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Kanneganti Venkata Subbayya (Died) and ors. Vs. P. Ranga Rao Tobacco Co. and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAndhra Pradesh High Court
Decided On
Case NumberCivil Revn. Petn. No. 2041 of 1968
Judge
Reported inAIR1972AP72
ActsNegotiable Instruments Act, 1881 - Sections 35 and 92; Evidence Act, 1872 - Sections 114
AppellantKanneganti Venkata Subbayya (Died) and ors.
RespondentP. Ranga Rao Tobacco Co. and ors.
Appellant AdvocateT. Sankarrao, Adv.
Respondent AdvocateP. Anjaneya Sarma, Adv.
Excerpt:
.....1872 - petitioner claimed to hold assignor of promissory note liable for dishonour of promissory note - maker of promissory note declined to accept registered notice by petitioner - under section 76 non-presentment of negotiable instrument does not obstruct application of rule of dishonour - held, assignor along with maker of promissory note liable for dishonour. - motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers entitlement to defend the action joint appeal by insured and insurer - held, the language employed in enacting sub-section (2) of section 149 appears to be plain and simple and there is no ambiguity in it. it shows that when an insurer is impleaded and has been given notice of the case, it is entitled to defend the action only on..........instruments act which inter alia enacts that there should be presentment of the promissory note for payment to the maker by or on behalf of the holder and that in default of such presentment, the other parties thereto are not liable thereon to such holder.6. it is submitted that in the instant case, there was no presentment of the promissory note to the maker, and consequently, the endorser cannot be made liable. the argument is that dishonour by non-payment can arise only on the omission of the maker to pay the same when the demand is accompanied by the presentment of the promissory note. the condition as to the presentment of the negotiable instrument was not satisfied and, consequently, there was no dishonour so as to attract the liability of the indorser in accordance with.....
Judgment:
ORDER

1. This revision petition arises out of a suit brought by an assignee of a promissory note. The defendants 2 and 3 were carrying on business in partnership in the name and style of 'Sri Ranga Rao Tabacco Co.' The partnership firm is cited as the 1st defendant. The 2nd defendant incurred a liability on behalf of the partnership firm and executed a promissory note for the price payable by the firm on account of goods supplied by the 4th defendant. The promissory note in favour of the 4th defendant bears the date 27-8-1964. The note was subsequently assigned by the 4th defendant to the plaintiff for due consideration on 4-12-1964. Four days later, on 8-12-1964, the plaintiff got a registered notice issued calling upon the maker of the promissory note to pay the amount due thereon. Thereupon, the plaintiff, gave notice of dishonour to the 4th defendant as per Ex. B-5 dated 18-12-1964. Nearly four months later, the 4th defendant replied to the notice under Ex. B-6 repudiating his liability. Upon this, the suit followed.

2. The additional Subordinate Judge, Guntur, granted a decree against the defendants 1 to 3 i.e., the firm and the partners (the makers of the promissory note), but declined to grant a decree against the assignor. The plaintiff has preferred this revision petition challenging the correctness of the dismissal of the claim against the 4th defendant.

3. The Subordinate Judge was the opinion that the avoidance of the receipt of the registered notice by the maker of the promissory note is not tantamount to a dishonour of the negotiable instrument by the non-payment. Accordingly, the lower Court came to the conclusion that the 4th defendant is not liable.

4. Two questions have been formulated in the course of the argument in this revisions petition. The first point on which the argument turned, is whether the endorsement of the postman on Ex. A-4. the returned registered notice is admissible in evidence in the absence of the testimony of the Postman. The contention that is urged on behalf of the respondent is that there is no proof of the refusal of the registered notice by the addressee. There is clear authority to the effect that, notwithstanding the absence of the evidence of the Postman. the endorsement made by him is admissible in evidence. The authority in Bapayya v. Venkataratnam, : AIR1953Mad884 , is clear. It lays down unequivocally that the admissibility of the endorsement of refusal made by the postman does not depend upon the oral testimony of the person making the endorsement. It is in the discharge of his official duties that the Postman makes the endorsement of refusal. And, an act done in an official capacity is presumed to have been done in the proper exercise of the official function. The presumption consequently is that it is a valid act. It is therefore, incumbent on the person call in gin question the effectiveness of the official act to make out the plea affirmatively. In the case referred to above, the question arose with reference to a notice under Section 106. Transfer of Property Act. It was held that the statutory obligation as to notice was duly complied with by the production of the registered notice bearing the endorsement of the Postman about the refusal of the addressee to receive it. I am of opinion that the endorsement on Ex. A-4 is sufficient to prove that a demand for the payment of the money due under the promissory note was made and that it was not met.

5. The second point debated before me was, whether it can be said that there was a dishonour of the promissory note inasmuch a there was no presentment of the promissory note by the holder to the maker of the promissory note. Learned Counsel for the respondent relied upon Section 92 of the Negotiable Instruments Act, which reads as follows:---

'A promissory note, bill of exchange or cheque is said to be dishonoured by non-payment when the maker of the note, acceptor of the bill or drawee of the cheque makes default in payment upon being duly required to pay the same.'

He has also relied on the provisions. of Section 64 of the Negotiable Instruments Act which inter alia enacts that there should be presentment of the promissory note for payment to the maker by or on behalf of the holder and that in default of such presentment, the other parties thereto are not liable thereon to such holder.

6. It is submitted that in the instant case, there was no presentment of the promissory note to the maker, and consequently, the endorser cannot be made liable. The argument is that dishonour by non-payment can arise only on the omission of the maker to pay the same when the demand is accompanied by the presentment of the promissory note. The condition as to the presentment of the negotiable instrument was not satisfied and, consequently, there was no dishonour so as to attract the liability of the indorser in accordance with the provisions of Section 35 of Negotiable Instruments Act.

7. The argument outlined above rests upon the basic premise that in order to make the indorser liable on the ground of dishonour of the negotiable instrument by the maker, the presentment of the instrument is an essential pre-requisite. The question arises whether the only contingency that can give rise to dishonour of the negotiable, instrument is refusal of payment on presentment of the promissory note. In other words; is it not possible to make out the dishonour of the negotiable instrument by the maker in any other contingency? Cannot the dishonour of the negotiable instrument be proved to have taken place by proof of the refusal of payment by the maker, not on the ground of want of presentment of the Promissory note, but on some other ground? Supposing refusal to make the payment was not accompanied by any reason at all was assigned by the maker of the promissory note. In a situation like that, can it not be said that the liability of the indorser is attracted in terms of Section 35 of the Act? To my mind, the answer appears to be clear. The intendment of S. 35 is to make the indorser liable in all cases of dishonour by non-payment. howsoever the refusal to pay may have occurred. The refusal to honour the obligation under a promissory note may arise either on the presentment of the promissory note or in circumstances where the promissory note has not been presented. The true test, therefore, is whether there was a refusal to meet the liability due under the promissory note. If such a refusal is proved, the fact that the promissory note has not been presented to the maker when he declined to honour the obligation would be immaterial when the refusal was not based upon the plea that the promissory note was asked to be presented but was not presented. On a reading of all the relevant provisions of the Negotiable Instruments Act, it is clear that the insistence on the presentment of the Negotiable Instrument is a privilege or an option given to the maker. If he so chooses, he can insist upon the production of the promissory note, bill of exchange or cheques and may decline to honour the obligation except on the due presentment of the negotiable instrument. But, this option is capable of being waived; and, where the dishonour of the obligation is attributable not to the non-presentment of the instrument when it was insisted upon but to some other reasons, there is no justification for holding that the provisions of Section 35 are not applicable.

8. On a true construction of the provisions of Sections 92 and 64 it appears to me that they cannot be read as making an exhaustive provision that dishonour of a negotiable instrument cannot take place in contingencies other than the one for which provisions has been made thereunder. Rather, the true meaning of the sections is that non-payment by the maker of a promissory note after presentment thereof is envisaged as one of the situations where dishonour of the obligation may have occurred. It would be contrary to the spirit and intendment of Section 35 to construe the expression 'dishonour' occurring in that section as being limited to the contingency that is envisaged by reading Sections 92 and 64 together. The proper construction, in my opinion, is to read Section 35 so as to give a broader meaning to the expression 'dishonour' by interpreting it to mean as contemplated by the other sections but also dishonour of the obligation in other contingencies as well.

9. My attention has been drawn to a decision in Kadappa Chetti v. Thirupathi Chetti, AIR 1925 Mad 444. That case related to a hundi to which the provisions of Section 91 are applicable. In that context, the learned Judges made certain observations on which considerable stress is placed by the learned counsel for the respondent. Venkata Subba Rao, J. observed:----

'There cannot generally be any dishonour by the drawee without presentment of the bill to him for acceptance or for payment. Dishonour by the drawee is a condition precedent under Section 35 for the coming into existence of , the liability of the indorser'.

It will readily be appreciated that the observations made by the learned Judge were with reference to a hundi and were based upon the provisions of Section 91 of the Negotiable Instruments Act. There is a clear distinction between the two Section 91 and 92. The former is applicable only to bills of exchange, where as the latter is equally applicable to promissory notes, bills of exchange and cheques. It is, no doubt, true that the learned Judge's observation referred to payment as well as acceptance of a bill of exchange. But, one cannot ignore that the Division Bench that decided the Madras case was concerned with the law applicable to a hundi and to a case where the acceptance under Section 91 was a condition precedent. The Division Bench had no occasion to consider the question whether in relation to a promissory note the liability of the indorser under Section 35 does not arise on the ground that the promissory note was not presented to the maker. The decision relied upon by the learned Counsel, is, therefore, inapplicable to the case on hand.

10. Though the question has not been considered from that angle and the argument before me also has not covered that ground it is pertinent to refer to the provisions of Section 76 of the Negotiable Instruments Act. That section embodies the exceptions where presentment is unnecessary. It may be noted that presentment is not insisted upon among other cases in circumstances where the maker closes his place of business on a business day he or any other authorised person fails to attend the place of business or the maker cannot be found after due search. In the instant case, the notice, calling upon the maker to payment amount could not be delivered because of the avoidance and refusal of service by the maker. it appears to me that in a case lying Section 76 becomes applicable and the omission to present the negotiable instrument will not subject the holder to any disability. It is also to be noted that there is an exemption from presenting the negotiable instrument in cases where a party waives his right or the drawer would not suffer any damage from want to such presentment. I am of opinion that in a case where the maker of the promissory note declines to accept the registered notice issued by the assignee, it is permissible to invoke the principle underlying Section 76 and to equate the situation with a waiver, with the result that the non-presentment of the negotiable instrument will not be an impediment to the application of the rule of dishonour and the consequences arising therefrom.

11. The decision of the lower court cannot, therefore be upheld. The revision petition is allowed. There shall be a decree against the 4th defendant who will also pay the costs in the court below. There will be no order as to costs in this revision petition.

12. Petition allowed.


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