1. Primarily three propositions that have been canvassed and thus fall for determination in this regular first appeal are (1) whether the suit of the plaintiff was based on the original consideration of the debt amount advanced to the defendant-respondent and thus the non-presentment of the cheques for payment had no effect whatsoever on the latter's liability towards the plaintiff creditor: (2) whether, in the alternative, even if it is assumed that the present suit was based on the said cheques, the non-presentment thereof in terms of Section 64 of the Negotiable Instruments Act, 1881(Act 26 of 1881), hereinafter referred to as the Act, would discharge the drawer thereof of his liability thereon to the holder and (3) whether it is open to the Court of law to allow lesser rate of interest on the principal amount than the one agreed upon between the parties?
2. The relevant facts, which have a bearing on the propositions set out above, are that the plaintiff, who is a licensed money-lender, from time to time advanced in cash to the defendants a total sum of Rs. 22,100/- as loan payable on demand: that against, an amount of Rs. 7,700/- out of the above mentioned loan amount the defendants issued in favour of the plaintiff cheques Exhibits P-1 to P-6 and pronote Exhibits A. C. and E against a further sum of Rs. 12,000/- wherein the rate of interest was fixed at 12 per cent. per annum: and that when the defendant failed to return the loan the plaintiff issued notice for the payment thereof to which he got no reply from them and that led to the filing of the present suit for recovery of a sum of Rs. 26,700/- : Rs. 22,100/- out of that being the principal and Rs. 4,600/- interest thereon at the rate of twelve per cent per annum.
3. The defendants resisted the suit, inter alia. with the plea that the cheques and pronotes in question had not been presented, as required under Section 64 of the Act and so they stood absolved of the liability under them.
4. Issue No. 2 out of the issues which the trial Court framed on the basis of the pleadings is the only issue relevant for the purpose of this appeal and it is in the following terms:
'2. Whether the presentment of pronotes and cheques is necessary? If so, to what effect?'
The trial Court held that non-presentment for payment of cheques Exhibits P-1 to P-6 on the drawee thereof, as required by Section 64 of the Act, discharged the defendants, the drawers thereof, of their liability under them and it thus disallowed to the plaintiff a decree with regard to a sum of Rs. 7,700/- covered by the said cheques and thus granted only a decree for Rs. 16,322/- which included Rs. 14,400/- as the principal and Rs. 1,922/- as the interest there on at the rate of six per cent per annum.
5. The defendants having not challenged the judgment and decree of the trial Court the controversy in this appeal is limited to the right to recovery of Rs. 7,700/- only at the instance of the plaintiff.
6. Mr. Nand Lal Dhingra, learned counsel for the appellant, in support of his first proposition, urged that the principal amount sought to be recovered was loan advanced to the defendant-respondent from time to time in that the present suit was based on the said consideration. The cheques and pronotes that were issued by the defendants did not discharge the defendants of their liability to repay the said loan till the same were cashed unless the cheques and pronotes were accepted by the plaintiff in full and final settlement of his claim against the debtor i.e. the defendant-respondents.
7. He further urged that the repayment of the loan through cheques and pronotes was only conditional. In support of his submission, he placed reliance on a Division Bench judgment of the Orissa High Court reported in Abdul Majid v. Ganesh Das Kalooram Ltd., AIR 1954 Orissa 124. The facts involved therein were that the plaintiff in that case supplied 971 Maunds of paddy in three instalment to defendant No. 2 acting as agent of defendant No. 1. The value there of was assessed at Rs. 4,005/6-. Defendant No. 2 made a cash payment of Rs. 1,005/6/- towards the aforesaid value of the paddy supplied by the plaintiff and for the remaining amount of Rs. 3,000/-, defendant No. 2 drew three cheques to be drawn from the deposit account of defendant No. 1 in the Darjeeling Bank Limited, defendant No. 3. The cheques, when presented, were dishonoured, as by that time the said Bank had gone into liquidation. The question therein arose as to whether there had been presentment of the cheques. The trial Court held that there had been due presentment of the cheques and decreed the suit. The lower appellate Court holding that there had not been any presentment of the cheques held defendant No. 2 absolved of his liability in view of Section 84 of the Act and against his judgment the case was taken in appeal to the High Court. Mohapatra, J., speaking for the Bench, held that on a plain reading of the plaint itself it was clear that the present suit of the plaintiff was for recovery of the balance of the value of the paddy supplied to defendants 1 and 2 in three instalments and that the suit was based on the original cause of action arising on the supply of paddy by the plaintiff, and approvingly quoted the following observation of Garth. C.J. Made in Sheikh Akbar v. Sheikh Khan. (1881) ILR 7 Cal 256:
'When a cause of action for money is once complete in itself, whether for goods sold or for money lent, or for any other claim, and the debtor then gives a bill or note to the creditor for payment of the money at a future time, the creditor, if the bill or note is not paid at maturity may always as a rule sue for the original consideration provided that he has not endorsed or lost or parted with the bill or note, under such circumstances as to make the debtor liable upon it to some third person.'
The learned Judge also approvingly quoted the following observations of Richards, C. J. Made in Ram Sarup v. Jasoda Kunwar, (1912) ILR 34 All 158:
'If a creditor has a cause of action for the recovery of money, for which his debtor has executed a promissory note, separate from and independent of the note, he can recover upon such case, in case the note for any reason cannot be put in evidence. Nor is the creditor necessarily debarred from suing on the original cause of action by the fact that It arose out of the same transaction in the course of which the promissory note was executed.'
The learned Judge then went on to hold that the proposition of law is equally clear that when a creditor accepts a promissory note or a bill of exchange or a cheque on account of his outstanding loan, it is taken as a conditional payment and the dues of the creditor will be discharged only when the creditor receives the cash and drew support for his above view from the following observations of Page, C.J. in a Full Bench decision of Rangoon High Court reported in Chit Maung v. Roshan N.M.A. Kareem Comer and Co; AIR 1934 Rang 389(FB):
'It is prima facie to be presumed (although the presumption is rebuttable) that the parties to the transaction have agreed that the promissory note or other negotiable instrument given and taken in such circumstances shall be treated as conditional payment of the loan: the cause of action on the original consideration for money lent being suspended during the currency of the negotiable instrument, and if and so long as the rights of the parties under the instrument subsist and are enforceable: but the cause of action to recover the amount of the debt revives if the negotiable instrument is dishonoured or the rights thereunder are not enforceable. On the other hand the cause of action is extinguished when the amount due under the negotiable instrument is paid...................'
With respect I find myself in full agreement with the above view. In the case in hand, the plaintiff advanced the amount in question to the defendants on loan and, the frame of the plaint would show that he had sought to recover the said loan amount. The liability of the defendant debtors to pay the same did not come to an end on their having issued cheques or promissory notes in question of the value equal to the loan amount unless the same were accepted by the plaintiff creditor in full and final settlement of his claim thus giving rise to a new contract.
8. The case of the defendants not being that the payment of the cheques and pronotes was in full and final settlement of the dues, their liability for the said dues remained and the present suit shall have to be taken to be based on that cause of action alone. That being so, then the question of non-presentment or due presentment of the cheques becomes irrelevant to the consideration of the liability of the defendants to their creditor i.e. the plaintiff-appellant.
9. In view of the above, it becomes unnecessary to examine the second proposition canvassed by the learned Judge. However, since the Court below has non-suited the plaintiff-appellant regarding the amount covered by the said cheques on the ground of non-presentment, it is just as well that this aspect of the case is also dealt with.
10. The trial Court relied upon the judgment reported in Wallibhoy-Suleman v. Jagjiwandas Tulsidas, AIR 1936 Nag 260, for its conclusion that non-presentment of cheques in question on the drawee absolved the drawer thereof of his liability thereon to the holder in terms of Section 64 of the Act.
11. For facility of reference, the provisions of Section 64 of the Act require immediate notice which are in the following terms:
'64. Promissory notes, bills of exchange and cheques must be presented for payment to the maker, acceptor or drawee thereof respectively, by or on behalf of the holder as hereinafter provided. In default of such presentment, the other parties thereto are not liable thereon to such holder.
* * * * *'
A perusal of the above provisions would indicate that these not only provide for the presentment of a promissory note, bill of exchange and the cheque on the maker, the acceptor or the drawee respectively, but also for the providing that in case of non-presentment 'other parties thereto' shall stand discharged of their liability thereon. The question that arises for consideration is as to what construction should be put on the expression 'other parties thereto'.
12. No decided case, reported or unreported, either of any High Court or that of the Supreme Court, directly dealing with the effect of non-presentment of a cheque on the liability of a drawer thereof has been brought to my notice. However, in some cases, which either relate to the promissory note or the bill of exchange, the view expressed is that the expression 'other parties thereto' would mean the parties other than the maker of the promissory note, the acceptor of the bill of exchange and the drawee of the cheque, as the case may be; while one or two authorities have gone to the extent of holding that the expression 'other parties thereto' has reference only to the holder of the negotiable instrument in question. Phul Chand v. Ganga Ghulam. (1899) ILR 21 All 450, and Manik Ratan Guin v. Prakash Chandra, AIR 1955 Cal 338, fall in the first category, while Oudh Commercial Bank Ltd. v. Gur Din, 59 Ind Cas 604 = (AIR 1920 Oudh 191) falls in the second category.
13. Ghania Lal v. Karam Chand, AIR 1929 Lah 240, approvingly quoted the ratio of Phul Chand's case, (1899) ILR 21 All 450(supra) and held that the maker of the promissory note despite non-presentment of the promissory note continued to be liable thereon. In Benares Bank Ltd. v. Hormusji Pestonji, (1930) ILR 52 All 696 = (AIR 1930 All 648) which was a case wherein the proposition to be settled was as to whether acceptor of the bill of exchange was or was not discharged of his liability thereon in the eventuality of the same not having been presented by the holder for payment to him, i.e., the acceptor. Following the ratio of Phul Chand's case (supra) it was held that the expression 'other parties thereto' meant the parties other than the maker, the acceptor and the drawee of the promissory note, bill of exchange and cheque respectively.
14. (Firm) Wallibhoy-Suleman's case, AIR 1936 Nag 260(supra) dealt with the proposition as to whether the drawer of a bill of exchange is absolved of his liability thereunder, in case of non-presentment of the same for payment on the acceptor. It was held that the drawer being a mere surety for the payment of the amount, so his liability was merely conditional. It was further held that the expression 'other parties thereto' included, inter alia, the drawee of the bill of exchange and thus absolved him of his liability thereon in case of non-presentment for payment and so in view of the well recognised principle of law that the discharge of the principal is discharge of the surety, the drawer of the bill of exchange in question also stood discharged of his liability.
15. In the decisions of the Lahore High Court, the Allahabad High Court and the Calcutta High Court noticed above, the expression 'other parties thereto' has been interpreted to exclude from its ambit only the maker of the promissory note, acceptor of the bill of exchange, and drawee of the cheque, perhaps by presuming that the expression 'other parties thereto' be read as 'other parties thereto respectively' otherwise the word 'maker' could not have been limited in its application to the promissory note only. I am of the opinion, with respect, that if that had been the intention of the legislature, then the word 'respectively' would have been added after the expression 'other parties thereto' also as it did, in the earlier part of this section, which portion reads: 'the maker', 'the acceptor' or 'the drawee' of the promissory note, bill of exchange or cheque respectively. I am of the view that the expression 'maker' is of wider amplitude in its use. It can be generally used in relation to all the three types of negotiable instruments, namely, promissory note, bill of exchange and the cheque unlike the expression 'drawer' which for the same purpose has been used in relation to only the bill of exchange and the cheque and in the whole of the Act has nowhere been so used with regard to promissory note. That the legislature had in mind such a distinction regarding the use of the two expressions 'maker' and the 'drawer' is evident from the provisions of Section 37 of the Act wherein the expression 'maker' had been used both in relation to promissory note and the cheque, while regarding the bill of exchange, the expression 'drawer' had been used. I am, therefore, of the considered view that the expression 'other parties thereto' must be interpreted to exclude from its ambit the 'maker' of the cheque as well. Otherwise it does not appeal to reason that the drawer of a cheque who has been held out to be the principal debtor under Section 37 of the Act would be absolved of his liability under the cheque in case of non-presentment for payment and the drawee would continue to be saddled with the liability thereunder, even if either at the time of issue of the cheque or thereafter the drawer never placed at the disposal of the drawee any money to enable the latter to honour the cheque, as and when presented.
16. For the foregoing reasons, I hold that the drawer (the defendant-respondents)despite non-presentment of the cheques in question is liable thereon. I, therefore, also decree the suit of the plaintiff regarding the amount covered by cheques Exhibits P-1 to P-6 amounting to Rs. 7,700/-.
17. Now coming to the third contention advanced by the learned counsel that it was not open to the trial Court to allow less interest than agreed upon between the parties, it has to be pointed out that in the pronotes the rate agreed upon between the parties was 12 per cent. Per annum, but the trial Court allowed interest at the rate of six per cent. Per annum. In my opinion, the trial Court in this regard seems to have acted against the mandatory provisions of Section 79 of the Act which provides that when interest at a specified rate is expressly made payable on a promissory note or a bill of exchange, interest shall be calculated at the said specific rate on the amount of principal money due thereon.
18. In view of the above, the trial Court ought to have allowed interest on the principal amount at the rate of 12 per cent. Per annum. Hence I order that the appellant would be entitled to 12 per cent. Per annum interest on Rs. 12,000/-. As regards the balance amount of Rupees 10,000/-. there being no such agreement in writing as is the case with regard to the pronotes, the appellant would be entitled to only the customary interest i.e. six per cent. Per annum. As far as the future interest on the total decretal amount is concerned, that in any case would be at six per cent. per annum.
19. For the reasons stated, the claim of the appellant with regard to the amount covered by cheques, Exhibits P-1 to P-6 totalling Rs. 7,700/- is also allowed along with the interest as mentioned above. The judgment and decree of the trial Court stands modified to the extent indicated and the appeal is allowed with costs.
20. Appeal allowed.