25 November 1964
Supreme Court


Case number: Appeal (civil) 56 of 1962






DATE OF JUDGMENT: 25/11/1964


CITATION:  1965 AIR 1628            1965 SCR  (2) 249  CITATOR INFO :  RF         1991 SC1579  (7)

ACT: Banking practice-- Cheque--"Certified as good for  payment", Scope of.

HEADNOTE: The  members of the Bombay Bullion  Association,  respondent herein,  were permitted under the Forward Contracts  Control Act  (Bom.  Act 64 of 1947) to carry on forward dealings  in bullion  subject to the bye-laws framed by the  Association. The  appellant who was a member of the Association  and  was carrying  on  business  as bullion  merchant,  defaulted  in performing  his obligation to tender silver of which he  was the  forward  seller,  on the settlement  day,  and  so  the Association, purporting to act under its bye-laws, purchased a  quantity  of  silver at the risk  of  the  appellant  and claimed  from  him the difference in price.   The  appellant paid  the amount and challenging the legality of  his  being treated as in default filed a suit for its refund.  The suit was  dismissed by the High Court.  In appeal to the  Supreme Court it was contended that the Association should not  have made  the purchase because the purchasers had not  fulfilled the terms of their obligations under the bye-laws in  making their  payments  to the Association.  The  contentions  were that  : (i) certain of the purchasers who had made  payments into the Clearing House of the Association by cheques, drawn on  their  account in the Clearing House, had  not  had  the cheques certified as good for payment as required by bye-law 137-B,  and (ii) one payment was made by a purchaser,  by  a cheque  drawn, not on the Clearing House but on a branch  of the  Clearing House in the city, and which besides  was  not certified good for payment as required by the bye-law. HELD : (i) Where a payment was made by a cheque drawn on  in account  with the Clearing House and the amount  represented by that cheque was transferred to the Clearing House Account of  the  Association,  it is virtually a  payment  in  cash, though  in form a payment by cheque.  Since payment in  cash is  one of the modes of payment recognised by the byelaw  it satisfied the requirement of a valid payment. [255 E-F;  262 G-H]



Arsene  A.  Larocque v. Hyacinthia Beauckemin,  (1897)  A.C. 358, referred? to. (ii)Where  the  Clearing House had accepted the  cheque  and credited  it to the Association after ascertaining from  the branch on which it was drawn, that the drawer of the  cheque had  enough funds at that branch for meeting of the  cheque, the  cheque need not be certified as good for payment.   The position  with respect to such a cheque is the same as  when the  cheque  is  drawn on an account  in  the  same  branch, because the certificate of the banker that is referred to in the bye-law is the certificate of a bank different from that into which the cheque is being paid.  In any event, when the staff  of the Clearing 1-louse ascertained from  the  branch that the cheque was backed by sufficient funds to the credit of  the  customer in the branch on which it  was  drawn,  it satisfied the requirements of a cheque certified as good for payment within the bye-law. [260 B; 262 A-C; 263 G-H] up./ 65-17 250

JUDGMENT: CIVIL APPELLATE‘ JURISDICTION: Civil Appeal No. 56 of 1962. Appeal  by special leave from the judgment and decree  dated March  3, 4, 1958 of the Bombay High Court in Appeal No.  27 of 1957. Purshattam  Tricumdas, J. B.  Dadachanji, O. C.  Mathur  and Ravinder Narain, for the appellant. H.N. Sanyal, Solicitor-General, N. P. Nathwani, AtiqurRehman and  K. L. Hathi, for respondents Nos. 1-3, 5, 6,  8-17,  19 and 20. The Judgment of the Court was delivered by Ayyangar, J. This appeal, by special leave, raises for  con- sideration   a  very  short  point  regarding   the   proper construction   of  bye-law  137-B  of  the  Bombay   Bullion Association Ltd., which will hereafter be referred to as the ’Association’  and  in  particular  whether  on  the   facts established  in this case the requirements of the said  bye- law has been satisfied. The  appellant  is  a member  of  the  first  respondent-the Association  and carries on business as a bullion  merchant. By  a notification dated March 14, 1949, the  Government  of Bombay  in exercise of the powers conferred by s. 6  of  the Bombay Forward Contracts Control Act, 1947 (Bombay Act  LXIV of   1947)  sanctioned  by  the  bye-laws  framed   by   the Association.   Under  the  said  Act  the  members  of   the Association  were permitted to carry on forward dealings  in bullion  subject  to  the  said  bye-laws.   The  appeal  is concerned with the regularity of a purchase effected by  the Association  purporting  to  act under its  bye-laws,  of  a quantity  of  silver at the risk of the  appellant,  on  the footing that he had defaulted in performing his contract  as a  seller  on February 3, 1953 which was a  settlement  day. The Association made this purchase treating the appellant as a  defaulter  and  claimed from  him  the  difference  which amounted to Rs. 1,37,880-12-0.  The appellant paid this  sum when  demanded on the 5th February under protest but on  the next  day he filed the suit out of which the present  appeal arises  against  the Association and its Directors  for  its refund  on the ground that the purchase at his risk  by  the Association was invalid as contrary to the bye-laws and was, therefore,  not  binding  on him.   The  appellant  did  not dispute  that he defaulted in performing his  obligation  to tender the bullion of which he was the forward seller on the



settlement day as he was bound to do under the relevant bye- laws  but  the point on which he attacked the  purchase  was that no purchase could be made unless the forward purchasers for that settlement had fulfilled the terms of their 251 obligations  under the bye-laws and that as they had  failed to do so, the Association had no right to effect a  purchase on behalf and for the benefit of such defaulting purchasers. The suit was tried before Coyajee J. on the Original Side of the Bombay High Court.  The learned Judge recorded a finding that there had been no default on the part of the purchasers and he, therefore, dismissed the suit.  An appeal  preferred by  the appellant to a Division Bench also failed and it  is the  correctness of this decision of the High Court that  is challenged in this appeal. Though  the  evidence  went into minute details  as  to  the things  that happened on the Vaida day-February 3, 1953  and in  particular  whether the several parties who  figured  as purchasers  on  the Vaida day had or had not paid  in  their cheques  into  the  Clearing House  of  the  Association  on February  3,  1953 as they were bound to do under  the  bye- laws,  it  is not necessary for us to go  into  this  matter because  there is a concurrent finding of fact of  both  the Courts  that  each  one  of  the  cheques  of  the   several purchasers was, paid into the Clearing House on February  3, 1953, though it is now clear from the evidence that  entries in regard to some of these transactions which took place  on February  3, 1953 were made by the receiving bank or by  the Clearing House only on the 4th.  It is on the basis of  this finding which could not be and was not challenged before  us that  we propose to deal with the points urged before us  in this appeal. There  is also one other matter which is referred to in  the pleadings  as  well as in the judgments of  the  High  Court which also we are putting aside.  This relates to a plea  by the  appellant  that the Director-, of the  Association  had acted  mala fide in permitting certain infractions  of  bye- laws  on the 3rd February by purchasers who would  otherwise be  in  default and treating them is if they  had  fulfilled their  obligations.   The suggestion was that  some  of  the members of Board of Directors had, in their individual capa- city, figured as purchasers at the said settlement and  that it  was this personal interest of theirs that led  to  their favouring the group of purchasers as against the sellers  at this Vaida.  There was nothing in the evidence in support of this plea and Coyajee, J. having negatived it, the same does not  appear to have been pressed before the Division  Bench. Mr. Purshotam-learned Counsel for the appellant did not seek to reagitate this matter, as indeed he could not, and  hence this aspect also might be excluded from consideration. This  leads  us  to  the main question  which  it  would  be apparent from the above narrative is whether those who  made forward 252 purchases  for  this Vaida had fulfilled  their  obligations under the bye-laws.  Now, the first matter that requires  to be  noticed  is that the settlement for the Maha  Vaida  was originally  fixed  to February 2, 1953.  Bye-law 32  of  the Association empowers the Board to fix the    days         of settlement in these terms :               "32. (1) The settlement days shall be fixed by               the Board or the Sub-Committee appointed by it               keeping in mind the provisions or these  Rules               and bye-laws." but  el. (3) of the same bye-law empowers the Board :



             "if of opinion that circumstances exist  which               require an alteration of days so fixed [by cl.               (1)]  the Board -may postpone such  settlement               day for a period not exceeding 5 days." It  was  in exercise of this power that the  Vaida  day  was postponed  from  February 2, 1953 to February 3,  1953.   No dispute was raised by the appellant regarding the competence of  the  Board  to  effect this change of  date  or  to  the validity of the change effected thereby. Bye-law  120  makes  provision for the  establishment  of  a Clearing House for effecting a settlement on the Vaida days. This bye-law reads :               "  120.   Clearing House  :-A  Clearing  House               shall be established under the jurisdiction of               the  Board to act as an ordinary agent of  the               members  for  settling  forward   transactions               effected  between members in gold, silver  and               sovereigns  by exchanging delivery  orders  as               also  for  making payment of  the  amounts  of               difference through the Clearing House." Under  the  powers thus conferred the Bank of  Baroda  which opened  a  branch at the premises of  the  Association  were appointed  as the Clearing House.  Bye-law 125 provides  for the  appointment of a Clearing House Committee by the  Board of Directors of the Association.  Bye-law 127 specifies  the powers  and duties of the Clearing House Committee and  this runs :               "127.  Powers and duties of the Clearing House               Committee :-               (1)   The   Clearing  House  Committee   shall               settle  forms  of  clearing  sheets,  delivery               forms, "Kaplis" (slips) relating to payment of               differences  and delivery of goods  and  other               necessary  documents  for being used  for  the               work relating to the Clearing House and  every               member  shall  have to use the said  forms  or               other forms of the same size and with 253 similar writing.  The said Committee shall from time to time fix charges for the said forms. (2)  It shall issue instructions with regard to the work  of the  Clearing House and every member shall act according  to the same. (3)  If  any  member  does not act  according  to  any  such instructions  or commits any error or mistake in  filing  in any  form or other document or writes so illegibly  that  it cannot be deciphered or makes delay in submitting, any  such form  or document to the Clearing House, then in every  such case, the Clearing House Committee can impose on any  member a  penalty  not  exceeding Rs. 500.   Sub-Committee  can  be appointed  for attending to the work relating to  this  sub- clause. (4)  It  shall  fix Havala rates in respect  of  outstanding transactions  (transactions,  which  are  not  squared   up) between  two members and all members shall enter Havalas  in respect  of  such outstanding transactions  (which  are  not squared  up)  at these rates and also prepare  statement  of differences  at those rates.  Delivery orders also shall  be issued at these very rates.  The Havala rates in respect  of transactions  are given to facilitate the settlement.   That does  not  in  any way reduce the liability  in  respect  of transactions. (5)  The Clearing House Committee may declare any member  as a  defaulter  and for that purpose, it shall have  power  to pass  such  resolutions and orders as it  deems  proper  and



necessary. (6)  If,  in  connection with any  forward  settlement,  the Clearing  House-- finds, it difficult to make settlement  on the  days  fixed  for settlement, then  the  Clearing  House Committee shall have power to make a change‘ of 48 hours  at the  maximum in all or any settlement days relating to  that forward settlement." Bye-law 134(1) reads "134.  (1)  The member who wants to  have  his  transactions settled through the Clearing House shall have to send to the Clearing  House a clearing sheet in the settled  form  (form No.  1) on the days fixed for that purpose (which  day  will hereafter be known as he Clearance Day). 254 Bye-law  137  specifies the obligations of  members  of  the Association who give delivery and it reads:               "137.   The  member who has to  give  delivery               shall have to submit to the clearing house  as               many  delivery orders signed by him  as  there               would  be, upon a calculation on the basis  of               every  delivery  order being either  for  five               bars of silver or for 1,000 tolas of gold bar,               or  for 1,000 sovereigns.  If any  member  has               sent delivery orders without signing he  shall               attend  the Clearing House at 10 A.M.  in  the               morning on the date fixed for giving  delivery               orders  by the Clearing House and  shall  sign               the  delivery orders.  If the  Clearing  House               finds  it  necessary it can call  for  further               delivery  orders  from  any  member,  and  the               member   shall  have  to  furnish   the   same               forthwith but if the goods are with a bank  he               shall have to give delivery orders on the bank               directly as mentioned above."  Bye-law  137-A(1)  deals with theobligations  of  a  member whose clearance sheet shows outstanding sales and it reads :               "137-A(1).   A  member whose  Clearance  Sheet               shows outstanding  sales shall submit  to  the               Clearing Housewith hisdelivery   orders    a               complete list of bars(gold or silver)    in               his  possession  or in the possession  of  his               Banker  inBombay with their number and  marks,               to bedelivered against such delivery orders." As  stated  earlier,  it  is  now  common  ground  that  the appellant did not carry out his obligations under this  bye- law.   Bye-law 137-B whose proper construction is raised  by this  appeal  deals with the obligations  of  members  whose Clearance Sheet shows outstanding purchases.  It reads :               "137-B.  A member whose Clearance Sheet  shows               outstanding  purchases  will  submit  to   the               Clearing  House  with his  Clearance  Sheet  a               cheque  certified  "good  for  payment"  or  a               demand draft on a Bank or a Bank’s payslip  or               cash  for an amount sufficient to pay for  all               his outstanding purchases at the rate fixed by               the Association.  Failing payment as aforesaid               the  purchases  outstanding in  the  Clearance               Sheet  or a part thereof will be auctioned  at               the purchaser’s risk on the same day.               The  cheques, demand drafts etc., so  received               by  the Clearing House will be paid  into  the               Clearing  House Account in the Bank of  Baroda               Ltd.,  Bullion  Hall  Subbranch,  and  crossed               cheques payable to bearer or payslips 255



             of  the  said Bank in favour  of  the  sellers               whose   delivery  orders  are  given  by   the               Clearing  House  to  the  purchasers  will  be               handed over by the Clearing House to the  said               purchasers.   The sellers shall give  delivery               of the goods covered by the delivery order  to               the  said purchasers against such  cheques  or               payslip issued by the said bank.  Refusal by a               seller  to give delivery of goods  covered  by               his  delivery order to the  purchaser  against               such a cheque or payslip during the time fixed               for giving delivery, will amount to failure to               give delivery and consequences in Bye-law  147               will ensue." It was not contested that if by the transactions to which we shall refer presently, members whose Clearance Sheets showed outstanding purchases had fulfilled their obligations  under Bye-law  137-B, the Association was entitled to  effect  the purchases  at the risk and cost of the appellant  under  the succeeding  bye-laws which confer upon the Association  this power   to   effect  purchases  or  sales  to   square   the transactions of defaulting members. An  analysis of the bye-law 137-B would show that  a  member whose  Clearance Sheet showed outstanding purchases had,  on the  Vaida  day, to file his Clearance Sheet and to  make  a payment  into the Clearing House of an amount sufficient  to pay  for all his outstanding purchases at the rate fixed  by the Association.  This payment had to be made along with the Clearance  Sheets and had to be in one of four forms: (a)  a cheque certified good for payment, or (b) a Demand Draft  on a  bank,  or  (c) a bank’s pay-in-slip, or  (d)  cash.   The question  raised in this appeal, relates to whether  certain of the purchasers had made payments into the Clearing  House of  the  amounts  payable by them in any  of  the  permitted modes.  Before proceeding further we might add that the Bank of  Baroda  which was the Clearing House admitted  that  the amounts required to be paid by the several purchaser-members had  been  received by it on the 3rd and the  total  amounts represented   by  these  payments  were  credited   to   the Association. Before setting out the matters in controversy as regards the form of payment adopted by certain purchasers under  bye-law 137-B,  it  is necessary to premise the narrative by  a  few facts.  As already stated, the Bank of Baroda Ltd. had  been appointed  as  the Clearing House of the  Association  under bye-law  120  in or about 1949 and had been  functioning  as such  ever  since.  To facilitate payments  by  and  between members  the  Bank had opened a special  branch  called  the ’Bullion Hall Sub-branch’ in the premises of the 256 Association itself.  Bye-law 174(3) required every member to open an account in the Bank, so that it might be  convenient to  pay  or draw cheques for effecting clearance.   All  the members  had, in pursuance of and in obedience to this  bye- law, opened such accounts. The Bank issued special pay-in-slips for doing its  business as  a Clearing House.  These slips were in triple foil,  all of  which  had  to be filled in by  the  member  making  the payment.   When  a member made a payment  into  the  Bullion Exchange  Branch of the Bank the extreme right of the  three parts  which  recited  the  payment to  the  credit  of  the Clearing House of the Association by the member named and of the  amount, also specifying the particulars of the  payment would  be  signed or initialled by the  Cashier  and  Ledger Keeper  and be retained with the Bank.   The  paying-in-slip



consisting  of the other two parts in which similar  entries were made and bearing the signature or initials of the  Bank authorities  was  handed  over  to  the  member  making  the payment.   He  had thereafter to present this  slip  to  the Clearing House along with the Valan or the Clearance  Sheet, and  thereupon the Clearing House department  would  endorse receipt  on  the  part to the extreme left  which  would  be returned to the member-the other part being retained by  the Clearing House. The settlement for the Vaida on February 3, 1963 appears. to have been an exceptionally heavy one on account of the  very large volume of sales and purchases for that settlement  and there  was a total outstanding sale of 1897 bars  of  silver with, of course, corresponding purchases of the same number. Sellers  of 1,004 bars gave delivery orders as  required  by bye-laws  137  and  137-A  but  the  appellant  who  had  an outstanding  sale  of  853  bars failed  to  submit  to  the Clearing   House   the  necessary  delivery   orders.    The purchasers  of  the 1,897 bars had, under the  bye-laws,  to submit  their  Clearance Sheets and make payments  into  the Clearing House in the manner provided by bye-law 137-B of  a total  sum of Rs. 88,31,050 by February 3, 1953.  By  reason of the extraordinary situation created by the heavy payments having to be made coupled with a strike of the Clerks of the members   on  the  previous  day,  the  Directors   of   the Association  passed  a  resolution extending  the  time  for payment  and delivery of Clearance Sheets beyond  the  usual banking hours to 7 P.m. on the 3rd February. The  point  in  controversy in the appeal  is  whether  this amount  had been paid into the Bank on the 3rd  February  to the  credit of the Clearing House in the manner provided  by bye-law  137-B.  Out of the Rs. 88,31,050, some  amount  was paid in cash, 257 Rs.   42,99,400  by  cheques  drawn  by  members  on   their respective accounts with the Bullion Hall Sub-branch of  the Bank of Baroda Ltd. in favour of the Association’s  Clearing House  account,  Rs. 24,64,050 by four pay  slips  of  other banks in favour of the Bank of Baroda Ltd., Rs. 15,30,150 by transfers  by  two  members from  their  accounts  with  the Jhaveri  Bazar  branch of the Bank of Baroda  Ltd.,  to  the Bullion Hall Sub-branch for payment to the Association,  Rs. 4,65,000  was by a cheque drawn by a member on  his  account with  the Fort Branch of the Bank of Baroda Ltd., in  favour of  the Association, Clearing House Account.  Of these,  the submission  of the appellant was that only the cash  payment was  a  proper  one  and that the  rest  were  not  made  in accordance  with  bye-law 137-B.  Before  dealing  with  it, however,  it  might be stated that the Bank of  Baroda  Ltd. Clearing  House  submitted a statement on February  4,  1953 stating  that all the payments totalling Rs.  88,31,050  had been  received  by  it  as a Clearing  House  and  had  been credited to the Association. Now, taking first the amounts paid by cheques drawn by  mem- bers  on  their  accounts in the  Bullion  Hall  Sub-branch, several points were urged in support of the contention.  The first was this : On February 3, 1953 the banking hours ended at  2.30 P.m. and several of the payments into the  Clearing House  Account  by cheques drawn on the Banking  account  at this  branch were made after that hour.  It was,  therefore, contended  that  even  if  there was  enough  money  in  the accounts of the several members to meet the cheques drawn by them,  still their cheques could not be treated as  cash  as the  banking  hours had passed.  This was  answered  by  the Division  Bench  by  pointing out  that  there  was  nothing



illegal  in  the bank functioning for the  purpose,  of  the members  of  the Clearing House after 2.30  P.m.  that  day. There  was  evidence before the Court that the  ledgers  and other books of account in the bank were available for  being looked  into  to ascertain whether a  member’s  account  had sufficient  funds to meet the cheques which had been  drawn. There  was  also  evidence that the state  of  the  member’s account  was  ascertained  before the  triplicate  form  was accepted  by the bank and the two left side foils passed  on to  the  depositing  member for being  handed  over  to  the Clearing  House and, as we stated earlier, on the  next  day the bank submitted a statement acknowledging receipt of  the amount  of the several cheques and showed their  amounts  to the credit of the Association.  In these circumstances,  the learned Judges of the High Court came to the conclusion that there had been a payment as required by the bye law 137-B on February 3, 1953. L3Sup./65 258 We entirely agree with the High Court as regards the alleged illegality  said to have been caused by the  Bank  accepting cheques  after  the close of the usual  Banking  hours.   It would  be  noticed that the extension of the  banking  hours from  2.30 P.m. to 7 p.m. that day was not in  contravention of any statute and whatever the position might have been, if such  extension acted to the detriment of a  constituent  of the bank, in the case on hand it was really for the  benefit of the customer.  In those circumstances, there was  nothing illegal  and,  of course, nothing improper  in  the  banking business having continued so long as the work of the bank as a Clearing House continued. There  were  also  other objections raised  to  support  the argument that these payments were contrary to bye-law 137-B. To appreciate them it would be necessary to state a few more facts.  From the analysis that we have made of payments that were  made  into  the Clearing House by  the  purchasers  in satisfaction of the amounts due by them for the  settlement, Rs.  42,99,400 were by way of cheques drawn on  the  Bullion Hall  Sub-branch of the bank.  We have also stated that  the staff  of  the bank to whom the cheques were  presented  had endorsed  on the slips that there were sufficient  funds  in the  account to enable the cheque to be cleared and that  it was after this process that the pay-in-slips were  presented to   the  Clearing  House  with  the  Clearance  Sheets   in fulfilment  of  their  obligations under  the  bye-law.   In regard  to these payments by transfer entries to the  credit of the Association it was urged               (1)   That  several of the  members  numbering               about 17 or so, did not, in fact, have  enough               funds in their accounts before 7 P.m. that day               to  enable  the  cheques which  they  drew  in               favour  of the Clearing House to  be  honoured               and  that in consequence  notwithstanding  the               acceptance of the cheques by the bank, such  a               payment  could  not be deemed  within  bye-law               137-B. It  was  common  ground  that at 2.30 P.m.  on  the  3rd  of February  the  amount  to the credit  of  several  of  these members was not sufficient to enable the cheques which  they issued  later  in  the day to be cleared.   But  before  the cheques  were actually presented the purchaser-members  paid into  their  accounts  (a) refunds which  they  obtained  of margin moneys which they had deposited with the  Association and  to which they were entitled under the bye-laws and  (b) other  cheques in favour of the Bank of Baroda.   Taking  up



first  the margin money refunds, purchasers had,  under  the bye-laws, to pay margin moneys on their purchases and  these had  to  be  refunded  to  them  on  fulfilment  of  certain conditions.  ’Me amounts 259 originally  paid  as  margin  by  the  purchasers  had  been credited  to the Association and when the amount had  to  be refunded payment orders were made out by the Association  on the  3rd of February of the amounts due to be  refunded  and these  refund orders were paid by the respective  purchasers to  the credit of their accounts and their accounts were  so credited  with the Bullion Hall Subbranch.  It was  not  the case of the appellant that the members were not entitled  to the refund granted by the Association but what was  objected to was that the refunds were really not due that day and had been  improperly paid over by the Association in advance  of the  time  when it was due  Bye-law 33-C(2) deals  with  the refund of margin money and it reads:               "Where the conditions described in clause  (a)               or (b) as the case may be, cease to exist, the               Association shall return the margin amount  to               the members concerned on the day following the               next clearance day after making the  necessary               adjustment." On this the appellant’s case was that the margin money could have been returned only on the 4th and that the  Association acted improperly in refunding the amounts to the  purchasers on  the 3rd itself to enable them to utilise that money  for the purpose of making their payments towards the settlement. We  do not see any sub. stance in this complaint, nor do  we see  any relevance of this to the point now in  controversy, viz., whether there had been a compliance with bye-law  137- B.   As already pointed out, the Vaida was originally  fixed for  the  2nd of February and if that had stood  the  amount would  have  been refundable on the 3rd.  It  was,  however, owing  to  a strike of the Gumashtas of the members  that  a situation had arisen by reason of which the Vaida had to  be postponed  by  a day.  Whether as urged by  Mr.  Purshottam, that upon the proper construction of bye-law 33-C that  when a  Vaida day is shifted the day fixed for the refund of  the margin  money  also  gets shifted or  whether  it  would  be payable on the day originally fixed, would, in our  opinion, make  no difference to the result.  The bye-law  imposes  an obligation on the Association to refund the margin money  on the day next after the Vaida.  On its terms, however, if the conditions  of cls. (a) & (b) cease to exist, and  obviously they  ceased to exist in the present case even on  the  2nd, there is nothing in the bye-law to preclude the  Association from refunding the margin money.  Again, even if the  margin money  were  returned before such refund  could  be  legally enforced,  the propriety or impropriety of the refund  would have no bearing on the only point for consideration relevant to the question whether bye-law 137-B was 260 complied  with  or  not viz., whether the  accounts  of  the members  were  in  credit  at  the  time  the  cheques  were presented. (2)  The  next category of objection under this head was  in relation  to  the  bank having given credit to  one  of  the members  for the amount of a cheque of Rs. 2,00,000/-  which was  drawn on the Bank of India, Australia and China.   Now, the  evidence in the case was that  this  constituent-Khimji Poonja  & Co. had to pay Rs. 4,65,000/- as a purchaser.   He had a credit balance at 2.30  P.m.   on  the  3rd   of   Rs. 1,93,215/13/5.  To enable him to meet   the  cheque for  Rs.



4,65,000/- which he drew on the Bullion Hall Sub-Branch   he paid  into  his account Rs. 1,05,500/- as refund  of  margin money.   Besides, he drew a cheque for Rs.  2,00,000/on  his account with the Bank of India, Australia & China in  favour of the Bank of Baroda and paid this cheque to the credit  of his account with the Head Office of the Bank of Baroda.  The Head  Office intimated this credit to the  Bullion  Exchange Branch  and when he presented his cheque for Rs.  4,65,000/- to the Bullion Exchange Branch the same was honoured and the amount  credited  to the Association.   The  learned  Judges accepted  this  evidence and the explanation and  held  that this constituent had enough funds with the Bank to meet  the cheque  of  Rs. 4,65,000/- which he  drew.   Mr.  Purshottam challenged  the  credibility of this evidence.  We  do  not, however, propose to go into it for the reason that if, as  a matter of fact, the Bank of Baroda as a Banking  Institution gave  Khimji Poonja & Co. credit for Rs. 2 lakhs that was  a matter  between those two parties and is not a matter  which bears  upon the validity of the payment for  Rs.  4,65,000/- which Khimji made.  It is not disputed, or rather it  cannot be disputed that the Head Office of the bank credited Khimji Poonja  &  Co. with the sum of Rs. 2,00,000/- and  there  is evidence  as  to the intimation of this credit by  the  Head Office.   Of course, the cheque by Khimji on  the  Chartered Bank was not certified "good for payment" but that was not a payment  under bye-law 137-B.  The Head Office  accepted  it and therefore nothing follows from their not having insisted on  that cheque being certified.  The fact remains that  the Head  Office  accepted  that cheque; we  shall  take  it  in anticipation of being cleared, and as a fact it was  cleared the next day.  With the propriety of the Head Office of  the Bank  crediting  the  constituent with the  amount  of  that cheque   before  actual  realisation  neither  the   Bullion Exchange Branch nor the Association to whose account the sum of  Rs. 4,65,000/- represented by the cheque drawn in  their favour was credited, nor the appellant are concerned.   When once  the Bank credited that sum into the account there  was enough 261 credit for meeting the cheque of Rs. 4,65,000/- which is the only point we are concerned with. (3)  The  third head of objection that was raised, and  this was  the one which was the subject of strenuous  contest  in the High Court and before us, was whether the cheques on the Bullion  Exchange  Sub-branch which were paid  in  with  the Clearance  Sheets were "certified good for  payment"  within bye-law 137-B.  It was urged that only four modes of payment were  recognised  and that a cheque even on  the  customer’s account in the same bank was still a cheque and that  unless ’It  was certified good for payment it did not  satisfy  the requirement  of  a valid payment within bye-law  137-B.   In this  connection it was stressed that having regard  to  the consequences  flowing from a payment or non-payment  on  the terms  of the bye-laws a strict and literal construction  of the  bye-law  was called for and that the Courts  should  so construe the bye-law and hold that a literal and not  merely a  substantial  compliance  with  it in  the  sense  of  the Clearing  House  having received payment would  satisfy  the rule.  In connection with the submission that cheques  drawn against  the  customer’s account in the same branch  of  the bank could not be "cheques certified good for payment"  even though there were enough funds to meet the cheques,  learned Counsel drew our attention to the fact that certification of a.  cheque  was a well known form  of  commercial  procedure which bankers adopted for the purpose of clearance by  which



the  certifying and the Clearing bank became bound  to  each other.   Reliance  was, in this connection,  placed  on  the observations of the Privy Council in Gaden v.The  Newfoundland Savings Bank(1) where it is stated :               "The only effect of the certifying is to  give               the  cheque additional currency by showing  on               the  face  that it is drawn in good  faith  on               funds  sufficient to meet its payment, and  by               adding to the credit of the drawer that of the               bank on which it is drawn." Reference  was also made to the judgment of Lord  Wright  in Bank of Baroda v. Punjab National Bank(2) where the  histroy of  certification  or marking of cheques in India  is  dealt with.  We do not, however, derive any assistance from  these decisions on the point now in controversy.  The first  thing to  be noticed about this objection as to  certification  is that  there is no question of certification where  a  cheque drawn  on an account in a branch of a bank is paid into  the same  branch  to  the credit of another  party  who  has  an account  in that branch.  Certification is a method  adopted when a (1)      [18991      A.C.      281      at      p.      285. (2) 71 I.A. 124. 262 bank  on  which a cheque is drawn  verifies  the  customer’s account  on  which it is drawn and indicates on  the  cheque that  there  are enough funds in his account  to  meet  that cheque.   It is obvious that there could be no  question  of such  -a  certification by a bank of a cheque ,drawn  on  an account in a branch when the drawer pays it to the credit of a different account in the same branch.  The verification of the   account  of  the  constituent  for  the   purpose   of ascertaining  whether  there is enough credit  to  meet  the cheque  which  precedes a certification takes place  at  the very moment when the cheque is cleared.  There is  therefore no question then of two banks-a certifying bank on which the cheque  is drawn and a clearing bank into which that  cheque is  paid.  In such circumstances, we should  consider-  that the  proper view to take of the payment would be that it  is really a payment in cash.  The Privy Council had, in  Arsene A. Larocque v. Hyacin the Beauchmin,(1) to consider  whether the payment a company by receipts given by it on account  of the  purchase  price of the property which they sold  was  a payment  in  cash.   In  dealing  with  this  question  Lord Macnaghten  quoted  with  approval the  following  from  the judgment of James L. J. in Spargo’s(2) case :               "It  was said by the Lord Chancellor,  and  we               entirely concurred with him, that it could not               be  right  to put any construction  upon  that               section  (s.  25 of the Companies  Act,  1867)               which  would  lead to such an absurd  and  un-               justifiable  result as this, than in  exchange               of  cheques would not be payment in  cash,  or               that an order upon a banker to transfer  money               from  the account of a company would not be  a               payment in cash." and another passage from the judgment of Mellish, L.J.               "It  is  a general rule of law that  in  every               case where a transaction resolves itself  into               paying  money  by A to B and then  handing  it               back  again  by B to A, if  the  parties  meet               together  and agree to set one demand  against               the  other, they need not go through the  form               and  ceremony of handing the  money  backwards               and forwards."



We consider these observations apposite and hold that  where a payment was made by a cheque drawn on an account with  the Bullion  Exchange Sub-branch and the amount  represented  by that cheque was transferred to the Clearing House Account of the Association it is virtually a payment in cash, though in form a payment by cheque. (1) [1897] A.C.        358. (2) L.R. 8 Ch. 407. 263 The  next  transaction to which objection was  taken  was  a payment  into  the Bullion Hall Sub-branch of a sum  of  Rs. 4,65,000/-  by  one Sri Bansilal & Sons.  The  evidence  was that the cheque was drawn not on his account on the  Bullion Hall Sub-branch of the Bank of Baroda but with the branch of the Bank at the Fort, Bombay.  The evidence which the  Court accepted  was  that on the presentation of  the  cheque  the staff  ascertained that the constituent had enough funds  in the  bank for the cheque to be cleared and accepted  it  and credited  the  same to the account of the  Bullion  Exchange Association.   The objection raised to the receipt  of  this payment  was also founded on the cheque not being  certified as good for payment.  It will be noticed that the only point of difference between this cheque and the cheques which were drawn  on accounts of members with the Bullion  Hall  branch which  we have dealt with just now is, that the  cheque  for Rs. 4,65,000/was not drawn on the drawer’s account with  the Bullion Hall Subbranch but on an account in the same bank at the Fort branch.  For the purpose of considering this  point it  is  not  necessary to enter on any  examination  of  the question as to what extent the two branches of the same bank are  separate entities.  There is no doubt that  a  customer cannot claim to draw cheques except on the branch where  his moneys are deposited and on the account in respect of  which the  cheque  is  issued.   But  that  is  not  what  is   in controversy in the present case.  Here a cheque drawn on the Fort Branch is paid into the Bullion Hall Sub-branch to  the credit  of the Association.  The Bullion Hall Sub-branch  of the  bank  accepts  that  cheque  and  credits  it  to   the Association after ascertaining that the drawer of the cheque has enough funds at the Fort branch for meeting that cheque. The only question is whether the payment could be treated as by  a  cheque which is certified as good  for  payment.   We consider that what we have stated earlier as to the position in regard to a cheque drawn on an account in the same branch would also apply to the present case and that a  certificate of  the  banker  that is referred to in  the  bye-law  is  a certificate  of  a bank different from that into  which  the cheque  is being paid.  Even if there be any doubt  in  this matter  we  are satisfied that when once the  staff  at  the Bullion  Hall  Sub-branch ascertained that  the  cheque  was backed by sufficient funds to the credit of the customer  in the  account  on  which  it  is  drawn,  it  satisfies   the requirements  of  a  cheque certified as  good  for  payment within bye-law 137-B.  The learned Judges of the High Court, therefore,,  rightly held that this payment was not  outside the payments permitted by the said bye-law. The  last  of the cases concerns a payment by  one  Jethalal Sangji Shah of a cheque for Rs. 1.16,250/-. The cheque was 264 made in favour of the Bank of India Ltd. not certified  good for  payment and was paid into the Bullion Hall  Sub-branch. The Clearing House received this cheque from Jethalal Sanagi Shah  after  obtaining a declaration from him  that  he  had enough  credit  in his account with the Bank  of  India  for meeting  that cheque.  It was stated that the  Directors  of



the  Association were approached by the Bank as  to  whether this cheque could be received in payment and that it was  on their  advice that a declaration in the form  specified  was taken  from the member and it was only thereafter  that  the payment  was accepted as conforming to bye-law  137-B.   Mr. Purshottam  submitted that this payment could certainly  not be  within  bye-law  137-B. and  we  consider  that  learned Counsel is right.  This, however, does not help him  because it concerns the price for 25 bars and, having regard to  the quantity  of  silver  with  which  we  are  concerned,   Mr. Purshottam could not but concede that even if the payment by this  constituent  was  irregular it would  not  affect  the validity  of the purchase at the risk of the appellant.   We thus reach the conclusion that except the last payment which was  not  quite  regular  but  whose  irregularity  is   not material, all the other payments were substantially, if  not literally,  in accordance with the requirements  of  bye-law 137-B and in consequence the purchase made by the  Directors at  the risk of the appellant was legal and justified  under the bye-laws. Before concluding it is necessary to advert to the fact that both  before the learned trial Judge as well as  before  the Division  Bench a detailed analysis was made of the  several payments made by about 17 members of the Association with  a view to establish that those payments were not, even if they were made on the 3rd. in accordance with bye-law 137-B.  The learned Judges considered the several objections which  were formulated  to  the  validity of these  payments  and  after discussing some of the details of the individual cases which were  placed before the Court, recorded their  finding  that the payments satisfied the requirements of the relevant bye- law.   In view of the arguments addressed to us we have  not examined in detail each one of the objections but have dealt only  with  those  specifically  urged  before  us  and  the tenability  in  general  of the principles  on  which  these objections were based. The appeal accordingly fails and is dismissed with costs. Appeal dismissed. 265