P L D 1962 Dacca 582 (PLP)

HASAN, J.‑On the 29th of November 1951, Messrs Bansidhar Gopaldas and Company, a firm carrying on business as Exporters and Importers in Singapore drew .three bills of exchange for Rs. 6,444‑0‑3, Rs. 4,197‑5‑3 and Rs. 7,613‑4‑0 vide Exhs. 1, 1 (a), and 1 (b) respectively, upon the defendants Messrs Durvesh Brothers, a firm carrying on business in Karachi and Chittagong payable 45 days after sight. Thereafter Messrs Bansidhar Popaldas and Company endorsed the three bills in favour of the Bank of India Limited, Singapore (plaintiff) with a note : "pay to the order of Bank of India Limited. Value received in account per S. S. Pentakota." The plaintiffs Chartered Bank of India in their turn endorsed the bill in favour of Messrs Chartered Bank of India, Australia and China. The Chartered Bank of India, Australia and China represented the said three bills to the defendants firm and the three bills of exchange were accepted by the defendants firm on the 7th of December 1951. As the bills were not honoured in time by the defendants‑firm, the plaintiffs by a cable dated 4th of January 1952, instructed their agent the Chartered Bank of India, Australia and China at Chittagong to extend time for payment of the said three bills in 30 days, that is, until 24th of February 1952. On receipt of further information from the Chartered Bank of India, Australia and China the plaintiffs on the 25th of March 1952, instructed the Chartered Bank of India, Australia and China to represent the bills to the defendants again and in the event of non‑payment to get the bills noted, and protested. The defendants after the presentation by the Chartered Bank of India, Australia and China dishonoured the bills and the bills were duly noted, protested and certified for non‑payment on 10th of April 1952, and a suit was instituted on the 16th of February 1954, the claim being Rs. 18,254‑9‑6, that is, with interest at the rate of 6% per cent. per annum from the 24th of February 1952, till the date of the judgment and thereafter. This claim includes Rs. 18,504‑9‑6 that is the amount of the said three bills of exchange and a sum of Rs. 250 as incidental costs.

2. The suit was contested by the defendants on the ground that the suit was not maintainable at the instance of the plaintiff ; that the plaintiff was not the holder of the bills of exchange in due course but merely the collecting agent for Messrs Bansidhar Gopaldas and Company ; that the suit was bad for defect of parties as Messrs Bansidhar Gopaldas & Co., had not been impleaded in the bills ; that the defendants were commission agents of Messrs Bansidhar Gopaldas & Company and they accepted the bills on the commission basis under the instruction of Messrs Bansidhar Gopaldas & Company and that the said sum was payable after adjustment of accounts between the parties.

3. The trial Court dismissed the suit holding that the suit was not maintainable at the instance of the plaintiffs as the plaintiffs were not the holders in due course, that the suit was bad for defect of parties as Messrs Bansidhar Gopaldas & Company have not been made a party in this suit ; that the suit was hit by the provisions of Foreign Exchange Regulation Act, that the Chartered Bank of India, Australia and China in Chittagong was the holder in due course and that the defendants were not the purchasers of goods. Hence the appeal by the plaintiffs.

4. Mr. Abdullah, the learned Advocate for the appellant, contends that the plaintiffs are the holders in due course and not the Chartered Bank of India, Australia and China ; that the Chartered Bank of India, Australia and China was the collecting agent of the plaintiffs on a commission basis and that his client is entitled to lead evidence to show that the Chartered Bank of India, Australia and China was the collecting agent of his client. In support of his case that the Chartered Bank of India, Australia and China was the commission agent of the plaintiffs, he has relied on oral as well as documentary evidence. The documentary evidence relied on by the learned Advocate for the appellant is Exhs. 2 (e), 1, 2 (d), 2 (c), 2 (f ), 2 (w), 2 (o), 2 (n), 2 (m), 2 (A) (4), A (11) and A (16). He has also relied on the oral evidence of P. W. 1, P. W. 2, P. W. 3 and P. W.

4. These documents and also the oral evidence relied on by the learned Advocate for the appellant in a way lend support to the plaintiffs' case of commission agency but they do not prove that the defendants were aware of the arrangement between the plaintiffs and the Chartered Bank of India, Australia and China at Chittagong.

5. On the other hand, the defendants contend that they were not the purchaser of the bills of exchange but they accepted them for sale on behalf of Messrs Bansidhar Gopaldas & Company on a commission basis. In support of their case reliance has been placed on Exhs. 2, 2 (a), A (S), A (1), A (3), A (5), A (16), A (19) and A (11) printed in the supplementary paper book and also the oral evidence of D. W.

1. We find that the bral and documentary evidence lends support to the contention of the defendants. Furthermore this contention has been accepted by the trial Court.

6. Now the question arises whether the plaintiffs and the defendants are entitled to plead the cases made out by them in the circumstances of the present suit. Section 7 of the Negoti able Instruments Act (XXVI of 1881.) has defined `drawer' and 'drawee' as follows:‑ "The maker of a bill of exchange or cheque is called the "drawer", the person thereby directed to pay is called the drawee." "When in the bill or in any endorsement thereon the name of any person is given in addition to the drawee to be resorted to in case of need, such person is called a drawee in case of need." And `acceptor' has been defined as follows :‑ "After the drawee of a bill has signed his assent upon the bill, or, if there are more parts thereof than one, upon one of such parts, and delivered the same or given notice of such signing to the holder or to some person on his behalf, he is called the "acceptor." And the `payee' has been defined as: ‑ "The person named in the instrument to whom or to whose order the money is by the instrument directed to be paid is called the "payee." The essentials of a valid acceptance are as follows : must written, must be signed by the drawee or his agent, must be the bill, must be completed by delivery. There is no obligation on the drawee to pay until the drawee has delivered the accepted bills to the holder or some persons on behalf of the holder. While a drawee changes his mind and before delivery of the bill to the holder communicates fact to the holder that obliterates his acceptance in such a case is he not an acceptor. The acceptance can also be conditional.

7. Section 8 of the Negotiable Instruments Act defines holder' as follows: ‑ "The "holder" of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto." "Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss destruction." And section 9 of the said Act defines holder in due course as follows: ‑ "Holder in due course" means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable or bearer of the payee or endorsee thereof if, payable to or to the order of before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title."

8. Mr. Abdulla contends that the bills of exchange Exhs. 1, 1 (a) and (b) will go to show that the plaintiff is the holder of these bills of exchange for consideration and as such the plaintiff is the holder in due course and is entitled to institute the suit. He bas further contended that there is sufficient evidence to show that the Chartered Bank of India, Australia and China in Chittagong is the agent of the plaintiff. There is no doubt that Exhs. 1, 1 (a) and 1 (b) will go to show that the plaintiff was holding these bills for consideration but subsequently the plaintiff endorsed these bills in favour of the Chartered Bank of India, Australia and China. In view of the definition of "holder" in section 8 of the Negotiable Instruments Act that "the holder of a promissory note, bill of exchange or cheque means any person entitled in his own name to the posses thereof and to receive or recover the amount due thereon from the parties there to", it appears to us that the moment the plaintiff endorsed in favour of the Chartered Bank of India Australia and China, it parted its right, title and interest in those bills in favour of the Chartered Bank of India, Australia and China and thereby the interest of the plaintiff vested in the Chartered Bank of India, Australia and China and as such it is only the Chartered Bank of India, Australia and China that is entitled to sue the defendants and not the plaintiffs. It would have been a different question if the Chartered Bank of India, Australia and China re‑endorsed the bills in favour of the plaintiffs because the re‑endorsement would have transferred the right, title and interest of the Chartered Bank of India, Australia and China to hold the bills and to realise the same from the plaintiffs. But in this case it has not been shown to us that the Chartered Bank of India, Australia and China re‑endorsed the bills in favour of the plaintiffs. So we find that the suit at the instance of the plaintiffs is not maintainable.

9. Mr. Abdullah has contended that in view of the pro visions in paragraph 3 of section 46 of the Negotiable Instruments Act he is entitled to lead evidence. Section 50 of the Act provides: ‑ "The indorsement of a negotiable 'instrument followed by the delivery transfers to the indorsee the property therein with the right of further negotiation ; but the indorsement may, by express word, restrict or exclude such right, or may merely constitute the indorsee an agent to indorse the instrument, or to receive its contents for the indorsee or for some other specified person." From these it appears that the endorsement may, by express words, restrict or exclude such rights ox may merely constitute the endorsee an agent to endorse the instrument or receive its contents for the endorser or for some other specified person. In our opinion when the endorser wants the endorsee to act as an agent it must be shown on the note itself in order to succeed in a suit by the endorser in the absence of the endorsee against L the acceptor. But no such case has been made out in the present suit.

10. Now coming to the question whether the plaintiffs can lead evidence to show that the Chartered Bank of India, Australia and China was their agent in this case and the defendants to show that they were the agent of Messrs Bansidhar Gopaldas and Company. In support of the respective contentions of the parties, Mr. Abdullah has relied on the cases of Punjab National Bank Ltd., Lahore v. Cotton Factory known as Be! Krishna Dass Durga Dutta (A I R 1924 Lah. 640) (Haji) Safdar Ali Khan v. Mian Umar Bakhsh and others (A I R 1936 Pesh. 151), P. S. Ponnayya v. P. P. Palaniappa Chetty and others (51 I C 435), Subramanian Chetty v. Alagappa Chetty and others (I L R 30 Mad. 441) and The Bombay Company, Limited v. Official Assignee of Madras (I L R 44 Mad. 381), while on the other hand Mr. Sobhan has relied on the cases of Ghulam Mohiuddin v. Ram Ditta Mal and another (A I R 1930 Lah. 248), Patoju Sangayya v. Patoju Sanyasi and another (23 I C 545) and Gauri Datta Pendey v. Bandhu Pandey and others (A I R 1929 All. 394).

11. It has been further contended by the learned Advocate Mr. Abdullah for the appellant that if a party is not allowed to lead evidence that the endorsee is an agent then there will be difficulties in the commercial community and the trade will be affected adversely.

12. In our considered opinion when an endorser endorse a bill of exchange in favour of the endorsee and makes deliver of the bills of exchange to the endorsee without qualification, in that case in between the endorser and the endorsee the endorse can lead evidence to show that what is apparent is not the real thing but the endorser cannot lead any oral evidence to show that what is apparent is not the real thing when the endorser wants to realise the money from the drawee instead of realisation by the endorsee from the drawee. According to the definition of section 8 of the Negotiable Instruments Act the endorsee is entitled to realise the money from the drawee. If it is held that the endorser is also entitled to realise the money from the drawee, in that case two persons will be in a position to realise the money from the drawee whereby anomalies will be created and the drawee may be made to pay twice in place of once. Similarly a drawee can lead evidence to show after acceptance that he accepted the bills as an agent from the drawer when the case is in between the drawer and the drawee but he is not entitled to plead that when the suit is in between the endorsee and the drawee. Hence we find that in the present case no evidence can be led by the plaintiffs to show that the Chartered Bank of India, Australia and China in Chittagong was the agent of the plaintiff ; nor the defendants are entitled to lead evidence to show that the Chartered Bank of India, Australia and China was not entitled to recover the property as they were the commission agent of Messrs Banshidhar Gopaldas & Company and the Chartered Bank of India, Australia and China in Chittagong was not entitled to recover the money. In the present case the Chartered Bank of India, Australia and China has not been made a party nor the Chartered Bank of India, Australia and China has instituted the present suit and as such the suit is not maintainable at the instance of the plaintiffs the endorsee without qualification in favour of the Chartered Bank of India, Australia and China.

13. Now coming to paragraph 3 of section 46 of the Negotiable Instruments Act on which Mr. Abdullah has relied, we find the following provision: ‑ "As between such parties and any holder of the instrument other than a holder in due course, it may be shown that the instrument was delivered conditionally or for a special purpose only, and not for the purpose of transferring absolutely the property therein." In our opinion this passage only authorises the disclosure of real position between the endorser and his endorsee but not between the endorser and the acceptor after the endorsement in favour of the endorsee.

14. The next question arises whether the present suit is also hit by the provision of the Foreign Exchange Regulation Act (VII of 1947). Subsection 1 (b) of section 5 of the Foreign Exchange Regulation Act, 1947 provides "(1) Save as may be provided in and in accordance with any general or special exemption from the provisions of this subsection which may be granted conditionally or uncon ditionally by the State Bank, no person in or resident in, Pakistan shall‑ (b) draw, issue or negotiate any bill of exchange or pro missory note or acknowledge any debt, so that a right (whether actual or contingent) to receive a payment is created or transferred in favour of any person resident outside Pakistan." Subsection (1) of section 21 of the Foreign Exchange Regulation Act provides: "No person shall enter into any contract or agreement which would directly or indirectly evade or avoid in any way the operation of any provision of this Act or of any rule, direction or order made thereunder." These provisions clearly go to show that the contracts entered into between Messrs Banshidhar Gopaldas and Company and the defendants are not valid in law and as such the suit is not maintainable. But Mr. Abdullah, the learned Advocate for the appellant, contends that in view of the provision in subsection (3) of section 21 of the Foreign Exchange Regulation Act the plaintiff's suit is not hit by any provision of the Act. It is contended that subsection (3) of the aforesaid Act has authorised a person to institute a suit and to obtain a decree but the execu tion of the said decree is subject to the permission of the Central Government or State Bank, as the case may be and he has also relied on the case of Kshitish Chandra Ghosh v. Nagendra Nath Majumdar (P L D 1959 Dacca 71).

15. Subsection (3) of section 21 of the Foreign Exchange Regulation Act, 1947 runs thus "(3) Neither the provisions of this Act nor any term (whether expressed or implied) contained in any contract that any thing for which the permission of the Central Government or the State Bank is required by the said provisions shall not be dole without that permission, shall prevent legal proceedings being brought in Pakistan to recover any sum which, apart from the said provisions and any such term, would be due, whether as a debt, damages or otherwise, but‑ (a) the said provisions shall apply to sums required to be paid by any judgment or order of any Court as they apply in relation to other sums ; and (b) No steps shall be taken for the purpose of enforcing any judgment or order for the payment of any sum to which the said provisions apply except as respects so much thereof as the Central Government or the State Bank, as the case may be, may permit to be paid ; and (c) for the purpose of considering whether or not to grant such permission, the Central Government or the State Bank, as the case may be, may require the person entitled to the benefit of the judgment or order and the debtor under the judgment or order,, to produce such documents and to give such information as may be specified in the requirement."

16. The meaning of the first portion of the said subsection, namely, "neither the provisions of this Act nor any term (whether expressed or implied) contained in any contract that anything for which the permission of the Central Government or the State Bank is required by the said provisions shall not be done without that permission" becomes clear when reference is made to subsections (1) and (2) of section 21 of the Foreign Exchange Regulation Act. Subsection (1) of this Act prohibits any contract which would directly or indirectly evade or avoid in any way the operation of any provision of the Act or of any rule, direction or order made thereunder. Subsection (2) is an exception to subsection (1) of the Act providing that any contract which expressly or impliedly contains a term that a thing shall not be done unless permission of the Central Government or the State Bank, as the case may be, shall not be rendered invalid by any provision or having the effect under this Act that a thing shall not be done without the permission of the Central Government or the State Bank, as the case may be, and sub section (3) of the Act provides for suits for a contract of a nature coming under subsection (2) of section 21 of the Foreign Exchange Regulation Act.

17. In our opinion, the above view makes the provision of subsection (3) of section 21 of the Foreign Exchange Regula tion Act clear, that is, only in case of a contract, a term of which expressed or implied that nothing shall be done without the permission of the Central Government or the State Bank, as the case may be, a suit may be instituted and execution of such a decree is subject to the permission etc., as enumerated in clauses (a), (b) and (c) of subsection (3) of section 21 of the Foreign Exchange Regulation Act and in no other case. Further more this Act provides for prevention of fraud in the public interest and any interpretation other than the one we have given and the acceptance of the contention of Mr. Abdullah will perpetuate fraud and defeat the purpose of the Act which is not the intention of the Legislature. It is seen that the Chartered Bank of India, Australia and China sought permission of the proper authority but that has been refused. Hence we find that the suit is also hit by the provisions of the Foreign Exchange Regulation Act. In the result, this appeal is dismissed with costs and the judgment and decree of the trial Court are affirmed. IDRIS, J.‑I agree. S. B./A. H. Appeal dismissed.