- (1.)This appeal which has come to this Court with a certificate issued by the Bombay High Court raises for our decision a short and interesting question about the scope and effect of the provisions contained in S. 89 of the Indian Companies Act, 1913, in relation to the law of banking. This question arises in this way. The appellant the Oriol Industries, Ltd., (hereafter called the company) was incorporated on May 15, 1945, and it appointed as its managing agents M/s. Poddar Chacko and Co. Soon after its incorporation the company passed a resolution on May 21, 1945, whereby it decided to open an account with the respondent, the Bombay Mercantile Bank. Ltd., (hereafter called the bank) and in accordance with the said resolution an account was opened with it on May 28, 1945. Twentyeight cheques were drawn on this account aggregating the total amount of Rs. 28,882-13-0 during the period between May 28, 1945 and July 31,1945 These cheques were drawn by K. Poddar and M. J. Chacko in pursuance of the authority conferred on them by the company. On September 28, 1948, by its liquidator the company brought the present suit claiming to recover from the bank the said amount of Rs. 28,882-13-0. The case for the company as set out in the plaint was that the payment of the said amount had been made by the bank wrongfully and negligently and the amount drawn under the said cheques had been wrongfully debited to the company in is account kept by the bank. It appears that the resolution for winding up of the company was held by the Court to be null and void, and so the plaint was subsequently amended whereby the name of the liquidator was struck out and the suit then purported to be one which was instituted by the company itself. The plea raised by the company that the cheques in question had been negligently and wrongfully honoured by the bank was seriously disputed by the bank in its statement. Mr. Justice Tendolkar, who tried the suit on the Original Side of the Bombay High Court, however, upheld the plea raised by the company and came to the conclusion that the cheques had been wrongfully honoured. Even so, Mr. Justice Tendolkar held that out of the total amount in dispute an amount of Rs. 8,882-13-0 had been actually received by the company and so on equitable grounds he rejected the company's claim in regard to the said amount. The company's claim was, however, decreed in respect of the balance of Rs. 20,000.
(2.)The decree thus passed by Tendolkar, J. was challenged by the bank in its appeal, whereas the rejection of the company's claim in respect of Rs. 8,882-13-0 by the trial judge gave rise to cross-objections by the company. The Court of Appeal has reversed the finding of Tendolkar, J., and has held that the bank was not liable to repay any amount to the company since it had accepted and honoured the cheques issued on it in good faith. It may be stated at this stage that the plea of negligence which had been originally urged by the company in its plaint was expressly given up at the trial. Since the Appeal Court accepted the bank's case on the principal question of law it did not think it necessary to consider the question of limitation or the question about the applicability of the equitable doctrine on which the trial judge had relied. In the result the appeal filed by the bank was allowed, the cross-objections preferred by the company were rejected, and the suit filed by the company was dismissed with costs. The company then moved the High Court for a certificate, and on a certificate being granted it has come to this Court; and on its behalf Mr. Andley has urged that in coming to the conclusion that the company's claim was unsustainable the Appeal Court has misjudged the effect of the provisions of S. 89 of the Indian Companies Act in relation to the conduct of the bank in the present case. That is how the principal question which falls for our decision is about the scope and effect of the provisions of S. 89 of the Indian Companies Act.
(3.)Before dealing with the said question of law it is necessary to dispose of a minor point raised by Mr. Andley. He contends that the cheques issued by K. Poddar and M. J. Chacko and honoured by the bank had not been issued in the form required by the resolution which gave them authority to operate on the company's account with the bank. The relevant resolution passed by the company provided that
"the banking accounts of the company be opened with the bank and another bank and that the said banks be and hereby authorised to honour cheques, bills of exchange and promissory notes, drawn, accepted or made on behalf of the company by the Managing Agents M/s. Poddar Chacko and Co., by both the Directors of the managing Agents firm, namely, Mr. Keshavdeo Poddar and Mr. M. J. Chacko and to act on any instructions so given relating to the account whether the same be overdrawn or not or relating to the transactions of the company."

The argument is that two conditions had to be satisfied before the bank could accept a cheque issued under this resolution; the cheque had to be signed by both the Directors of the Managing Agents firm, and it had to be drawn on behalf of the company. In point of fact, all the cheques have been signed by the two individuals without describing themselves as Directors of the Managing Agents firm and without showing that they had drawn them on behalf of the company. These defects, it is urged, made the cheques irregular and inconsistent with the mandatory requirements of the resolution, and the bank was, therefore, not justified in honouring the said cheques. In our opinion, this argument is unsound. On a fair and reasonable construction of the resolution it is difficult to uphold the contention that the resolution required the drawers of the cheques to specify on each cheque that they were made or drawn on behalf of the company. The object of the resolution as well as its effect merely was to conform to the requirements of S. 89 of the Indian Companies Act to which we will presently refer. It cannot be said that the resolution required that the drawers of the cheques had to comply with the said condition apart from the requirements of S. 89; and so it would be unreasonable to treat the said requirement as a condition prescribed by the resolution independently of S. 89.