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Petitioner: NATIONAL BANK OF PAKISTAN VS Respondent: SHAHYAR TEXTILE MILLS LTD.
Court Name: Sindh High Court Judge(s): Anwar Mansoor Khan Title: NATIONAL BANK OF PAKISTAN vs SHAHYAR TEXTILE MILLS LTD. Case No.: Suit No, 959 of 1990 Date of Judgment:2001-05-25 Reported As: 2003 CLD 1370 Result: Suit dismissed
Judgment ORDER ' The present suit has been filed by the plaintiff against the defendants Nos,1 to 4, the defendant No,1 being the company and the defendants Nos,2 to 4 are directoRs, The suit has also been filed against the defendants Nos,5 and 6, they being the employees of the bank. It is alleged that various Bills of Exchange were discounted by the plaintiff through its Risala Road Branch, were, against the value, discounted price was paid to the defendant No, 1. It is stated that the defendants Nos,2 to 4 are the directors of the defendant No,1. It is stated that the said finance was granted by discounting as afore-stated, on the basis of various Letters of Credits opened in favour of the defendant No,1 where against the defendants were liable to make shipment or goods mentioned on the face of the documents. The two Letters of Credit were opened by Messrs Fazal Sons Company (Osaka) Ltd., Japan. It is on the basis of this that the defendant No,1 drew Bills of Exchange of various amounts drawn on the Foreign Importer, payable at the counter of Habib Sons Trust and Finance Ltd. It is the case of the plaintiff that the defendants Nos,1 to 4 in collusion with defendants Nos,5 and 6 got the said Bills of Exchange discounted for Rs,3,74,94,511.60, which amount was paid to them. The plaintiffs have given the list of the Bills of Exchange, but had not filed any copy of the same. Admittedly, the defendant No,1 executed Bill of Exchange and handed over shipping documents in terms of the L/Cs. The plaintiff-Bank was to recover the value of the Bills of Exchange, 120 days from the date of the Bills of Lading at the counter of Habib Sons Trust and Finance Ltd. In London. The Bills of Exchange and other shipping documents including the Bills of Lading were sent to the bankers (for acceptance by the foreign importers). It is stated that the Bills of Exchange was presented to the drawee for acceptance by the bankers (on behalf of the plaintiff) where it was not accepted and remained dishonoured till November, 1989. The allegation
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in the plaint being that the Letter of Credit accompanied with the Bills of Exchange was forged and was fraudulent and were not issued by the company of whose Bills of Lading the same were alleged to be. ' The plaint filed by the plaintiff makes out a case whereby, the sum of Rs,3,74,94,511.60 being paid to the defendants by crediting the same to the current account of the defendant .No,1 was based on fraudulent Letter of Credit. There is however nothing to show that the Bills of Exchange, details of which are given in the plaint were fraudulent. In fact, it is stated that after the complaint was filed with the F.I.A., the drawee accepted the Bills of Exchange in November, 1989. The drawee being the foreign importeRs, The payments against the said Bills of Exchange were to be recovered from the drawee and brought in Pakistan for which the defendant No,1 also executed E-Form. Such E-Forms have been produced in evidence as Exhs.8/3 to' 8/15. It is thus the case of the plaintiff that because the Bills of Exchange were not accepted by the drawer, initially, and the Bills of Exchange are not available with them, they can fall back on the Form-Es, and it is this document that the plaintiffs are relying in plaint. ' The plaintiff having filed their suit the defendants filed their written statement whereby, the defendants Nos,1 to 3 filed one written statement and defendants Nos,5 and 6 filed another written statement. In the written statement by the defendants Nos,1 to 3 they have denied the statement that the Bill of Lading was fraudulent and stated that the transaction were in the usual course of the banking business and there was no fraud. It is stated in the written statement that the defendant-company had made shipment and negotiated the documents with the plaintiff in good faith and was therefore not liable for the same as in law, according to them, after negotiation, it was the plaintiff who could make the claim for payment under the accepted Bills of Exchange from the drawee. Negotiation of the documents was stated to be negotiation of the Bills of Exchange also. It is stated that the original Bills of Exchange were delivered for it being presented for payment on the drawee and the bill were issued in accordance with the law has to be acted in accordance with the same and cannot vary therefrom. Amongst other please having been taken, the defendants have denied the liability as, having delivered the Bills of Exchange it was the liability of the plaintiffs to secure the monies. It is only on non-acceptance or dishonour of the documents that the defendant No,1 could be liable. The written statement of the defendants Nos,5 and 6 are also on record in which, it was stated that the Bills of Exchange were negotiated in usual course of business and after having received authorized and the scrutinized E-Form available with them, in accordance with law, they were not liable. In fact, it is stated that four of those Bills were paid directly to the plaintiff. It was stated by the defendants 5 and 6 that the Letter of Credit required that the Bills of Exchange be drawn for acceptance within 120 days from the date of shipment by the defendant No,1, which was done and was also permissible by the Exchange Control Rules. ' Issues were framed and evidence was led. The evidence led by the plaintiff was that of one Mr. Mehmood Ahmed, General Director, State Bank of Pakistan, Mr. Zafar Ahmed Khan, Incharge Export Department Marine Service (Pvt.) Ltd. And lastly of Mr. Naim Ahmed Shaikh, Incharge Foreign Exchange Branch, National Bank of Pakistan. The statement of the officer of the State Bank of Pakistan does not carry any meaning or weight. In fact, the documents that have been produced are only photocopies of letters written to National Bank of Pakistan, originals not available with them. In fact, adjustments in foreign exchange have been shown in Exh.6/1 (A)(B)(C) and (D). This categorically shows that payment had been received by National Bank of }rakistan against various Bills of Exchange under diffeient Letters of Credit against presentment of those Bills of Exchange. The attempt to show that the Bill of Lading was forged is in relation to the documents for which Mr. Zafar Ahmed Khan has been .Produced in the said examination-in-chief. The said Zafar Ahmed Khan stated that letters dated 10-8-1989 and 6-3-1989 being Exhs.7/1 and 7/2 had been written to National Bank of Pakistan and have been produced. Exh.7/2 categorically states that the cargo had
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been confirmed and was warehoused by the shipper pending final negotiation with the importeRs, This categorically shows that the shipment was made, but there was some dispute with the importer, wherefore the delivery was not made to them at that time. Notwithstanding the fact, otherwise also, the question of recovery of money is based on the Bills of Exchange drawn by the defendant No,1 company which was to be negotiated by the acceptance and payment by the drawee named on the Bills of Exchange. It is otherwise not important to go into details of the cargo, or the Bill of Lading. The plaintiffs can claim against dishonoured Bills of Exchange. It is clear from Exh.7/ 2 that there were some negotiations being conducted with the importeRs, In the plaint it is clearly stated in para.8 that the drawee (the importer) had accepted the Bills of Exchange, though late. In the examination-in-chief Mr. Naim Ahmed Shaikh, Incharge of the Foreign Exchange Branch National Bank of Pakistan has laid great emphasis on the Letters of Credit (Exhs.8/ 1 and 8/2). It is stated that, "the documents were presented by the defendant No,1 for negotiation". He further says that, "The Bills of Exchange were payable on 120 days from the Bill of Lading and M/s. Habib Sons Trust and Finance, London was mentioned as drawee. The negotiation officer had obtained 1B-9 (indemnity-cum-guarantee) for the reason that the Letters of Credit was established at Bahamas and the drawee was shown based at London". The said witness goes on to say that; "the defendant No,1 was given due credit for the amount of the Letters of Credit which was withdrawn by the defendant No, 1. The plaintiff's witness further says that "the said shipping company however disowned the Bill of Lading and disputed their genuineness. The plaintiff-Bank then demanded refund from the defendant No, 1. Thereafter acceptance of the documents was communicated to the plaintiff by the drawee bank. The plaintiff-bank in the meantime, had reported the matter to Federal Investigation Agency as well. The defendant No,1 then gave post-dated cheques in the sum of Rs,70 million to the plaintiff which, however, were not presented for encashment. During the year 1990, some remittances were received from abroad were received in the account of defendant No,1 by Bank of Oman. The defendant No,1 informed the State Bank of Pakistan and applied for treating such remittances against E-Forms pertaining to the transactions carried out through the plaintiff- bank". In fact, the witness himself was not sure as to which remittance was brought in. The present suit, according to him, was thereafter filed for the dues which remained outstanding and payable to the plaintiff by the defendant No, 1. From the evidence it is clear that the suit has been based on E-Forms and not on the Bills of Exchange, but the plaintiff's claim on the basis of the discounting of the said Bills of Exchange. ' In the cross-examination the witness of the plaintif: has categorically stated that "it is correct that during the period between 13-1-1990 and 10-9-1990 the plaintiff had received a sum of Rs,5.5 million from the defendants and remittances in the sum of Rs,20 million was received". To a further question the witness said that "the drawee had accepted the Bills of Exchange in November, 1989. The original Bills of Lading were sent to the drawee bank alongwith the documents sent during the year 1q87. It is incorrect to suggest that the Bills of Lading in original, are available with the plaintiff- Bank. It is correct that after forwarding the documents. It was responsibilicy of the plaintiff-Bank to follow their acceptance". ' From the evidence it is clear that the Bills of Exchange were accepted. Such is also contained in the plaint. If one were to say that the documents that is, the Bills of Exchange were not accepted, the Negotiable Instruments Act, 1881 provides for a specific procedure for the purpose of recovery from the drawer of maker of the same, Before I proceed to deal with the same, it is important to state that the Bills of Exchange is a Negotiable Instrument as defined under section 5 of the Negotiable Instruments Act, 1881. Under section 21 of the Negotiable Instruments Act the meaning of the expressions "At Sight", "On presentment" and "After sight" have been defined as under:-- "The expression 'after sight' means, in a promissory note after presentment for sight, and, in a bill of exchange, after acceptance, or noting for nonacceptance, or protest for non-acceptance.'
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' Section 21-B of the Act reads as under:-- "A note or bill payable at a determinable future time.---A promissory note or bill of exchange is payable at a determinable future time within the meaning of this Act if it is expressed to be payable:-- (a) at a fixed time after date or sight; or (b) on or at a fixed time after the occurrence of a specified event which is certain to happen, though the time of its happening may be uncertain." ' The present Bill of Exchange was covered under clause (A) of section 21-B that it was 120 days after the date. The bills were to mature, therefore, 120 days after the date mentioned on the Bill of Lading and was liable to be presented for acceptance and payment in accordance with law. The case of the plaintiff seems to be, that the Bill of Lading was forged and was defective. Be that as it may, even if it is accepted that the Bill of Lading was forged it could not be said that the Bills of Exchange was forged as the drawer or the maker of the Bills of Exchange was the defendant No,1, who was the customer of the plaintiff. Admittedly, the documents were delivered which included the Bills of Exchange. Under section 58 of the Negotiable Instruments Act, it is categorically provided that when, a Bills of Exchange has been lost or has been obtained from any maker, drawer, acceptor or holder thereof by means of an offence or fraud or for an unlawful consideration, neither the person who finds or so obtains the instrument nor any possessor or endorsee who claims through such person is entitled to receive the amount due thereon from such maker, drawer, acceptor or holder, unless such possessor or endoree is or some person through whom he claims was, a holder thereof in due course. Admittedly, the Bills of Exchange have been accepted and admittedly some payments were made. At best it could be said that it was dishonoured for some payment on the basis of the provisions of the Negotiable Instruments Act. In this present case, admittedly payment under the various Bills of Exchange had been received though it is possible to say under which particular negotiable instrument the same was paid. Admittedly, drawee therefore, becomes liable to make payment. Section 30 of the Negotiable Instruments Act, 1881, which reads as under:-- "30. Liability of drawer.---(1)(a) The drawer of a bill of exchange by drawing it, engages that on due presentment it shall be accepted and paid according to its tenor, and that if it be dishonoured, he will compensate the holder or any endorser who is compelled to pay it; and (b) the drawer of a cheque by drawing it, engages that in the case of dishonour by the drawee he will compensate the holder: ' Provided that due notice of dishonour of the bill or cheque has been given to or received by the drawer as hereinafter provided. (2) The drawee of a bill of exchange is not liable thereon until acceptance in the manner provided by this Act." (Underlining is mine) ' The said provisions clearly stipulate that if the drawer of a Bills of Exchange drawing it, engages that on a due presentment it shall be accepted and paid according to its tenor and that it is dishonoured he will compensate the holder or endorser who is compelled to pay it. In fact, the drawee shall not be liable till such time the same are accepted. Admittedly, the Bills have been accepted. Thus the drawee had become liable discharging the drawer. The drawer shall and can only be made liable only when it is shown which of the Bills of Exchange are dishonoured by non- payment, as admittedly, the same was accepted. There is nothing to prove that the said bill or any one of them have been dishonoured per law. As stated above,, the witness of the plaintiff had categorically stated that the bills were accepted on due presentment and that upon due presentment and upon acceptance it could not have been said that the drawee had dishonoured the bill. Dishonour could be by refusal to pay. But such has not been pleaded, nor has evidence
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been led on this score. Ex facie, I was of this view, wherefore by an order dated 2-5-2001 I had put it to Mr. Muhammad Yousuf Leghari that:- "Form-E is the requirement under the Foreign Exchange Regulation Act, which is an undertaking that upon export, the Exporter would get back the Foreign Exchange being the value of goods in Pakistan. Penal liability is caused under the provision of the Foreign Regulation Act triable by a Special Tribunal for the purpose, consequent upon the Foreign Exchange not being remitted. This document is nothing but an undertaking given to the State Bank of Pakistan and does not create a liability as to payment in Pak. Rupees or otherwise of a finance that may have been given upon discounting of the Foreign Bills. I had asked Mr. Leghari as to under what document other than the Form-E does he claim the amount. He states, that it is on the basis of the non-payment of the Bills of Exchange. No doubt, upon a Bill of Exchange having been refused/dishonoured there is recourse of the holder against the drawer of the Bill of Exchange but such could only be upon presentation of the original Bills of Exchange as having been dishonoured. At this, Mr. Leghari seeks time to look up the law and place the law before this Court whether such is necessary or not? " ' It will be seen that I had asked Mr. Leghari to produce the original Bills of Exchange if they had been dishonoured and recourse was being sought on the basis of dishonoured bill. The said Bills of Exchange, or at least those that were dishonoured could have been, but have not been produced. Even if it is admitted that the drawee had not accepted the bills, it was mandatory upon the holder namely, the plaintiff to give a notice of dishonour to the drawer after `protesting/noting' in England. A notice to the drawer is of great importance and is mandatory in terms of section 30 of the Act. In fact, under the provisions of Bill of Exchange Act, 1882 which was prevalent in the United Kingdom (London) where the bills were sent for negotiation, it is categorically provided that the documents namely, the bill had to be presented. Sections 39 to 49 of Bill of Exchange Act, categorically provides rules and duties of the holder. Admittedly, the bank or its agent in England were the holders of the bill. They were required to present the documents for acceptance under the provision of Bill of Exchange Act, 1882. It is provided in section 43 of the said Act that a bill is said to be dishonoured by non-acceptance when it is duly presented for acceptance as prescribed by the Act or is refused or cannot be obtained or when the presentment for acceptance is executed and bill is not accepted. Under section 45 of the Bill of Exchange Act, 1882 it is provided that, presentment for payment has to be made and in the manner as provided therein. Section 47 thereof provides that a Bill of Exchange is said to be dishonoured by non-payment, if it is duly presented for payment, such is refused or cannot be obtained or, where presentment is excused and the bill is overdue and unpaid. Upon refusal of the drawee to pay and after acceptance, the Bill of Exchange is dishonoured by non-payment. After dishonour it was the duty of the plaintiff-Bank to have `Noted' or 'Protested' the bill under section 51(2) of Bill of Exchange Act, 1882 which reads as under:-- "51. Noting or protest of bill.---(1) Where an inland bill has been dishonoured it may, if the holder thinks fit, be noted for non-acceptance or non-payment, as the case may be but; it shall not be necessary to note or protest any such bill in order to preserve the recourse against the drawer or endorser. (2) Where a foreign bill, appearing on the'face of it to be such, has been dishonoured by non- acceptance, it must be duly protested for non-acceptance and where such a bill, which has not been previously dishonoured by non-acceptance is dishonoured by non-payment, it must be, duly protested for non-payment. If it be not so protested, the drawer and endorsers are discharged. Where a bill does not appear on the face of it to be a foreign bill, protest thereof in case of dishonour is unnecessary. (3) A bill which has been protested for non-acceptance may be subsequently protested for non- payment.
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(4) Subject to the provisions of this Act, when a bill is noted or protested, it may be noted on the date of its dishonour and must be noted not later than the next succeeding business day. When a bill has been duly noted, the protest may be subsequently extended as of the date of noting. (5) Where the acceptor of a bill becomes bankrupt or insolvent or suspends payment before it matures, the holder may cause the bill to be protested for better security against the drawer and endorseRs, (6) A bill must be protested at the place where it is dishonoured:-- (a) When a bill is presented through the post office, and returned by post dishonoured, it may be protested at the place to which it is returned and on the day of its return if received during business hours, and if not received during business hours, then not later than next business day. (b) When a bill drawn payable at the place of business of residence of some person other than the drawer, has been dishonoured by non-acceptance, it must be protested for non-payment at the place where it is expressed to be payable, and no further presentment for payment to, or demand on the drawer is necessary. (7) A protest must contain a copy of the bill, and must be signed by the notary making it, and must specify: (a) The person at whose request the bill is protested. (b) The place and date of protest, the cause or reason for protesting the bill, the demand, made and the answer given, if any, or the fact that the drawee or acceptor could not be found. (8) Where a bill is lost or destroyed or is wrongly detained from the person entitled to hold it, protest may be made on a copy or written particulars thereof. (9) Protest is dispensed with by any circumstance, which would dispense with notice of dishonour. Delay in noting or protesting is excused when the delay is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct or negligence. When the cause of delay ceases to operate, the bill must be noted or protested with reasonable diligence." ' Such would be evidence of non-acceptance by nonpayment. A corresponding provision is also provided in the Negotiable Instruments Act, 1881. Sections 99 and 100 of the said Act also provide for 'noting' and 'protest'. Section 102 of the Negotiable Instruments Act, 1881 reads as under:-- "102 Notice of protest.---When a promissory note or bill of exchange is required by law to be protested, notice of such protest must be given instead of notice of dishonour, in the same manner and subject to the same conditions, but the notice may be given by the notary public who makes the protest." ' Section 103 of the Act reads as under:-- "103 Protest for non--payment after dishonour by non-acceptance.---All bills of exchange drawn payable at some other place than the place mentioned as the residence of the drawee, and which are dishonoured by non-acceptance may, without further presentment to the drawer, be protested for non-payment in the place specified for payment unless paid before or at maturity." ' Section 104 of the Act categorically provides as under:-- "104. Protest of Foreign Bills.---Foreign bills of exchange must be protested for dishonour when such protest is required by the law of the place where they are drawn." ' Section 104 contemplates that where protest is provided in the law in the place where it is to be presented, it must be protested for dishonour. As discussed above, under the Bill of Exchange Act, both 'noting and protest' is provided. The plaintiff ought to have acted in the manner as provided by law and should have protested as a holder should have brought the same back to Pakistan and ought to have given a notice of dishonour under section 30 of the Negotiable Instruments Act. ' Section 48 of the Negotiable Instruments Act, 1881 categorically states that subject to section 58 (where the title is defective) a promissory note, bills of exchange or cheque payable to order is negotiable by the holder by endorsement and delivery thereof. The general effect of taking an
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instrument as additional payment is to suspend the right of action of the original debt during the currency of the instrument. It could thus have been a good defence in action for recovery of the debit to plead that the plaintiff has taken a bill of exchange from the debtor on account of the debt. Admittedly, the payment has been made in Exchange of the defendants having given the Bill of exchange. If the said instrument is dishonoured, payment of the original debit can be enforced as if no security had been taken. Such would only be where the bill has been negotiated by the maker/drawer and the holder namely, the bank in this present case. However, where the bill is required to be presented by the drawee Or the acceptor of the said bill and if the acceptor having accepted the same the right of the creditors and the remedy contained on the bill though continuing would remain suspended. After such dishonour, it shall be upon the creditor who may sue the debtor or the original consideration or on the instrument, but such would only be, where the Bill of Exchange has been dishonoured. In such a case, the debt which was additionally paid shall be treated as subsisting throughout.…
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