RAMLAL ONKARMAL FIRM versus MOHANLAL JOGANI RICE AND ATIA MILLS

Citation: [1965] 3 S.C.R. 103 · Decided: 16-02-1965 · Supreme Court of India · Bench: RAGHUBAR DAYAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
RAMLAL ONKARMAL FIRM 
v. 
MOHANLAL J"OGANI RICE AND ATIA MILLS 
February 16, 1965 
103 
B (RAGHUBAR DAYAL, J. R. MUDHOLKAR, R. S. 
BACHAWAT 
AND 
V. RAMASWAMI. JJ.] 
D 
E 
F 
Debt-Discharge of on payment by cheque-acceptance by c~!­
!ecting bank draft in payment of cheque-Whether debt dis-
charged. 
In oayment of an amount due from them to the respondents. 
the aopellants sent to the respondents on August 31, 1948 a cheque 
which had been drawn on the Sibsagar branch of a Tripura Bank 
in favour of the appellants by a third party and thereafter endorsed 
by the appellants to the respondents. On September, 4, 
1948, the 
respondents forwarded the cheque to their bankers, a Gauhati Bank-
who, in turn, sent the cheque to the Tripura Bank at Sibsagar for 
encashment. That bank debited the amount of the cheque to the 
account of the third party and sent to the respondent's Gauhati Bank 
a draft which was payable at its own Head Office at Calcutta. There-
after the respondents' Gauhati Bank forwarded the draft to their 
Head Office at Calcutta for collection but the latter never presented 
the draft and made no a !tempt to collect the amount of the draft. 
In the meantime, the respondents bank closed its business on 
Sept~mber 17, 1948 and was ordered to be wound up. About a month 
later, the Tripura Bank also closed its business and was compelled 
to enter into a scheme of arrangement with its creditors. 
Upon the failure of their attempts to obtain payment of the 
draft amount from the Tripura B•nk, the respondents instituted a 
suit against the appellants claiming payment of their dues on the 
ground that the cheque dated August 31, 1948 was received by the 
respondents as a conditional payment, and as the cheque had not 
been cashed, the respondents were entitled to enforce their original 
claim. The sub-Judge dismissed the suit but the High Court in appeal 
reversed the decision and decree the suit. 
On appeal to the Supreme Court, 
HELD: (per Raghubar D•yal, Bachawat and Ramaswami, JJ)-
Although the respondents originally received the cheque as -a condi-
-6 
tional payment of their dues, and if nothing else had happened, the 
ori!\inal debt would have revived on non-payment of the cheque, 
havmg regard to the !aches of the respondents in the collection of 
the draft and the consequential prejudice to the appellants, the res-
pondents must be deemed to have retained the draft as. absolute 
payment· of the cheque and on the payment of the cheque, the original 
debt stood discharged. rl05 E-Fl 
B 
Chetty on Contracts, 22nd Edn. Art. 1079; Addison's Treating on 
the Law of Contracts, 11th Edn. p. 156; 
flobkins v. Ware, L.R. (1869) 4 Ex. 268; 
Chamber.!yn v. Delarive, 2 Wils. K.B. 353, referred to. 
(per Mudholkar. ,J.) : There was evidence to show that res-
pondents' bank, instead of collecting cash from the Tripu"a Bank 
at Sibsagar, sought, for reasons of their own, to collect th; amount 
by draft. Furthermore, after the resrxmdent bank went into J:qui-
dation, the respondents wrote to the Tripura Bank stating that the 
lOJ 
SUPREME 
COURT 
REPORTS 
(1965] 3 s.o.R. 
amount of the demand draft 
belonged to them and not to their A 
bankers who were only acting as their agents for collection purposes 
and that accordingly the draft amount should be paid to them. Thus, 
though the cheque endorsed by the appellants in favour of the 
r.espondonts was only a conditional payment of the amount for which 
tne che~ue was drawn, the respondents, by accepting the demand 
draft drawn by the Tripura Bank must be deemed to have accepted 
the draft as a legal tender or. as absolute payment of the amount 
payable under the cheque endorsed in their favour by the appel-
B 
!ant. Their rights thereafter would rest only upon the demand draft 
~!'d not upon the original debt which the appellant owed to them. 
1 he remedy of the respondents, therefore, could be against their 
own bank, or against the Tripura Bank, but not against the appel-
lants. fl08 E, 109 CJ 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 638 
of 0 
1962. 
Appeal by special leave from the judgment and decree dated 
May 21, 1957 of the Assam High Court in First Appeal No.']., of 
1962. 
; 
N.C. Chatterjee and D.N. Mukherjee. for the appellants. 
D 
S.C. Nath, P.K. Chatterjee for R. Gopa/akrishnan, for the 
respondent. 
The Judgment of RAGHUBAR DAYAL, BACHAWAT and RAMA-
SWAMJ JJ. was delivered by BACH~WAT J. MUDHOLKAR J. delivered 
a separate Judgment. 
Bachawat J. The 

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