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Appeal No. 56 of 1962.
Appeal by special leave from the judgment and decree dated March 3, 4, 1958 of the Bombay High Court in Appeal No. 27 of 1957.
Purshattam Tricumdas, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellant.
H.N. Sanyal, Solicitor General, N. P. Nathwani, AtiqurRehman and K. L. Hathi, for respondents Nos. 1 3, 5, 6, 8 17, 19 and 20.
The Judgment of the Court was delivered by Ayyangar, J.
This appeal, by special leave, raises for con sideration a very short point regarding the proper construction of bye law 137 B of the Bombay Bullion Association Ltd., which will hereafter be referred to as the 'Association ' and in particular whether on the facts established in this case the requirements of the said bye law has been satisfied.
The appellant is a member of the first respondent the Association and carries on business as a bullion merchant.
By a notification dated March 14, 1949, the Government of Bombay in exercise of the powers conferred by section 6 of the Bombay Forward Contracts Control Act, 1947 (Bombay Act LXIV of 1947) sanctioned by the bye laws framed by the Association.
Under the said Act the members of the Association were permitted to carry on forward dealings in bullion subject to the said bye laws.
The appeal is concerned with the regularity of a purchase effected by the Association purporting to act under its bye laws, of a quantity of silver at the risk of the appellant, on the footing that he had defaulted in performing his contract as a seller on February 3, 1953 which was a settlement day.
The Association made this purchase treating the appellant as a defaulter and claimed from him the difference which amounted to Rs. 1,37,880 12 0.
The appellant paid this sum when demanded on the 5th February under protest but on the next day he filed the suit out of which the present appeal arises against the Association and its Directors for its refund on the ground that the purchase at his risk by the Association was invalid as contrary to the bye laws and was, therefore, not binding on him.
The appellant did not dispute that he defaulted in performing his obligation to tender the bullion of which he was the forward seller on the settlement day as he was bound to do under the relevant bye laws but the point on which he attacked the purchase was that no purchase could be made unless the forward purchasers for that settlement had fulfilled the terms of their 251 obligations under the bye laws and that as they had failed to do so, the Association had no right to effect a purchase on behalf and for the benefit of such defaulting purchasers.
The suit was tried before Coyajee J. on the Original Side of the Bombay High Court.
The learned Judge recorded a finding that there had been no default on the part of the purchasers and he, therefore, dismissed the suit.
An appeal preferred by the appellant to a Division Bench also failed and it is the correctness of this decision of the High Court that is challenged in this appeal.
Though the evidence went into minute details as to the things that happened on the Vaida day February 3, 1953 and in particular whether the several parties who figured as purchasers on the Vaida day had or had not paid in their cheques into the Clearing House of the Association on February 3, 1953 as they were bound to do under the bye laws, it is not necessary for us to go into this matter because there is a concurrent finding of fact of both the Courts that each one of the cheques of the several purchasers was, paid into the Clearing House on February 3, 1953, though it is now clear from the evidence that entries in regard to some of these transactions which took place on February 3, 1953 were made by the receiving bank or by the Clearing House only on the 4th.
It is on the basis of this finding which could not be and was not challenged before us that we propose to deal with the points urged before us in this appeal.
There is also one other matter which is referred to in the pleadings as well as in the judgments of the High Court which also we are putting aside.
This relates to a plea by the appellant that the Director , of the Association had acted mala fide in permitting certain infractions of bye laws on the 3rd February by purchasers who would otherwise be in default and treating them is if they had fulfilled their obligations.
The suggestion was that some of the members of Board of Directors had, in their individual capa city, figured as purchasers at the said settlement and that it was this personal interest of theirs that led to their favouring the group of purchasers as against the sellers at this Vaida.
There was nothing in the evidence in support of this plea and Coyajee, J. having negatived it, the same does not appear to have been pressed before the Division Bench.
Mr. Purshotam learned Counsel for the appellant did not seek to reagitate this matter, as indeed he could not, and hence this aspect also might be excluded from consideration.
This leads us to the main question which it would be apparent from the above narrative is whether those who made forward 252 purchases for this Vaida had fulfilled their obligations under the bye laws.
Now, the first matter that requires to be noticed is that the settlement for the Maha Vaida was originally fixed to February 2, 1953.
Bye law 32 of the Association empowers the Board to fix the days of settlement in these terms : "32.
(1) The settlement days shall be fixed by the Board or the Sub Committee appointed by it keeping in mind the provisions or these Rules and bye laws." but el.
(3) of the same bye law empowers the Board : "if of opinion that circumstances exist which require an alteration of days so fixed [by cl.
(1)] the Board may postpone such settlement day for a period not exceeding 5 days.
" It was in exercise of this power that the Vaida day was postponed from February 2, 1953 to February 3, 1953.
No dispute was raised by the appellant regarding the competence of the Board to effect this change of date or to the validity of the change effected thereby.
Bye law 120 makes provision for the establishment of a Clearing House for effecting a settlement on the Vaida days.
This bye law reads : " 120.
Clearing House : A Clearing House shall be established under the jurisdiction of the Board to act as an ordinary agent of the members for settling forward transactions effected between members in gold, silver and sovereigns by exchanging delivery orders as also for making payment of the amounts of difference through the Clearing House.
" Under the powers thus conferred the Bank of Baroda which opened a branch at the premises of the Association were appointed as the Clearing House.
Bye law 125 provides for the appointment of a Clearing House Committee by the Board of Directors of the Association.
Bye law 127 specifies the powers and duties of the Clearing House Committee and this runs : "127.
Powers and duties of the Clearing House Committee : (1) The Clearing House Committee shall settle forms of clearing sheets, delivery forms, "Kaplis" (slips) relating to payment of differences and delivery of goods and other necessary documents for being used for the work relating to the Clearing House and every member shall have to use the said forms or other forms of the same size and with 253 similar writing.
The said Committee shall from time to time fix charges for the said forms.
(2) It shall issue instructions with regard to the work of the Clearing House and every member shall act according to the same.
(3) If any member does not act according to any such instructions or commits any error or mistake in filing in any form or other document or writes so illegibly that it cannot be deciphered or makes delay in submitting, any such form or document to the Clearing House, then in every such case, the Clearing House Committee can impose on any member a penalty not exceeding Rs. 500.
Sub Committee can be appointed for attending to the work relating to this sub clause.
(4) It shall fix Havala rates in respect of outstanding transactions (transactions, which are not squared up) between two members and all members shall enter Havalas in respect of such outstanding transactions (which are not squared up) at these rates and also prepare statement of differences at those rates.
Delivery orders also shall be issued at these very rates.
The Havala rates in respect of transactions are given to facilitate the settlement.
That does not in any way reduce the liability in respect of transactions.
(5) The Clearing House Committee may declare any member as a defaulter and for that purpose, it shall have power to pass such resolutions and orders as it deems proper and necessary.
(6) If, in connection with any forward settlement, the Clearing House finds, it difficult to make settlement on the days fixed for settlement, then the Clearing House Committee shall have power to make a change` of 48 hours at the maximum in all or any settlement days relating to that forward settlement.
" Bye law 134(1) reads "134.
(1) The member who wants to have his transactions settled through the Clearing House shall have to send to the Clearing House a clearing sheet in the settled form (form No. 1) on the days fixed for that purpose (which day will hereafter be known as he Clearance Day).
254 Bye law 137 specifies the obligations of members of the Association who give delivery and it reads: "137.
The member who has to give delivery shall have to submit to the clearing house as many delivery orders signed by him as there would be, upon a calculation on the basis of every delivery order being either for five bars of silver or for 1,000 tolas of gold bar, or for 1,000 sovereigns.
If any member has sent delivery orders without signing he shall attend the Clearing House at 10 A.M. in the morning on the date fixed for giving delivery orders by the Clearing House and shall sign the delivery orders.
If the Clearing House finds it necessary it can call for further delivery orders from any member, and the member shall have to furnish the same forthwith but if the goods are with a bank he shall have to give delivery orders on the bank directly as mentioned above.
" Bye law 137 A(1) deals with theobligations of a member whose clearance sheet shows outstanding sales and it reads : "137 A(1).
A member whose Clearance Sheet shows outstanding sales shall submit to the Clearing Housewith hisdelivery orders a complete list of bars(gold or silver) in his possession or in the possession of his Banker inBombay with their number and marks, to bedelivered against such delivery orders.
" As stated earlier, it is now common ground that the appellant did not carry out his obligations under this bye law.
Bye law 137 B whose proper construction is raised by this appeal deals with the obligations of members whose Clearance Sheet shows outstanding purchases.
It reads : "137 B. A member whose Clearance Sheet shows outstanding purchases will submit to the Clearing House with his Clearance Sheet a cheque certified "good for payment" or a demand draft on a Bank or a Bank 's payslip or cash for an amount sufficient to pay for all his outstanding purchases at the rate fixed by the Association.
Failing payment as aforesaid the purchases outstanding in the Clearance Sheet or a part thereof will be auctioned at the purchaser 's risk on the same day.
The cheques, demand drafts etc., so received by the Clearing House will be paid into the Clearing House Account in the Bank of Baroda Ltd., Bullion Hall Subbranch, and crossed cheques payable to bearer or payslips 255 of the said Bank in favour of the sellers whose delivery orders are given by the Clearing House to the purchasers will be handed over by the Clearing House to the said purchasers.
The sellers shall give delivery of the goods covered by the delivery order to the said purchasers against such cheques or payslip issued by the said bank.
Refusal by a seller to give delivery of goods covered by his delivery order to the purchaser against such a cheque or payslip during the time fixed for giving delivery, will amount to failure to give delivery and consequences in Bye law 147 will ensue.
" It was not contested that if by the transactions to which we shall refer presently, members whose Clearance Sheets showed outstanding purchases had fulfilled their obligations under Bye law 137 B, the Association was entitled to effect the purchases at the risk and cost of the appellant under the succeeding bye laws which confer upon the Association this power to effect purchases or sales to square the transactions of defaulting members.
An analysis of the bye law 137 B would show that a member whose Clearance Sheet showed outstanding purchases had, on the Vaida day, to file his Clearance Sheet and to make a payment into the Clearing House of an amount sufficient to pay for all his outstanding purchases at the rate fixed by the Association.
This payment had to be made along with the Clearance Sheets and had to be in one of four forms: (a) a cheque certified good for payment, or (b) a Demand Draft on a bank, or (c) a bank 's pay in slip, or (d) cash.
The question raised in this appeal, relates to whether certain of the purchasers had made payments into the Clearing House of the amounts payable by them in any of the permitted modes.
Before proceeding further we might add that the Bank of Baroda which was the Clearing House admitted that the amounts required to be paid by the several purchaser members had been received by it on the 3rd and the total amounts represented by these payments were credited to the Association.
Before setting out the matters in controversy as regards the form of payment adopted by certain purchasers under bye law 137 B, it is necessary to premise the narrative by a few facts.
As already stated, the Bank of Baroda Ltd. had been appointed as the Clearing House of the Association under bye law 120 in or about 1949 and had been functioning as such ever since.
To facilitate payments by and between members the Bank had opened a special branch called the 'Bullion Hall Sub branch ' in the premises of the 256 Association itself.
Bye law 174(3) required every member to open an account in the Bank, so that it might be convenient to pay or draw cheques for effecting clearance.
All the members had, in pursuance of and in obedience to this bye law, opened such accounts.
The Bank issued special pay in slips for doing its business as a Clearing House.
These slips were in triple foil, all of which had to be filled in by the member making the payment.
When a member made a payment into the Bullion Exchange Branch of the Bank the extreme right of the three parts which recited the payment to the credit of the Clearing House of the Association by the member named and of the amount, also specifying the particulars of the payment would be signed or initialled by the Cashier and Ledger Keeper and be retained with the Bank.
The paying in slip consisting of the other two parts in which similar entries were made and bearing the signature or initials of the Bank authorities was handed over to the member making the payment.
He had thereafter to present this slip to the Clearing House along with the Valan or the Clearance Sheet, and thereupon the Clearing House department would endorse receipt on the part to the extreme left which would be returned to the member the other part being retained by the Clearing House.
The settlement for the Vaida on February 3, 1963 appears.
to have been an exceptionally heavy one on account of the very large volume of sales and purchases for that settlement and there was a total outstanding sale of 1897 bars of silver with, of course, corresponding purchases of the same number.
Sellers of 1,004 bars gave delivery orders as required by bye laws 137 and 137 A but the appellant who had an outstanding sale of 853 bars failed to submit to the Clearing House the necessary delivery orders.
The purchasers of the 1,897 bars had, under the bye laws, to submit their Clearance Sheets and make payments into the Clearing House in the manner provided by bye law 137 B of a total sum of Rs. 88,31,050 by February 3, 1953.
By reason of the extraordinary situation created by the heavy payments having to be made coupled with a strike of the Clerks of the members on the previous day, the Directors of the Association passed a resolution extending the time for payment and delivery of Clearance Sheets beyond the usual banking hours to 7 P.m. on the 3rd February.
The point in controversy in the appeal is whether this amount had been paid into the Bank on the 3rd February to the credit of the Clearing House in the manner provided by bye law 137 B. Out of the Rs. 88,31,050, some amount was paid in cash, 257 Rs. 42,99,400 by cheques drawn by members on their respective accounts with the Bullion Hall Sub branch of the Bank of Baroda Ltd. in favour of the Association 's Clearing House account, Rs. 24,64,050 by four pay slips of other banks in favour of the Bank of Baroda Ltd., Rs. 15,30,150 by transfers by two members from their accounts with the Jhaveri Bazar branch of the Bank of Baroda Ltd., to the Bullion Hall Sub branch for payment to the Association, Rs. 4,65,000 was by a cheque drawn by a member on his account with the Fort Branch of the Bank of Baroda Ltd., in favour of the Association, Clearing House Account.
Of these, the submission of the appellant was that only the cash payment was a proper one and that the rest were not made in accordance with bye law 137 B. Before dealing with it, however, it might be stated that the Bank of Baroda Ltd. Clearing House submitted a statement on February 4, 1953 stating that all the payments totalling Rs. 88,31,050 had been received by it as a Clearing House and had been credited to the Association.
Now, taking first the amounts paid by cheques drawn by mem bers on their accounts in the Bullion Hall Sub branch, several points were urged in support of the contention.
The first was this : On February 3, 1953 the banking hours ended at 2.30 P.m. and several of the payments into the Clearing House Account by cheques drawn on the Banking account at this branch were made after that hour.
It was, therefore, contended that even if there was enough money in the accounts of the several members to meet the cheques drawn by them, still their cheques could not be treated as cash as the banking hours had passed.
This was answered by the Division Bench by pointing out that there was nothing illegal in the bank functioning for the purpose, of the members of the Clearing House after 2.30 P.m. that day.
There was evidence before the Court that the ledgers and other books of account in the bank were available for being looked into to ascertain whether a member 's account had sufficient funds to meet the cheques which had been drawn.
There was also evidence that the state of the member 's account was ascertained before the triplicate form was accepted by the bank and the two left side foils passed on to the depositing member for being handed over to the Clearing House and, as we stated earlier, on the next day the bank submitted a statement acknowledging receipt of the amount of the several cheques and showed their amounts to the credit of the Association.
In these circumstances, the learned Judges of the High Court came to the conclusion that there had been a payment as required by the bye law 137 B on February 3, 1953.
L3Sup./65 258 We entirely agree with the High Court as regards the alleged illegality said to have been caused by the Bank accepting cheques after the close of the usual Banking hours.
It would be noticed that the extension of the banking hours from 2.30 P.m. to 7 p.m. that day was not in contravention of any statute and whatever the position might have been, if such extension acted to the detriment of a constituent of the bank, in the case on hand it was really for the benefit of the customer.
In those circumstances, there was nothing illegal and, of course, nothing improper in the banking business having continued so long as the work of the bank as a Clearing House continued.
There were also other objections raised to support the argument that these payments were contrary to bye law 137 B.
To appreciate them it would be necessary to state a few more facts.
From the analysis that we have made of payments that were made into the Clearing House by the purchasers in satisfaction of the amounts due by them for the settlement, Rs. 42,99,400 were by way of cheques drawn on the Bullion Hall Sub branch of the bank.
We have also stated that the staff of the bank to whom the cheques were presented had endorsed on the slips that there were sufficient funds in the account to enable the cheque to be cleared and that it was after this process that the pay in slips were presented to the Clearing House with the Clearance Sheets in fulfilment of their obligations under the bye law.
In regard to these payments by transfer entries to the credit of the Association it was urged (1) That several of the members numbering about 17 or so, did not, in fact, have enough funds in their accounts before 7 P.m. that day to enable the cheques which they drew in favour of the Clearing House to be honoured and that in consequence notwithstanding the acceptance of the cheques by the bank, such a payment could not be deemed within bye law 137 B.
It was common ground that at 2.30 P.m. on the 3rd of February the amount to the credit of several of these members was not sufficient to enable the cheques which they issued later in the day to be cleared.
But before the cheques were actually presented the purchaser members paid into their accounts (a) refunds which they obtained of margin moneys which they had deposited with the Association and to which they were entitled under the bye laws and (b) other cheques in favour of the Bank of Baroda.
Taking up first the margin money refunds, purchasers had, under the bye laws, to pay margin moneys on their purchases and these had to be refunded to them on fulfilment of certain conditions. 'Me amounts 259 originally paid as margin by the purchasers had been credited to the Association and when the amount had to be refunded payment orders were made out by the Association on the 3rd of February of the amounts due to be refunded and these refund orders were paid by the respective purchasers to the credit of their accounts and their accounts were so credited with the Bullion Hall Subbranch.
It was not the case of the appellant that the members were not entitled to the refund granted by the Association but what was objected to was that the refunds were really not due that day and had been improperly paid over by the Association in advance of the time when it was due Bye law 33 C(2) deals with the refund of margin money and it reads: "Where the conditions described in clause (a) or (b) as the case may be, cease to exist, the Association shall return the margin amount to the members concerned on the day following the next clearance day after making the necessary adjustment.
" On this the appellant 's case was that the margin money could have been returned only on the 4th and that the Association acted improperly in refunding the amounts to the purchasers on the 3rd itself to enable them to utilise that money for the purpose of making their payments towards the settlement.
We do not see any sub.
stance in this complaint, nor do we see any relevance of this to the point now in controversy, viz., whether there had been a compliance with bye law 137 B. As already pointed out, the Vaida was originally fixed for the 2nd of February and if that had stood the amount would have been refundable on the 3rd.
It was, however, owing to a strike of the Gumashtas of the members that a situation had arisen by reason of which the Vaida had to be postponed by a day.
Whether as urged by Mr. Purshottam, that upon the proper construction of bye law 33 C that when a Vaida day is shifted the day fixed for the refund of the margin money also gets shifted or whether it would be payable on the day originally fixed, would, in our opinion, make no difference to the result.
The bye law imposes an obligation on the Association to refund the margin money on the day next after the Vaida.
On its terms, however, if the conditions of cls.
(a) & (b) cease to exist, and obviously they ceased to exist in the present case even on the 2nd, there is nothing in the bye law to preclude the Association from refunding the margin money.
Again, even if the margin money were returned before such refund could be legally enforced, the propriety or impropriety of the refund would have no bearing on the only point for consideration relevant to the question whether bye law 137 B was 260 complied with or not viz., whether the accounts of the members were in credit at the time the cheques were presented.
(2) The next category of objection under this head was in relation to the bank having given credit to one of the members for the amount of a cheque of Rs. 2,00,000/ which was drawn on the Bank of India, Australia and China.
Now, the evidence in the case was that this constituent Khimji Poonja & Co. had to pay Rs. 4,65,000/ as a purchaser.
He had a credit balance at 2.30 P.m. on the 3rd of Rs. 1,93,215/13/5.
To enable him to meet the cheque for Rs. 4,65,000/ which he drew on the Bullion Hall Sub Branch he paid into his account Rs. 1,05,500/ as refund of margin money.
Besides, he drew a cheque for Rs. 2,00,000/on his account with the Bank of India, Australia & China in favour of the Bank of Baroda and paid this cheque to the credit of his account with the Head Office of the Bank of Baroda.
The Head Office intimated this credit to the Bullion Exchange Branch and when he presented his cheque for Rs. 4,65,000/ to the Bullion Exchange Branch the same was honoured and the amount credited to the Association.
The learned Judges accepted this evidence and the explanation and held that this constituent had enough funds with the Bank to meet the cheque of Rs. 4,65,000/ which he drew.
Mr. Purshottam challenged the credibility of this evidence.
We do not, however, propose to go into it for the reason that if, as a matter of fact, the Bank of Baroda as a Banking Institution gave Khimji Poonja & Co. credit for Rs. 2 lakhs that was a matter between those two parties and is not a matter which bears upon the validity of the payment for Rs. 4,65,000/ which Khimji made.
It is not disputed, or rather it cannot be disputed that the Head Office of the bank credited Khimji Poonja & Co. with the sum of Rs. 2,00,000/ and there is evidence as to the intimation of this credit by the Head Office.
Of course, the cheque by Khimji on the Chartered Bank was not certified "good for payment" but that was not a payment under bye law 137 B. The Head Office accepted it and therefore nothing follows from their not having insisted on that cheque being certified.
The fact remains that the Head Office accepted that cheque; we shall take it in anticipation of being cleared, and as a fact it was cleared the next day.
With the propriety of the Head Office of the Bank crediting the constituent with the amount of that cheque before actual realisation neither the Bullion Exchange Branch nor the Association to whose account the sum of Rs. 4,65,000/ represented by the cheque drawn in their favour was credited, nor the appellant are concerned.
When once the Bank credited that sum into the account there was enough 261 credit for meeting the cheque of Rs. 4,65,000/ which is the only point we are concerned with.
(3) The third head of objection that was raised, and this was the one which was the subject of strenuous contest in the High Court and before us, was whether the cheques on the Bullion Exchange Sub branch which were paid in with the Clearance Sheets were "certified good for payment" within bye law 137 B.
It was urged that only four modes of payment were recognised and that a cheque even on the customer 's account in the same bank was still a cheque and that unless 'It was certified good for payment it did not satisfy the requirement of a valid payment within bye law 137 B.
In this connection it was stressed that having regard to the consequences flowing from a payment or non payment on the terms of the bye laws a strict and literal construction of the bye law was called for and that the Courts should so construe the bye law and hold that a literal and not merely a substantial compliance with it in the sense of the Clearing House having received payment would satisfy the rule.
In connection with the submission that cheques drawn against the customer 's account in the same branch of the bank could not be "cheques certified good for payment" even though there were enough funds to meet the cheques, learned Counsel drew our attention to the fact that certification of a. cheque was a well known form of commercial procedure which bankers adopted for the purpose of clearance by which the certifying and the Clearing bank became bound to each other.
Reliance was, in this connection, placed on the observations of the Privy Council in Gaden vs
The Newfoundland Savings Bank(1) where it is stated : "The only effect of the certifying is to give the cheque additional currency by showing on the face that it is drawn in good faith on funds sufficient to meet its payment, and by adding to the credit of the drawer that of the bank on which it is drawn.
" Reference was also made to the judgment of Lord Wright in Bank of Baroda vs Punjab National Bank(2) where the histroy of certification or marking of cheques in India is dealt with.
We do not, however, derive any assistance from these decisions on the point now in controversy.
The first thing to be noticed about this objection as to certification is that there is no question of certification where a cheque drawn on an account in a branch of a bank is paid into the same branch to the credit of another party who has an account in that branch.
Certification is a method adopted when a (1) [18991 A.C. 281 at p. 285.
(2) 71 I.A. 124.
262 bank on which a cheque is drawn verifies the customer 's account on which it is drawn and indicates on the cheque that there are enough funds in his account to meet that cheque.
It is obvious that there could be no question of such a certification by a bank of a cheque ,drawn on an account in a branch when the drawer pays it to the credit of a different account in the same branch.
The verification of the account of the constituent for the purpose of ascertaining whether there is enough credit to meet the cheque which precedes a certification takes place at the very moment when the cheque is cleared.
There is therefore no question then of two banks a certifying bank on which the cheque is drawn and a clearing bank into which that cheque is paid.
In such circumstances, we should consider that the proper view to take of the payment would be that it is really a payment in cash.
The Privy Council had, in Arsene A. Larocque vs Hyacin the Beauchmin,(1) to consider whether the payment a company by receipts given by it on account of the purchase price of the property which they sold was a payment in cash.
In dealing with this question Lord Macnaghten quoted with approval the following from the judgment of James L. J. in Spargo 's(2) case : "It was said by the Lord Chancellor, and we entirely concurred with him, that it could not be right to put any construction upon that section (section 25 of the Companies Act, 1867) which would lead to such an absurd and un justifiable result as this, than in exchange of cheques would not be payment in cash, or that an order upon a banker to transfer money from the account of a company would not be a payment in cash." and another passage from the judgment of Mellish, L.J. "It is a general rule of law that in every case where a transaction resolves itself into paying money by A to B and then handing it back again by B to A, if the parties meet together and agree to set one demand against the other, they need not go through the form and ceremony of handing the money backwards and forwards.
" We consider these observations apposite and hold that where a payment was made by a cheque drawn on an account with the Bullion Exchange Sub branch and the amount represented by that cheque was transferred to the Clearing House Account of the Association it is virtually a payment in cash, though in form a payment by cheque.
(1) (2) L.R. 8 Ch.
407. 263 The next transaction to which objection was taken was a payment into the Bullion Hall Sub branch of a sum of Rs. 4,65,000/ by one Sri Bansilal & Sons.
The evidence was that the cheque was drawn not on his account on the Bullion Hall Sub branch of the Bank of Baroda but with the branch of the Bank at the Fort, Bombay.
The evidence which the Court accepted was that on the presentation of the cheque the staff ascertained that the constituent had enough funds in the bank for the cheque to be cleared and accepted it and credited the same to the account of the Bullion Exchange Association.
The objection raised to the receipt of this payment was also founded on the cheque not being certified as good for payment.
It will be noticed that the only point of difference between this cheque and the cheques which were drawn on accounts of members with the Bullion Hall branch which we have dealt with just now is, that the cheque for Rs. 4,65,000/was not drawn on the drawer 's account with the Bullion Hall Subbranch but on an account in the same bank at the Fort branch.
For the purpose of considering this point it is not necessary to enter on any examination of the question as to what extent the two branches of the same bank are separate entities.
There is no doubt that a customer cannot claim to draw cheques except on the branch where his moneys are deposited and on the account in respect of which the cheque is issued.
But that is not what is in controversy in the present case.
Here a cheque drawn on the Fort Branch is paid into the Bullion Hall Sub branch to the credit of the Association.
The Bullion Hall Sub branch of the bank accepts that cheque and credits it to the Association after ascertaining that the drawer of the cheque has enough funds at the Fort branch for meeting that cheque.
The only question is whether the payment could be treated as by a cheque which is certified as good for payment.
We consider that what we have stated earlier as to the position in regard to a cheque drawn on an account in the same branch would also apply to the present case and that a certificate of the banker that is referred to in the bye law is a certificate of a bank different from that into which the cheque is being paid.
Even if there be any doubt in this matter we are satisfied that when once the staff at the Bullion Hall Sub branch ascertained that the cheque was backed by sufficient funds to the credit of the customer in the account on which it is drawn, it satisfies the requirements of a cheque certified as good for payment within bye law 137 B.
The learned Judges of the High Court, therefore,, rightly held that this payment was not outside the payments permitted by the said bye law.
The last of the cases concerns a payment by one Jethalal Sangji Shah of a cheque for Rs. 1.16,250/ .
The cheque was 264 made in favour of the Bank of India Ltd. not certified good for payment and was paid into the Bullion Hall Sub branch.
The Clearing House received this cheque from Jethalal Sanagi Shah after obtaining a declaration from him that he had enough credit in his account with the Bank of India for meeting that cheque.
It was stated that the Directors of the Association were approached by the Bank as to whether this cheque could be received in payment and that it was on their advice that a declaration in the form specified was taken from the member and it was only thereafter that the payment was accepted as conforming to bye law 137 B. Mr. Purshottam submitted that this payment could certainly not be within bye law 137 B. and we consider that learned Counsel is right.
This, however, does not help him because it concerns the price for 25 bars and, having regard to the quantity of silver with which we are concerned, Mr. Purshottam could not but concede that even if the payment by this constituent was irregular it would not affect the validity of the purchase at the risk of the appellant.
We thus reach the conclusion that except the last payment which was not quite regular but whose irregularity is not material, all the other payments were substantially, if not literally, in accordance with the requirements of bye law 137 B and in consequence the purchase made by the Directors at the risk of the appellant was legal and justified under the bye laws.
Before concluding it is necessary to advert to the fact that both before the learned trial Judge as well as before the Division Bench a detailed analysis was made of the several payments made by about 17 members of the Association with a view to establish that those payments were not, even if they were made on the 3rd.
in accordance with bye law 137 B.
The learned Judges considered the several objections which were formulated to the validity of these payments and after discussing some of the details of the individual cases which were placed before the Court, recorded their finding that the payments satisfied the requirements of the relevant bye law.
In view of the arguments addressed to us we have not examined in detail each one of the objections but have dealt only with those specifically urged before us and the tenability in general of the principles on which these objections were based.
The appeal accordingly fails and is dismissed with costs.
Appeal dismissed.

Output:
The members of the Bombay Bullion Association, respondent herein, were permitted under the Forward Contracts Control Act (Bom.
Act 64 of 1947) to carry on forward dealings in bullion subject to the bye laws framed by the Association.
The appellant who was a member of the Association and was carrying on business as bullion merchant, defaulted in performing his obligation to tender silver of which he was the forward seller, on the settlement day, and so the Association, purporting to act under its bye laws, purchased a quantity of silver at the risk of the appellant and claimed from him the difference in price.
The appellant paid the amount and challenging the legality of his being treated as in default filed a suit for its refund.
The suit was dismissed by the High Court.
In appeal to the Supreme Court it was contended that the Association should not have made the purchase because the purchasers had not fulfilled the terms of their obligations under the bye laws in making their payments to the Association.
The contentions were that : (i) certain of the purchasers who had made payments into the Clearing House of the Association by cheques, drawn on their account in the Clearing House, had not had the cheques certified as good for payment as required by bye law 137 B, and (ii) one payment was made by a purchaser, by a cheque drawn, not on the Clearing House but on a branch of the Clearing House in the city, and which besides was not certified good for payment as required by the bye law.
HELD : (i) Where a payment was made by a cheque drawn on in account with the Clearing House and the amount represented by that cheque was transferred to the Clearing House Account of the Association, it is virtually a payment in cash, though in form a payment by cheque.
Since payment in cash is one of the modes of payment recognised by the byelaw it satisfied the requirement of a valid payment.
[255 E F; 262 G H] Arsene A. Larocque vs Hyacinthia Beauckemin, (1897) A.C. 358, referred? to.
(ii)Where the Clearing House had accepted the cheque and credited it to the Association after ascertaining from the branch on which it was drawn, that the drawer of the cheque had enough funds at that branch for meeting of the cheque, the cheque need not be certified as good for payment.
The position with respect to such a cheque is the same as when the cheque is drawn on an account in the same branch, because the certificate of the banker that is referred to in the bye law is the certificate of a bank different from that into which the cheque is being paid.
In any event, when the staff of the Clearing 1 louse ascertained from the branch that the cheque was backed by sufficient funds to the credit of the customer in the branch on which it was drawn, it satisfied the requirements of a cheque certified as good for payment within the bye law.
[260 B; 262 A C; 263 G H] up./ 65 17 250


Input:
ivil Appeal No. 3812 of 1989.
From the Judgment and Order dated .1.2.89 of the Andhra Pradesh High Court in Revision Petition No. 302 of 1989.
K.N. Bhatt, M.J. Paul and Kailash Vasdev for the Appellant.
A. Subba Rao for the Respondents.
The Judgment of the Court was delivered by AHMADI, J.
Special leave granted.
This tenant 's appeal raises the question whether a tenant who omits to pay or tender the rent in respect of the demised premises under the belief that he had a right to purchase the property under a prior agreement to sell and was, therefore, not obliged to pay the rent can be said to be a wilful defaulter within the meaning of the proviso to sub section (2) of Section 10 of the A.P. Buildings (Lease, Rent & Eviction) Control Act, 1960 (hereinafter called 'the Act ').
Section 10(1) lays down that a tenant shall not be evicted except in accordance with the provisions of this section or sections 12 and 13 of the Act.
Clause (i) of sub section (2) of that section next provides that a land lord who seeks to evict his tenant may apply to the Control ler for a direction in that behalf and the Controller on being satisfied that the tenant has not tendered the rent due by him within fifteen days after the expiry of the time fixed in the agreement of tenancy or in the absence of any such agreement by the last day of the month next following that for which the rent is due, shall make an order direct ing the tenant to put the landlord in possession.
This is, however, subject to the proviso which reads under: "Provided that in any case falling under clause (i), if the Controller is satisfied that the tenant 's default to pay or tender rent was not wilful, he may notwithstanding anything in section 11, give the tenant a reasonable time, not exceeding fifteen days, to pay or tender the rent due by him to the landlord upto the date of such payment or tender and 118 on such payment or tender, the application shall be rejected.
" The proviso, therefore, makes it clear that if the Control ler is satisfied that the tenant 's default is not wilful he may give the tenant an opportunity to pay or tender the rent due by him to the landlord and on such payment or tender being made within the time allowed, the landlord 's applica tion for eviction shall be rejected.
The benefit of this proviso is available to only those tenant who are not guilty of wilful default.
In the present case, the courts below have come to the conclusion that the tenant 's default was wilful and hence the benefit of the proviso was not avail able to him.
The question then is whether this conclusion reached by the courts below can be sustained on he facts found proved.
The facts lie in a narrow compass.
The respondents purchased the demised premises by a registered sale deed dated 7th December, 1977 for Rs.70,000.
The appellant was in actual possession of a part of the premises as a tenant of the vendors at the date of purchase.
After the purchase of the property the respondents served the appellant with a notice dated 13th December, 1977 calling upon him to pay the rent due and deliver vacant possession of the demised prem ises.
The appellant replied to the notice on 29th December, 1977 alleging that the vendors had orally agreed on 14th October, 1977 to sell the property to him for Rs.70,000 and had received Rs.5,000 as earnest.
The appellant, therefore, contended that he was under no obligation to pay the rent and vacate the premises since he was ready and willing to purchase the property.
The respondents sent a reply denying the existence of any such oral agreement and filed a suit for eviction.
It may here be mentioned that on the date of the purchase of the property the rent was paid to the ven dors up to the end of November 1977.
The respondents, there fore, claimed the rent from December 1977 to May 1978 from the appellant.
Since the appellant failed to pay the rent for the said period the courts below came to the conclusion that he was a wilful defaulter and passed a decree in eject ment against him.
The tenant has, therefore, come in appeal to this Court.
The short question then is whether it can be said that the tenant 's default to pay or tender rent from December 1977 to May 1978 was not wilful to avail of the benefit of the proviso extracted above.
It may be noticed that in cases where the tenant has defaulted to pay or tender the rent he is entitled to an opportunity to pay or tender the same if his default is not wilful.
The proviso is couched in nega tive form to reduce 119 the rigour of the substantive provision in Section 10(2) of the Act.
An Act is said to be wilful if it is intentional, conscious and deliberate.
The expressions 'wilful ' and 'wilful default ' came up for consideration before this Court in section Sundaram Pillai etc.
V.R. Pattabiraman etc., [1985] 2 SCR 643.
After extracting the meaning of these expressions from different dictionaries (See: pp. 659 & 660) this Court concluded at p. 661 as under. "Thus a consensus of the meaning of the words 'wilful default ' appears to indicate that default in order to be wilful must be inten tional, deliberate, calculated and conscious, with full knowledge of legal consequences flowing therefrom".
Since the proviso with which we are concerned is couched in negative form the tenant can prevent the decree by satisfy ing the Controller that his omission to pay or tender the rent was not wilful.
If the Controller is so satisfied he must give an opportunity to the tenant to make good the arrears within a reasonable time and if the tenant does so within the time prescribed, he must reject the landlords application for eviction.
In the present case, it is not in dispute that the tenant did not pay the rent from December 1977 to May 1978 before the institution of the suit.
Under the eviction notice served on him in December 1977 he was called upon to pay the rent from December, 1977 only.
The appellant tenant did not pay or tender the rent from Decem ber 1977 to May 1978 not because he had no desire to pay the rent to the respondents but because the bona fide believed that he was entitled to purchase the property under the oral agreement of 14th October, 1977.
He had also paid Rs.5,000 by way of earnest under the said oral agreement.
True it is, his suit for specific performance of the said oral agreement has since been dismissed but he has filed an appeal which is pending.
He, therefore, bona fide believed that he was entitled to purchase the property under the said oral agree ment and since he had already paid Rs.5,000 by way of ear nest thereunder he was under no obligation to pay the rent to the respondents.
In order to secure eviction for non payment of rent, it must be shown that the default was intentional, deliberate, calculated and conscious with full knowledge of its consequences.
Here is a tenant who felt that even though he had invested Rs.5,000 as earnest the vendor has sold the property to the respondents in total disregard of his right to purchase the same.
This is not a case of a tenant who has failed to pay the rent without any rhyme or reason.
He was not averse to paying the rent but he genuinely believed that he was under no obligation to do so as he had a prior 120 right to purchase the property.
We are, therefore, of the opinion that this is a case in which the Controller should have invoked the proviso and called upon the appellant to pay the arrears from December 1977 to May 1978 within a certain time.
Failure to do so has resulted in miscarriage of justice.
We are, therefore, of the opinion that the ejectment decree cannot be allowed to stand.
In the result we allow this appeal and set aside the eviction decree.
The matter will go back to the Controller with a direction that he will give the benefit of the provi so extracted above to the appellant in accordance with law.
Parties will bear their own costs.
N.V.K. Appeal allowed.

Output:
The respondents purchased the demised premises by a registered sale deed dated 7th December, 1977 for Rs.70,000.
The appellant was in actual possession of a part of the premises as a tenant of the vendors at the date of purchase.
After the purchase the respondents served the appellant with a notice dated 13th December, 1977 calling upon him to pay the rent due, and deliver vacant possession of the demised premises.
The appellant replied to the notice on 29th Decem ber, 1977 alleging that the vendors had orally agreed on 14th October, 1977 to sell him the property for Rs.70,000, and had received Rs.5,000 as earnest money, and that he was under no obligation to pay the rent and vacate the premises, since he was ready and willing to purchase the property.
The respondents sent a reply denying the existence of any such oral agreement.
A suit for eviction, was thereafter filed by the re spondents claiming rent from December 1977 to May 1978 from the appellant, and since the same was not paid, the appel lant it was contended had rendered himself liable to evic tion on the ground of wilful default.
The courts below held that the appellant failed to pay the rent, and concluded that he was a wilful defaulter and passed a decree for ejectment against him.
In the appeal to this Court, on the question: whether it can be said 116 that the tenant 's default to pay or tender rent from Decem ber 1977 to May 1978 was not wilful to avail of the benefit of the proviso to clause (i) of the sub section (2) of Section 10 of the Andhra Pradesh Building (Lease, Rent and Eviction) Control Act, 1960.
The Court, allowing the appeal.
HELD: 1.
An act is said to be wilful if it is intention al, conscious and deliberate.
[119A] section Sundaram Pillai etc.
vs V.R. Pattabiraman etc.
, [1985] 2 SCR 643, refered to. 2.
In order to secure eviction for non payment of rent, it must be shown that the default was intentional deliber ate, calculated and conscious with full knowledge of its consequences.
[119G] 3.
In cases where the tenant has defaulted to pay or tender the rent, he is entitled to an opportunity to pay or tender the same if his default is not wilful.
The proviso to sub section (2) of Section 10 is couched in negative form to reduce the rigour of the substantive provision in Section 10(2) of the Act.
[118H; 119A] 4.
The appellant tenant in the instant case, did not pay or tender the rent from December 1977 to May 1978, not because he had no desire to pay the rent to the respondents but because he bona fide believed that he was entitled to purchase the property under the oral agreement of October 14, 1977.
He had also paid Rs.5,000 by way of earnest under the said oral agreement.
He, therefore, bona fide believed that he was entitled to purchase the property under the said oral agreement and since he had already paid Rs.5,000 by way of earnest thereunder he genuinely believed he was under no obligation to pay the rent to the respondents.
[119E F] 5.
This is not a case of a tenant who has failed to pay the rent without any rhyme or reason.
He was not averse to paying the rent but he genuinely believed that he was under no obligation to do so as he had a prior right to purchase the property.
[119H; 120A] 6.
This is a case where the Controller should have invoked the proviso to sub section (2) of Section 10 of the Act and called upon the appellant to pay the arrears from December 1977 to May 1978 within a certain time.
Failure to do so has resulted in miscarriage of justice.
The 117 ejectment decree cannot therefore, be allowed to stand and is accordingly set aside.
The.matter will go back to the Controller who will give the benefit of the aforesaid provi so to the appellant.
[120A B]


Input:
(Civil) No. 8227 of 1982.
Under Article 32 of the Constitution of India.
Dr. Abishek Singhvi, A. Subba Rao and A.S. Gauraya for the Petitioners.
Girish Chandra and section Suri for the Respondents.
855 The Judgment of the Court was delivered by PATHAK, CJ.
This petition under Article 32 of the Con stitution has been filed by two petitioners, the Assam Rifles Multi purpose Co operative Society Limited and Major General A.S. Guraya, AVSM (Retd.), Vice Chairman of the said Co operative Society.
It is stated in this petition that on the north eastern extremity of India, between latitudes 27deg.
N. and 28deg.
N. and on both sides of longitude 97xE., within the former Tirup District in the NEFA area (now in Arunachal Pradesh) lies substantial territory which is a part of India.
It is claimed that Major General Guraya as Inspector General Assam Rifles prepared a programme for settling retired defence personnel, specially of the Assam Rifles, in that region and took preparator steps for effect ing such settlement.
It is asserted that about two hundred retired personnel with their families journeyed to the region and settled there on the basis of a scheme approved by the Government of India.
It is alleged that the scheme assured allotment of land, grant of title deeds in respect of the allotted land, facilities for movement by air to and from Mohanbari, freedom to develop the allotted areas, grant of advance by way of loans, provision of marketing facili ties for disposal of surplus produce, guaranteed supply of essential commodities and provision of the basic require ments of life for the purpose of encouraging the all round economic development of the area.
The Co operative Society was formed with the object of ameliorating the conditions of the settlers and for improving their economic lot.
The petitioners relied on correspondence exchanged between them and the authorities of the State Government and of the Central Government and prayed for directions from this Court to the respondents for grant of the reliefs indicated in the writ petition.
Counter Affidavits have been filed by the Government of India.
Most of the allegations made by the petitioners have been denied.
It is asserted that funds have been set apart and basic facilities have been provided.
It is alleged that land was not allotted to Major Gen. Guraya as he did not belong to the Assam Rifles and the scheme for rehabilitation of retired personnel from that unit did not cover him.
It is alleged that he has engineered this writ petition.
We may mention at the very outset that Major General Guraya, who appears in person before us, has categorically stated that he is not interested any more in any personal allotment.
The case was taken up by us on 20 February, 1987 and after 856 hearing the parties we were satisfied that settlement and habitation in that region should be encouraged.
The region constitutes part of Indian territory and is located on the Indian border with China and Burma.
It is in the public interest and for the benefit of the public that settlement of Indian citizens should be encouraged in this area and the area should be suitably developed.
In that view, on 20 February, 1987 we made an order directing the Central Gov ernment to nominate a competent authority of suitable status to examine the problem and to look into the scheme and, after hearing the petitioners, to report to the Central Government to enable it to make an appropriate order for redress of the grievances of the petitioners.
Pursuant to the order of this Court, a report was submitted by the present Director General, Assam Rifles in which he noted the features of the original scheme set forth in NEFA Adm. letter No. PC 42/63 of 16/17 August, 1963 and the approval with modifications of the Government of India in the Minis try of External Affairs thereto, as well as the points raised by the Assam Rifles Ex servicemen before this Court and before the Director General, Assam Rifles when he visit ed Vijayanagar for the purpose, and in that report, he has made a number of recommendations in support of the scheme to settle Assam Rifles Ex servicemen and to ensure that the various facilities and concessions originally promised to them are provided.
We had directed in our order of 20 Febru ary, 1987 that the final order should be made by the Govern ment of India after consideration of the report.
It seems that the Government considered the recommendations at an inter Ministerial meeting held in the Home Ministry on 6 July, 1987 and thereafter took the decision contained in Annexure III to the affidavit of Shri R.K. Tandon, Deputy Secretary (NE), Ministry of Home Affairs, New Delhi.
It appears that the Government has decided that the Assam Rifles Ex servicemen who have been allotted 10 11 acres of prime land per family in a valley should be provided with agricultural input facilities including animal husbandry, fertilizers, insecticides as well as horticultural support under the normal schemes run by the State Government, that the State Government should be requested to issue specific letters in respect of each family to enable it to obtain loans from banks and other financial institutions, that while free air lifts were not possible, the State Government should be asked to find out whether the subsidised rate of Rs.89 per flight per head could be further reduced and that in any event no charges be levied for abortive flights, that while a full time doctor is already posted in Vijaynagar, the State Government should be requested to post a mid wife to the Vijayanagar hospital and to arrange for periodical visits of a Gynaecologist, that the State PWD be requested to undertake the repair of the suspension bridges forthwith, 857 that the Multi purpose Co operative Society should apply to the State Government for recognition, and that a meeting be called to sort out the difficulties in the disbursal of pension by the Department of Posts and that on issues such as grant of citizenship, loans etc.
the position indicated in the minutes of the inter Ministerial meeting held on 6 July, 1987 should be maintained.
The report of the present Director General Assam Rifles and the decisions taken by the Central Government thereupon have been considered by us in the light of the submissions made by the parties.
The decisions of the Central Government placed before us refer to requests to be made to the State Government to provide some of the facilities required by the settlers.
Reference has already been made to those matters earlier.
More than sufficient time has passed, and it is desirable to ascertain what action has been taken by the State Government pursuant to those requests of the Central Government.
Certain supplementary directions are necessary from this Court, and we make them now: 1.
The Central Government and the State Government should decide between them as to which of them will give loans to the settlers and to what extent.
The Central Government should direct that the exist ing Post Office establishment be enlarged to handle dis bursement of pensions.
The State Government should upgrade the existing middle school to the status of a high school and make ade quate provision for additional seats in the student hostel to absorb the corresponding increase in the number of stu dents resulting from such upgradation.
The grant of domicile certificates should be consid ered in relation to the settlers, at least in respect of the members of the petitioner society.
The case will now be listed on 1 August, 1989 before which date the respondent No. 1, the Union of India, and the respondent No. 2, the State of Arunachal Pradesh, will file affidavits indicating the action adopted by them pursuant to the decisions taken at the inter Ministerial meeting men tioned earlier and pursuant to the directions made by this Court in this Order.

Output:
The petitioners, the Assam Rifles Multi purpose Co operative Society, and its Vice Chairman a retired Military Officer, filed a writ petition in this Court praying for directions to the respondents for implementing the scheme, approved by the Government of India, for settling retired Defence Personnel, specially of the Assam Rifles, in the North Eastern Region.
The petitioner asserted that in pursu ance of this scheme, which assured the allotment of land, grant of title deeds in respect of the allotted land, facil ities for movement by air, freedom to develop the allotted area, grant of advance by way of loans etc.
and also provi sion of basic requirements of life for encouraging all round economic development of the area, about 200 retired person nel with their families journeyed to the region and settled there.
The respondents, in their counter affidavits contended that funds had been set apart and basic facilities provided.
This Court, by its Order dated February 20, 1987, di rected the Central Government to nominate a competent au thority for examining the problem, and looking into the scheme and submitting a report to the Central Government to enable it to consider the same and take necessary steps for redressal of the petitioners ' grievances.
Accordingly, the Director General of Assam Rifles submitted to the Government his report, making a number of recommendations in support of the scheme to settle Assam Rifles Ex servicemen and to ensure that the various facilities and concessions original ly promised to them were provided.
The Central Government considered the recommendations at an inter Ministerial meet ing and took certain decisions and placed them before the Court.
After considering the report and decisions of the Government 854 thereon and submissions made by the parties, this Court, HELD: The region constitutes part of Indian territory and is located on the Indian border with China and Burma.
It is in the public interest and for the benefit of the public that settlement of Indian citizens should be encouraged in this area and the area should be suitably developed.
[856A B] More than sufficient time has passed and it is desira ble to ascertain what action has been taken by the State Government pursuant to the requests made to it by the Cen tral Government to provide some of the facilities required by the settlers, and it is considered necessary to make the following supplementary directions: [857C D] The Central Government and State Government should decide between them as to which of them will give loans to the settlers and to what extent.
[857D] The Central Government should direct that the existing post office establishment should be enlarged to handle disbursement of pensions.
[857E] The State Government should upgrade the existing middle school to the status of High School and make adequate provi sion for additional seats in the students ' hostel to absorb the increasing number of seats resulting from such upgrada tion and the grant of domicile certificates in relation to settlers, atleast in respect of members of petitioner socie ty should be considered.
[857E F] Respondents No. 1 and 2 will file before the next date of hearing, affidavits indicating the action taken by them pursuant to the decisions taken at the inter Ministeri al meeting and pursuant to the directions made by this Court.
[857G]