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Pynda Venkatachalapati Garu Vs. Pynda Ramakrishnayya and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported inAIR1930Mad168
AppellantPynda Venkatachalapati Garu
RespondentPynda Ramakrishnayya and ors.
Cases ReferredSadasuk Janki Das v. Kishan Pershad A.I.R.
Excerpt:
.....whereas the other was a contract between the plaintiff and the partnership of which defendant 3 was a member. ) very clearly indicates the view that no liability attaches under a promissory note unless such liability is expressly recited, possibly, therefore, darguvarapu sarrapu v. the principle that only the maker of the promissory note can be held liable thereunder is not applicable in a case like this where an independent contract is alleged. 146: it is of the utmost importance that the name of a person or firm to be charged upon a negotiable document should be clearly stated on the face 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 not in the name of the partnership, on the promissory notes therefore defendant 3 can alone be held liable; but it is contended for the plaintiff appellant that as the loans were given to the partnership, the other three partners will also be liable for their amount. the plaint is not worded so as to indicate clearly that the plaintiff bases his suit not only on the promissory notes but on the independent liability of the partnership, but it is i think capable of such interpretation; no question of amending it was raised in the lower court because the subordinate judge held that because the promissory notes had been executed for the loans by defendant 3, it was not open to the plaintiff to base his claim on any other cause of action.2. one of the earliest cases in which this question.....
Judgment:

Phillips, J.

1. This suit is brought by the plaintiff to recover two loans given to a firm of four brothers, defendants 1 to 4. For each of the loans a promissory note was executed by defendant 3 alone which he signed in his own name and not in the name of the partnership, On the promissory notes therefore defendant 3 can alone be held liable; but it is contended for the plaintiff appellant that as the loans were given to the partnership, the other three partners will also be liable for their amount. The plaint is not worded so as to indicate clearly that the plaintiff bases his suit not only on the promissory notes but on the independent liability of the partnership, but it is I think capable of such interpretation; no question of amending it was raised in the lower Court because the Subordinate Judge held that because the promissory notes had been executed for the loans by defendant 3, it was not open to the plaintiff to base his claim on any other cause of action.

2. One of the earliest cases in which this question was considered is Sheik Akbar v. Sheik Khan [1881] 7 Cal. 256. There it was held that, when the original cause of action is the bill or note itself, and does not exist independently of it, there is no cause of action for money lent, or otherwise than upon the note itself, for the note is the only contract between the parties. If really there is no independent cause of action, this decision that the note alone can be sued upon must be accepted and has been accepted in many cases since it was propounded. The appellant, however, relies on the case in Karmali Abdulla v. Karimji Jwanji A.I.R. 1914 P.C. 132, in which the Privy Council held that one partner could he held liable upon hundis drawn by another partner when the transaction for which the hundis were drawn was a partnership transaction. In that case the suit was not based upon the hundis but upon the account between the parties, of which the hundis formed one item. In Shunmuganatha Chettiar v. Srinivasa Iyer [1916] 40 Mad. 727 a Bench of this Court held on the strength of the above case that in a suit on a promissory note executed by two out of the three partners of a firm for money advanced for purposes of the firm the third partner was also liable. If this latter decision is correct, the plaintiff's contention that he has a cause of action against the other partners, defendants 1 and 2 and 4 must succeed.

3. It is, however, argued for the respondent that the case in Shunmuganatha Chettiar v. Srinivasa Iyer [1916] 40 Mad. 727, goes beyond the case in Karmali Abdulla v. Karimji Jivanji A.I.R. 1914 P.C. 132, and is not good law. Even in the case in Sheik Akbar v. Sheik Khan [1881] 7 Cal. 256, it was recognized that, where there was a cause of action independent of the note, resort could be had to that cause of action; and in this Court it has been held that, where the note has been executed by the Manager of a Malabar tavazhi, the other members of the family or the tavazhi are liable: Krishna Iyer v. Krishnaswami Iyer [1900] 23 Mad. 597 and Thankammal v. Kunhanna : (1919)37MLJ369 . The Subordinate Judge has distinguished these cases as being cases governed by Hindu Law and has held that they are the only exceptions to the rule that the maker of a promissory note alone is liable thereon. This is quite true if there is no alternative cause of action, but in Sadasuk Janki Das v. Kishan Pershad A.I.R. 1918 P.C. 146, the Privy Council while holding that the principal could not be made liable on a promissory note which was not signed in his name, remarked that the plaintiffs in that case could:

had they thought it fit to have framed their case in an alternative form and have sued both on the hundis and alternatively upon the consideration.

4. In that case the money was lent to the Maharaja Sir Kishan Pershad Bahadur, defendant 1, through his agent, Mohan Lal, defendant 2, and the suit was brought upon the hundi alone, and it was held that, as the alternative relief had not been put forward in Courts below, the plaintiff's suit as against defendant 1 must fail because he was not liable under the hundi itself. In the present case, if the plaintiff really entered into a contract with the partnership that is clearly a contract which is independent of the contract evidenced by the promissory notes, because in those notes the contract was one between the plaintiff and defendant 3 alone whereas the other was a contract between the plaintiff and the partnership of which defendant 3 was a member.

5. In Darguvarapu Sarrapu v. Rampratapu [1902] 25 Mad. 580, where a promissory note was given by one partner for the price of goods sold to the partnership, it was held that the other partners were liable. In principle there would appear to be no distinction between money to be paid for the price of goods and money to be paid for repayment of a loan; if that is so, in this case the partnership would be liable to the plaintiff. There appears to me to be no reason why the liability incurred by members of a joint family under the Hindu Law in respect of a promissory note should be put upon any different footing to the liability incurred by the partners of a firm under Section 251, Contract Act; but the language of their Lordships in Sadasuk Janki Das v. Kishan Pershad A.I.R. 1918 P.C. 146 (of 46 Cal.) very clearly indicates the view that no liability attaches under a promissory note unless such liability is expressly recited, Possibly, therefore, Darguvarapu Sarrapu v. Rampratapu [1902] 25 Mad. 580, requires reconsideration. However, it is, unnecessary to discuss the question now, for the cause of action may be based on the contract independent of the promissory note.

6. In that event the real question at issue is not whether the firm benefited by the transaction, but whether the firm did enter into the contract. If the plaintiff can show that there was a contract with the partnership and the promissory note was merely evidence of such contract, all the partners would appear to be liable. The principle that only the maker of the promissory note can be held liable thereunder is not applicable in a case like this where an independent contract is alleged. I think, therefore, that the Subordinate Judge ought not to have refused to allow the plaintiff to adduce evidence as to this independent contract. I would, therefore, allow plaintiff to amend his plaint and after the amendment is approved the suit will be remanded for fresh disposal in the light of the above remarks.

7. Costs in this Court will abide the result of the suit.

Reilly, J.

8. The promissory notes on which the plaintiff sues in this case have not been translated; but it is admitted that there is no word in them to indicate or suggest that the plaintiff in lending the amounts mentioned in them, was dealing with any one but defendant 3, who executed the notes. Whatever may have been the relations of defendant 3 to the other defendants at the dates when he made these notes, on no fair, nor even possible, interpretation of the notes themselves could it be held that any person but defendant 3 was liable on them. Mr. Ramachandra Iyer does not suggest that an undisclosed principal can be held liable on a promissory note executed by his agent; but he contends that a person to whom no reference whatever is made in a promissory note executed by his partner may be held liable on the note. His argument is that, though under Section 27, Negotiable Instruments Act, an agent must act in his principal's name when making a promissory note, if he is to bind his principal by the note, that section has no application to partners, whose liabilities for each other's acts are regulated by Section 251, Contract Act. I see no basis for the contention. Under Section 251, Contract Act, a partner can bind his copartners to the same extent as if he was their agent and no further. If such a contention as Mr. Ramachandra Iyer's was ever possible, it is not possible after the language used by the Privy Council in Sadasuk Janki Das v. Kishan Pershad A.I.R. 1918 P.C. 146:

It is of the utmost importance that the name of a person or firm to be charged upon a negotiable document should be clearly stated on the face 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.

9. There is no distinction in this respect between what is necessary to make it clear that a firm is bound by a promissory note made by one of its partners and what is necessary to make it clear that a principal is bound by a promissory note made by his agent. I agree that on the promissory notes in this suit the plaintiff can get a decree against no one but defendant 3, and that he has got.

10. But it is further contended that the plaintiff could get a decree against all the defendants as partners on the consideration for the promissory notes, that is on the loans made to the firm represented by defendant 3 in the transactions. That is so, if it is proved that the loans were made to the firm and if the pleadings are sufficient to support such a case. I do not think it is of any profit now to discuss the old question whether, when a promissory note has been executed for a certain amount a suit can be based on the consideration only if the consideration has been antecedent to the execution of the note or that can be done also when the consideration and the note are contemporaneous. That question appears to me to have been concluded by the case which I have already mentioned: Sadasuk Janki Das v. Kishan Pershad A.I.R. 1918 P.C. 146. In that case it is stated in the judgment of the Privy Council that

it would, of course, have been open to the plaintiffs, had they thought fit, to have framed their case in an alternative form and to have sued both on the hundis and alternatively upon the consideration.

11. There the execution of the hundis and the making of the loan were contemporaneous. In this part of the case Mr. Varadachariar for defendants 1, 2 and 4 suggested in his turn that there was a distinction in this matter between suing a principal on a loan made to his agent acting within authority for him and suing a firm on a loan made to them represented by one of the partners. There again in my opinion no distinction can properly be drawn. If when an agent takes a loan for his principal but executes a promissory note for the amount which does not disclose that the borrower is his principal, the lender can sue the agent on the note and alternatively the principal, on the loan, I see no reason, why, when the loan is made to a firm but a promissory note is taken from one of the partners, which does not disclose that any one but he is liable on it, the lender should not sue the partner on the note which he has made and alternatively the firm on the loan itself. It appears to me to make no difference in this matter that the agent is a different person from his principal, while the partner is included in the persons forming his firm. But, if the firm is to be made liable in such a suit the lender must not only allege and prove that the loan was really taken for his firm by the partner who made the promissory note but must base the suit on the loan to the firm. Although we have not got the full plaint in Sadasuk Janki Das v. Kishan Pershad A.I.R. 1918 P.C. 146 before us, it is instructive to notice that the report shows that in that plaint it was alleged that the money was borrowed by

defendant 2 who executed the hundis for and on behalf of and as agent of defendant 1

(his principal); but nevertheless the plaint was confined in the opinion of their Lordships to an action brought on the hundis themselves. That shows that if the suit is to be based on the note and alternatively on the consideration, it is not enough to allege that the loan was taken for the principal or the firm. In the present case the suit is obviously upon the promissory notes. Is it also or alternatively on the consideration? In connexion with each note the plaint states that defendant 3 borrowed the amount

for the trade carried on by the defendants as Paida & Co.

In para. 7 it is stated that

demand for the repayment of the principal and interest due on the two promissory notes was made by the plaintiff.

and in para. 8 it is stated that

the cause of action for this suit arose on 11th April 1920 and 17th August 1920 the dates of the two promissory notes.

12. With great respect it is quite impossible in my opinion to get out of those statements any averment that the loans were made to the firm of which defendant 3 was a partner or any allegation that the plaintiff has or bases his suit upon an alternative cause of action against the firm. The plaint also contains a statement that the defendants, that is the firm, repaid Rs. 100 towards the second promissory note; but repayment of part of the debt by parties not liable on the notes cannot make them liable on the notes or on the consideration. I have no wish to insist on technicalities of pleadings to the detriment of any party. But it is the duty of a plaintiff to make clear to the Court and to his opponent what his alleged cause of action is. In my opinion only by torturing the language of the plaint in this case or by an effort of the imagination can we say that the plaintiff intended to sue the defendants alternatively on the loan to the firm. Nor could we do so without implicitly criticizing the opinion expressed by the Privy Council of the plaint before them in Sadasuk Janki Das v. Kishan Pershad A.I.R. 1918 P.C. 146. I have no doubt that, when presenting his plaint, the plaintiff was under the impression that he could sue all the defendants on the promissory notes themselves, as was contended for him before us. But that was undoubtedly a mistake. On the plaint as it stands, although I do not agree with all his opinions or reasoning in my opinion the decision of the learned Subordinate Judge was right.

13. But in the circumstances I think the plaintiff may properly be allowed an opportunity to amend his plaint. I agree that we should give him a short adjournment in which he may, if he wishes, amend his plaint so as to make it clear that he is alternatively suing all the defendants as members of a firm or loans made to that firm. If he makes the amendment, I would set aside the decree of the Subordinate Judge and remand the suit to him for fresh disposal on the amended plaint, the costs of this appeal in that event to abide and allow the result of the suit at the new trial. (After allowing the amendment, their Lordships remanded the suit for fresh disposal).


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