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Jang Bahadur Singh Vs. Chander Bali Singh and anr. - Court Judgment

LegalCrystal Citation
Subject Banking
CourtAllahabad
Decided On
Reported inAIR1939All279
AppellantJang Bahadur Singh
RespondentChander Bali Singh and anr.
Excerpt:
.....and administered by the cantonment board. [deolali cantonment board v usha devidas dongre, 1993 mah.lj 74; 1993 lab ic 1858 overruled]. - 7. it follows therefore from these definitions that the holder in section 8 is a person to whom there has been negotiation by endorsement and delivery in a case like the present, and not a person who has merely acquired rights under a sale deed. it was not stated whether or not the note had been endorsed in favour of the plaintiff and this question was not raised in argument......negotiable by the holder by endorsement and delivery thereof.5. this shows that for a promissory note payable to order, there must be negotiation by endorsement and delivery. if on the other hand the promissory note was payable to bearer the delivery would be sufficient as is provided by section 47. it is for this reason that the words occur in section 43:but if any such party has transferred the instrument with or without indorsement to a holder for consideration...6. sections 47 and 48 occur in ch. 4 'of negotiation' and section 46 states:a promissory note, bill of exchange or cheque payable to bear or, is negotiable by the delivery thereof.a promissory note, bill of exchange or cheque payable to order, is negotiable by the holder by indorsement and delivery thereof.7. it follows.....
Judgment:

Bennet, J.

1. This is a civil revision by a plaintiff against a decree of the Small Cause Court dismissing his suit. On 1st July 1933 a promissory note was executed by defendant 1, Chander Bali Singh,' in favour of defendant 2, Ranbaj Singh, purporting to be for Rs. 200 in cash. On 14th February 1936 defendant 2 executed a sale deed of this promissory note in favour of the plaintiff but no endorsement was made by defendant 2 in favour of plaintiff on 4ho back of the note and no endorsement of any kind. The defence was as follows : Ranbaj Singh has a daughter, Mt. Phulbasi Kunwar, who was married to the brother of defendant 1 and the brother is apparently dead. There are two daughters, issues of this marriage. A suit was brought by Mt. Phulbasi Kunwar for maintenance against defendant 1 and a compromise was executed in that suit by which defendant 1 agreed to maintain Mt. Phulbasi Kunwar. It is found, and is common ground that 1, or 8 days before this compromise the promissory note in suit was executed by defendant 1 in favour of defendant 2. The case for defendant 1 was that he executed this promissory note not for any cash consideration but as security that he would carry out the compromise of maintenance of Mt Phulbasi Kunwar and the compromise agreeing to meet the expenses of the marriages of her two daughters. The Court below has found that this defence is correct and that the promissory note in suit was not executed for any cash consideration but was merely executed as security. The Court therefore dismissed the suit of the plaintiff. In revision the ground is taken that plaintiff was a holder in due course and was entitled to a decree even if the promissory note was without consideration. This argument is based on the provisions of Section 43, Negotiable Instruments Act, 26 of 1881. That Section provides as follows:

A negotiable instrument made, drawn, accepted indorsed or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without indorsement to a holder for consideration, such holder, and every subsequent holder deriving title from him, may recover the amount due on such instrument from the transferor for consideration or any prior party thereto.

2. The question arises whether it can be said that the plaintiff is a holder for consideration. Learned Counsel relies on Section 8. In Section 8 it is laid down as follows:

The 'holder' of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto.

Where the note, bill or cheque is lost or destroyed its holder is the person so entitled at the time of such loss or destruction.

3. But this Section merely states what are the rights of a holder and does not tell us how a holder comes into existence. For the creation of a holder we must refer to Sections 14 and 15 which provide as follows:

Section 14. When a promissory note, bill of exchange, or cheque is transferred to any person, SO as to constitute that person the holder thereof, the instrument is said to be negotiated.

Sction 15, When the maker or holder of a negotiable instrument signs the same otherwise than as such maker for the purpose of negotiation, on the back or face thereof, or on a slip of paper annexed thereto, or so signs for the same purpose ;t damped paper intended to be completed as a negotiable instrument, he is said to indorse the mime, and is called the 'indorser.

4. These Sections show that a holder is created by endorsement and negotiation. if the promissory note, bill of exchange or a cheque is payable, as in the present case, to order, Section 48 applies which provides as follows:

Subject to the provisions of Section 58, a promissory note, bill of exchange, or cheque payable to order, is negotiable by the holder by endorsement and delivery thereof.

5. This shows that for a promissory note payable to order, there must be negotiation by endorsement and delivery. If on the other hand the promissory note was payable to bearer the delivery would be sufficient as is provided by Section 47. It is for this reason that the words occur in Section 43:

But if any such party has transferred the instrument with or without indorsement to a holder for consideration...

6. Sections 47 and 48 occur in Ch. 4 'Of Negotiation' and Section 46 states:

A promissory note, bill of exchange or cheque payable to bear or, is negotiable by the delivery thereof.

A promissory note, bill of exchange or cheque payable to order, is negotiable by the holder by indorsement and delivery thereof.

7. It follows therefore from these definitions that the holder in Section 8 is a person to whom there has been negotiation by endorsement and delivery in a case like the present, and not a person who has merely acquired rights under a sale deed. In the case therefore of a promissory note payable to order, there must be an endorsement and in the case of a promissory note payable to bearer, there need not be an endorsement. A cheque is also governed by the same rule. The point has been before the Court in a provious ruling, Parsotam Saran v. Bankey Lal : AIR1935All1041 . It was hold there that a transferee under a sale deed of a promissory note is not a holder thereof within the meaning of Section 8, Negotiable Instruments Act, and cannot enforce the rights conferred on the holder by Section 43 of that Act. In that case it was held that the instrument was not negotiated and that the mere note on the back of the promissory note that the amount due under it had been transferred to the plaintiff by means' of a sale deed was not sufficient to constitute negotiation. In the present case there-is not even a note on the back of the instrument that there has been any transfer by the sale deed. Learned Counsel for the applicant referred to an earlier ruling, Hazari Lal v. Tulshi Ram (1913) 11 A.L.J. 481. In that ruling there had been a transfer of a promissory note to the plaintiff by a registered sale deed. It was not stated whether or not the note had been endorsed in favour of the plaintiff and this question was not raised in argument. The ruling therefore is no authority on the point now before us. Following the ruling first mentioned we hold that there has been no negotiation in favour of the plaintiff of this promissory note, and therefore the plaintiff is not a holder within the meaning of Section 43, Negotiable Instruments Act, and he cannot claim the right of a holder for consideration under that Section. Learned Counsel suggested that the plaintiff might get a decree against his vendor, defendant 2 No doubt the plaintiff did ask for an alter, native relief against defendant 2 in the plaint, but in the grounds of revision no such ground has been advanced. We therefore consider that the point cannot now be. raised. For these reasons we dismiss this application in revision with costs.


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