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Damodar Keshav Parasharami Vs. Ramnath Radhakisan - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMumbai
Decided On
Case NumberFirst Appeal No. 241 of 1930
Judge
Reported inAIR1932Bom607; (1932)34BOMLR1327; 140Ind.Cas.734
AppellantDamodar Keshav Parasharami
RespondentRamnath Radhakisan
DispositionAppeal dismissed
Excerpt:
- - but it seems to me that we cannot take the view of this document which the plaintiffs ask us to take unless we do violence to a well-established rule both in india and in england on the construction of that most important class of documents from a commercial point of view, namely, negotiable instruments. 482 it was held that unless an executant of a promissory note clearly indicates therein, either by an addition to his signature or otherwise, that he executes it as agent of another or that he does not intend thereby to incur personal responsibility, he is liable personally on the promissory note according to section 28 of the negotiable instruments act......note, but also in the signature appended to the promissorynote, and yet the directors were held personally liable as there was nothing in the note itself to exclude their personal liability, and the affixing of the company's seal was held not sufficient to show that the note was signed on behalf of the company.5. the same view was adopted by this court in in re the new fleming spinning & weaving company (ld) in liquidation i.l.r. (1879) bom. 275. where it was held that in order to make a company liable on a bill or a note it must appear on the face of such bill or note that it was intended to be drawn, accepted, or made on behalf of the company, and no evidence dehors the bill or note was admissible under section 47 of the indian companies act (x of 1866).6. in sitaram krishna v......
Judgment:

Patkar, J.

1. In this case the plaintiff sued to recover Us. 8,000 on a promissory note dated February 22, 1926, passed by defendant No. 2. The plaintiff in the original plaint sued the liquidator of the Sangamner Weavers' Co-operative Society and defendant No. 2, and stated in para. 2 that defendant No. 2 in his capacity as chairman of the Society passed a promissory note, and that statement was repeated in para. 3. By Ex. 22 the plaintiff amended the plaint with the result that the words, in his capacity as the Chairman of the Society' in para. 2 were omitted, and para. 3 was deleted.

2. Defendant No. 1 contended that the Co-operative Society was not liable under Section 51 of the Co-operative Societies Act. The learned Joint First Class Subordinate Judge held that defendant No. 2 was liable as he passed the promissory note, and did not in the promissory note intend to exclude his personal responsibility.

3. The promissory note is signed by defendant No. 2 the chairman of the Weaving Society. In the body of the promissory note he also described himself as chairman of the Weaving Society, and agreed to pay the amount of the promissory note. The khata of which the account was taken stands in the name of defendant No. 2 and not in the name of the Society. Defendant No. 2 did not expressly exclude his personal liability, nor did he state in the body of the promissory note that he was passing the promissory note on behalf of or on account of the Weaving Society.

4. According to the leading case in Dutton v. Marsh(1871) L.R. 6 Q. B. 361 the rule is stated as follows (p. 364):-.where parties in making a promissory note or accepting a bill, describe themselves asdirectors or by any similar form of description, but do not state on the face of the document that it is on account or on behalf of those whom they might otherwise be considered as representing,-if they merely describe themselves asdirectors. but do not state that they are acting on behalf of the company,-they are individually liable. But, on the other hand, if they state they are signing the note or the acceptance on account of or on behalf of some company or body of whom they are the directors and the representatives, in that case, as the case of Lindus v. Melrose (1858) 3H.N. &. 177 fully establishes, they do not make themselves liable when they sign their names, but are taken to have been acting for the company, as the statement on the face of the document represented.

In the promissory note in that case the defendants not only described themselves as directors in the body of the promissory note, but also in the signature appended to the promissorynote, and yet the directors were held personally liable as there was nothing in the note itself to exclude their personal liability, and the affixing of the company's seal was held not sufficient to show that the note was signed on behalf of the company.

5. The same view was adopted by this Court in In re The New Fleming Spinning & Weaving Company (Ld) in Liquidation I.L.R. (1879) Bom. 275. where it was held that in order to make a company liable on a bill or a note it must appear on the face of such bill or note that it was intended to be drawn, accepted, or made on behalf of the company, and no evidence dehors the bill or note was admissible under Section 47 of the Indian Companies Act (X of 1866).

6. In Sitaram Krishna v. Chimandas FatehchandI.L.R. (1928) Bom 610 30 Bom. L.R. 1300 it was held that in an action on a bill of exchange or promissory note against a person whose name appears as party to the instrument, it is not open by way of claim or defence to show that the signatory was in reality acting for an undisclosed principal, and that the question in such cases is, what is the fair interpretation of the document to be construed? Marten C.J. observed at p. 645 as follows:-

I quite follow that if the name of the firm had been put first, or if there were words saying ' Athale, for Gangadhar and B. Friends,' the case might be different. But it seems to me that we cannot take the view of this document which the plaintiffs ask us to take unless we do violence to a well-established rule both in India and in England on the construction of that most important class of documents from a commercial point of view, namely, negotiable instruments.

7. The same rule was also laid down by their Lordships of the Privy Council in Sadusuk Janki Das v. Kishan Pershad (1918) L.R. 46 IndAp 33 21 Bom. L. R 605 where it was held that no person is liable upon a hundi or bill of exchange unless his name appears on the instrument in a manner which, upon a fair interpretation of its terms, shows that the name is the name of the person really liable, and that a statement after the signature of the drawer that he is acting Superintendent for another is merely descriptive, and does not make the other person a party to the instrument.

8. The Cases relied on on behalf of the appellant, i.e., Alexander v. Sizer (1869) L.R. 4 Exch. 102 and Lindus v. Melrose(1858) 3 H. & N. 177 are distinguishable, because in the first case the promissory note was passed, 'For Mistley, Thorpe, and Walton Railway Company', and was signed by John Sizer as Secretary, and in the second case the promissorynote was passed 'for value received in stock on account of the L. and B. Company, Limited.' The personal responsibility was, therefore, excluded on the face of the document.

9. Section 28 of the Negotiable Instruments Act lays down the same principle. It says :-

An agent who signs his name to a promissory note, bill of exchange or cheque without indicating thereon that he signs as agent, or that he does not intend thereby to incur personal responsibility, is liable personally on the instrument, except to those who induced him to sign upon the belief that the principal only would be held liable.

10. There is no evidence in the present case that the plaintiff induced defendant No. 2 to sign on the belief that the Weaving Company only would be held liable, and it is necessary that an agent intending to avoid personal liability upon a promissory note signed by him should, on the face of the document, exclude his personal responsibility or indicate that he signs as agent.

12. In Koneti Naicker v. Gopala Ayyar I.L.R. (1913) Mad. 482 it was held that unless an executant of a promissory note clearly indicates therein, either by an addition to his signature or otherwise, that he executes it as agent of another or that he does not intend thereby to incur personal responsibility, he is liable personally on the promissory note according to Section 28 of the Negotiable Instruments Act. It appears that in that case the suit was brought not only against the agent sought to be held liable and who passed the promissory note, but also against defendants Nos. 1 and 2 on whose behalf it was alleged by the plaintiff that the promissory note was passed.

13. The same view is followed in the case of Elliott v. Bax-Ironside[1925] 2 K.B. 301 where the facts were somewhat different and the letters passed between the parties indicated that the defendant by endorsing intended to guarantee the payment of the bill, and at p. 305 it was observed by Bankes L.J. as follows :-

Of course, if those signatures had been followed by some such word a as ' for the company ' or ' as directors' the defence would have been established, but here there was nothing but the defendants' names coupled with the statement that they were directors ; and it appears to me, as the result of the authorities, that where signatures appear on a bill ofexchange or promissory note in that form the word ' directors ' is a word of description only;

14. I think, therefore, that as there are no words excluding the personal responsibility of defendant No. 2 in the promissory note sued upon, and as he is a party to the negotiable instrument, he is personally liable under Section 28 of the Negotiable Instruments Act,

15. I think that the view taken by the lower Court is right, and this appeal must be dismissed with costs.

Nanavati, J.

16. I agree, and have nothing to add.


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