AMERICAN EXPRESS BANK LTD. versus CALCUTTA STEEL CO. AND ORS.

Citation: [1992] SUPP. 3 S.C.R. 833 · Decided: 18-12-1992 · Supreme Court of India · Bench: A.M. AHMADI · Disposal: Appeal(s) allowed

Judgment (excerpt)

AMERICAN EXPRESS BANK LTD. 
v. 
CALCUTT A STEEL CO. AND ORS. 
DECEMBER 18, 1992 
[A.M. AHMADI, M.M. PUNCHHI AND K. RAMASWAMY, JJ.J 
Negotiable Instruments Act, 1881: Sections 5, 7, 32-lmport of steel 
billets through canalised agency MMTC-Letter of Credit opened MMTC Ale 
A 
B 
end user--Goods delivered- Appropriated by end user-Bills of Exchange 
accepted by end !fSer-Liability of drawee and acceptor-MMTC-Whether C 
absolved. 
Specific Relief Act, 1963: Section 34--Grant of relief-Discretionary 
power of Courts-Exercise of with Circumspection-Principles of justice and 
fairplaJ-Ends of justice-To be kept in mind. 
Words & Phrases : "Acceptance''-Meaning of. 
·The first respondent (CSC) obtained licence to import steel billets. 
D 
As per Government of India's import policy, iron and steel Wt're to be 
imported through canalised agency viz., Minerals and Metals Trading 
Corporation of India Ltd. (MMTC). Hence CSC wrote to MMTC for letter E 
of authority to import the said goods, with a copy addressed to the 
supplier. The price was payable by way of Demand Draft drawn on MMTC 
Ale. CSC. It wa-; decided that in order to reduce the financial burden of 
the end user it would open Letter of Credit directly in favour of the foreign 
suppliers with the condition ·that the name as opener of the Letter of F 
Credit by the end user in favour of the foreign suppliers would be shown 
as MMTC. It was also made clear that this was to meet the exchange 
control only and MMTC was not in any way responsible for the failure of 
CSC to comply with the requirements of the Letter of Credit, and that 
CSC would accept the drafts and make payment on the due dates. There-
G 
after the first respondent CSC opened Letter of Credit in favour of the 
foreign supplier. 
On December 31, 1986 about 7 tonnes of steel billets were shipped 
by the foreign supplier and the Bills of Exchange were presented to 
MMTC A/c. CSC. The cargo reached Calcutta port in the month of H 
833 
834 
SUPREME COURT REPORTS [1992) SUPP. 3 S.C.R. 
A February 1987 and the documents were presented. to CSC, which executed 
a trust receipt in favour of the appellant-Bank and endorsed its accep-
tance on the three Bills of Exchange. The appellant released the d.ocu-
ments of title to the goods, and obtained the necessary endorsement 
from MMTC. CSC took delivery of the goods and appropriated the 
B 
same. When the appellant-Bank presented the Bills of Exchange on 
maturity to CSC for payment they were dishonoured. CSC filed a suit 
against the supplier before the High Court for a declaration that the 
three Bills of Exchange were illegal, null and void. A Single Judge 
dismissed the suit. The appeal filed before the Division Bench was 
allowed and the suit was decreed. Hence this appeal by the appellant-
C Bank. 
Respondent CSC contended that its liability on the basis of the Bills 
of Exchange being commercial instruments would arise only if it was the 
drawee and acceptor thereof; that the sale of goods having taken place on 
high seas and the Bills of Lading made to the order of MMTC, it alone 
D was the drawee; and that CSC being not an agent of MMTC, the accep-
tance by CSC was void. 
Allowing the appeal, this Court 
HELD ~ 1. A party that takes a negotiable instrument makes his 
E contract with all the parties who appear on its face to be bound for its 
payment. Therefore, the Negotiable ~nstruments Act insists that a Bill 
of Exchange makes the acceptor personally liable unless the acceptor 
states on the face of the bill that he subscribes for a disclosed principal. 
The usual mode of accepting bills of exchange is for the drawee to write, 
F 
'accepted' across the face of the bill and then to sign his or its name 
underneath. The acceptance need not necessarily be on the face of the 
bill and an acceptance on its back is ·also sufficient. In all cases it is 
essential that the acceptance should be on the bill itself, otherwise it is 
a mere nullity. (841-D,E] 
G 
2. "Acceptanceh in regard to a bill of exchange is a technical term. It 
does not mean "taking" ·or "receiving". Acceptance of a bill of exchange is 
the signification by the drawee of his assent to the order of the drawer. It 
is the act by which the drawee evinces his consent to comply with, and be 
bound by, the request contained in a bill of exchange directed to him, and 
H is the drawee's agreement to pay the bill when it falls due. In commercial 
AMERICAN EXP. BANK v. CALCUIT A STEEL CO. 
835 
parlanc

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