Banking Corporation Limited, being Current Account No. 23, has brought this suit against the said Bank which is now taken-over by the National Bank of Pakistan under Ordinance No. 30 of 1973, claiming a sum of Rs. 1,00,000 as damages on account of dishonour of cheque drawn by him on his account while his account was in sufficient funds. The plaintiff has however, not pleaded any special damages.

Eastern Banking Corporation Limited, defendant in its written statement took the stand that the plaintiff's account had no sufficient funds and they had lawful excuse to return the cheque as the plaintiff had failed neglected avoided to surrender the original guarantee tendered by it on behalf of the plaintiff to the P. 1. A. Here 1 may mention that it appears that the .plaintiff had another account with the defendant in the name of Travomars and in that account some guarantee was furnished to P. 1. A. on behalf of the plaintiff.

On the pleadings of the parties the following consent issues filed by the learned counsel for the parties were adopted by the Court.

(1) Is the Suit as framed maintainable

(2) What were the incidences of the plaintiff's accounts with the defendant

(3) Was the plaintiff's cheque in question wrongfully returned by the defendants without effecting payment

(4) Is the plaintiff estopped from making the suit claim

(5) Did the return of the plaintiff's cheque constitute dishonour

(6) Has the plaintiff suffered damages, if so to what extent

(7) Has any cause of action accrued to the plaintiff

(8) What should the decree be 7

Today at the Bar Mr. Nasim Faruqui Advocate for the defendant stated that he does not press issues Nos. 1, 4 and 7.

In support of his claim the plaintiff examined himself and produced the cheque (Exh. 6;1) which was dishonoured and its memorandum (Exh. 6/2) which stated the reason for return of the cheque as refer to drawer". He also produced a copy of his account with Eastern Banking Corporation Limited (Exh. 6/12) showing that a sum of Rs. 10,000 was lying to his credit in his account with defendant 1. He additionally produced a letter from the United Rank Limited, dated 3-1-1969 (Exh. 6/3) wherein it is stated that on account of dishonour of the cheque in question he was required to clear the overdraft in his account with the United Bank Ltd. This cheque was drawn and delivered by the plaintiff to United Bank Ltd. for credit of his account with it after its clearance.

The plaintiff also examined Khalid Mahmood (Exh. 7) who stated that the plaintiff had an account with the United Bank Limited, Pakistan Chowk Branch Karachi of which he was the Manager. He produced the letter Exh. 6/3. This witness in his cross-examination stated that the Bank had allowed to the plaintiff overdraft facilities and the facilities were secured by hypothecation of stocks. He further stated that the cheque of Rs. 10,000 which was dishonoured, was deposited by Yasmeen Plastic Industries in their current account in order to reduce their liability of Rs. 1,00,000.

The defendants examined A. S. Qadri (Exh. 9) who was the Manager of defendant 1 at the relevant time, posted at Karachi. He stated that the plaintiff had two accounts in two different names, the first with the name of Yasmeen Plastic Industries and other in the name of TRAVOMARS and that at the request of the plaintiff, the Bank had furnished a bank guarantee to P. 1. A. which was not returned by the plaintiff at any time in spite of several letters written in this regard. He further stated that the Bank used to send to the plaintiff a copy of the monthly statement of accounts and half yearly confirmation slip showing the balance in the account. He produced a copy of the statement of account from 16-J 1-1967 to 1-1-1970 (Exh. 9/1) in the name of Yasmeen Plastic Industries. He has also produced another statement of account of TRAVOMARS from 23-11-1967 to 1-6-1970 (Exh. 9,/2). He stated that the plaintiff did not dispute the correctness of the statement of account sent to his firms. He further stated that the cheque was never dishonoured but was returned with the remarks refer to drawer' for three reasons, namely, insufficiency of funds, (2) Bank had a lien over the amount of Rs. 1,00,000 for the bank guarantee furnished on behalf of Yasmeen Printing Industries & TRAVOMARS to the P. I. A. and (3) if the cheque was honoured that would have amounted to closer of the account and this could be done only when the unused cheques were ;turned to the Bank. He stated that another cheque drawn in the account of TRAVOMARS was returned with the same remarks for the same reason. Regarding the guarantee the witness has stated that the plaintiff stand in his letter dated 23-6-1979 (Exh. 6,118) that the guarantee was collected by Mr. M. Naqvi is incorrect as no such person was in the employment )f the Bank and there was no other person. In the cross-examination - to Mr. Jan Muhammad Dawood he stated that the statements of account were sent every month by ordinary post and in this case there was a lien on the account of the plaintiff and they informed him by the letter addressed to the firm of the plaintiff namely, TRAVOMARS. The letter was sent by the ordinary post. He admitted that the Bank had not sent separate debit notes of debiting expenses for the same were represented i4 the monthly statement of account. He explained that the incidental charges are charged to cover the expenses of cheque books, ledger books and statements etc. He further stated that such charges run between Rs. 5 to Rs. 10 per account half-yearly and that such charges are normally debited in the account in the last week of June and December. He admitted the suggestion that no incidental charges were debited in the account of Yasmeen Plastic Industries for 1-I1-1968 to 23-1-1969. He also admitted that the Bank guarantee to P. I. A. had already expired when the cheque was presented. He, however, explained that unless the bank guarantee was returned to the Bank the Bank could not know that any claim had arisen within the validity period of the Bank guarantee. He further admitted that the Bank did not receive any claim from P. I. A.

Having generally reviewed the evidence led before me in this case, I now deal with issues Nos. 2, 3, 5, 6 and l for, as stated earlier Issues Nos. 1, 4 and 7 are not pressed by Mr. Nasim Faruqui Advocate for the defendants.

I would take Issues Nos. 2, 3 and 5 together.

Issues Nos. 2, 3 & 5.-The Plaintiff is his deposition stated that he drew the cheque on his account with the defendant 1 for there was a balance of Rs. 10,000 in his account. In support of the statement he produced a copy of statement account which bears the date of 6-2-1968 and sht7ws that on 4-1-1968 a sum of Rs. 1,10,000 was lying to the credit of the plaintiff in his account with defendant 1. It further shows that on 22-1-1968 a sum of Rs. 10,000 was lying to this credit in the said account. However, the cheque (Exh. 6/1) which was returned unpaid is dated 30-12-1968 and it was presented to the Bank on 1-1-1969 as would appear from the memorandum (Exh. 6/2). Therefore, this statement of account does not support the claim of the plaintiff that when the cheque was presented he had a sum of Rs. 10,000 in his account. The plaintiff has also not produced any account book in support of his claim.. There is no other evidence except the plaintiff's word and statement of the account (Exh. 6/1). On the other hand defendants, witness A. S. Qadri produced copies of statements of accounts of Tasneem Plastic Industries as well as TRAVOMARS (Exh. 9/1 and Exh. 9/2) Exh. 9/1 is relevant to the case under consideration and according to it on 30-12-1968 a sum of Rs. 9,99 was lying to the credit of the plaintiff in this account: Therefore, it is obvious that the cheque drawn was in excess of Rs. 5 and there being no sufficient fund in the account of the plaintiff it was returned for that. reason. The trend of cross-examination of the witness shows that assurance, of this statement of account was being challenged. However, Mr. A. S. Qadri in his deposition clearly stated that the Bank used to send monthly statements of account and half-yearly confirmation slips of plaintiff's balance in the account. This statement was not questioned in the cross-examination. Significantly. the plaintiff in his cross-examination did not deny the suggestion that the Bank used to send him the statements of account. He, however, stated that he did not remember if the Bank had sent the statements of account. Now, if the plaintiff was receiving the monthly statements of his account and the statement of account produced by the defendants was incorrect, he should have produced his copy of the statement of account to show that there was sufficient balance in his account.

The burden of proof being on the. plaintiff he has failed to show that there was sufficient balance in his account and therefore it is not possible to hold on the basis of the evidence available on- record that the plaintiff's cheque was wrongfully returned by the defendant. No doubt that when a cheque is returned with the remarks refer to drawer' it means dishonour of the cheque' for the expression refer to drawer' amounts to a statement by the Bank that "we are not paying, go back to the drawer and ask why" or also, "go back to the drawer and ask him to pay". [See Plunkett and another v. Barclays Bank Limited (1)1.

So far as the question of guarantee is concerned the plaintiff's case is that the guarantee furnished on behalf of his firms was returned to the Bank by P. I. A. as the same was collected by Mr. M. Naqvi as asserted by him in his Letter (Exh. 6118) which name was subsequently corrected as Mr. A. S. K. Qadri in the letter addressed by the Advocate for the plaintiff dated 22-7-1970 (Exh. 6/16). However, A. S. K. Qadri came in the witness-box and denied that he ever collected the original guarantee. In any case, the question whether the guarantee was returned or not, in my view, is immaterial for the argument of Mr. Nasim Faruqui learned counsel for the defendant is that the Bank had a lien under section 171 of the Contract Act on the balance in the account of the plaintiff. However, in my opinion the provisions of section 171 of the Contract Act are not at all attracted, for under the provisions of this section a banker, amongst others named therein; in they absence of a contract to the contrary, has a right to retain as security for a) general balance of account goods bailed to him. In the present case firstly, the plaintiff has not pleaded and proved that there was any general balance outstanding against the plaintiff in his account, secondly no goods were bailed to them over which the Bank could claim lien under the said provisions. Therefore, no lien could be claimed on the credit balance in they account of the plaintiff with the defendant for non return of the original' guarantee issued on behalf of the plaintiff to P. I, A. even if the allegation is' accepted as correct.

As regards the third ground that if the cheque was honoured there would not have been left any balance in the account and that would have amounted to closure of the account and the same could not have been closed without returning unused cheques, it would suffice to say that in the absence of a contract. to that effect between the parties or banking usage or practice (which has to be pleaded and proved) the Bank had no right to refuse payment on that ground. The Bank, in the absence of a contract to the contrary or any statutory provision or banking usage or practice was bound to honour the' cheque, even when the balance in the account was equal to the amount of the cheque. However, if after the payment of the cheque nothing was left in the account it was open to the Bank to close the account after giving notice to the plaintiff. It is the duty of a banker to see that his client's credit should not suffer on such a ground and if it does, he be comes liable to pay him damages.

However, in the present case I have found as a fact that the Bank was entitled to refuse the' payment of the cheque for, the amount of the cheque exceeded the amount available as balance in the account of the plaintiff.

I am therefore, of the opinion that there was sufficient reason for not honouring the cheque.

Accordingly, I decide all these three issues against the plaintiff.

Issue No. 6.-In view of my findings on Issues 2, 3 and 5 it is not necessary to decide this issue. However, since an important question of law has been raised and there is no reported decision of this Court, I think it proper to decide the same.

(1) (1936) 2 K B 107

When a cheque of the customer who has sufficient funds- in the hands of a bank properly applicable to the payment of such cheque is dishonoured he is entitled to compensation for any loss or damage caused due to such dishonour. This principle is statutorily recognised in section 31 of the Negotiable Instruments Act, 1881, in the following words :

"31. The drawee of cheque having sufficient funds of the drawer in his hands, properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, must compensate the drawer for any loss or damage caused by such default."

However, it is submitted by Mr. Nasim Faruqui learned counsel for the defendants that the plaintiff has not pleaded with full particulars and proved any special damages as required by law. He further submitted that plaintiff's claim for Rs. 1,00,000 by way of damages cannot be taken into consideration in the absence of particulars and proof and the suit is liable to be dismissed. On the other hand, Mr. Jan Muhammad Dawood learned counsel for the plaintiff submitted that Court can treat the claim for Rs. 1,00,000 as a claim for general damages and award such damages as it considered just.

In reply Mr. Nasim Faruqui argued that under the provision of section 31 of the Negotiable Instruments Act no general damages can be awarded for compensation has to be for such loss or damage as is suffered by the drawer due to dishonour of the cheque which means special damages.

However. on the point in issue I may refer to a passage from Hart's Law of Banking, 4ih Edn., Vol. I, p. 443, which is quite illuminating. It is :

"Where the banker, being bound to honour his customer's cheque, has failed to do so he will be liable in damages. If special damage naturally ensuing from the dishonour is proved, it will be properly taken into account in assessing the amount of the damages. If the customer be a trader, the jury may properly award substantial damages, in the absence of the proof of special damage. In other cases the customer will be entitled to such damages as will reasonably compensate him for the injury which, from the nature of the case, he has sustained. All loss flowing naturally from the dishonour of a cheque may be taken into account in estimating the damages."

Further, Page in his Law of Banking, 5th Edition at page. 173 has stated that substantial damages may be given against the banker without actual loss to the customer.

Reference may also be had to the decision of House of Lords in Wilson v. United Counties Bank Limited and another (1). In this case it was held that there was a right to claim substantial damages in case of refusing or dishonouring of a cheque by a bank though in the case of non-trader special loss or injury must be proved before substantial damages could be claimed except where there are special circumstances like a man issuing a cheque to a financee being dishonoured wrongfully and the financee breaking off the engagement in consequence.

I may also cite here Gibbons v. West minister Bank Limited (2). In this case a bank wrongfully. dishonoured a cheque of the plaintiff; who was not a Trader. The plaintiff did not, in the statement of claim, plead any matters showing a loss of credit, but proved that, after the cheque was dishonoured, her landlords had asked her to pay her rent in cash; and not by cbeque.

(1) 1920 A C 102 (2)x(1939) 3 All E R 577

It was held by Lawsrence: J. that "the authorities which have been cited to me all lay down that a trader is entitled to recover substantial damage, without pleading and proving actual damage for the dishonour of his cheque, but it has never been held that the exception to the general rule as to the measure of damages for breach of contract extends to anyone who is not a trader. The cases in which this view has been taken, and which have been cited to me, are Marzetti v. Williams (1), Rolin v. Steward (2), Bank of New South Wales v. Milvain (3), Kinlan v. Ulster Bank Ltd. (4). The rule is so expressed in Grant on Banking, 7th Edn., pp. 88, 89, and in Smith's Leading Cases, 13th Edn., Vol. 2, p. 574, where it is also stated that the exception to the general rule is an exception which ought not to be extended, and reference there is made to the opinion of Lord Atkinson in the House of Lords in Addis v. Gramophone Co. Ltd. (5). In my opinion, ,l ought to treat this matter as covered by these authorities, and I must hold that ,the corollary of the proposition which is laid down by these cases is the law namely, that a person who is not a trader is not entitled to recover substantial damages unless the damages are alleged and proved as special damages. I am therefore of opinion that "the plaintiff, whom I hold not to be a trader, is entitled to recover only nominal damages, and she will have judgment for 40 s. Judgment for the plaintiff for 40 s".

The very same view regarding both traders and non-traders was adopted in Davicson v. Barclays Bank Ltd. (6).

However, it is submitted by Mr. Nasim Faruqui learned counsel for the defendants that the rule of English Law cannot be allowed in this country for there is no similar provision in. the English Bills of Exchange Act as is contained in section 31 of our Negotiable Instruments Act. But the submission is not well founded for according to Indian Text Bookwriters on Negotiable Instruments Act, 1881 same rule has been followed by Courts in the sub-continent in respect of the provisions of section 31 of the Negotiable Instruments Act, 1881, and in support reliance is placed by the authors on Jogendranath Chalravarti v. New Bengal Bank Ltd. (7).

I may also refer to a decision of Madras High Court in Messrs New Central Hall v. United Commercial Bank Ltd. (8). It was ruled by Pan. chapakes Ayyar sitting with Basheer Ahmed Sayeed, JJ. :

"We are of the opinion that the Indian Law on the subject is not at all different from the English Law on the point, and that in case of non-trader nominal damages should be awarded - where there is no proof of special loss or damage by the wrongful dishonouring, and in the case of a trader, substantial damages should be awarded even in the absence of proof of special loss or damages."

The Madras decision was followed by the High Court of Andhra Pradesh in S. K. C. C. Bank Ltd., Amalaparam v. Yissapraqada Subrahmanyam (9).

1 may mention that in this case the English decisions in Wilson v. United Counties Bank Ltd. and Gibbons v. Westminster Bank Ltd., were followed Therefore, if the plaintiff had succeeded in proving that his cheque was wrongfully dishonoured he would have been entitled to special damages'

(1) (1830) 1 B & Ad. 415 (2) (i854) 14 C B 59;

k3) (1884) 10 V L R 3 (4) 1928 1 R 171

(5) 1909 A C 488 (6) 1940 All E R 316

(7) A I R 1939 Cal. 63 (8) A I R 1959 Mad. 153

(9) A I R 1963 Andh, Pra. 250

notwithstanding the fact that he did not plead and prove any special damages.

As to the quantum of damages I may mention that in the Madras case of Messrs. The New Central Hall v. The United Commercial Bank Ltd. 11 cheques aggregating less than Rs. 4,000 were dishonoured and damages, on the fact of that case, in the sum of Rs. 6,000 were awarded and in Calcutta Case of Jogendra Nath Cljakravar/i v. New Bengal Bank Ltd., three cheques by a non-trader were dishonoured and damages in the sum of Rs. 500 were awarded. In the case reported in A I R 1963 Andh. Pra. 250, a cheque of Rs. 28 by a non-trader was dishonoured and an award of nominal damages in the sum of Rs. 175 by the lower Court was upheld.

Issue No. 8.-Since in this case the cheque was not unduly dishonoured I am of the view that the plaintiff is not entitled to any relief.

I, therefore, dismiss the suit leaving the parties to bear their own costs in the circumstances of this case.

S. Q. Suit dismissed.

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