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Legisetti Srinivasulu Vs. Gondi Peda Kondappa - Court Judgment

LegalCrystal Citation
CourtAndhra Pradesh High Court
Decided On
Case NumberCivil Revn. Petition Nos. 749 and 894 of 1957
Reported inAIR1960AP174
ActsContract Act, 1872 - Sections 60; Debts Law; Madras Agriculturists Relief Act, 1938 - Sections 8; Negotiable Instruments Act, 1881 - Sections 51 and 56; Transfer of Property Act, 1882 - Sections 130 and 137
AppellantLegisetti Srinivasulu;gondi Peda Kondappa
RespondentGondi Peda Kondappa;legisetti Srinivasulu
Advocates:T.S. Narasinga Rao, Adv. for Petitioner in C.R.P. No. 894/57, ;K. Venkata Ramaiah and ;K. Rama Krishna Rao, Advs. for Petitioner in 749/57, ;K. Venkatramaiah, Adv. for Respt. in No. 894/57, ;T.S. Nara
.....60 of contract act, 1872, explanation 1 of section 8 of madras agriculturists relief act, 1938 and sections 130 and 137 of transfer of property act, 1882 - plaintiff appropriated amount of debt paid by debtor toward interest - defendant challenged such appropriation - under section 60 creditor plaintiff has right to appropriate amount toward outstanding interest. (ii) endorsement - sections 51 and 56 of negotiable instruments act, 1881 - one of payee endorsed promissory note in credit of another out of two - such endorsement not valid as per section 50 - creditors praying for decree on grounds that endorsement amounts to assignment of chose in action - held, creditors entitled to decree on basis of such endorsement as pronote whether negotiable or not is a chose in action. - - ..........note in favour of the other. an objection was raised by the defendant that under section 51 of the negotiable instruments act when the endorsement is only by one of the two payees ft is invalid. the court, instead of considering the objection specifically raised, went on discussing some aspect which does not arise in the suit at all and gave a decision under section 56 of the negotiable instruments act, that part of the judgment which deals with the question supposed by the trial court to have arisen in the suit cannot he sustained.5. both sides have advanced arguments before me as to the maintainability of the suit in view of the patent defect in the manner of making the endorsement. section 51 of the negotiable instruments act reads thus;'51. every sole maker, drawer, payee or.....

Ranganadham Chetty, J.

1. C. R. P. No. 894 of 1957: The question that arises in this case is in regard to the appropriation of a sum of Rs. 100/- paid towards the debt on 15-8-1955. The plaintiff-creditor wants the sum to be appropriated towards interest in the first instance. His case is that when the amount was remitted through one G. Survanarayana. the defendant, as the debtor, sent explicit instructions that it should be appropriated towards interest. That case was not believed by the trial Court, andthe sum of Rs. 100/- was therefore, appropriated by the lower Court towards the principal. Hence this Revision Petition by the creditor-plaintiff.

2. I am not interfering with the finding of fact that no specific instructions were issued bv the defendant-debtor for the appropriation of. the sum towards interest. Nevertheless the creditor has got a right to appropriate the amount under Section 60 of the Contract Act towards the interest if be chooses. That right subsists even up to the stage of trial of the suit. I find from the plaint that the plaintiff, in fact, exercised the right of appropriation even in working out the figures of the amount due towards principal and interest. The option given to the creditor has been exercised with suffi-cient clarity at the time of institution of the suit.

3. The learned Advocate for the defendant argues that under explanation (1) to Section 8 of the Madras Agriculturists Relief Act (IV of 1938) the creditor is denied that right and contends that every payment made by the debtor should be appropriated compulsorily towards the princioal. But the fact is overlooked that explanation (1) relates only to the debts mentioned in Section 8, that is, debts contracted on or before 1-104932. The provision which has a direct application to the suit debt is Section 13. This debt is dated 15-6-1953 and there is no explanation under Section 13 similar to explanation (1) to Section 8 curtailing the liberty rf the creditor to exercise the right under Sectioin 60 of the Contract Act. The plaintiff was, therefore, free to deduct the sum of Rs. 100/- in abatement of outstanding interest. This Revision Petition is therefore allowed with costs.

4. Revision Petition No. 749/57: The suit is on an endorsed promissory note executed by the defendant in favour of two joint payees. One of the payees made an endorsement on the promissory note in favour of the other. An objection was raised by the defendant that under Section 51 of the Negotiable Instruments Act when the endorsement is only by one of the two payees ft is invalid. The Court, instead of considering the objection specifically raised, went on discussing some aspect which does not arise in the suit at all and gave a decision under Section 56 of the Negotiable Instruments Act, That part of the judgment which deals with the question supposed by the trial Court to have arisen in the suit cannot he sustained.

5. Both sides have advanced arguments before me as to the maintainability of the suit in view of the patent defect in the manner of making the endorsement. Section 51 of the Negotiable Instruments Act reads thus;

'51. Every sole maker, drawer, payee or indorsee, or all of several joint makers, drawers, payees or indorsees, of a negotiable instrument may, if the negotiability of such instrument has not been restricted or excluded as mentioned in Section 50, indorse and negotiate the same.'

It is obvious that the endorsement made by only one of two payees is invalid. But it does not follow that the creditor has no remedy on the alternative basis. Muhammad Khumarali v. Ranga Rao. ILR 24 Mad 654 while recognising that such an endorsement is Invalid, conceded to the plaintiff the right to a decree, on the ground that the endorsement amounted to an assignment of a chose-in-action, Muthar Sahib Maraikayar v. Kadir Sahib Maraikayar, ILR 28 Mad 544 expresses the view that

'a promissory note, whether negotiable or not, is nevertheless a chose-in-action and is subject to the incidents attaching to it in that aspect; so long as the rules of the law merchant are not departed from. Choses in action have been held assignable in this country, and it has been heldthat a non-negotiable promissory note may be assigned so as to enable the assignee to sue upon the note in his own name.'

Perumal Animal v. Perumal Naicker, AIR 1921 Mad '137 refers to the prevailing view in the Madras High Court that 'negotiable instruments are actionable claims assignable under this section (Section 130 T. P. Act) as well as by endorsement.' In Shanmuga Mudaliar v. Subbaraya Mudaliar, AIR 1933 Mad 133. (2) an argument was advanced by the debtor against, the possibility of the endorsement being treated! as an assignment of a chose-in-action because promissory notes are covered by Section 137 of the Trans-fer of Property Act. Section 130 of the Transfer of Property Act deals with transfers of actionable claims and requires an instrument to be in writing signed by the transferor. Section 137 of the Transfer of Property Act states

'nothing in the foregoing sections of this Chapter applies to stocks, by law or custom, negotiable, or to any mercantile document of title to goods.'

Apparently Section 137 takes away from the category of assign ability of choses-in-action all promissory-notes. The argument was repelled in the above case on the ground that Section 137 gives an extended privilege to mercantile documents and is In no way restrictive. In ILR 24 Mad 654 also emphasis was laid on the exclusion of negotiable instruments under Section 137 T. P. Act. But a distinction was made in that case between claims which have arisen before the passing of the amending Act of 1900 which introduces Section 137.

6. It is needless to consider whether Section 137 is restrictive or provides for extended privileges to mercantile documents. One possible way of excluding the limitation of Section 137 would be to dissociate the concept of debt underlying the instrument from the instrument itself and confine the operation of the element of assignability to the debt or actionable claim which forms the basis of the negotiable instrument while the rights, privileges-and immunities flowing from the negotiable instrument as such could only be transferred by an endorsement. In this view Section 137 T. P. Act can be construed as excluding the transfer of negotiable instruments as such and not affecting the debt form-ing the basis of such instruments,

7. The decree under revision is certainly not supportable. It is set aside. In the interests of justice I shall give the plaintiff a chance of amending his plaint by basing his right on an assignment of a chose-in-action without, of course deciding whether the endorsement offends against the Stamp Act and is admissible or not in evidence on the new basis which the plaintiff would be adopting for his suit. All other questions arising in the suit except in so far as they relate to the appropriation of Rs. 100/- paid by the defendant on 15-8-1955 and which is the subject matter of C. R. P. No. 894 of 1957 are left open for consideration by the lower Court.

8. In this view the Revision Petition by thedefendant is allowed with costs. The lower Courtmay consider the question of awarding of costs-or compensation when an application for amendment is made by the plaintiff-respondent. Thedefendant will be at liberty to file a Supplementalwritten statement. The suit is remanded to thelower Court for disposal according to law and inthe light of the observations made above.

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