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Prafulla Kumar Patnaik Vs. Shri Kumar Harischandra Singh Deo and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtOrissa High Court
Decided On
Case NumberSecond Appeal No. 49 of 1952
Judge
Reported inAIR1956Ori85
ActsNegotiable Instruments Act, 1881 - Sections 9
AppellantPrafulla Kumar Patnaik
RespondentShri Kumar Harischandra Singh Deo and anr.
Advocates:M.S. Rao, Adv.
DispositionAppeal dismissed
Cases ReferredVenkataratnam v. Kanaka Sundara Rao
Excerpt:
.....already, a look at the document itself would show that it is a conditional liability to pay, the condition being that the defendant should overdraw the amount that he bad deposited with the bank upto a certain limit......with the bank as fixed deposit, when the bank was about to collapse he took an endorsement of the suit handnote (ex. 4) in partial discharge of the amount due from the bank. he has filed the present suit to recover the sum due under ex. 4.2. the plea put forward by the executant, defendant 1, is that the handnote had been executed as collateral security to cover overdrawals on his current account with the bank and that the amount had been fully discharged by two payments made on 3-2-1947 and 9-4-1947 for which the necessary receipts had been passed by defendant 2 under exts. a-1 and a. the plaintiff took a transfer of the handnote on 13-6-1947 -- obviously sometime after the payments had been made.3. the courts below accepted the statement of defendant 1, that payment had been made, and.....
Judgment:

Panigrahi, C.J.

1. This appeal arises out of suit to enforce a negotiable instrument passed in favour of the Bank of Kamrup, Ltd., which has now gone into liquidation. Defendant 2 is the authorized Agent of the Bank and was the Manager of its branch at Cuttack. The plaintiff had invested Rs. 2000/- with the Bank as fixed deposit, when the Bank was about to collapse he took an endorsement of the suit handnote (Ex. 4) in partial discharge of the amount due from the Bank. He Has filed the present suit to recover the sum due under Ex. 4.

2. The plea put forward by the executant, defendant 1, is that the handnote had been executed as collateral security to cover overdrawals on his Current Account with the Bank and that the amount had been fully discharged by two payments made on 3-2-1947 and 9-4-1947 for which the necessary receipts had been passed by defendant 2 under Exts. A-1 and A. The plaintiff took a transfer of the handnote on 13-6-1947 -- obviously sometime after the payments had been made.

3. The Courts below accepted the statement of defendant 1, that payment had been made, and held that no amount was due under Ex. 4 on the date of negotiation and that consequently the plaintiff was not entitled to any relief.

4. Mr. Rao appearing for the unsuccessful plaintiff urges that the plaintiff was a 'holder in due course' and as such is entitled to recover the amount irrespective of the fact whether the discharge pleaded is due or not. Section 9, Negotiable Instruments Act defines a 'holder in due course' as 'one who for consideration becomes the possessor of a promissory note before the amount mentioned in it becomes payable and without having sufficient cause to believe that any defect existed in the title of the person from whom he derives his title.' In order to appreciate whether the plaintiff satisfies the requirements of this definition, it is necessary to quote Ex. 4 which says:

'On demand I, Harish Chandra Singh Deo son of Surclesh Chandra Singh Deo, execute a hand-note in favour of the Bank of Kamrup Ltd. for Rs. 1000/- only, with interest thereon at 8 per cent. per annum to be charged on the overdrawal account standing in my name with the said Bank of Kamrup, Ltd., on the amount which would be actually overdrawn by me up to a limit of Rs. 1000/-, and further I promise to you that I will deposit all bills, cheques, etc., for realization.' It will be seen that the handnote does not say that the amount was received in cash on the date of its execution. As its language expressly shows, it is merely a collateral security for amounts overdrawn upto a limit of Rs. 1000/- by the executant. In addition to the handnote, the executant also deposited scrips of M/s. East India Co. Ltd., to the extent of Rs. 2500/- as additional security and thisfact also is noted by the Agent (defendant 2) on the hand note itself.

A look at Ex. 4 would convince anybody that it was a document executed for collateral purposes, and offered as security in addition to the scrips deposited with the Bank. Undoubtedly, the plaintiff had some fixed deposit with the Bank and in partial discharge of that amount accepted the transfer of the suit handnote. But how can he be described as a 'holder in due course', or a bona fide transferee for valuable consideration when the document itself shows that it is not a simple p/n. payable on demand. The amount in the handnote would become payable only if the amount overdrawn exceeds Rs. 1000/-.

It has been proved to the satisfaction of both the Courts below that defendant 1 paid Rs. 1200/-in two instalments, and took receipts therefor under Exs. A and A-1. The receipts state that the amounts were received towards principal and interest due under the handnote and that they were kept in deposit. This only means that the amounts paid were entered in the Current Account, and to that extent the handnote (Ex. 4) would stand discharged.

5. The Manager of the Bank (defendant 2) was examined as D.W. 2, and be admits the passing of the aforesaid receipts. We arc in entire agreement with the Courts below that the liability of the executants bad been fully discharged by Exs. A and A-1. There was no necessity to endorse the payments on the handnote itself as the payments were made into the Current Account. 1 do not, therefore, see any force in the contention that the plaintiff must be deemed to be a 'holder in due course' because the handnote did not contain any endorsement or because it was left in the custody of defendant even though the liability under it bad been discharged.

6. Our attention was drawn to a decision of the Madras High Court reported in Venkataratnam v. Kanaka Sundara Rao AIR 1936 Mad. 879 (A). That was a case where the discharge pleaded was not satisfactorily proved, but the plaintiff's suit was dismissed because he did not go into the box and prove the transfer.

Pandrang Row, J.

'Even assuming that the discharge was prior to the endorsement there was no evidence whatever to show that the fact of the discharge was known to the plaintiff when he took the endorsement or that be was aware that any demand had been made for payment of the debt due under the suit promissory note before be took the endorsement.'

This observation on which Mr. Rao places reliance, is quite in consonance with the principle that 'the holder in due course' must be deemed to be a bona fide transferee for value for he has parted with consideration and there is no defect of title apparent on the face of the document. But as I have stated already, a look at the document itself would show that it is a conditional liability to pay, the condition being that the defendant should overdraw the amount that he bad deposited with the Bank upto a certain limit.

7. Mr. Rao then urged that whatever be the defect of title in the Bunk, his client having parted with money should have been awarded a decree against the transferee. However much we may sympathise with the plaintiff we cannot accept this contention as we find that the negotiation was made by defendant 2 acting on behalf of the Bank as its Agent.

8. The position therefore that emerges fromthis transaction is that all the time the plaintiff was dealing with the Bank as such and not with defendant 2 in his individual capacity. Unfortunately, the Bank has not been made a party to the suit. In that case we would have considered the propriety of giving a decree to the plaintiff against the transferor Bank.

9. The Courts below, in the circumstances of the case were right in refusing to give a decree against defendant 2 in his individual capacity.

10. In the result the appeal is dismissed butas there is no appearance for the respondents wemake no order as to costs.

Narasimham, J.

11. I agree.


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