P L D 1962 Supreme Court 376 (PLP)

S. A. RAHMAN, J.‑--This order will dispose of two cross appeals, arising out of a suit, brought by S. M. Hanif (Dacca) Limited, for recovery of Rs. 3,29,981 from the Central Bank of India Ltd., Dacca, on the allegation that the Bank had exacted Rs. 2,79,581 in excess of the sum due to it in respect of an import transaction, involving foreign exchange, and that the plaintiff was entitled to interest on this sum at 6 per cent. per annum from the 5th of December 1952 till the date of the suit. The suit was tried on the original side of the Dacca High Court by a learned Single Judge who dismissed it by order, dated the 19th of August 1959. On appeal, a Division Bench of the High Court partly reversed the decision. The plaintiff's suit was decreed for Rs. 1,76,767‑5‑0 which was the amount paid in excess on account of a transaction with Messrs Janak Limited of India, together with interest at 3 per cent. per annum from the 12th of May 1953, the date on which the cause of action was said to have arisen, till the date of the suit, viz., the 18th of November 1955. Proportionate costs were awarded to the plaintiff throughout. The decretal amount was further ordered to bear interest at 6 per cent. per annum till realisation. Both parties apparently felt aggrieved by the decision of the appellate Bench and have appealed to this Court on certificates of fitness granted by the High Court. The relevant facts may be briefly summarised. At the request of Messrs S. M. Hanif, a partnership firm, an irrevocable letter of credit in the sum of Rs. 5,83,000 estimated to be the value of 575 bales of cotton piece goods, to be dispatched by ship by Messrs Janak Limited Calcutta to Narayanganj, Dacca, was opened by the defendant‑Bank. The payment for the goods was to be made at Calcutta on presentation of shipping documents, including invoices in duplicate and bills of lading. The letter of credit was to be available for negotiation to the extent of the amount mentioned, by means of bills at sight, drawn on the plaintiff, without recourse, accompanied by duplicate signed invoices and complete sets of "clean" bills of lading. In respect of this letter of credit the goods actually shipped by Messrs Janak Limited were of the value of Rs. 5,82,489‑11‑6. Another irrevocable letter of credit was similarly opened at the request of the plaintiff in favour of Messrs National Textiles Limited, Calcutta, for a sum of Rs, 6,00,000 for the invoice value of 600 bales of cotton piece goods to be shipped from Calcutta to Narayanganj. The terms and conditions of this transaction were similar to those settled in the case of Messrs Janak Limited. On this letter of credit the goods actually shipped were valued at Rs. 3,7,713‑8‑6. For the transaction with Messrs Janak Limited, a sola of Exchange, dated the 10th September 1949, for a sum of Rs. 5,82,469‑11‑6 was drawn by the exporting firm and this was made payable at sight, to the order of the Central Bank of India Limited, for value received, against shipping documents. For the transaction with the National Textiles Limited, two bills of exchange, payable at sight, were similarly drawn, one dated the 12th September 1949, for a sum of Rs. 3,44,710‑6‑6 and the other, dated the 13th September 1949, for a sum of Rs. 13,003‑2‑0. These bills were also negotiated at Calcutta through the defendant Bank. It is not common ground between the parties that the bill of exchange drawn by Messrs Janak Limited was presented for payment to the plaintiff on the 15th September 1949, while the other two bills drawn by Messrs National Textiles Limited were similarly presented on the 16th of September 1949. Under instructions of the plaintiff, 95% of the amount shown in the two bills of Messrs National Textiles Limited was paid by the Bank (who had informed the plaintiff of the state of the bills of lading), namely, Rs. 3,39,827‑13‑6, on the ground that clean bills of lading did not accompany the sola of exchange. The other bill of Messrs Janak Limited was not honoured on the date of presentation on the plea that the bills of lading accompanying the bills of exchange were not "clean", there being endorsements on them that some bales were restitched and were spotted with rain‑water. On the 17th of September 1949, India devalued its currency. The official rate of exchange was not determined till the 27th of February 1951, when the ratio of hundred Pakistani rupees to Rs. 143‑8‑0 Indian, was agreed to be adopted. The State Bank of Pakistan had declared certain public holidays under the Negotiable Instruments Act, following this devaluation, and actual payment was made by the plaintiff to the defendant‑Bank on the 24th and the 27th of September 1949, respectively, on account of the three bills of exchange. The plaintiff did so under protest at the pre‑devaluation rate, viz. at par, but the Bank agreed to keep the sums In a suspense account till the exchange rate issue could be resolved. It may be mentioned that the plaintiff claimed to have paid Rs. 9,22,296 on the 21st September 1949 to get the release of the relevant goods, but the Bank insisted that the actual payment was on the two dates aforementioned. Nothing turns on this variation of dates. The firm of Messrs S. M. Hanif, by a deed of assignment, dated the 22nd March 1955, transferred its right, title and interest in the excess money paid to that Bank, to a private limited company S. M. Hanif (Dacca) Limited, which subsequently brought the suit for recovery of the amount in question with costs and interest. The plaintiff, inter alia, claimed that there was an agreement inter partes to refer the dispute in question to the State Benk of Pakistan for adjudication and that the opinion of the Bank was to be binding on the parties. This was denied on behalf of the Bank and the Courts below have found against the plaintiff on this point which has not been re‑agitated before us in this Court. The suit had been instituted on the 18th of September 1955, and it was argued In the plaint that the amount being held in a suspense account, was in trust with the Bank and that the cause of action arose on the date when the defendant committed a breach of trust by its denial of liability on the 12th of May 1953 and that, In any event, the cause of action arose on the 12th of April 1953 when the Bank refused to abide by the opinion of the State Bank of Pakistan. The bar of limitation was raised by the Bank to the suit, Art. 62 of the Second Schedule to the Limitation Act being invoked. The competency of the plaintiff to sue as the successor‑in‑interest of S. M. Hanif was also challenged. It was further pleaded on behalf of the defendant that the bills of exchange being payable in Pakistan, according to the contract between the parties, they must be deemed to be expressed in Pakistani rupees and no question of exchange arose. In the alternative, it was averred that the liability to pay having been incurred before the devaluation of Indian currency took place, there was no question of excess payment having been made. In the appeal filed on behalf of the plaintiff, the dismissal of the plaintiff's claim, in respect of the payment made against bills of exchange drawn by the National Textiles Limited Calcutta, by the appellate Bench which affirmed the decision, in this respect, of the trial Judge, was challenged. The decision turns on the determination of the relevant date for converting the Indian currency mentioned in the two bills of exchange into Pakistani currency, for the purpose of meeting those bills. A similar question arose for consideration In the case of the Central Bank of India Limited v. Md. Islam Khan (Civil Appeal No. 30‑D of 1960), disposed of by this Court by judgment, dated the 28th February 1962, at Dacca. On an examination of the provisions of the Negotiable Instruments Act, 1881, and the rules of International Law, bearing on the point, it was held in that case that the relevant date for conversion of the foreign currency Into Pakistani currency in such cases, would be the date on which the bill of exchange matured for payment and the liability for payment was incurred Mr. Asrarul Hossain, who appeared for the plaintiff‑appellant, sought to take the present case out of the principle laid down in the case mentioned, by urging that the liability to pay in the instant case was not incurred till the State Bank of Pakistan gave the permission to remit foreign currency to India, under the Foreign Exchange Regulation Act, 1947. This permission, he suggested, must have been accorded after the date of devaluation and, consequently, the liability must be assessed at the post. devaluation rate. In support of his position, learned counsel relied on the English case reported as Cummings v. London Bullion Co., Ltd. ((1952) 1 K B 327). In that case it was held that the date on which to convert a debt in foreign currency sued for in England, is the date on which the defendant was in default by reason of his failure to pay it : and though normally that date was the date on which the debt became due, in the case in question the defendants were not in default until the permission of the Treasury to pay it had been obtained, under the Exchange Control Act, 1947. It was their failure to act on that permission when obtained that constituted the default, and the rate of exchange prevailing on that very date, would apply for conversion of the foreign currency into English currency. It is contended, therefore, that the due date was postponed because of the necessity of permission of the State Bank for the remittance of a debt, after the devaluation. An effective answer has been given to this contention by Mr. Pal, on behalf of the defendant‑Bank. He has pointed out that at all relevant times there was no restriction on remittance of foreign currency to India and Indian States, by virtue of Notifications Nos. FE. 1/48‑SB, dated the 1st July 1941 and FE.2/48‑SB, dated the 1st July 1948, which exempted India and Indian States from the restrictive provisions of sections 4 and 5 of the Foreign Exchange Regulation Act, 1947. Our attention was also invited to a Circular Letter, Issued by the State Bank of Pakistan, dated the 27th February 1951, Exh. T, at p. 55 of the Record, Part II, addressed to All Authorized Dealers in Foreign Exchange. In this Circular letter, it was mentioned that notifications had been Issued, on the date of the letter, by the Central Government and the State Bank, canceling or amending those of their notifications which granted exemption from certain provisions of the Foreign Exchange Regulation Act, in respect of transactions with India and Indian States. The position envisag ed by the new notifications was also summarized in this Circular letter and inter alia it was clarified that the effect of the new notifications would be that all remittances in Indian rupees would require authorization of the State Bank "with the exception of those which Authorized Dealers are permitted to approve on behalf of the State Bank". This apparently means that in cases of letters of credit approved of by the State Bank no further express authorization for remittance of the foreign exchange would be required. Another circular letter, dated the 24th of November 1949, was issued by the State Bank of Pakistan and in paragraph 2 thereof it was directed that the "banks may respond at par all outstanding entries relating to the period up to 17th September 1949, in respect of amounts debited or credited to their accounts in India by their branches or correspondents in India". It was sought to be argued on behalf of the plaintiff that this permission applied only to realisation of bills sent by Pakistan offices of Banks to their offices and correspondents in India and not to transactions of the reverse kind. This sugges tion, however, is not in conformity with the general terms of the second sentence of this paragraph 2, which clearly comprehends both kinds of transactions within its scope. The necessity for permission of the State Bank of Pakistan to remit Indian currency, in respect of transactions in question which had taken place before devaluation, therefore vanishes and the ruling cited by the learned counsel for the plaintiff appears to be inapt in the circumstances of this case. There is then no reason why the ordinary rule of liability, namely, that the date of conversion of the currency should be the date on which the payment fell due should not be applied. Mr. Asrarul Hossain pressed for the American view taken in Die Deutsche Bank Filiale Nurnberg v. Charles Franklin Humphrey ((1926) 272 U S 517, 47 Sup. Ct. Rep. 166), for acceptance in this connection. In that case a majority of five Judges as against four dissentient opinions, ruled that in an action in the United States to recover damages for failure of a German Bank, to return on demand, a deposit payable in marks, the relevant amount in marks must be translated into dollars as of the time the suit is brought, and not when the demand is made. This dictum is contrary to the rule enunciated by Judicial Text book writers, such as Cheshire and Dicey. If adopted, such a rule would import an element of uncertainty into commercial transactions, as the rate of conversion of the foreign currency would depend on the unilateral action of one party in the transaction deciding to sue on a particular date. The other view has the merit of making the liability depend on a date which could be determined with precision with reference to the law applicable. We are not, therefore, inclined to change the view taken by this Court in the previous case referred to above. It is interesting to note that the maturity date rule has been authoritatively affirmed, in respect of a claim founded on failure to pay a debt expressed in terms of foreign currency, in a recent judgment of the House of Lords, reported as Tomkinson and another and First Pennsylvania Banking and Trust Co. In re: United Railways of Havana and Ragla Warehouses Ltd. ((1961) A C 1007). The American decision cited before us was also noticed in that case, while reviewing old and modern authorities on the point but their Lordships did not In the words of Viscount Simonds, "find in the judgment persuasive authority" justifying change of the rule that had been hitherto accepted by the English Courts. It was also pointed out therein that in respect of bills of exchange, express provision existed in section 72 (4) of the Bills of Exchange Act, 1882, embodying the same principle. But even if the question is examined on general considerations, apart from the statutory provision in English law, there appears no strong ground for departing from the rule accepted generally in respect of a debt expressed In foreign currency, including those founded on foreign bills of exchange payable fn this country. In the words of Lord Denning, "the creditor is entitled to be put into as good a position as if the debtor had done his duty and paid the debt on the due date ; and he is only truly put into such a position if the debt is converted into sterling at that date ; rather than at a later date when the foreign currency has depreciated or appreciated". The dictum may well be applied here with the substitution of the word "sterling" by "Pakistani Rupees". In the High Court, it appears that the argument was also advanced that the "sight bills" issued in this case were converted into bills "after sight" by the fact that these were "documentary bills" which had to be accompanied by "clean" bills of lading and consequently, the provisions of section 63 of the Negotiable Instruments Act, 1881, were attracted. Under that section the holder of a bill of exchange must, if so required by the drawee of a bill of exchange presented for acceptance, allow the drawee forty eight hours (exclusive of public holidays), to consider whether he will accept it. In the first place, the bills in question were bills "at sight" and it is difficult to see how they could be converted into bills "after sight". But assuming that the provisions of section 63, Negotiable Instruments Act could have been invoked, it is well‑settled that on the expiry of the period mentioned therein, the acceptance will relate back to the date of presentment. The point was, therefore, not pressed before us in this appeal. Mr. Asrarul Hossain also tried to make a grievance of the fact that the High Court had granted his client interest at 3 per cent. p. a. instead of 6% p. a. asked for on the excess sum paid. The rate of interest to be awarded was, however, within the discretion of the learned Judges. The amount was not due on a negotiable instrument but was bang claimed on an excess payment. No reason has been shown for holding that the discretion in this respect was improperly exercised and the point raised, therefore, has no substance. The plaintiff's appeal, consequently, fails on the merits. We next take up the appeal of the defendant‑Bank. The competency of the plaintiff to bring the suit is no longer assailed before us. It is urged, however, that the High Court was wrong in holding that the reference to "rupees" in the bills of exchange In question, was in terms of Indian currency and not in that of Pakistan. The argument, we must say, is specious and is pot consistent with the terms of the agreement between the parties. There was a specific clause agreed to between the parties by which the Bank was authorized to adopt one of three dates recited therein, for conversion of the amount shown in the Indian bills of exchange, into Pakistan currency, when demanding payment from the drawee. This by itself shows that the bills in question were to be expressed in Indian currency and that indeed would be a normal incident of a transaction of the kind under consideration. The Indian exporter was obviously to be paid in Indian currency in India by negotiation of the bills of exchange drawn by him and the Bank had to reimburse itself for this negotiation, by presenting the bills of exchange to the Pakistan Importer. The latter had to pay the amount shown in the bills in Indian currency after converting it into Pakistan currency on the due date. The contention raised on behalf of the Bank is, therefore, devoid of force. The second point urged for our consideration by Mr. Pal on behalf of the Bank is that of limitation. The learned counsel suggests that the plaintiff's suit was barred by time as, the claim was covered by Article 62 of the Second Schedule to the Limita tion Act. The High Court held that the disputed amount having been placed in a suspense account by agreement of the parties, a trust was created in favour of the plaintiff and there was no question of the suit being barred by time. Section 10 of the Trusts Act, 1882, was referred to in this connection. Mr. Pal contests the correctness of this finding. He argues that there was no vesting of ownership rights in the Bank, which was necessary for the creation of a trust for a specific purpose, within the meaning of section 10 of the Trusts Act. According to him, the property had to be "conveyed in trust" to the Bank, before section 10 could be applied. It seems to us that this argument cannot be allowed to prevail. If the money was transferred to the Bank with the obligation annexed that it would refund any excess amount found due as a result of the settlement of the exchange issue later, there would be a sufficient "conveyance in trust", as by definition a "trust" is "an obligation annexed toy the ownership of property and arising out of a confidence reposed, in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner", vide section 3 of Trusts Act, 1882. In the alternative, if the owner ship of the money did not pass to the Bank but remained with) the plaintiff, then it was a case of a deposit by the plaintiff with the Bank, subject to the express condition that a part of would be paid back to him and a part appropriated by the Bank, when the disputed question of the rate of exchange was resolved. In these circumstances too the bar of limitation could not be successfully pleaded against the claim. On either view, therefore, the Bank's plea must fail. The main point raised in this appeal, however, is with regard to the transaction with Messrs Janak Limited. The High Court bas passed a decree for Rs. 1,76,767‑11‑6 which was determined to be the excess payment made, together with interest at 3 per cent. p. a. Mr. Pal referred to the letter of authority, Exh. F, at p. 14 of Part II of the record, which was sent on the 22nd of August 1949 by Messrs S. M. Hanif, Narayanganj, to the defendant Bank. Clauses 1 and 2 of this agreement are in the following terms "We agree: (1) To accept upon presentation all Bills drawn pursuant hereto; and (2) To hold you harmless in the event of any damage to merchandise shipped or deficiency or defect therein or in the documents above described." Mr. Pal contends that by virtue of these two clauses, even if the bills of lading which were mentioned In the earlier part of this agreement were "unclean'", the Bank was entitled to payment, on the bills at sight being presented. The learned counsel, how ever, omitted to notice that there was no defect in the documents mentioned in this agreement. The documents, indeed were complete and accurate in so far as they described the bales as spotted with rainwater and re‑stitched. It could not be said, therefore, that the plaintiff was seeking to make the defendant liable for any defect Intrinsic to the documents. The contract inter partes clearly envisages "clean" bills of lading, accom panying the bills of exchange, for presentment. This position is not controverted on behalf of the Bank. It is also not denied that the bills of lading in this particular transaction were not clean. The liability of the drawee could only arise if in pursuance of the agreement, along with the bills of exchange, "clean" bills of lading were also shown to the plaintiff. As this essential condition was not satisfied 9n the present case, it could not be said that there was due presentation of the bills in question, on a date prior to the devaluation. Inspection of the goods was allowed in lieu of "clean" bills of lading being presented and e this undoubtedly took place after the devaluation. It was then that the payment became due. We have not been referred to any provision of law or any principle which could go against the view taken by the High Court that the liability was not Incurred till satisfaction was given to the plaintiff by inspection of the goods, in the absence of "clean" bills of lading accompany ing the bills of exchange. In the circumstances, the Bank's grievance appears to have no solid foundation. No other point was urged in this appeal which must also fail. The result is that both the appeals are hereby dismissed but in view of the circumstances the parties are left to bear their own costs in this Court. A.H. Appeals dismissed.