United Commercial Bank Ltd v New Era Corp

• Jurisdiction: Singapore
• Judge: T Kulasekaram J
• Judgment Date: 09 July 1976
• Neutral Citation: [1976] SGHC 7
• Date: 09 July 1976
• Subject Matter: Acceptance,Claim by plaintiff bank as holders,Bills of exchange bought by bank,Claim against acceptors,Defence that bills drawn on goods shipped on consignment basis,Bills of Exchange and Other Negotiable Instruments,Acceptor’s liability,Defendants denying that plaintiffs were bona fide holders for value
• Docket Number: Suit No 2433 of 1972
• Published date: 19 September 2003
• Defendant Counsel: JB Jeyaretnam (JB Jeyaretnam & Co)
• Court: High Court (Singapore)
• Plaintiff Counsel: P Selvam (Drew & Napier)

In this action the plaintiffs` claim against the defendants was for a sum of $47,488.27 as acceptors of two bills of exchange drawn at Bombay by Messrs International Impex Bureau upon the defendants payable after 90 days of acceptance to the order of the plaintiffs who are holders/payee and for interest on this sum. The defendants denied any liability on the claim. They alleged that the plaintiffs on behalf of the drawers presented these two bills along with five other bills drawn on them by Messrs International Impex Bureau (the drawers). These bills were drawn for goods shipped by the drawers to the defendants. They further alleged that these goods were shipped to them on consignment basis to the knowledge of the plaintiffs and in accordance with the previous course of business dealings between the drawers and them. In addition it was alleged that the defendants` sole proprietor had in fact informed the plaintiff bank`s Manager in Singapore prior to the acceptance of the bills that the goods were sent on consignment basis for the account and risk of the drawers and that they (the defendants) would only accept the bills if the plaintiffs themselves would not claim payment in their own rights. They said plaintiffs` Manager had accepted this condition and thereupon the defendants had accepted the bills. The defendants also alleged that previous to the acceptances of the said two bills they had accepted through the plaintiffs other bills of exchange drawn upon them by the drawers subject to the same conditions. The defendants denied that the plaintiffs were bona fide holders for value of the said two bills.

The plaintiffs` first witness, Mr Narayanan, was the Manager of the main Singapore branch at Raffles Place of the plaintiff bank at the material times relating to the transactions of these two bills the subject matter of this action. According to him he joined the plaintiff bank in 1946 and was transferred to Singapore in 1957. From then onwards he had been either with the main Raffles Place Branch or its other branch at Serangoon Road till 5 February 1972 when he was transferred out of Singapore to one of the bank`s other offices in India. He is now a Divisional Manager of the plaintiff bank at Bangalore. Whilst in Singapore and even elsewhere prior to that he had worked in the Inward Bills Departments of the bank`s offices and he was fully conversant with the nature of work there. From 1968 till his departure in February 1972 he had been the Manager of the Raffles Place branch of the plaintiff bank and as such he was not concerned with the bills that come to the bank as that would be looked after by other senior officers of the Inward Bills Department. He attended mainly to the administration and the overall supervision of the bank in Singapore.

He first became aware of the defendants` problems with the bank when his attention was drawn to the two unpaid bills by a personal letter which he had received from the Bombay Branch Manager around early May 1964. That letter is AB54 where the Bombay Branch Manager asked him to use his good offices and contact the drawee of these two bills and have him settle them soon. He then called Mr Khemani, the sole proprietor of the defendant firm, to the bank for a discussion. This discussion must have taken place sometime in May 1971. He does not remember exactly what happened on that occasion but could recollect that Mr Khemani made out to him at that discussion that the goods relating to the bills of exchange were sent to him on consignment basis by the drawers at the sole risk and responsibility of such drawers and as he was not able to dispose of the goods he was not in a position to pay the bills. He then pointed out to Mr Khemani that as he had accepted the bills of exchange he would be liable on them. Mr Khemani replied that he had certain arrangements with the drawers and unless these terms were fulfilled he would find it difficult to honour his obligations.

Mr Narayanan explained that the two bills in question about which he had spoken to Mr Khemani were the two bills FBPRW 65 and 66 (FIBC 485 and 486) which had been purchased by the Bombay branch. At the time of discussion with Mr Khemani he was aware that there were many other collection bills from Bombay outstanding on him but his discussions were purely on these two purchased bills, the subject matter of this claim. Mr Narayanan produced the originals of these two bills and they are the exhs P2A and P2B.

Mr Narayanan went on to explain that the Bombay branch of the bank used the code prefix letters `FBPRW` against the serial number assigned to the bill to signify bills purchased by that bank. The letters `FBPRW` stood for ` F oreign B ills P urchased in R upees without Letter of Credit`. For other foreign bills where they were merely collecting for customers the bank used the code prefix letters `FBC` against the serial number of the bill. The letters `FBC` stood for ` F oreign B ills for C ollection`. The Bombay branch used a round rubber stamp chop for bills purchased with the letters FBPRW with the serial number of the bill inserted within as could be seen in P2A and P2B and for collection bills they used a triangular shaped rubber stamp with the letters FBC with the serial number written within as could be seen in AB59 and 60. The Singapore branch did not make any distinction in inward bills be they collection bills or bills purchased. They used a square rubber stamp chop with the code prefix letters `FIBC` with the serial number where the letters `FIBC` stand for `Foreign Inward Bills for Collection`.

Mr Narayanan explained that from the code prefix letters `FBPRW`, on the two bills in question he was able to say that these two bills had been purchased by the Bombay Branch. In P2A the expression `At 90 days D/A` meant that 90 days after acceptance the drawee will be called upon to pay the bill. The words `D/A` stood for ` d ocuments against a cceptance` and meant that the documents of title of the goods covered by the bill would be released to the drawee on his acceptance of the bill. The documents in such cases would be bills of lading, the invoices and the insurance policies. These two bills were accepted by the defendants on 11 March 1970 and were due for payment on 9 June 1970. On the due date the bank`s bill collector would go with the bills and with statements like AB21 and 22 to the defendants. From AB21 and 22 Mr Narayanan said it appeared that interest here had been finally calculated up to 15 May 1972 which he said was probably the date when the last attempt was made by the bank to get paid on these two bills. Since the discussion in May 1971 he remembers Mr Khemani coming and seeing him several times when arrangements were already afoot for the bank to take legal action against the defendants on these two bills. Mr Khemani then appeared to be very nervous and upset and was very keen to find a solution to these two bills. Mr Narayanan said the allegation in the defence that Mr Khemani had informed him prior to accepting the bills that the goods were sent on consignment basis for the account and risk of the drawer and that he would only accept the bills if the bank themselves would not claim payment in their own rights was a blatant lie. The further suggestion that when Mr Khemani allegedly saw Mr Narayanan in February 1971 or early March 1971 Mr Narayanan after looking through the earlier bills and confirming that they were collection bills in which the bank had no interest had accepted that condition and it was only then that Mr Khemani had accepted the bills was also not correct. It was also not correct that previous to the acceptance of the said bills Mr Khemani had accepted through the plaintiff bank other bills of exchange drawn upon the defendants by the drawers on the same condition. Mr Narayanan went on to say as far as any bills from Bombay were concerned he had never seen Mr Khemani regarding the collection or acceptance of any bills before the discussion in May 1971. He had however seen Mr Khemani before as a customer of the bank and had also known him socially. The first time he saw Mr Khemani about any such bills was when the Manager of the Bombay branch drew his personal attention to the two unpaid bills in question by his letter AB54 in May 1971.

He said he knew Mr Khemani socially but had never had any social engagements with him except once when a Swami (a religious leader) came to his house. He had met Mr Khemani at social functions but had not accepted any great hospitality from him. Mr Khemani had come to the bank several times and on some of these visits he may have called on him at his office. He knew him as a customer of the bank and Mr Khemani had certain credit facilities with the bank and as far as those transactions were concerned he found that he had honoured his commitments properly. He knew that the two bills in question were protested when the bank contemplated taking legal proceedings against Mr Khemani. He did not see the protest notes, however. It would have been dealt with by the Inward Bills Department of the bank. He himself knew for the first time that the goods were sent on consignment basis from Mr Khemani at that first meeting in May 1971. It was during November, December 1971 and January 1972 that Mr Khemani saw him several times about the two bills. At these meetings Mr Khemani had put forward the suggestion that he would reship the goods to India and then go personally to Bombay and use his influence with his friends in the same line of business for the sale of the goods there at the best price and pay the bank. Mr Narayanan`s answer to that suggestion was that it would involve exchange control problems and moreover the bank was the holder for value of the accepted bills of exchange. At these discussions Mr Khemani did not agree to settle the bills but was keen to arrive at a settlement regarding the bills. Mr Narayanan said that...