X, a creditor carrying on business at Delhi, wrote to Y, one of its customers who resided at Chandigarh, saying "the favour of a cheque for the due amount within a week shall oblige". The customer upon such request sent a cheque by post. Cheque was stolen in the transit and was paid by the bank to the thief. X having not received the payment sued Y for recovery of amount. Decide the case by a reasoned order.

Reasoned Order: X v. Y

The Facts in Brief

X, a Delhi creditor, wrote to Y at Chandigarh requesting a cheque for the outstanding amount. Y responded by sending the cheque by post. The cheque was stolen in transit, and a thief presented and encashed it at the bank. X, having never received payment, now sues Y for the amount. The question is deceptively simple in its framing but legally layered in its answer.

The Central Question: Was There Payment to Discharge Y's Debt?

A negotiable instrument such as a cheque is, in settled law, a conditional payment — it operates as satisfaction of the debt only when the creditor actually receives the money. The debt between X and Y originated in their commercial dealings, and that debt survives so long as payment has not actually reached X. The thief who encashed the cheque was, of course, neither the holder nor the payee. Section 78 of the Negotiable Instruments Act, 1881 is explicit that payment, in order to discharge the maker, must be made to the holder of the instrument. Payment to the thief discharges no one — it merely enriches a criminal. Y's underlying debt to X, therefore, remains unpaid.

Was Y Authorised to Send the Cheque by Post?

Here lies the critical turning point. When X wrote to Y saying "the favour of a cheque within a week shall oblige," X was not merely requesting money — X was specifying the mode of remittance. That letter constitutes an implied, if not express, authorisation to Y to send the cheque by post. The law on this point is well-settled. When a creditor requests that payment be made by a particular mode, and the debtor follows that mode, the risk of transmission passes to the creditor. If the post was the authorised medium, then the act of posting the cheque is, in law, the act of delivering it to the creditor's agent — the postal authorities standing in the shoes of X for purposes of this transmission.

The Principle of Implied Agency of the Post

The House of Lords articulated the foundational rule long ago, and Indian courts have applied it consistently: where the creditor requests the debtor to send payment by post, the post office becomes the agent of the creditor. The debtor's obligation is fulfilled upon proper posting. If the letter is lost or stolen thereafter, the loss falls upon the creditor who selected that mode. In the instant case, X's letter expressly invited Y to send "a cheque" — not cash, not a bank transfer, but a cheque — and implicitly invited Y to do so by post, given the geographical distance between Delhi and Chandigarh and the natural implication of such a written request.

The Bank's Position

The bank that paid the thief occupies a separate and more complex position. Since the cheque was payable to X or to order, the bank would have paid it only on the presentation of some indorsement. If the bank paid without verifying the genuineness of the payee's indorsement, or if the thief presented it as a bearer instrument and the bank paid without due care, the bank may have acted in breach of its duty. However, that is a matter as between the bank and Y — it does not affect the primary question between X and Y. The bank's liability, if any, is to the true owner, i.e., X, if the bank failed to act in due course.

The Judgment

The suit by X against Y must fail. The reasoning is as follows:

• X requested Y to send a cheque. Y complied.

• Sending by post was the natural and implied mode of compliance given the circumstances.

• By requesting the cheque, X authorised the post office to receive it as X's agent.

• The theft occurred while the cheque was in the custody of X's agent (the post office).

• The loss from the theft falls on X, not Y.

• Y has discharged the obligation to the extent of posting the cheque in accordance with X's instructions.

• Y is therefore not liable to X for the amount of the cheque.

However, Y is not left without remedy and X is not left entirely without recourse. Y, as drawer, retains the right to countermand payment since the cheque has been stolen — and indeed should have done so promptly upon learning of the theft. If Y failed to stop payment and the bank paid the thief without proper verification of the payee's indorsement, the question of the bank's liability to X (as the true owner) may separately arise under Section 129 of the Act. X's remedy, if any, lies against the bank, not against Y.

The Caveat

It bears noting, as good authorship demands honesty, that had X's letter been a general request for payment without specifying the cheque or implicitly invoking postal transmission, the result might differ. In that situation, Y's decision to send by post would have been Y's own choice of risk. But on the facts here — a written request for a cheque from a creditor to a distant debtor — the authorisation to post is clearly implied, and the legal consequences flow accordingly.

Conclusion of the Court: The suit by X against Y is dismissed. Y sent the cheque in strict compliance with X's own request. The loss occasioned by the theft in transit must be borne by X. X is at liberty to pursue such remedies as may be available against the bank that paid the thief, subject to proof of negligence or breach of duty in that payment.