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V.K. Velappu Vs. M.J. Varu - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKerala High Court
Decided On
Case NumberA.S. No. 165 of 1978
Judge
Reported in[1987]61CompCas368(Ker)
ActsNegotiable Instruments Act, 1881 - Sections 8, 78 and 82
AppellantV.K. Velappu
RespondentM.J. Varu
Appellant Advocate N.K. Sreedharan, Adv.
Respondent Advocate S. Narayanan Poti and; S. Sankara Subban, Advs.
DispositionAppeal partly allowed
Excerpt:
.....of instrument. - - 1. plaintiff's suit for recovery of the amount due under exhibit a-3, promissory note, dated september 27, 1971, with incidental reliefs, having been decreed as prayed for, the defeated defendant has come up in appeal. 1,000 made on september 20, 1974, was endorsed on the promissory note by the defendant in his own hand ;no other payment was received towards the promissory amount; 15,000. 10. the plaintiff, being the holder of the promissory note, was entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto in terms of section 8 of the negotiable instruments act (act 26 of 1881). it is a well-settled principle that no person can sue on a negotiable instrument unless he is named therein as the..........of this appeal being additional issues nos. 5 and 6 which read as follows :'(5) whether the suit promissory note is executed by the defendant to c.l. varghese as contended by him in the written statement if so, is such a plea available to the defendant ?(6) whether the suit claim is discharged by the defendant as contended by him '5. the finding by the trial court under additional issue no. 5 is that the defendant has executed exhibit a-3, promissory note, in favour of the plaintiff: and the finding under additional issue no. 6 was that it was to be deleted as it did not really arise as the defendant had no case that he had made any payment to the plaintiff in discharge of the liability under exhibit a-3, promissory note.6. the plaintiff was examined as pw-1. on his side, exhibits.....
Judgment:

Bhaskaran, Actg, C.J.

1. Plaintiff's suit for recovery of the amount due under exhibit A-3, promissory note, dated September 27, 1971, with incidental reliefs, having been decreed as prayed for, the defeated defendant has come up in appeal.

2. The substance of the plaint allegations is that the appellant-defendant had borrowed from the plaintiff a sum of Rs. 15,000 for his contract work, executing in his own hand exhibit A-3, promissory note, promising to pay the amount with 6% interest thereon on demand ; a payment of Rs. 1,000 made on September 20, 1974, was endorsed on the promissory note by the defendant in his own hand ; no other payment was received towards the promissory amount; to the suit notice dated April 7, 1975, a true copy of which is exhibit A-2, the defendant had sent exhibit A-1 reply dated April 22, 1975, denying his liability, and putting forward false contentions ; hence the suit became necessary.

3. The defendant, in his written statement, while admitting the execution of the promissory note, denied having received any consideration from the plaintiff or having had any dealings with him ; according to him, a sum of Rs. 10,000 was advanced to him by one C.L. Varghese (DW.-2) and it was at his behest that he happened to execute a promissory note for Rs. 15,000 in favour of the plaintiff. His further case is that the said C.L. Varghese (DW.-2) was having black money and he used to do money-lending business, charging interest at 36%, and it was to avoid the disclosure of his having amassed wealth in that way and to avoid income-tax that he conceived the idea of making him execute the promissory note in favour of the plaintiff, instead of getting it executed in his own name. He also pleaded that the promissory note stood discharged by his having made the payments due thereunder to the said C.L. Varghese (DW.-2).

4. On the pleadings, the trial court framed six issues, the most relevant of them for the purpose of this appeal being additional issues Nos. 5 and 6 which read as follows :

'(5) Whether the suit promissory note is executed by the defendant to C.L. Varghese as contended by him in the written statement If so, is such a plea available to the defendant ?

(6) Whether the suit claim is discharged by the defendant as contended by him '

5. The finding by the trial court under additional issue No. 5 is that the defendant has executed exhibit A-3, promissory note, in favour of the plaintiff: and the finding under additional issue No. 6 was that it was to be deleted as it did not really arise as the defendant had no case that he had made any payment to the plaintiff in discharge of the liability under exhibit A-3, promissory note.

6. The plaintiff was examined as PW-1. On his side, exhibits A-1 to A-3, to which a short reference has already been made, were also proved and marked. In his oral evidence, PW-1 spoke about the execution of the promissory note by the defendant in his own hand ; the consideration paid by him and the source of income himself (who was the manager of the South Indian Trading Syndicate Private Limited) and his wife (who was a teacher) had. He also deposed that he had no dealings with the said C.L. Varghese (DW-2) whom he knew only in his (DW-2's) capacity as one of the directors of the said South Indian Trading Syndicate Private Limited ; and that it was absolutely false to say that the promissory note was executed in his name on behalf of the said C.L. Varghese (DW-2).

7. The defendant was examined as DW-1. DW-2, who is none other than the said C.L. Varghese, turned hostile. DW-3, one Govindan Nair, is stated to have been a teacher, working in the school where the plaintiff's wife was also a teacher.

8. On the facts surrounding the execution of the promissory note, the evidence of DWs-2 and 3 does not advance the case of the defendant much. DW-2, as already noticed, turned hostile to the defendant, and he categorically denied his having advanced the money to the defendant or the defendant having been asked to execute the promissory note in the name of the plaintiff. The evidence of DW-3, as already noticed, has relevance only with respect to the salary that was being received by the plaintiff's wife who was a teacher in the school where the witness also was teaching.

9. Assuming, without deciding, that the consideration for the promissory note proceeded from DW 2, and not from the plaintiff, we do not know how the defendant could succeed by putting forward a plea in the nature of benami. The execution of the promissory note is admitted. In fact, it is in the hand of none other than the defendant himself and the endorsement on September 20, 1974, also was in the hand of the defendant. The defendant mainly had a two-fold plea. (1) DW 2 having been the beneficiary of the promissory note, he alone, not the plaintiff, was entitled to bring the suit for recovery of the amount due thereunder; and (2) the consideration for the promissory note was Rs. 10,000, not Rs. 15,000.

10. The plaintiff, being the holder of the promissory note, was entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto in terms of Section 8 of the Negotiable Instruments Act (Act 26 of 1881). It is a well-settled principle that no person can sue on a negotiable instrument unless he is named therein as the payee or he becomes entitled to it as the indorsee or the bearer. In a suit on a negotiable instrument by the payee or the indorsee or the bearer, it is not open to the defendant to plead that the plaintiff is a mere benamidar, not entitled to payment, with a view to show that the note has been discharged by payment to the real owner. It follows, therefore, that a person who is not a holder of a negotiable instrument cannot maintain a suit for recovery of money due under it even though the holder is admittedly a benamidar. It would, therefore, mean that DW-2 who was set up as the beneficiary by the defendant, but who, admittedly was not the holder of the promissory note, could not have laid a suit to recover the amount due under the promissory note. In other words, the only person entitled to sue in law in this case was the plaintiff, the payee of the instrument. The provisions contained in Section 78 of the Act which provide:

'Subject to the provisions of Section 82, Clause (c), payment of the amount due on a promissory note, bill of exchange or cheque must, in order to discharge the maker or acceptor, be made to the holder of the instrument.'

11. Strengthen our view that in a case where the execution of the promissory note in the name of a certain person is admitted, it is not open to the maker of the promissory note to turn round and contend that the payee was only a benamidar; and that it was only tae real owner of the promissory note that was entitled to sue.

12. Clause (c) of Section 82 which provides :

'82. The maker, acceptor or indorser respectively of a negotiable instrument is discharged from liability thereon--...

(c) to all parties thereto, if the instrument is payable to bearer, or has been indorsed in blank, and such maker, acceptor or indorser makes payment in due course of the amount due thereon.'

13. has no application to the case on hand. In this case, the defendant, the maker of the promissory note, in order to plead discharge must make payment to the plaintiff who is the payee of the instrument. The defendant has no case that he had been discharged from liability by making to the plaintiff the amount due under the promissory note. There could be no doubt that beneficial ownership of a negotiable instrument does not carry with it a legal title to the property concerned; and, therefore, a mere declaration that a person is the beneficial owner will not entitle him to sue upon it, as it leaves unaffected the legal title of the person in whom it inheres; and it rests there only until it is transferred to the beneficial owner. In the absence of a plea by the maker of the note that the liability was discharged by payment to the holder thereof, the maker of the promissory note is bound to fail in his defence in a suit for recovery of the amount based on the promissory note.

14. On the plea that only a sum of Rs. 10,000 and not the full consideration of Rs. 15,000 mentioned in the promissory note, had been paid to the defendant, there is absolutely no evidence except the interested version given by the defendant himself in his pleadings and in the oral evidence. It is most unsafe to accept this plea which runs counter to the face value of the documents, particularly in the absence of any corroboration.

15. Counsel for the appellant submitted that future interest had been decreed on a sum of Rs. 17,507'50 in terms of the finding under issue No. 4, in paragraph 17 of the judgment under appeal. We modify the decree of the court below to the effect that future interest payable by the defendant would be on Rs. 15,000 which is the principal amount covered by the promissory note. To this extent, the appeal stands allowed in part. In all other respects, the decree of the court below shall stand confirmed and the appeal dismissed. In the circumstances of the case, we would direct the parties to suffer their respective costs.


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