Stock Holding Corporation of India Ltd. Vs Indusind Bank Ltd. and Another

D.K. Seth, J.@mdashAn order of status quo was granted on 6.4.2001 when this matter was moved with direction to serve the parties. Accordingly copy of the application has been served and this matter is being moved today. Learned Counsel appearing on behalf of the petitioner insisted that an interim order should be granted by continuing the order of status quo with further order for deposit of the cheques mentioned in the petition. The said prayer is being opposed on behalf of the defendant No. 1. It is contended that the order of status quo should be vacated and no interim order should be granted. Mr. Sarkar had pointed out that the plaintiff under a particular scheme ''cash on pay out'' had been functioning in the depository segment of the stock market. Under the said scheme immediate cheques used to be issued by the plaintiff which was payable on presentation on the date mentioned after pay out of funds made by the Stock Exchange. The defendant No. 2 by his letter dated 2.3.2001 accepted the advantage of this scheme. In the said letter contained in Annexure A the defendant No. 2 had pointed out that the cheque will be presented for payment only after pay out of funds are made by the Stock Exchange. It had also enclosed a format which was required by its banker and requested the plaintiff to enclose the cheque along with the letter on the line of the format addressed to the banker of the defendant No. 2. Accordingly, the plaintiff had issued a cheque for the respective amounts along with a letter in the format as above on 2.3.2001 addressed to the defendant No. 1. the banker of the defendant No. 2. Amongst various conditions, it. was also mentioned that the cheque will be presented for payment on the next day of pay out of rolling settlement No. 2001519 of the Calcutta Stock Exchange for the settlement of trades executed on 2.3.2001. By a letter dated 13.3.2001 addressed to the United Bank of India on which the cheques were drawn, the banker of the plaintiff was asked to stop payment in case of its presentation. The said letter is in Annexure C. On the same date the letter was addressed to the defendant No. 2 asking him not to present the said cheques till the payment is received by the plaintiff from the Calcutta Stock Exchange. This letter is in Annexure D. On the same date by a letter addressed to the defendant No. 1 contained in Annexure E the plaintiff had informed that there is likelihood of nonpayment of the amount by the Calcutta Stock Exchange on account of the imminent crisis reported in the newspaper and the pay out may not take place as scheduled. Therefore it was informed that the cheque may not be honoured, if presented, since funds have not been received and it would be paid as soon funds are received. By a letter dated 13.3.2001 the defendant No. 2 informed the plaintiff that the said cheques were discounted by the defendant No. 2 in favour of the defendant No. 1 on 5.3.2001. By reason of such discounting the defendant No. 1 has become the holder in due course under the Negotiable Instruments Act and therefore it had given notice to proceed for recovery of the amount against the plaintiff. On 24.3.2001 the defendant No. 2 had given a notice purporting to be one u/s 138 of the Negotiable Instruments Act on account of stop payment of the said cheques. In this background this suit has been filed for declaration that the said cheques were void and for certain other reliefs including injunction.

2. Mr. Sarkar had contended in support of his case that the cheque was an account payee cheque issued in the name of the defendant No. 2 striking out the expression ''bearer''. Therefore the cheque is pure and simply an account payee cheque. Thus it is not a negotiable instrument u/s 9 of the Negotiable Instruments Act until 14.3.2001, namely, the date of the cheque. He again contends that the cheques were issued along with letters which formed terms of the cheque which could not be incorporated in the cheque itself. Thus even if it is a negotiable instrument still then it is subject to the conditions incorporated in the offer and the acceptance which made it payable though on a particular date but only after pay out of the funds by the Calcutta Stock Exchange. Therefore, until and unless the condition is fulfilled and the payment is received, the cheque does not become payable even on demand. Therefore it cannot be treated to be a negotiable instrument before the date mentioned on the instrument. Therefore the said cheque could not be discounted by the defendant No. 1 at the instance of the defendant No. 2 and as such the defendant No. 1 could not be a holder in due course according to Section 8 of the said Act. He also points out that a cheque as defined in Section 6 is a cheque only when it is payable to bearer/order, and not otherwise. Thus, it is not a cheque within the meaning of the Negotiable Instruments Act so long it is inscribed ''account payee''. There are two limbs of his argument One. is that the cheque being account payee cheque, the same can never be a negotiable instrument nor a cheque within the meaning of the said Act, particularly when the same is a post-dated one. The other limb is that it cannot also be treated to be a negotiable instrument and not as a cheque before the 14th March, 2001 by reason of its being account payee which does not satisfy the test of negotiable instrument laid down in Section 9. Therefore, according to him, the defendant No. 1 cannot claim to be a holder of the negotiable instrument by reason of its claim discounted on 5.3. 2001. He also relies on para 7 of the decision in the case of M/s. Electronics Trade and Technology Development Corpn. Ltd., Secunderabad Vs. M/s. Indian Technologists and Engineers (Electronics) Pvt. Ltd. and another, , to contend that Section 138 has no manner of attraction in respect of a cheque where the cheque is sought to be presented after the drawer was requested not to present the cheque before the cheque becomes presentable or could be presented. Therefore, Section 138 of the Negotiable Instruments Act could not be attracted in such a case and as such any injunction granted in this case staying the operation of the cheque or the notice u/s 138 will not be hit by clauses (b) and (d) of Section 41 of the Specific Relief Act. On the other hand, the relief being claimed u/s 41 of the Specific Relief Act, the effect of such an instrument can be stayed during the consideration of the relief available u/s 41 of the Specific Relief Act. Relying on the decision in the case of Anil Kumar Sawhney vs. Gulshan Rai, reported in (1994) 79 CC 150 , he points out in support of his contention that a cheque which is account payee'' is not a negotiable instrument. He also relied on a decision by the Special Bench in the case of Tailors Priya, a firm Vs. Gulabchand Danraj, a firm, and contends that there was a difference between the English Law and the Indian Law where account payee cheques were not regarded as non-negotiable instrument. There was a distinction. The principle of the English Law was troubling the learned Judges delivering the Special Bench decision which is apparent from paras 16, 17 and 18 by D.N. Sinha, J. (as His Lordship then was) and para 25 by P.N. Mookherjee, J. (as His Lordship then was). In both these paragraphs the said Hon''ble Judges had expressed a feeling having regard to the English principle which was sought to be defined by Mookherjee, J. relying on Section 13 of the Negotiable Instruments Act. This feeling and anomaly had also formed favour with the English principle by reason by amendment in the Cheques Act, (England) whereby Section 81(a) was brought about by Cheques (Amendment) Act, 1992 indicating that account payee cheques are nontransferable and non-negotiable. This distinction sought to be made by the Indian Courts appears to have been followed by the English Statute. Thus, according to him, the same supports the contention of Mr. Sarkar to the extent that this instrument not being negotiable, the discounting of the same on 5.3.2001 does not make the defendant a holder in due course within the meaning of Section 8 of the said Act and as such he has not been able to make out a prima facie case for grant of an interim order. At the same time, he has also pointed out that from the facts as disclosed and Revealed, it is a case where an interim order should be granted even without notice in terms of the proviso to Rule 3 of Order XXXIX of the CPC without any service on the defendants though however copies of the petitioner have been served without the copy of the plaint and notice of motion. Therefore, in the facts and circumstances of the case, an interim order should be granted forthwith.

3. Mr. Sen, learned Counsel for the defendant No. 1 opposes the contention of Mr. Sarkar on the ground that the said, cheque is a negotiable instrument and could be negotiated even before it became due and payable or even afterwards even if it was a post dated cheque. It may not come within the definition of Section 9 but still then it becomes a negotiable instrument as soon it is presented for discount according to the normal practice of the banking system. He contends that the endorsement ''account payee'' will not take away the cheque outside the ambit of negotiable instrument He contends that Section 81A as amended in the Cheques Act in England has no manner of application in Indian cases. Relying on the decision reported in AIR 1976 SC 563 (Hind Overseas Pvt. Ltd. vs. R P. Jhunjhunwalla & Anr.) he contends that the Indian Law has to be interpreted according to its own system. It cannot be interpreted, borrowing the principle from the English Law. Therefore, in the present case the endorsement account payee'' does not change the character of the cheque as a negotiable instrument. He then contends that u/s 41 of the Specific Relief Act the present suit cannot be maintained which, in effect aims at obtaining an interim order to forbid the defendant No. 1 from proceeding u/s 138 of the N.I. Act Relying on the decision in the case of M/s. Electronics Trade and Technology Development Corpn. Ltd., Secunderabad Vs. M/s. Indian Technologists and Engineers (Electronics) Pvt. Ltd. and another, , he contends that nation to stop payment will not detract application of Section 138 of the Negotiable Instruments Act as has been held in the said case since been followed in NEPC Micon Limited and Others Vs. Magma Leasing Limited, . He also relied on a decision in the case of Cotton Corporation of India Limited Vs. United Industrial Bank Limited and Others, . He had contended that there cannot be any injunction restraining a person from initiating a criminal proceeding as has been held therein. He supported his contention relying on the decision in the case of Indian Bank Vs. Euro International Pte. Ltd., which followed the said decision and laid down the identical principle. He also relied on a decision in Aristo Printers Pvt. Ltd. Vs. Purbanchal Erade Centre, Guwahati, , in order to sustain the same contention. He had pointed out from Sections 138 and 139 of the N. I. Act that the present case satisfies the conditions laid down in Section 138 and that there is a presumption with regard thereto in terms of Section 139 and as such this court cannot grant injunction even indirectly which will prevent the defendant No. 1 from proceeding with the notice issued purported to be one u/s 138 of the N. I. Act He also contended that the terms of the contract between the plaintiff and the defendant No. 2 cannot bind the defendant No. 1. According to him by reason of the letter contained in Annexure ''B'' which was directly addressed to the defendant No. 1 by the plaintiff, the defendant No. 1 is bound to make payment irrespective of what might be the relation or condition between the plaintiff and the defendant No. 2. In terms of the said condition contained in Annexure ''B'' the plaintiff was bound to pay the defendant No. 1 and that it cannot stop payment of the cheque as assured in the said letter and that the said letter was issued in terms of the valid resolution passed by the Board of Directors and that the undertaking given In the said letter dated 2nd March. 2001 contained in Annexure ''B'' was irrevocable and represents normal trade. In the present case whether it is a negotiable instrument or not. the stoppage of payment itself attracts the application of Section 138 read with Section 139 of the N. I. Act Since the defendant No. 1 is a holder in due course of the said cheque, the defendant No. 1 has every right to proceed with the notice u/s 138 which cannot be stayed by grant of injunction even if it affects the same indirectly For all those reasons according to him the application for injunction should fail and no interim order should be granted. The learned counsel for the defendant No. 2. however, did not make any submission with regard to the question of grant of interim order.

4. I have heard the respective Counsels at length.

It appears that this, question can be determined at this stage without any affidavit since the question is a pure question of law based on the documents which are more or less admitted say the parties. Both the Counsel had relied on some documents and interpreted same in support of their respective contention according to their own way.

5. In the facts and circumstances of the case, now it is to be seen whether an interim order could at all be granted in the present facts and circumstances of the case. Admittedly, the interim order is dependent on making out of a prima facie case and the question of balance of convenience. Since an ad interim order is being asked for without complying with the provisions of Rule 3 of Order 39 therefore it is also to be seen whether this question can be covered under the proviso to Rule 3 of Code of Civil Procedure.

6. In the present case we will look into this question at a later stage. First we may find out as to whether a prima facie is made out or not. In order to find out as to whether a prima facie case Is made out or not we may refer to the definition of cheque as given in Section 6 of the N. I. Act. Section 6 demise: " a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand". Thus a cheque as defined under the N.I. Act is payable on demand. If it is expressed to be payable otherwise in mat event it does not satisfy the definition of a cheque. The holder is defined in Section 8 : "a holder of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto." Thus it is ordinarily the person in whose name the cheque is issued is the holder of the cheque. But it can be held by someone else by reason of Section 9 which defines holder in due course to mean "any person who for consideration became the possessor of a promissory note. bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof, if payable to order, before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title". Thus a person is holder in due course before it became payable provided he had no sufficient cause to believe that any defect exists in the title of the person from whom he derived his title. But the cheque has been qualified u/s 9 to mean a cheque if payable to bearer; or the payee or the endorsee thereof if payable to order''. Thus the cheque which can pass onto a holder in due course must be a cheque which is either bearer or payable to order and not otherwise. Now we are to examine as to whether a cheque marked account payee'' can also be included within the meaning of Section 6 but in such case the holder would be the person in whose name it stands. It can pass on to a holder in due course only when the cheque is payable either to bearer or to order. Therefore, the interpretation of the expression account payee endorsed on a cheque is the pivot on which the present question depends. Section 13 defines Negotiable Instrument as follows:

''13. "Negotiable Instrument" - [(1) A "negotiable instrument" means a promissory note, bill of exchange or cheque payable either to order or to bearer.

Explanation (I) - A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable.

Explanation (ii) - A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last endorsement is an endorsement in blank.

Explanation (iii) - Where a promissory note, bill of exchange or cheque, either originally or by endorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option.]

1(2) A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two. or one of some or several payees]''.

7. From the above definition it appears that a cheque is a negotiable instrument when it is payable either to order or to bearer. There are certain explanations which we may note. Explanation (i) explains that a cheque is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person and does not contain any words prohibiting transfer or indicating an intention that it shall not be transferable. Explanation (ii) defines cheque payable to bearer when it is so payable by expression on which the only or last endorsement is an endorsement in blank. Explanation (iii) provides that a cheque either originally or by endorsement may be expressed to be payable to the order of a specified person and not to him or his order. It is nevertheless payable to him or his order at his option. These three explanations clearly indicates what are the negotiable instruments. The only question that has to be considered is as to whether the endorsement ''account payee'' would take away the cheque from the definition of negotiable instrument in Section 13 read with Section 9 added with the explanations (i) (ii) (iii) respectively. If it appears that by reason of insertion of ''account payee'' on the cheque it becomes non-negotiable then only the question raised by Mr. Sarkar may succeed.

Mr. Sarkar had relied on the decision reported in AIR 1979 CC 150 being the case of Anil Kumar Sawhney [supra]. In the said decision it was held that it is only a cheque payable on demand and is a cheque within the meaning of Section 6. A post dated cheque is not a cheque. It may be a bill of exchange when it is written or drawn before the date when it becomes payable. It becomes a cheque only on the date when it becomes payable on demand. This decision does not help Mr. Sarkar. Even if the cheque as in the present case is post dated cheques are not treated as cheques but yet these are bills of exchange and can be negotiated. Therefore, the question that it was not a cheque becomes immaterial but then it has to be seen whether it satisfies the definition of cheque having regard to the defendant No. 1. Had it been the defendant No. 2 whether it comes u/s 6 or not it would have been a different question but as soon it comes at the hand of the defendant No. 1 in that event he has to be a holder in due course. In order to be a holder in due course he may hold the same as a cheque only when it is payable either to order or to bearer and not otherwise. If the cheque is a bill of exchange when it is post dated in that event u/s 9 the defendant No. 1 would become a holder in due course, provided it is payable lo bearer or order. But if the cheque is an account payee one in that event it becomes payable only on demand and that too in the account of the payee. It is an intention of the customer to the Banker to pay the specified sum to the named payee. Thus it cannot be a bill of exchange by reason of the definition contained in Section 6 nor the defendant No. 1 could, be a holder in due course since a holder in due course can hold a cheque only when it is payable on demand and is payable either to order or to bearer. The xerox copies of those cheques were produced in court wherefrom it appears that the word ''bearer'' in the cheque was scored through and for account payee is endorsed. Thus it does not satisfy the test of Section 13 read with Section 9 and thus the defendant No. 1 cannot become a holder of the cheque on 5.3.2001.

In the case of Tailors Priya, a firm Vs. Gulabchand Danraj, a firm, , this question had troubled the learned Judges sitting in the special benches with regard to the differences between the English Principle and the application to the Indian Law. Mr. Justice Sinha as his Lordship then was had observed in paragraphs 16. 17 and 18 as follows:

"(16) I now come to the provisions of the Indian Negotiable Instruments Act (Act XXVI of 1881). Section 5 of the said Act defines a ''Bill of Exchange'' as being an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to. or to the order of. a certain person or to the bearer of the instrument. Section 6 provides that a cheque is a bill of exchange drawn on a specified banker and not payable otherwise than on demand. Section 7 defines the word ''payee'' as being the person named in the instrument to whom, or to whose order, the money is directed to be paid. Section 13 defines a ''Negotiable Instrument'' which includes a cheque payable -either to order or bearer. A cheque is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable. Section 14 provides that when a cheque is transferred to any person so as to constitute that person the holder thereof, the instrument is said to be negotiated. Chapter XIV of the said Act deals with the subject of crossed cheques. Cheques may be crossed in two ways e.g. generally (Section 123) or specially (Section 124). Where a cheque bears across its face, the words and company'' or any abbreviation thereof, between two parallel transverse lines, or of two parallel transverse lines simply, either with or without the words "not negotiable", that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed specially, and to be crossed specially otherwise than to the banker to whom the same is crossed, or his agent for collection, shall be liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid. Section 130 lays down that a, person taking a cheque crossed generally or specially, bearing in either case the words "non negotiable", shall not have, and shall not be capable of giving a better title to the cheque, then that which the person from whom he took it had. Under the Indian Law as it stood previously, and the English Law before the Bills of Exchange Act, a person could draw a nontransferable cheque by simply omitting the word ''order or bearer''. But now, both under the Indian Law and the English Law, one way to restrain negotiation of a cheque is by crossing a cheque with the words not negotiable''. A cheque crossed ''not negotiable'', may be transferred, but the transfer is not attended by the same important consequences as in the negotiation of a negotiable instrument. If the transferor had a good title, the transferee is entitled to receive payment. But if the title of the transferor is defective, the transfer is affected by such defects, and is not immune to the same, as is a holder for value in due course of a negotiable instrument. In other words, a cheque endorsed as ''Not Negotiable'' is deprived of one of the two attributes of negotiability, viz., transferability free from defects; but is left with the other, namely transferability by delivery or endorsement Thus, where a cheque is marked with the crossing ''not negotiable'', there cannot be ''a holder in due course'', but only a ''holder''. Next, we come to Section 50 of the said Act, which deals with the effects of endorsement. It provides that the endorsement of a negotiable instrument followed by delivery, transfers to the endorsee the property therein, with the right of further- negotiation; but the endorsement may. by express words, restrict or exclude such right. Section 54 provides that, subject to the provisions contained in the said Act as to crossed cheques, a negotiable instrument endorsed in blank is payable to the bearer thereof even though originally payable to order.

(17) It is thus found that a cheque is a negotiable instrument and may be transferred or negotiated by endorsement and delivery, making the endorsee the holder in due course. But unlike other negotiable instruments, there are specific provisions with regard to crossed cheques. Those provisions have been mentioned above. If the words ''not negotiable'' are used with special crossing, then it is still transferable but not negotiable. The Negotiable Instruments Act does not provide specifically for a crossing, ''a/c payee or a/c payee only''. At one time it used to be thought in England that such endorsement had no legal effect and it was even thought that such endorsement invalidated a cheque. However, the practice of making such endorsements is so widespread and has been going on for such a length of time, that it can no longer be said that such a crossing would invalidate a cheque. But, there has really been no satisfactory decision with regard to the legal consequences of such crossing. The two cases mentioned above, which are always cited, do not specifically deal with such endorsements, except a passing observation of Lord Scrutton LJ. In (1924) 1 KB 775. However, it seems that the text books are unanimous in their opinion that an endorsement or crossing containing the words a/c payee'' or ''a/c payee only'' does not restrict the negotiability of the cheque. It is only a direction on the collecting banker to put the money into the account of the person shown as the payee, on the face of the cheque. The result is this : Supposing A issues a cheque in favour of B and crosses it ''a/c payee only''. B may negotiate it in favour of C and C may negotiate it in favour of D and so on. The only result of such crossing is that when it is put into the hands of the collecting banker, the banker is put on notice that the money must be put into the account of B only and not in any other account, and if it puts the money into some other account with notice of the crossing, it will be liable for negligence. I however fail to see the merits of this curious procedure. In the illustration given above. C may take the cheque from B and become holder for value and yet if he goes to his banker asks the banker to collect the money, the duty of the banker would be, not to put the money into C''s account but into B''s account, and if B has no account then the banker may refuse to accept the cheque at all. Under such circumstances, I do not see what benefit C has got by negotiation. It amounts to this, that he becomes a holder for value but without the right of getting his banker to collect the money.

(18) This curious position in law is not known to the public at large. It is generally believed that by crossing a cheque with the words ''a/c payee only'', it is made non-negotiable. Indeed, such endorsements are made in order to render it non negotiable, and as a measure of safety. In my opinion, the law on the point should be reconsidered and there is no reason why we should blindly follow the English law on the point. However, the position seems to have been so uniformly accepted by text book writers, both in England and India, that I am unable to depart from that view on the strength of my own feelings about it. The matter should however be corrected by legislation. I therefore hold that according to the law as it stands at present, a cheque payable to order or bearer and crossed ''a/c payee'' or ''a/c payee only'' but without the endorsement, ''not negotiable'', is a negotiable instrument, and may be negotiated, but the collecting banker has a duty to put the money, when collected, into the account of the payee indicated, and into no other account."

8. On the same question in paragraph 25 Mukherjee, J. as His Lordship then was had observed as follows:

"(25) The points, thus arising, are of some considerable difficulty, though, in the ultimate analysis, one aspect of the matter would not require a decision in the instant reference. As we have seen above, the problem before us has three aspects, - first, whether a cheque, crossed "A/c payee only", that is "Account Payee only", is a negotiable instrument; second, whether, even apart from that, a suit on such a cheque may be brought as a summary suit under Order XXXVII of the Code; and, third whether such a suit is triable or entertainable by the local City Civil Court. As, in our view, whatever be the answer to the first part, the second and the third must be answered in the affirmative, the instant Rule is bound to fall. In the premises, the first part need not be answered in the instant reference and 1 reserve my opinion on the same. I would. "however, freely confess that, notwithstanding several decisions of high authority in the English Courts (Vide. (1891)1 QB 435 at pp. 4389, (1904) 12 KB 465 at p. 472; (1914) 3 KB 356 at pp. 373-4. (1922) AC 1, (1924) 1 KB 775 at pp. 793-4 and (1927) 2 KB 297 at p. 307). to the effect that a crossing Account Payee'' or Account Payee only" would not make the cheque non-negotiable or non-transferable. which have apparently Influenced judicial opinion on the point in this country, vide. British Bank of Middle East Vs. Almal Brothers, , and certain broad passages on the subject in the leading treatises, purporting to summaries the law on the point (Vide Halsbury''s Laws of England, 3rd Edition, Vol. 2 page 183 (Art. 347). Paget''s Law of Banking, 5th Edition, pp. 154-5 and 156 Sheldon on ''Practice'' and Law of Banking'' 6th Edition, pp. 24 and 78-9, Chalmers on Bill of Exchange'' 12th Edition pp. 253-4, Byles on Bills, 20th Edn. P. 45 and Daver''s Law and Practice of Banking, 2nd Edition, p. 57 and Bhashyam and Adiga- "The Negotiable Instruments Act" 10th Edition p. 546) to a similar effect namely, that such a crossing (''Account Payee'' or ''Account Payee only'') does not affect the transferability or negotiability of the cheque but only conveys an intimation to or represents a direction upon the collecting banker to place the proceeds of the cheque to the specified or particular account, I cannot help feeling, in view, particularly, of the later part of explanation (i) of Section 13(1) of the Indian Act and the analogous provisions of Sections 8(1) and 8(4) of the corresponding English statute (The Bills of Exchange Act, 1882) that the matter requires further and closer examination (see also in this connection Chalmers supra p. 254 and Paget supra p. 156). I would also add that the view that a cheque, crossed Account Payee only'', is a negotiable instrument, that is, that it does not indicate a prohibition of transfer, - the test of non-negotiable instruments under the above statutes, - smacks of unreality and gives a rude shock to our practical common sense and sense of realities". It ignores the substance of the matter and even contradicts the form and the writing of the instrument and, accordingly, it should not be adopted or accepted unless the statute compels such adoption or acceptance".

9. Thus it appears that an account payee cheque cannot be held to be a negotiable instrument having regard to the realities in contradiction to the form of writing the instrument. However, the observations made by the special bench are obiter since the court was not called upon to decide such question. However, it may be noted that this principle has ultimately been followed in English law by suitably amending the statute by introduction of Cheques Amendment Act, 1992 whereby Section 81A was incorporated where account payee cheques were held not transferable and was only valid as between the parties thereto. Mr. Sen, however, contended relying on the decision reported in Hind Overseas Private Limited Vs. Raghunath Prasad Jhunjhunwalla and Another, that the English principle cannot be relied upon for the purpose of interpreting the Indian Law. Paragraph 31 of the said decision reads as follows:

"(31). Although the Indian Companies Act is modeled on the English Companies Act, the Indian Law is developing on its own lines. Our law is also making significant progress of its own as and when necessary. Where the words used in both the Acts are identical, the English decisions may throw good light and reasons may be persuasive. But as the Privy Council observed long ago in Rcunanandi Kuer vs. Kalawati Kuer, AIR 1928 PC 24. It has often been pointed out by this Board that where there is a positive enactment of the Indian legislature, the proper course is to examine the language of that statute and to ascertain its proper meaning uninfluenced by any considerations derived from the previous state of the law or of the English Law upon which it may have been founded.''

If it was true in the twenties it is more apposite now that the background, conditions and circumstances of the Indian society, the needs and requirements of our country call for a somewhat different treatment. We will have to adjust, adapt, limit or extend, the principles derived from English decisions, entitled as they are to great respect, suiting the conditions of our society and the country is general, always, however, with one primary consideration in view that the general interests of the shareholders may not be readily sacrificed at the altar of squabbles of directors of powerful groups for power to manage the company."

10. In fact the Indian Law is to be incorporated according to its own development without borrowing anything from the English Principle. It is an admitted position in the banking system in India that whenever the word bearer'' is scored through in a cheque and the same is endorsed as ''account payee'' in such case such cheque is payable only to the account of the person in whose name cheque is drawn. The scoring of the word bearer'' and crossing the cheque and making it account payee'' of a person named in the cheque makes it non-transferable. If the cheque is. Not transferable in that event it becomes non-negotiable. It may be negotiable between the third parties. Even if it is deposited in the bank of drawee in that event the drawee''s bank is expected to collect the sum and credit it to the account of the payee. Such bank is only a collecting agent and nothing else. As such collecting agent it has no authority to negotiate. At the same time, the drawee also cannot negotiate the said cheque with his own banker. Since the cheque was endorsed ''account payee'', therefore the same cannot be treated to be a negotiable instrument within the definition of Section 13 of the Negotiable Instruments Act. As soon the cheque is account payee it does not become a bill of exchange. Since the bill of exchange is also a negotiable instrument and if the document is non-negotiable, it cannot be negotiated as a bill of exchange inasmuch as bill of exchange as defined in Section 5. only relates to a document which is payable to order or to the bearer of the instrument A cheque may be a bill of exchange u/s 6 when it is payable on demand. Thus an account payee cheque also does not satisfy the test of bill of exchange. Therefore, whether it is post-dated or not it becomes irrelevant as soon the cheque is an account payee cheque. The moment the cheque is an account payee one, it cannot be negotiated within the definition either of bill of exchange or cheque or of negotiable instrument and as such the defendant No. 1 cannot become a holder in due course.

11. Therefore, the said cheque could not be discounted on 5.3.2001. It could have only been presented on 14.3.2001 by the defendant No. 1 on behalf of defendant No. 2. In case of stoppage of payment it is only the defendant No. 2 who could have claimed to be aggrieved by reason of Section 138 and not the defendant No. 1 until he becomes the holder in due course. Thus as rightly contended by Mr. Sarkar, Section 138 does not apply when stoppage of payment is applied by a letter requesting the drawee not to present the cheque before the presentation date as in the present case. Therefore, prima facie, it appears that Section 138 cannot be attracted in the present case. If Section 138 is not attracted in that event the question of initiation of a criminal proceeding cannot arise.

12. In that event u/s 31 of the Specific Relief Act a document can be declared void and cancelled and such a prayer has been made in the plaint. Though prayer for injunction has been made for restraining the defendant from proceeding with the notice u/s 138 of the N.I. Act but the same does not take away the character of the suit outside the scope of Section 31 of the Specific Relief Act Section 41 of the Specific Relief Act may forbid the prayer for injunction if it falls within clauses (b) and (d) of the said Section. Therefore, no such injunction can be granted restraining the defendant from initiating any proceedings u/s 138. Thus the prayer for grant of stay of the operation of the document, if indirectly prohibits initiation of criminal proceedings, such a prayer cannot be granted in view of the'' Apex Court''s decision in the case of Cotton Corporation of India Limited Vs. United Industrial Bank Limited and Others, , followed in Indian Bank Vs. Euro International Pte. Ltd., and AIR 1992 Gauhati 81 [M/s. Aristo Printers (P) Ltd. vs. M/s. Purbachal Trade Guwahati. But in the present case as observed earlier. Section 138 cannot be attracted and that far as the defendant No. 1 is concerned, the cheque cannot be negotiated either as a cheque or as a negotiable instrument and as such ''the defendant No. 1 cannot claim any right with regard thereto. At the same time the defendant No. 2 having discounted the cheque and obtained the same it also cannot be allowed to take advantage of Section 138. The advantage of Section 138 is available to a person who either is a holder or a holder in due course. Since I have already observer that ''he defendant No. 1 is not a holder in due course and that the holder defendant No. 2 has received money having discounted, he cannot take advantage of Section 138. As such there is no scope of prohibiting from initiating any proceedings u/s 138, when prima facie it appears that no right is available to the parties.

Be that as it may. at the present moment it appears that the cheque was issued subject to certain conditions as is apparent from the various correspondence. The defendant No. 2. had requested the plaintiff to issue the cheque under the scheme cash on pay out. He had undertaken that the cheque would be presented for payment only alter the pay out of funds or paid by the Stock Exchange and therefore, defendant No. 2 who had agreed that he will be presenting the cheque only when the Stock Exchange had paid out the funds. He had also requested to issue a letter in the format annexed with the said letter. Accordingly, the plaintiff had issued the letter in the format which contains certain clauses namely that the plaintiff had irrevocably undertaken to honour the cheque when presented or within three months from the date mentioned. However. it also contains a clause that the cheque will be presented for payment on the next date of pay out of the rolling settlement No. 2001519 of the Calcutta Stock Exchange for the settlement of. trades executed on 2.3.2000. Thus the condition was also made known to the defendant No. 1 to the extent that the said cheque is to be presented only after the payment by the Calcutta Stock Exchange and not before even if the date is mentioned on 14.3.2001 which was the expected date after 13.3.2001 being the scheduled date for pay out. But still then the date will not make any difference in respect of the condition of the cheque which was issued subject to the letters that it was" to be presented only after pay out. This letter was issued on the basis of the offer by the defendant No. 2 which contains that the cheque will be presented only after the pay out of the funds. Therefore, it is only after receipt, the drawer was liable to pay in terms of the condition given by the drawee. The same was indicated to the banker of the drawee. It was only an intimation of the drawee that it will be paid on the day next after pay out. Such cheque was issued under a scheme. Under the said scheme the condition was that it will presented after the receipt of the amount from the Calcutta Stock Exchange. The cheque will be presented as and when the funds will be available. The system is well known to the contracting parties including the banker. It is known that the funds will be available only after the Calcutta Stock Exchange pays the sum. Until the said payment is made, the funds will not be available. It was not unknown to any of the parties about the situation under which it was issued. The cheque was issued on the basis of the fact that the plaintiff had knowledge that he had no fund. On the other hand it was issued on condition that the amount would be received from the Calcutta Stock Exchange on 13.3.2001 and, accordingly, it would be presented on 14.3.2001. But the condition clearly indicates that it will be paid after the funds are received by the plaintiff. Therefore, the condition that it will not stop payment of the cheque is clarified in the first clause, namely only after the payment is received from the Calcutta Stock Exchange. If the stoppage was effected even after receipt of the fund from the Calcutta Stock Exchange, in that event it would have attached Section 138. In fact, Section 138 is meant for preventing fraudulent and dishonest transactions. In the present case it is neither fraudulent nor dishonest.

13. On the other hand the transaction was a contingent one having regard to the conditions namely happening of certain events. If the contract is contingent and it is dependant on the happening of certain events, then its performance depends on such contingency. Until that event happens the performance does not mature for enforcement. It was the defendant No. 2 who wanted to take certain advantage on the expectation of the contingency of pay out. Now he cannot take advantage before the happening of the contingency. The discounting of the cheque by the defendant No. 1 was, therefore dependant on the same contingency. The defendant No. 1 was bound by the terms that the cheque would be presented one day after the pay out. Therefore until the pay out the cheque could not be presented. However the court has to be alive to the situation. The situation is brought about by reason of some unprecedent disruption in the working of the Stock Market. These are not normally expected. Therefore the court has. to view it having regard to the surrounding circumstances under which it. had happened. It was an accidental situation which could not be foreseen. Therefore,'' it cannot attract Section 138 even if there is a stoppage.

14. From the letter dated 13.3.2001 addressed to the defendant Nos. 1 and 2 as well as the banker of the plaintiff, it appears that on the ground of certain contingencies defendant Nos. 1 and 2 were requested not to present the cheque. The reason was also intimated to both the defendant Nos. 1 and 2 in the letter dated 13.3.2001. Therefore, non-disclosure of reason in the letter addressed to the banker of the plaintiff will in no way affect or alter the situation. In the letter dated 13.3.2001 the situation was made clear that the cheque was to be presented one day after the pay out of the funds by the Stock Exchange on the pay out date But necessary amounts were not credited by the clearing member therefore the defendant No. 2 was requested not to present the cheque by the letter contained in annexure "D" till the payment is received from the Calcutta Stock Exchange. The payment will be released immediately after the funds from Stock Exchange is received. Similarly in the letter contained in annexure "E" the defendant No. 1 was also informed that there has been a payment crisis in the Calcutta Stock Exchange and no pay out would take place. Therefore, it was informed that if presented the cheque may not be honoured and that the defendant No. 1 will be informed as soon as pay out is declared in order to enable the defendant No. 1 to present the cheque. These conditions were well-known to the defendant No. 1 as is apparent from annexure "F" addressed by it. Therein it is informed that the said cheque was discounted on 5.3.2001 the question of discounting depends on the negotiability of the instrument. As observed earlier, since the defendant No. 2 was not entitled to encash the cheque, therefore it was the responsibility of the defendant No. 1 to scrutinise and check up whether such a cheque could be discounted or not. In the circumstances, it appears that it was the responsibility of the defendant No. 1 and defendant No. 2. who had between themselves created the situation. They cannot take advantage of such a situation and put the plaintiff in Jeopardy despite having known the terms of the scheme and the terms of the issuing of the cheques.

15. In such circumstances it appears that a prima facie case has since been made out. It further appears that the situation is so urgent that unless an ad interim order is granted the purpose would be defeated and thus it clearly satisfies the test provided in proviso to Rule 3 of Order 39 of the Code of Civil Procedure.

16. In the circumstances, in my view the ad interim order should be continued until further orders with direction to the defendant No. 1 to deposit the said cheques with its advocate on record in a sealed cover. The advocate on record shall hold the said cheques subject to further orders of this court and shall produce the same as and when called upon to do so.

17. Affidavit in opposition is to be filed within 23.4.2001; reply, if any. within 30.4.2001 and the matter will appear on 2nd of May. 2001. All parties are to act on a signed xerox copy of this order on the usual undertaking.