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Ghanashayam Sabato Vs. B.V. Ranganath Swamy Pandito and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtOrissa High Court
Decided On
Case NumberSecond Appeal No. 38 of 1958
Judge
Reported inAIR1961Ori152
ActsHindu Law; Negotiable Instruments Act, 1881 - Sections 8; Transfer of Property Act, 1882 - Sections 130
AppellantGhanashayam Sabato
RespondentB.V. Ranganath Swamy Pandito and anr.
Appellant AdvocateR.C. Mishra, Adv.
Respondent AdvocateK.S.R. Murty, Adv. for Respondent 1
DispositionAppeal allowed
Cases ReferredRai Ram Kishore v. Ram Prasada
Excerpt:
.....is made a party to the suit as the pronote originally stood in his name'.these lines convince me to observe that this is a suit based upon the debt and the plaintiff wants to make use of the promissory note not as the basis of the suit but as the best evidence of the loan transaction. : it is perfectly clear that the ratio decidendi in all these cases was that the right of suit on a promissory note vested in the person who could give a valid discharge to its maker or acceptor, and that it was not essential that, in order to maintain a suit on the basis of a promissory note, the plaintiff must, on the face of the instrument, be the payee or the holder or the holder in due course'.their lordships had made a reference to section 43 of the act which makes it clear that the instrument can..........to the defendant no. 1 from out of the joint family funds. the defendant no, 1 had executed the suit promissory note dated 23-9-44 in favour of the. defendant no. 2 agreeing to pay the same on demand bearing interest at 12 per cent per annum'.again towards the close of the paragraph the plaint runs:'so the plaintiff files the suit for recovery of rs. 917/8/- from the defendant no. 1 and the 2nd defendant is made a party to the suit as the pronote originally stood in his name'.these lines convince me to observe that this is a suit based upon the debt and the plaintiff wants to make use of the promissory note not as the basis of the suit but as the best evidence of the loan transaction. in this view of the matter, while the suit is for recovery of money on the basis of a loan advanced,.....
Judgment:

S.P. Mahapatra, J.

1. The plaintiff has brought this second appeal against the reversing judgment of the lower appellate Court arising out of a suit for recovery of a sum of Rs. 917/8/-. The promissory note executed by defendant No. 1 in favour of defendant No. 2 is dated 23rd September 1944 for a principal amount of Rs. 500/-. Plaintiff and defendant No, 2 are two brothers, defendant No. 2 being the elder. The plaintiffs version is that the money was advanced from out of the joint family funds and in a partition in the year 1945 this debt along with the promissory note fell to the share of the plaintiff. Defendant No. 1 made two payments to the plaintiff on 6th September 1947 and 26th August. 1950.

2. Defendant No. 1 contested the suit mainly on the ground that the suit is not maintainable as there is no endorsment on the pronote as required under the provisions of the Negotiable Instruments Act. Defendant No. 1 admitted execution of the handnote, but did not admit that the consideration was paid from out of the joint family funds or that on partition the promissory note fell to the share of the plaintiff.

3. The trial court on a discussion of the evidence adduced on behalf of the plaintiff, however, found that the consideration was paid from out of the joint family funds and that on partition the promissory note fell to the share of the plaintiff. He also negatived the contention of the defendant as to the maintainability of the suit so he allowed a decree in favour of the plaintiff. The facts that the money was paid from out of the joint family funds or that the promissory note fell to the share of the plaintiff were not contested before the lower appellate Court and neither are they contested before me.

The main ground which was urged before the lower appellate Court and also accepted by him is that the suit is hit by the provisions of Negotiable Instruments Act, there being no endorsement and also by Section 130 of the Transfer of Property Act, which requires that an actionable claim can be transferred only by an instrument in writing. It is to be mentioned that defendant No. 2, the elder brother of the plaintiff, did not contest the plaintiff's suit,

4. On a careful perusal of the plaint I feel satisfied that this is not a suit based upon promissory note but on the debt advanced by defendant No. 2 in favour of defendant No. 1. I will quote the relevant passage in the plaint. The opening lines of paragraph 5 run as follows:

''While the plaintiff and defendant No. 2 were joint they had advanced Rs. 500/- on 23-9-44 to the defendant No. 1 from out of the joint family funds. The defendant No, 1 had executed the suit promissory note dated 23-9-44 in favour of the. defendant No. 2 agreeing to pay the same on demand bearing interest at 12 per cent per annum'.

Again towards the close of the paragraph the plaint runs:

'So the plaintiff files the suit for recovery of Rs. 917/8/- from the defendant No. 1 and the 2nd defendant is made a party to the suit as the pronote originally stood in his name'.

These lines convince me to observe that this is a suit based upon the debt and the plaintiff wants to make use of the promissory note not as the basis of the suit but as the best evidence of the loan transaction. In this view of the matter, while the suit is for recovery of money on the basis of a loan advanced, the provisions of the Negotiable Instruments Act regarding transfer of the promissory note by endorsement are not essential to be considered.

5. Mr. K.S.R. Murty, appearing on behalf of the debtor-respondent, however, contends that even if this position is accepted, Section 130 of the Transfer of Property Act, which requires an actionable claim to be transferred only by a written instrument, will stand as a bar in the present suit. Section 130 manifestly appears to apply-to cases of transfer of actionable claims and debts. It is too wall known to be controverted that partition of a Hindu Joint family cannot be taken to be a case of transfer. When the undisputed and unchallenged findings are to the effect that the money was advanced from out of the joint family funds in which both the plaintiff and defendant No. 2 were interested and when on partition, this debt fell to the share of the plaintiff, Section 130, T. P. Act can safely be ruled out of consideration.

6. But I am not inclined to dispose of the case merely on the aforesaid point arising out of the nature of the suit itself; but I will discuss the other question whether the suit can be maintained in spite of there being no endorsement as required under the Negotiable Instruments Act. This point was agitated before both the Courts below and was canvassed before me. Several cases were cited before me but I intend to follow in this respect the principles laid down in the Full Bench decision of the Allahabad High Court reported in the case of Rai Ram Kishore v. Ram Prasada, AIR 1952 All 245.

Their Lordships exhaustively discussed all the relevant sections of the Negotiable Instruments Act and had made a thorough review of the entire case law on the subject. The facts were exactly similar. The debtor had executed promissory notes in the name of Rai Amar Nath, the Karta of the Hindu joint family and the money was advanced from out of the joint family funds. On the basis of a partition decree, the promissory notes in suit fell fo the share of the younger brother Rai Ram Kishore who brought the suit for recovery of the amount. The point taken was that there being no endorsements on the negotiable instruments, the suit cannot be maintained by the plaintiff Rai Ram Kishore. Their Lordships discussed the definition of the 'holder of a promissory note', under Section 8 of the N. I. Act, as

'any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto'.

As on the basis of the decree Amar Nath had ceased to be entitled to the possession of the instruments and had ceased to have the right to receive the money, at the time of the suit, there was no holder, or holders in due course, of the promissory notes, if it was to be held that the plaintiff Rai Ram Kishore had not become the holder. Section 78 of the Act provides that a maker or acceptor of a promissory note, bill of exchange or cheque, is required to pay the amount due to the holder of the instrument in order to obtain a discharge. But when there is no holder at all, it appears clear that the right to receive the money must vest in the person who is entitled to receive the money and the maker can obtain a full discharge if he pays the dues to the person who is entitled to receive the money. Their Lordships, therefore, opined:

'This provision cannot and should not be considered to mean that the right to institute a suit on the basis of a negotiable instrument vests merely in the holder of the instrument and in no other person. Obviously, when there is no holder the right to recover the money on the negotiable instrument must, in case the holder dies, pass to his legal representatives and, in other cases, when the holder loses his status as such for any other reason, pass to the person who becomes entitled to the money due under the instrument'.

Their Lordships, therefore, held that Rai Ram Kishore, to whose share fell the promissory notes, was entitled to maintain the suit. After a thorough and exhaustive review of the entire case law on the subject, their Lordships observed in paragraph 11 of the report.:

'It is perfectly clear that the ratio decidendi in all these cases was that the right of suit on a promissory note vested in the person who could give a valid discharge to its maker or acceptor, and that it was not essential that, in order to maintain a suit on the basis of a promissory note, the plaintiff must, on the face of the instrument, be the payee or the holder or the holder in due course'.

Their Lordships had made a reference to Section 43 of the Act which makes it clear that the instrument can be transferred with or without endorsement. Respectfully agreeing with the decision of the Full Bench of the Allahabad High Court, I feel convinced to find that the suit is maintainable and the plaintiff is entitled to the decree as passed by the trial Court.

7. In conclusion, therefore, the appeal is allowed, the judgment and decree passed by the lower appellate Court are set aside and the judgment and decree passed by the trial Court are confirmed.

The plaintiff-appellant is entitled to costs throughout.


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