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Sattamuthu Chettiar Vs. Abdul Kareem Maracayar and ors. - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtChennai
Decided On
Reported in(1932)63MLJ880
AppellantSattamuthu Chettiar
RespondentAbdul Kareem Maracayar and ors.
Cases ReferredBills of Exchange Act. In Macdonald v. Whitfield
Excerpt:
.....of the plaintiff and defendants 2 to 4 and endorsed by the father to the plaintiff as one of the family assets allotted to the plaintiff on the latter's releasing his rights in the family properties. the ground on which, while giving a decree against the maker of the note, the 1st defendant, the learned judge in the court below refused to give a decree against the assets of the father in the hands of defendants 2 to 4 is that the note was endorsed to the plaintiff as part of a partition, and it is to be presumed that the learned judge thought that in those circumstances the personal liability of the indorser was negatived by the nature of the transaction. it is a well-established rule of law that the whole facts and circumstances attendant upon the making, issue and transference of a..........of the plaintiff and defendants 2 to 4 and endorsed by the father to the plaintiff as one of the family assets allotted to the plaintiff on the latter's releasing his rights in the family properties. the only point now arising for consideration is whether the lower court was right in dismissing the suit as against defendants 2 to 4 or whether it should have given a decree against them also on the ground alleged by the plaintiff that the father having indorsed the note to the plaintiff and the maker having defaulted payment, the father was himself personally responsible as the indorser and defendants 2 to 4 are liable as his legal representatives to the extent of his assets in their hands. the ground on which, while giving a decree against the maker of the note, the 1st defendant, the.....
Judgment:

Krishnan Pandalai, J.

1. The petitioner is the plaintiff. His suit was brought on a promissory note executed by the 1st defendant in favour of the father of the plaintiff and defendants 2 to 4 and endorsed by the father to the plaintiff as one of the family assets allotted to the plaintiff on the latter's releasing his rights in the family properties. The only point now arising for consideration is whether the Lower Court was right in dismissing the suit as against defendants 2 to 4 or whether it should have given a decree against them also on the ground alleged by the plaintiff that the father having indorsed the note to the plaintiff and the maker having defaulted payment, the father was himself personally responsible as the indorser and defendants 2 to 4 are liable as his legal representatives to the extent of his assets in their hands. The ground on which, while giving a decree against the maker of the note, the 1st defendant, the learned Judge in the Court below refused to give a decree against the assets of the father in the hands of defendants 2 to 4 is that the note was endorsed to the plaintiff as part of a partition, and it is to be presumed that the learned Judge thought that in those circumstances the personal liability of the indorser was negatived by the nature of the transaction.

2. In this Court the petitioner's learned advocate has urged first, that under Section 35 of the Negotiable Instruments Act the only way in which the father could have excluded personal liability as indorser of the note was by expressly endorsing it ' without recourse ' and, that not having been done, it is not open to the Court to infer any other ground of exemption from liability. It was also urged that there was nothing in the nature of the transaction that the endorsement was part of a family partition wherefrom it may be inferred that the indorser intended to exclude personal liability.

3. On the first question the words of Section 35 of the Negotiable Instruments Act are clear enough. It says that

in the absence of a contract to the contrary, whoever indorses and delivers a negotiable instrument before maturity, without in such indorsement expressly excluding 'or making conditional his own liability is bound thereby to every subsequent holder in case of dishonour by the drawee, acceptor or maker to compensate such holder for any loss or damage by such dishonour etc.

4. The words make it clear that the rule whereby the indorser of a negotiable instrument who indorses without restricting his liability in the endorsement by express words makes himself liable to the indorsee as surety for the amount of the instrument in the case of dishonour is subject to there having been no contract to the contrary, i.e., that although the indorsement is ex facie unrestricted, the indorser as between himself and the indorsee, by agreement either express or to be inferred from the nature of the transaction, excluded personal liability to the latter. No Indian authority was cited on this point : but English authorities are ample. In Denton v. Peters (1870) 5 Q.B. 475 a partner indorsed to his co-partner a bill accepted by a person who was indebted to them for goods sold. On the debtor defaulting payment the indorsee brought a suit against the indorser and pleaded that the indorsement being on its face absolute and unrestricted, he was entitled to a decree. But when it appeared that the parties had been partners and the indorsement was made to enable the plaintiff to collect the money from the debtor for their joint benefit, the Court held that the form of the indorsement notwithstanding, the defendant was not liable to the plaintiff. That decision was in 1870, before the Bills of Exchange Act. In Macdonald v. Whitfield (1883) 8 App. Cas. 733, a case from Canada, where the law on this point is the same as that of England, the directors of a company in order to make themselves personally liable to a bank from which the company was borrowing money made successive indorsements of the bill on which the money was borrowed. And the indorsements by one director to another and by him to a third and by him to a fourth and so on were on their face unconditional and unrestricted. But it was proved that the purpose of the indorsements and the arrangement in pursuance of which they were made was not that they might stand surety to each other but that they might all as between themselves and the bank be surety for the debt advanced to the company. On those facts it was held that far from the indorser being liable for the whole amount to his indorsee and that indorsee in his turn as indorser to his indorsee and so on they were all liable equally to contribute to the debt if one of them had paid it. Lord Watson stated:

It is a well-established rule of law that the whole facts and circumstances attendant upon the making, issue and transference of a bill or note may be legitimately referred to for the purpose of ascertaining the true relation to each other of the parties who put their signatures upon it, either as makers or as indorsers, and that reasonable inferences derived from these facts and circumstances are admitted to the effect of qualifying, altering or even inverting the relative liabilities which the law-merchant would otherwise assign to them.

5. This decision was in 1883 soon after the English Bills of Exchange Act. Nothing has been cited to show that these decisions which are of the highest authority are not good law according to Section 35 of the Negotiable Instruments Act. It follows that the Lower Court was right in looking at the nature of the transaction to ascertain whether there was in fact any undertaking by the father of the plaintiff to stand guarantee for the payment of the note indorsed to the plaintiff.

6. It appears to me that, the only answer possible upon the facts which are admitted is in the negative. The family was a trading family, the plaintiff was a son by the first wife of the father, and defendants 2 to 4, who are minors, are the children of the second wife. It was found necessary to effect a partition and the plaintiff was given a share. Thereupon he withdrew from the family by Ex. I, which recites quite explicitly that he had no longer any rights in the family properties and took for his share the assets therein stated altogether amounting to Rs. 35,500. One of these assets was the suit note for Rs. 550 executed by a stranger, the 1st defendant, to the head of the family, the father. Besides this, there were four other notes, which were similarly indorsed, of the total value of Rs. 5,000, and the rest of the amount was made up of Rs. 13,950 paid in cash, Rs. 5,000 by credit opened in the plaintiff's name in a firm at Negapatam and Rs. 11,000 secured by a promissory note given by the father. Having regard to the nature of this transaction it is impossible to understand how the father, who was handing over family assets, should have made himself personally liable and he could only do so out of his own share of the family property to the plaintiff in case any of the outstandings were not duly paid. Where at a partition family properties are divided and the parties, being majors and able to look after themselves accept the properties allotted for their share of the assets, it is too much to say that there is as between them a covenant for title or a guarantee of payment by strangers to the family. In my opinion the learned Judge drew the correct inference from the facts that there was no such undertaking between the plaintiff's father and himself.

7. It is urged that this question was res judicata by a decision given in respect of another promissory note on which the plaintiff succeeded in getting a decree against defendants 2 to 4. If the plaintiff was fortunate enough to get such a decree, I cannot deprive him of it, but certainly it is not res judicata in this case.

8. The Civil Revision Petition must be dismissed with costs.


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