Case Note & Summary
The dispute arose from the Bombay Bullion Association's forward contracts in bullion. The appellant, a member carrying on business as a bullion merchant, defaulted as a forward seller on the settlement day of February 3, 1953. Acting under its bye-laws, the Association purchased a quantity of silver at the appellant's risk and claimed the difference amounting to Rs 1,37,880-12-0. The appellant paid this sum under protest and filed a suit for refund, challenging the validity of the purchase on the ground that the forward purchasers had not fulfilled their obligations under the bye-laws. Specifically, the appellant argued that certain purchasers paid into the Clearing House by cheques drawn on their accounts with the Clearing House without getting them certified as good for payment as required by bye-law 137-B, and that one payment was made by a cheque drawn on a branch of the Clearing House in the city, also not certified. The Bombay High Court dismissed the suit, and a Division Bench affirmed the dismissal. The Supreme Court, by special leave, considered whether the requirements of bye-law 137-B were satisfied on the facts. On the first contention, the Court held that where a cheque drawn on an account with the Clearing House results in the amount being transferred to the Association's Clearing House account, it is virtually a payment in cash, even though in form a cheque. Since cash payment is a recognized mode under the bye-law, the payment was valid. On the second contention, the Court held that where the Clearing House accepted the cheque drawn on a branch and credited it to the Association after ascertaining from that branch that the drawer had sufficient funds, the cheque need not be certified as good for payment. The banker's certificate contemplated by the bye-law is that of a bank different from the one into which the cheque is being paid; here the staff of the Clearing House verified the funds, satisfying the requirement. Consequently, the Court dismissed the appeal and affirmed the High Court's decision, upholding the Association's purchase and the payment made by the appellant as valid.
Headnote
A) Banking - Cheque Payment - Bye-law 137-B, Bombay Bullion Association - Payment by cheque drawn on account with Clearing House where amount transferred to Association's Clearing House account is equivalent to cash - Bombay Bullion Association Ltd. Bye-law 137-B - The appellant contended that purchasers' payments by cheques drawn on their Clearing House accounts were invalid because cheques were not certified as good for payment; however, where the amount was transferred to the Association's Clearing House account, it was virtually a payment in cash and satisfied the bye-law's requirement of a valid payment. Held that such payment is valid. B) Banking - Cheque Certification - Bye-law 137-B, Bombay Bullion Association - Cheque drawn on branch of Clearing House need not be certified if Clearing House ascertains sufficient funds from that branch - Bombay Bullion Association Ltd. Bye-law 137-B - A payment made by cheque drawn on a branch of the Clearing House in the city, not certified, was valid when the Clearing House accepted the cheque and credited it to the Association after ascertaining from the branch that the drawer had enough funds; the certificate of the banker referred to in the bye-law is the certificate of a bank different from that into which the cheque is being paid. Held that such cheque satisfied the requirement of a cheque certified as good for payment within the bye-law.
Issue of Consideration
Whether the payments made by purchasers by cheques drawn on accounts with the Clearing House, without certification as good for payment as required by bye-law 137-B, were valid; whether a cheque drawn on a branch of the Clearing House in the city, not certified, was valid when the Clearing House accepted it after ascertaining sufficient funds.
Final Decision
Appeal dismissed; High Court's judgment affirmed; payments valid; Association's purchase upheld.
Law Points
- Payment by cheque drawn on account with Clearing House where amount transferred to Association's account is virtually cash
- certification of cheque is unnecessary when Clearing House ascertains sufficient funds from branch
- bye-law 137-B satisfied by such transfer
- validity of purchase by Association on defaulting seller
