Dishonoured cheque-Endorsement after notice of dishonour to endorsee with notice of dishonour-Whether endorsee can sue drawer on the cheque Bills of Exchange Ordinance, section 36 (1) (5), section 38, section 30 (1)--Presumption of value-Notice of dishonour, sections 49 and 55 (1) and section 50 (2) (c) (iv).
Case summary
The appellants claimed Sh. 350 from the respondent on a cheque drawn by the respondent payable to cash or bearer. The cheque was given by the respondent to one Mohan Singh, who gave it to one Hari Chand. Hari Chand presented the cheque to the bank, and it was dishonoured and returned marked “Refer to drawer”. Hari Chand gave the cheque so marked back to Mohan Singh, who referred to the drawer, the respondent, Rattan Singh.
The respondent said that he had no funds to meet the cheque. Some weeks later, Mohan Singh (who had, at the time, notice of its dishonour) endorsed the cheque to the appellants allegedly for value. The appellants noticed, at the time they took the cheque, that it had “Refer to drawer” written upon it and that it was a dishonoured cheque.
Held (21st August 1956):
The appellants were holders of the cheque but not holders in due course.
Applying the presumption in section 30(1) of the Bills of Exchange Ordinance, the appellants were holders for value.
The appellants, being endorsees for value with notice of the dishonour of the cheque, took it subject to any defect of title attaching thereto at the time of dishonour; but, subject to this, could sue on the cheque in their own names (Bills of Exchange Ordinance, sections 36(1) and 38). Hornby v. McLaren (1908) 24 T.L.R. 494, followed.
Notice to a drawer of dishonour of a cheque is not necessary where the dishonour is due to lack of funds in the banker’s hands or where payment has been countermanded (Bills of Exchange Ordinance, section 50(2)(c)(iv)).
Appeal allowed and judgment entered for appellants.
Authority cited:
Chalmers on Bills, 12th edn., pp. 121, 157;
Byles on Bills, 20th edn., p. 17.
Counsel:
D. D. Doshi for the appellants (original plaintiffs).
K. I. Joshi for the respondent (original defendant).
