Skip to content


Bhagirath Vs. Gulabkanwar and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtRajasthan High Court
Decided On
Case NumberRegular First Appeal No. 47 of 1953
Judge
Reported inAIR1956Raj174
ActsNegotiable Instruments Act, 1881 - Sections 8 and 78; Code of Civil Procedure (CPC) , 1908 - Sections 82 - Order 1, Rule 10 - Order 2, Rule 3
AppellantBhagirath
RespondentGulabkanwar and ors.
Appellant Advocate Murli Manohar, Adv.
Respondent Advocate Zabar Raj, Adv.
DispositionAppeal dismissed
Cases ReferredRishabkumar Mohanlal v. Motilal Kasturchand
Excerpt:
.....to satisfy the debt so far as the beneficial owner is concerned on the ground that he was the true owner. the reason, to our mind, is simple and that is that if the matter is decided one way or the other in the absence of the holder, the latter cannot be held to be bound by any decision which might have been so arrived at, and the maker or the acceptor of the note would be exposed to unnecessary risk, and the object of section 78 would be clearly defeated. madanlal khemka (k) seem to us to have struck the correct note when it was laid down therein that the real owner of a note may sue provided he is in a position to obtain a good discharge from liability for the maker or acceptor of the note, and such a discharge couldonly be obtained with confidence or certainty where the holder..........bring a suit in accordance with the section quoted above, and no other person, even if he be the true owner is competent to do so. reliance was also placed in this connection on section 8, negotiable instruments act which reads 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.the contention is that the maker of the promissory note in order to obtain his discharge in an effectual manner is required in law to make the payment to the holder of the instrument and from this it is further argued that.....
Judgment:

Modi, J.

This is an appeal by the defendant Bhagirath in a suit brought against him by the plaintiff Mst. Gulab Kanwar on behalf of herself and her sons Sampatchand and Suratsingh who are minors. The suit was principally based upon a promissory note and has been decreed with respect to it by the Senior Civil Judge Jodhpur but the rest of their claim stands dismissed.

2. The case disclosed by the plaintiffs is that there were money dealings between Nauratanmal deceased, grandfather of the minor plaintiffs, and the defendant, and the latter had also taken certain kothas on rent from the deceased and was in occupation thereof.

It is said that after the death of Nuratanmal,on 15-10-1951, accounts were gone into between theparties on Migsar Sudi 15 Smt. 2008 (correspondingto the I3th December, 1951) and a sum of Rs. 9708/7/- was found due against the defendant. Thelatter expressed his inability to repay the amountfound due.

Thereupon the old khata was squared up, a sum of Rs. 8/7/- was paid in cash by the defendant, and as for the balance of Rs. 9700/- he executed a promissory note in favour of Mst. Gulabkanwar, and this amount was stated in the promissory note to have been received by the defendant in cash. It was further stipulated in the promissory note that the defendant would pay interest at the rate of 7 3/4 annas per cent per mensem. The plaintiffs eventually brought a suit for the recovery of Rs. 9700/. principal and Rs. 75/3/- as interest and Rs. 673/9 3/4-as arrears of rent, amounting in all to Rs. 10448/12 3/4-.

As was subsequently made clear by Mst. Gulabkanwar, the debt covered, by the promissory note (and the kothas) had fallen to the share of Nauratanmal at a family partition, and on his death his minor grand-sons Sampatchand and Suratsingh (their father Dhanpat Singh having predeceased Nauratanmal) became the owners thereof and the promissory note had been executed in Mst. Gulab-kanwar's name because her sons were minors and she was their natural guardian.

Mst. Gulabkanwar also stated in her replication that if the money due on the promissory note was paid to her sons, she would have no objection whatsoever and that she would be prepared to give a complete discharge to the defendant both on her own behalf if required and also on behalf of her sons as their natural guardian.

The defendant admitted the execution of the promissory note but contended that he had not received any consideration for it and, therefore, the plaintiffs' suit was bound to fail The defendant further pleaded that the suit as brought by the plaintiffs was bad for this joinder of plaintiffs and causes of action. He also raised certain other pleas but they are not material for the purposes of the present appeal and, therefore, we do not propose to mention them.

3. The trial court dismissed the suit so far as it related to the arrears or rent but decreed it for a sum of Rs. 9700/- principal plus Rs. 75/3/- as interest till the date of suit minus a sum of Rs. 66 3/4-which has been held to be the price of certain goods received by the plaintiffs from the defendant about which there is no dispute in the present appeal.

4. It is not denied before us that the promissory note upon which the present suit was founded had been executed by the defendant. The defendant's main contention in this appeal, however, is that the suit as brought by the plaintiffs was not competent. Learned counsel put his argument in this way. His contention was that the minors had no right to bring the suit in law as they were not the holders of the promissory note and it had been admittedly, executed in favour of their mother Mst. Gulabkanwar.

As for Mst. Gulabkanwar it was contended that though she was the holder and could bring the suit on the basis of the promissory note, it was equally clear that no consideration whatsoever had proceeded from her with respect to the promissory note and, therefore, the plaintiffs' suit was also bound to fall as filed by her.

It was also argued that as the rights of the mother and her two sons did not arise out of the same transaction, there was a misjoinder of the plaintiffs and causes of action, and, consequently, the plaintiffs' suit was bad on that score as well. We propose to deal with the first point first.

5. Now so far as the defendant's contention as regards the maintainability of the present suit on behalf of the minor plaintiffs is concerned, learned counsel for the appellant based his argument on Section 78, Negotiable Instruments Act. That section reads as follows:

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 holdur of the instrument.

We may mention straightway that Section 82(c) has no relevance to the case before us and, therefore, it is the application of the rest of the section Which we have to consider. The argument of learned counsel is that it is only the holder of the promissory note who is entitled to bring a suit in accordance with the section quoted above, and no other person, even if he be the true owner is competent to do so. Reliance was also placed in this connection on Section 8, Negotiable Instruments Act which reads 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.

The contention is that the maker of the promissory note in order to obtain his discharge in an effectual manner is required in law to make the payment to the holder of the instrument and from this it is further argued that as no other person has been mentioned in this section who could give a lawful discharge to the maker, except the holder, it is the latter only who is entitled to bring a suit on the basis of the promissory note and that this is and would be the position in law even where the holder is not the true owner but happens to be merely a benamidar for him.

6. Now there is no doubt that there is considerable divergence of judicial opinion on the question raised before us. Broadly speaking it appears that there are two schools of opinion. One view is that the holder only has the right to bring a suit on the promissory note even if he may not be the true owner, and that the latter has no locus standi to bring a suit on the footing of the note because the property in the note including the right to receive or recover the amount due on it is vested in the holder and nobody else, unless it has been transferred to the plaintiff by the process prescribed by law e.g., by endorsement and delivery.

According to this view the fact that the holder of a note has been made a party and that he has further admitted that he is only a benamidar for the plaintiff makes no difference to the real position in Jaw. This view is represented by the decisions in Ramanuja Aiyangar v. Sadagopa Ai-yangar 28 Mad 205 (A) Subba Narayana Vathiyar v. Hamahwami Iyer 30 Mad 83 (PB) (B) Subbaraya Iyer v. Vaithinatha Iyer 33 Mad 115 (C) Chinna Kuzhanclai Animal v. Kuzhandai Veeraswami 1935 Mad 312 (AIR V 22) (D) Rooti Lal v. Manna Kunwar 3922 All 70 (AIR V 9) (E); Harkishore v. Gura Mia 1931 Cal 387 (AIR V 13) (F) Bundar Lal v. Maula Bakhsh, 1935 Oudh 278 (AIR V 22) (G) and Awadhbihari Singh v. Sheoshankar 1955 Pat 451 (AIR V 42) (H).

7. The other school of opinion is represented by the decisions in Brojo Lal Sana v. Budh Nath 1928 Cal 148 (AIR V 15) (I) Sewa Ram v. Hoti Lal 1931 All 108 (AIR V 18) (J) Lachmi Chand v. Madan-lal Khemka 1947 All 52 (AIR V 34) (K) Rai Ram Kishore v. Ram Prasad 1952 All 245 (AIR V 39) (L) Balanna v. Firm Khudai Nazar Khan 1941 Nag 207 (AIR V 28) (M) and Rishabkumar Mohanlal v. Motilal Kasturchand 1949 Nag 21 (AIR V 36) (N). The view which has been, generally speaking, accepted in the last-mentioned cases is that Section 78 docs not deal with the question of the right of suit, as such.

What it really enacts is a rule for the protection of the debtor and provides that the parts who can give an effective discharge to the maker or acceptor of a promissory note or bill of exchange or cheque is the holder thereof. According to this view, a suit brought by the true owner where the holder is a mere benamidar is competent and need not and should not be thrown out provided that the true owner can secure an effective discharge to the maker or the acceptor in respect thereof.

8. We do not propose to examine these cases individually, and before we proceed to examine, for ourselves, the principle underlying them, we consider it proper to refer to two decisions of the Privy Council which have been referred to in some of the cases mentioned above and have been treated as having some bearing, on a proper decision of the question under consideration.

9. In Sadasuk Janki Das v. Kishen Pershad 1918 PC 146 (AIR V 5) (O) their Lordships observed that it was of the utmost importance that the name of a person or firm to be charged upon negotiable document should be clearly stated on theface or on the back of the document so that the responsibility is made plain and can be instantly recognized as the document passes from hand to hand, and that it was not sufficient to merely describe the name of the principal in some way but that it must be disclosed in such a way that on any fair interpretation of the instrument his name is the real name of the person liable upon the instrument.

It is important to bear in mind that in this case the plaintiff wanted to make an undisclosed debtor liable on the instrument on the allegation that the latter was the real debtor and their Lordships repelled such liability. With respect, this must indeed be so, but it is a question, whether the proposition laid down by their Lordships must be held to be necessarily true in the converse case, that is, of a creditor and whether it can be argued from this decision that it is only the holder of the promissory note who alone can bring a suit on the note and nobody else.

A question at once arises what is to happen in those cases where the holder is dead and the claim on the basis of a promissory note still remains unsatisfied. It appears to us that it would be going too far to say that their Lordships laid down the entire law on the subject in the case before them and indeed there was no necessity to do so as they were only called upon to decide the case before them with reference to the facts of that case.

In Ch. Gur Narayan v. Sheolal Singh 1918 PC 140 (AIR V 5) (P), their Lordships observed that the system of acquiring and holding property and even of carrying on business in names other than those of the real owners, usually called the benami system, is and has been a common practice in India, and that there was nothing inherently wrong in it and that it accorded within its legitimate scope with the ideas and habits of the people.

Their Lordships, therefore, further proceeded to observe that so long as a benami transaction did not contravene the provisions of the law, the Courts were bound to give it effect and that the benamidar had no beneficial interest in the property or business that stood in his name and that he represented in fact the real owner and that so far as their relative legal position was concerned, the benamidar was a mere trustee for the real owner. It was, consequently, held that a benamidar could maintain an action in his own name although the beneficial owner was no party to it.

The position, therefore, admits of no questioning that benami transactions are legal so far as this country is concerned unless they are hit by any positive rule of law. The point that We Wish to make is that so far as these two decisions of the Privy Council are concerned, they do not directly govern the question which has arisen for determination before us and cannot be considered to be conclusive on it.

10. The question then is what is the true effect of Section 78 read with Section 8, Negotiable Instruments Act. Do these sections in their cumulative effect lay down that the holder alone and nobody else can bring a suit on the basis of a promissory note for recovering a sum due thereon, for, that appears to us to be the basic consideration underlying the decisions in Harkishore v. Gura Mia (F) and other cases following that opinion.

We have given this matter our very careful and anxious consideration and, with respect, we have come to the conclusion that it would be going too far to hold that the sections under consideration or the scheme of the Negotiable Instruments Act preclude anybody except the holder of the promissory note or bill of exchange or cheque from filling a suit based thereon.

Section 78 does not say so in clear terms which, it might have said if the intention of the legislature was so to provide. What this section really appears to us to lay down is that a payment, in order to act as a full discharge of the instrument, must be made to the holder or as provided in Section 82(c) where its application arises. The section does not deal with the right to bring a suit.

It would, therefore, be reading too much into the section to say that it forbids all suits by any person except the real holder, for, it is not difficult to conceive of cases where it is impossible for the holder to bring a suit, and such a case arises where the holder dies before recovering upon the promissory note, or a bill of exchange or a cheque. Can it be said that in such a case no suit at all can be brought? Obviously not.

Again, it may happen that by operation of law, the property in a negotiable instrument vests in a person other than the holder, and there has been no endorsement in his favour by the holder such, as where a promissory note is allotted to the share of a person by a decree of the court in a suit for partition. In such a case also, we see no adequate justification why the true owner should be held to be precluded from bringing a suit in his own name. The true view, therefore, appears to us to be somewhat like this.

The various provisions of the Negotiable Instruments Act deal with the right of negotiation of instruments, which initially vests in the payee but which may also be exercised by the holder or the holder in due course. Some provision is obviously necessary for the protection of the maker or acceptor of the instruments concerned as they are negotiable, and it was with a view to achieve this object that Section 78 has been enacted to lay down that a payment made to the holder would grant full discharge to the maker or acceptor.

We are, therefore, of opinion that Section 78 should not be construed to mean that the right to institute a suit on the basis of an instrument specified in the section vests merely in the holder and no other person whatever. We, therefore, agree, with respect, with the view taken in Brojo Lal Sah v. Budh Natti (I) and similar other cases in so far as it accords with what we have stated above.

11. At the same time, it has to be remembered that although a beneficiary or a true owner may bring such a suit, it is the holder who can give a discharge to the maker according to Section 78, Negotiable Instruments Act, and consequently the debtor would be entitled to insist that before he can be called upon to pay to the true owner, the latter must secure to him a lawful discharge from the holder.

If this essential requirement envisaged in Section 78 is not fulfilled, it is obvious that the maker or the acceptor would be exposed to a real risk on account of his liability subsisting still to the holder within the meaning of Section 78, and we see no justification for adopting a view which would lay him open to such an unnecessary risk involving a double liability.

12. Considering the matter, therefore, from the combined operation of these two principles, we now proceed to examine certain kinds of cases which may arise and to see how the principles we have stated above would work out in relation to them.

13. The first class of case is where the holder brings a suit himself without impleading the beneficial owner. ' There is no difference of opinion as regards such a case. Such a suit would be perfectly good and if the holder obtains a decree upon the instrument against the maker, the beneficial owner thereafter cannot be heard to say that the debtor should not have paid the holder or that he wasstill liable to satisfy the debt so far as the beneficial owner is concerned on the ground that he was the true owner. Section 78 is a complete answer on the point.

14. The second type of cases arises where the beneficial or true owner brings a suit without impleading the holder (who is alive) either as a plaintiff or as a defendant. It appears to us on the principles which have commended themselves to us that in this class of case the plaintiff cannot maintain his suit in the absence of the holder.

The reason, to our mind, is simple and that is that if the matter is decided one way or the other in the absence of the holder, the latter cannot be held to be bound by any decision which might have been so arrived at, and the maker or the acceptor of the note would be exposed to unnecessary risk, and the object of Section 78 would be clearly defeated. We, therefore, wish to point out that those cases which lay down that the claim of the true owner can be decreed even in the absence of the holder and the latter has not been made a party to the suit have gone too far.

On this view, with utmost respect, it appears to us that the Full Bench case of Rai Ram Kishore v. Ram Prasad (L) goes farther than we would be prepared to go, because in that case the holder of the promissory notes was alive but he was not made a party to the suit. The earlier decisions of the Allahabad High Court in Sewa Ram v. Hoti Lal (J) and Lachmi Chand v. Madanlal Khemka (K) seem to us to have struck the correct note when it was laid down therein that the real owner of a note may sue provided he is in a position to obtain a good discharge from liability for the maker or acceptor of the note, and such a discharge couldonly be obtained with confidence or certainty where the holder himself is a party.

14a. A third type of case may arise in which the suit has been brought by the true owner and the holder has been impleaded as a party whether as a defendant or as a co-plaintiff. We have already held above that a true owner can bring a suit and the further condition that such owner must be in a position to secure a proper discharge from responsibility from the holder is capable of being satisfied in such cases.

Such a case arose in Sewa Ram v. Hoti Lal (J) where the learned Judges moulded their decree to say that the decretal amount shall be paid to or to the credit of the holder who was the plaintiff's benamidar, and it was further provided that it shall not be recoverable except on obtaining a discharge from the holder in respect of the liability of the main defendant under the promissory note in suit, and a provision was also made that if the decretal amount was deposited in court or was brought to it in execution of the decree, it shall enure to the credit of the holder.

15. We further think that in a case of the aforesaid category where the holder is a co-plaintiff, the position is still simpler. In such a case the interest of the defendant maker can be easily safeguarded without any difficulty whatever as the holder is also in the same array of parties as the true owner, and there can be no objection to passing a suitable decree so as to give a lawful and an effective discharge to the maker. Such a suit must be held to be competent because the holder is undoubtedly a party to it as a co-plaintiff.

Reference may be made in support of this view to Rishabkumar Mohanlal v. Motilal Kasturchand (N) where the learned Judges said that they were prepared to accept that suit by a beneficial owner would be good where the holder of the instrument is made a party and gives a valid discharge and that where the benamidar is a co-plaintiff, the matter would be simple and the claim in such a suit would be really decreed at his instance though the decree may be passed in favour of the other plaintiff also.

We may, however, point out that this position, in our opinion, will not hold good where the holder is neither a plaintiff nor even a defendant but has merely been produced as a witness in the suit brought by the real owner, as in such a case no decree can be passed qua the holder so as to effectually bind him, he being not a party to it.

16. Lastly, another type of case arises where the holder is no longer alive and the debt on the instrument still remains to be recovered from its maker or acceptor. We are of opinion that in such a case it could not possibly be insisted in law or common sense that no suit whatsoever could be brought as the holder is dead or that no person other than the holder could give a discharge within the meaning of Section 78, Negotiable Instruments Act.

The legal representative of the holder would appear to us to be clearly entitled to recover upon the instrument and Section 78 or anything else in the Negotiable Instruments Act cannot and does not stand in the way of such a suit being brought by the legal representatives of the holder against the person liable on the instrument.

17. Now let us see in which category of the cases classified above, the present case falls. It clearly appears to us to fall within the second branch of the third category mentioned above. The present suit has been brought by Mst. Gulabkanwar as well as by her minor sons Sampatchand and Suratsingh, Mst. Gulabkanwar being admittedly the holder of the promissory note. Both are co-plaintiffs in the suit 111 substance and any detect in the manner as to the mention of their names in the array of parties in the plaint is altogether immaterial.

The holder Mst. Gulabkanwar has also clearly conceded in her pleading that she would have no objection to a decree being passed in favour of her sons or her being called upon to give a discharge in her personal capacity or on behalf of the minor sons to the defendant. Such a case to our mind is comparatively simple and admits of no real or serious objection so far as the maintainability of the suit on the side of the plaintiffs is concerned.

We, therefore, hold that the suit as brought by Mst. Gulabkanwar on behalf of her minor sons is competent and that it is not hit by Section 78, Negotiable Instruments Act as it would be perfectly competent to her being a co-plaintiff to give a discharge to the defendant in this very suit on the claim arising under the promissory note executed by the defendant in her favour.

18. Upon the view which has commended itself to us and we undoubtedly consider it to be essentially just and equitable and therefore the better view -- we are further of opinion that the next question raised by learned counsel for the defendant as to consideration is bereft of all force. In this view the suit as brought by the sons is maintainable even if they are not the holders and the holder is their mother who is also a party to the suit.

The correct approach, in our opinion, is to look at the suit as a whole. It is not disputed even by the defendant that consideration followed from the grand-father of the minor plaintiffs, whose heirs the latter undoubtedly are, and that provides excellent support as to consideration for the suit brought by the heirs of the deceased. In such circumstances the contention of learned counsel that no consideration proceeded from Mst. Gulabkanwar is entirely without force. We have no hesitation in repelling this contention.

19. The only other point which was seriously canvassed before us on behalf of the defendant was that this suit was bad for mis-joinder of plaintiffs and causes of action. This contention was based on the argument that so far as Mst. Guiab Kanwar is concerned, her claim was based on the promissory note while her two minor sons could only advance their claim on the basis of the original consideration and not on the basis of the promissory note and, therefore, there was a misjoinder of plaintiffs and causes of action.

There is, in our opinion, no force in this contention either. As we have already pointed out, the present suit has been brought by the true owners who are the minors on the basis of the promissory note of which Mst. Gulabkanwar was the holder and we have no doubt that in a suit of this character, based as it was upon the promissory note, both the minors and their mother were properly impleaded as plaintiffs.

The entire liability so far as the present appellant is concerned, was based on the promissory note, and all the questions that have been raised and which we have discussed above, both with regard to the minor plaintiffs as well as Mst. Gulabkanwar have arisen on that footing and the legal implications said to arise from such a situation.

To such a suit it appears to us that it would be entirely illogical to say that the holder is not a necessary or a proper party or that there is any misjoinder of plaintiffs and causes of action. We have, therefore, no hesitation in saying that there is no misjoinder of the plaintiffs and causes of action in the present case and the defendant's contention in this connection is not well-founded.

20. The result is that there is no force in this appeal, and we hereby dismiss it with costs. We however, add a rider to the decree passed by the lower court and direct that all moneys realised in execution of this decree shall enure to credit of the plaintiffs Sampatchand and Suratsingh and shall be recoverable on the footing that Mst. Gulabkanwar do give a discharge to the defendant in respect thereof as the holder of the promissory note in suit.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //