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Nilgiri Trading Co. by Its Managing Partner J. Nanja Gowder and ors. Vs. K. Simrathmull and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai High Court
Decided On
Case NumberAppeal No. 218 of 1953
Judge
Reported inAIR1957Mad691; (1957)2MLJ27
ActsNegotiable Instruments Act, 1881 - Sections 8 and 51
AppellantNilgiri Trading Co. by Its Managing Partner J. Nanja Gowder and ors.
RespondentK. Simrathmull and anr.
Appellant AdvocateD. Ramaswami Iyengar and ;P.R. Varadarajan, Advs.
Respondent AdvocateP.S. Balkrishna Iyer and ;P.S. Ramachandra Iyer, Advs.
Disposition Appeal dismissed
Cases ReferredGhulam Mohiuddin v. Ramditta Mal
Excerpt:
.....defendant, as the managing partner, executed four hundies and they were endorsed by the payee in favour of two banks. as the defendants failed to honour the hundies on the due dates, the payee was compelled by the banks to make payments and no making such payments obtained back the four hundies with the endorsement payment received. thereafter the payee endorsed the hundies to the plaintiff. in a suit instituted by him to recover the amount due on the hundies, it was contended by the defendants that the suit, based as it was only on the hundies, were not maintainable, as the payee could not negotiate them as he was not a holder within the meaning of section 8 of the negotiable instruments act (xxvi of 1881) as required by explanation to section 51 of the act.; held, the plaintiff was..........of the indian overseas bank. as the defendants failed to honour the humdis on the due dates, seth sunderdass was compelled by the banks to make payments, and on payment seth sunderdass obtained the four hundis back with the endorsement ''payment received". thereafter seth sunderdass endorsed the four hundis to the plaintiff who has instituted the suit to recover the amounts due under them. so far as the promissory note is concerned, which was also similarly endorsed to the plaintiff there is no dispute in this appeal.2. the main plea raised in defence was that the plaintiff was not entitled to sue on the four hundis as such and the suit was not maintainable otherwise because the suit was based only on the hundis. the plea was that as there were endorsements of payment by the banks.....
Judgment:
1. This is an appeal by defendants 1 to 7 and 9 to 11 in O. S. No. 250 of 1951 in the court of the Subordinate Judge of Octacamund against a decree passed against them. The suit was to recover a sum of Rs. 7271, being the principal and interest due under four hundis, two of them dated 5-9-1948 for Rs. 500 and Rs. 2000 respectively, and two other hundis dated 27-10-1948 for Rs. 1500 and Rs. 2000 respectively executed by the 11th defendant as the managing partner of the first defendant company, namely, the Nilgiri Trading Co., in favour of one Seth Sunderdas Harbhaghavandas, and the principal and interest due on a promissory note dated 28-11-1948 executed by him in favour of the same Sunderdass for Rs. 300.

Defendants 2 to 10 are other partners of the defendant company. The due date for the first two hundis dated 5-9-1948 was 3-12-1948 and for the other two hundis the due date was 25-1-1349. Of these four hundis, three of them were endorsed by the said Sunderdass in favour of the Bank of Mysore and the fourth in favour of the Indian Overseas Bank. As the defendants failed to honour the humdis on the due dates, Seth Sunderdass was compelled by the banks to make payments, and on payment Seth Sunderdass obtained the four hundis back with the endorsement ''Payment received". Thereafter Seth Sunderdass endorsed the four hundis to the plaintiff who has instituted the suit to recover the amounts due under them. So far as the promissory note is concerned, which was also similarly endorsed to the plaintiff there is no dispute in this appeal.

2. The main plea raised in defence was that the plaintiff was not entitled to sue on the four hundis as such and the suit was not maintainable otherwise because the suit was based only on the hundis. The plea was that as there were endorsements of payment by the banks on the hundis and there were no re-endorsements by the respective banks to Seth Sunderdass, he had no power to negotiate and endorse them in favour of the plaintiff. This contention was based on the Explanation to Section 51 of the Negotiable Instruments Act. That section declares that every sole maker, drawer, payee or endorsee, or all of several joint makers, drawers, payees or indorsees of a negotiable instrument may, if the negotiability of such instrument has not been restricted or excluded as mentioned in Section 50 indorse and negoliate the same. It is really on the Explanation that Mr. Ramaswami Aiyangar for the appellant laid stress. That runs thus:

''Nothing in this section enables a maker or drawer to indorse or negotiate an instrument, unless he is in lawful possession or is holder thereof, or enables a payee or indorsee to indorse or negotiate an instrument unless he is holder thereof".

The argument ran thus. Seth Sunderdass no doubt was a payee; but he could not negotiate because he was not a holder of the hundis on the date on which he purported to indorse them in favour of the plaintiff. Section 8 of the Negotiable Instruments Act defines a holder. In so far as it is material, the definition runs thus:

"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".

The learned Subordinate Judge held that Seth Sunderdas would fall within the scope of this definition and therefore he could endorse the hundis to the plaintiff.

3. The only question in this appeal is whether Seth Sunderdass on the undisputed facts in this case, can be held to be a holder of the hundis when he made the endorsements in favour of the plaintiff. Mr. Ramaswami Aiyangar, learned counsel for the appellants, was unable to cite any decided case which in any way would support his contention. On the other hand, we consider that the question has been sufficiently answered by Subramania Aiyar, O. C. J. in Muthar Sahib Maraikayar v. Kadir Sahib Maraikayar, ILR 28 Mad 544 (A). The facts of that case were as follows:

The defendants who traded under the name and style of S. M. P. M. K. obtained twenty five negotiable promissory notes from different persons and endorsed the same to one Meyyappa Chetti who again indorsed them to the Bunk of Madras. On presentation to the makers the notes were dishonoured. Thereupon the said Meyyappa Chetti paid Bank and obtained return of the promissory notes. Subsequently Meyyappa Chetti assigned his right to the notes by an instrument to the plaintiff. The defendants on demand failed to pay the amount and the suit was filed for the recovery of the amount due in respect of the promissory note.

Various defences were raised; but the lower appellate court accepted one of the pleas in defence, namely, that as the promissory notes had not been indorsed over to the plaintiff he could not sue on them. The learned Judges held that the absence of an endorsement in favour of the plaintiff was no bar to the suit. The argument pressed upon the learned Judges in that case was that the property in the notes should be taken as still residing in the last indersee, the Bank of Madras (corresponding to the Bank of Mysore and the Overseas Bank in the present case), and, therefore, the instrument of assignment relied on by the plaintiff conferred on him no right whatever to the notes. Dealing with this arguments Subramania Ayyar O. C. J. observed thus:

"The fallacy of this argument is in the assumption that, notwithstanding the payment to the Bank of Madras of all that was due to it by Meyyappa Chetti as indorser, an indorsement back to Meyyappa Cbetti from the bank was, in point of law, necessary to revest the title in the notes in him. This contention is but a repetition in different words of the argument that transfer of a negotiable promissory note can be effected by indorsement only and in no other way, which has already been sufficiently refuted. It is true that there is no averment in the plaint of an express reiransfer by the Bank to Meyyappa Chetti. But it may be pointed out that when a prior indorser, in the technical language of the law, takes up a no'e' see Elliswarth v. Brewer 11 Pickering per Show Shaw C. J. at p. 320) (B), on payment to his immediate indorsee and discharges his liability under the contract arising by the indorsement, there is no provision either in the Negotiable Instrument Act or elsewhere prescribing the mode in which such 'taking up' of the note is to be established".

The learned Officiating Chief Justice relied upon the prima facie presumption that if a person who indorses bill of exchange to another, whether for value or for purposes of collection, shall come to the possession thereof again, he shall be regarded, unless the contrary appears in evidence, as the bona fide holder and proprietor of such bill and shall be entitled to recover, notwithstanding there may be on it one or more indorsements in full subsiquent to the one to him, without producing any receipt or indorsement back from either of such indorsee whose names he may strike from the bill or not as he may think proper.

In the present case not only Seth Sunderdass obtained the hundis from the respective banks, there were also receipts of payments appearing on the back of the hundis. We have no hesitation in holding, on the strength of the law as laid down in the above case, that on the facts found in the case before us the title in the hundis revested in Seth Sunderdass and therefore he was enitled without anything further to sue and recover the amount due under the hundis. If that be so, he would certainly be the holder within the definition of Section 8 of the Negotiable Instruments Act. If he is a holder, it follows that there is no restriction on his capacity to negotiate the hundis.

Mr. Ramaswami Aiyangar, learned counsel for the appellants, tried to limit the application of the rule of law laid down in ILR 28 Mad 544 (A) to the case of an indorsement for collection only. It may be that in the subsequent decision, Subramanian Chetty v. Alagappa Chetty, ILR 30 Mad 441 (C), there was an endorsement only for collection. But we have not been cited any authority which has limited the scope of the rule enunciated in ILR 28 Mad 544 (A). He also relied on a decision of a single Judge of the Lahore High Court in Ghulam Mohiuddin v. Ramditta Mal, AIR 1930 Lah 248 (D). But in that case there was no payment at any time by any endorser to the endorsee and getting back possession of the promissory note. That decision has therefore no bearing on the facts of the present case. We wholly agree with the learned trial Judge that the plaintiff is entitled to file, the suit on the hundis.

4. The appeal fails and is dismissed with costs.


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