Skip to content


Arjuna Goundar and anr. Vs. Pillaiyar Goundar - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Reported in(1972)2MLJ462
AppellantArjuna Goundar and anr.
RespondentPillaiyar Goundar
Cases ReferredWaring v. Ward
Excerpt:
- .....(as he then was) in pattabiraman v. ganapathi kannappa mudali : air1962mad202 . in that case the suit promissory note was executed by one subramania pillai, the deceased father of the defendants in favour of one chinna munusami mudali; and. the respondent ganapathi kannappa mudali, claiming to have obtained an. assignment of the promissory note and thereby had become a holder in due course, filed a suit on the promissory note. chinna munusami mudali was not made a party to the suit; claiming that a number of payments had 'been, made to the original payee chinna munusami mudali and on his behalf to his two undivided sons in respect of which no credit had been given in the suit and that chinna munusami mudali had himself agreed to receive only 10 annas in the rupee of the balance due on.....
Judgment:
ORDER

S. Ganesan, J.

1. Pillaiyar Goundar, the respondent in both these Civil Revision Petitions, had instituted two suits, the first one O.S. No. 397 of 1971 against Arjurva Goundar, the petitioner in C.R.P. No. 1984 of 1971 on a promissory note for Rs. 700 executed by the latter in favour of his elder brother Govindaraja after taking an assignment from Govindaraja and the second O.S. No. 398 of 1971 against Kista Goundar, the petitioner in C.R.P. No. 1985 of 1971 on a promissory note for Rs. 650 executed by the latter in favour of his elder brother Govindaraja after taking an assignment of the promissory note as in the other case.

2. The petitioners contended that the promissory notes were not supported by consideration. According to the petitioners, the promissory notes were taken by their brother Govindaraja in consideration of each of them agreeing to discharge some debts in the family and as the debts are found not to be true, the promissory notes are devoid of consideration and are therefore unenforceable.

3. These two Civil Revision Petitions arise out of two applications, I.A. No. 982 of 1971 filed by Arjuna Goundar and I.A. No. 984 of 1971 filed by Kista Gounder for impleading their brother Govindaraja as a party defendant in the suits on the ground that, in case it was found that Pillaiyar Gounder the respondent (assignee of ;the proinissory notes) was entitled to decrees, Govindaraja their elder brother was bound to indemnity the petitioners for the loss caused thereby to them.

4. The learned District Munsif had dismissed both the applications on the ground that the petitioners would not be entitled to indemnity against Govindaraja and that they are not than fore entitled to implead the said Govindaraja as a party to the suits under Order 8-A of the Civil Procedure Code. The learned District Munsif has relied on the decision of Ramachandra Iyer, J., (as he then was) in Pattabiraman v. Ganapathi Kannappa Mudali : AIR1962Mad202 . In that case the suit promissory note was executed by one Subramania Pillai, the deceased father of the defendants in favour of one Chinna Munusami Mudali; and. the respondent Ganapathi Kannappa Mudali, claiming to have obtained an. assignment of the promissory note and thereby had become a holder in due course, filed a suit on the promissory note. Chinna Munusami Mudali was not made a party to the suit; claiming that a number of payments had 'been, made to the original payee Chinna Munusami Mudali and on his behalf to his two undivided sons in respect of which no credit had been given in the suit and that Chinna Munusami Mudali had himself agreed to receive only 10 annas in the rupee of the balance due on the promissory note, the petitioners filed an application under Order 8-A, Rule 1, Civil Procedure Code, for impleading Chinna Munuswami Mudali and. his two sons as defendants. While observing that Rule 1 of Order 8-A, Civil Procedure Code, applies to cases where the defendant would be entitled to-contribution or indemnity against a third party and that Order 8-A will apply to suits on promissory notes, Ramachandra Iyer, J., has held that, if the maker of a promissory note is-made liable, he cannot proceed against the endorser as if the latter Was a surety, as the liability under the note is always and ultimately that of the maker, that, where the endorser negotiates a promissory note for the full value without, giving credit to any payments that he might have received from the maker which are not endorsed on the note the case is one where the payee or the endorser fraudulently negotiates the note for the full value, that the holder in due in course in such an event cannot 'be prevented from collecting the money due on the promissory note according to its tenor and that, if the maker is put to a loss on account of the fraudulent act of the payee or endorser, his remedy would be only in the nature of damages and not amounting to an equitable claim of indemnity. The learned Judge has further observed that the maker who is in the position of a principal debtor not having any right of indemnity against the original payee or endorser would not have any right to proceed against the latter under Order 8-A, Rule 1, Civil Procedure Code.

5. The authority of this decision is challenged by the learned Counsel for the petitioner by reference to the following decisions. In Ruirappa Chetty v. Narasimha Chetty : AIR1965Mad495 , in a suit by the assignee-mortgagee the defence was that the mortgagor-defendant had discharged the debt by payment to the original mortgagee (assignor) prior to the date of assignment; and Anantanarayanan, O.C.J., (as he then was) allowed the defendant to implead the original mortgagee as a party-defendant under Order 8-A, Rule 1 and Order 1, Rule 10; Civil Procedure Code. While referring to the decision of Ramachandra Iyer, J., in Pattabhiramnn's case : (1962)1MLJ246 cited above, Anantanarayanan, O.C.J., had observed that, on the facts in that case and the context, any later suit that might have to be filed by the defendant against the proposed party in case the suit by the plaintiff (assignee) succeeded, might well be brought within the scope of an action for 'indemnity'. In the learned Judge's view the term, 'indemnity' had to be broadly interpreted and will mean indemnity such as either at law or in equity; and had further observed that he did not see how it could be disputed that the situation was one to which rule 1 of Order 8-A would apply 'both substantially and in a formal sense as well.

6. In Muniandi v. Selvarajan (1968) 2 M.L.J. 123, the defendant, the maker of the promissory note, contended that he had paid certain amounts to the father of the plaintiff in liquidation of the promissory note debt and that, as the father had not accounted for the same either by instructing his son to give credit to it or otherwise, he (the defendant) was entitled to implead the father as the second defendant in the action. Ramaprasada Rao, J., had followed the decision of Anantanarayanan, O.C.J. (as he then was), in Rudrappa Chetty v. Narasmiha Chetty : AIR1965Mad495 and relying upon the passage in Eastern Shipping Co. v. Quah Beng Kee L.R. (1924) A.C. 177, that a right of indemnity exists where the relation between the parties is such that either in law or in equity there is an obligation upon the one party to indemnify the other, held that the defendant was entitled to implead the plaintiff's father as second defendant in the suit by virtue of the provisions of Order 8-A, Civil Procedure Code.

6-A. In Parasmul Chordia v. Rajalakshmi Anmmal (1969) 1 M.L.J. 169, the defence to the suit on a promissory note admittedly executed by the defandant was that there was no consideration for the transaction and that the plaintift's son had executed a varthamanam subsequently admitting that the promissory note was not supported by consideration and that in case it was successfully enforced he would indemnify the defendant; and the defendant took out an application under Order 8-A for third party notice to the son of the plaintiff. Veeraswami, J. (as he then was), dissented from the view taken by Panchapakesa Ayyar, J., in Uttaman Chettiar v. Thiagaraja Pillai A.I.R. 1956 Mad. 155, that the third party notice procedure would not apply to suits on negotiable instruments and upheld the application for impleading the sons of the plaintiff: on the ground that, if the suit was decreed and the varthamanam was found to be true and the claim for indemnity can be based on that, the defendant would be entitled to a decree for indemnity as against the third party. The learned Judge has not specifically adverted to the principles laid down by Ramachandra Iyer, J., in the decision cited supra, but had pungently observed that the learned Judge had interpreted it in such a way as to practically emasculate its effect.

7. In Maruda Pillai v. V.S. Venkatarama Iyer : (1969)2MLJ16 , in a suit for arrears of rent the defendant pleaded that he had paid the arrears to the plaintiff's brother and filed an application under Order 8-A to implead him as a defendant. Alagiriswami, J., following the decision of Ramaprasada Rao, J., in Muniandi v. Selvarajan : (1968)2MLJ12 , cited above, upheld the application, saying that the plaintiff's brother, if he had received the money promising to pay it to the plaintiff, is in equity obliged to indemnify the defendant. Referring to the decision of Ramachandra Iyer, J.' the learned Judge had observed that he did not think that it was necessary to say in that case that the plaintiff's husband had obtained money by false pretences and that it could be very well said that he had promised to pay it to his wife but had not and that he was therefore under an equitable duty to indemnify the defendant in that case.

8. In Rangaswami Gounder v. Ramaswami Gouniar (1971) 84 L.W. 25, in a suit filed by an assignee of a promissory note, the defendant the maker of the note filed an application under Order 8-A, Rule 1 of the Civil Procedure Code, for impleading the husband of the assignor as a party defendant in the suit, contending that the consideration for the promissory note was paid by the assignor's husband, that he had received the entire amount due under the promissory note and had passed a receipt to him in full discharge of it and that as such he was entitled to be indemnified for the payments made to him in the event of the petitioner succeeding in getting a decree against him. Ramanujam, J., followed the decision in Rudrappa Chetty v. Narasimha Chetty : AIR1965Mad495 , Muniandi v. Selvarajan : (1968)2MLJ12 and also the decision in Parasmul Ghordia v. Rajalakshmi Ammal (1969) 1 M.L.J. 169 and held that the defendant could proceed against the assignor's husband under the third party procedure. While referring to the decision of Ramachandra Iyer, J., in Pattabiramam's case : (1962)1MLJ246 cited above, the learned Judge has merely observed that Ramachandra Iyer, J., had however, directed the payee to be impleaded as a party-defendant in that suit under Order 1, Rule 10.

9. It is thus seen that there is a clear divergence of view between Ramachandra Iyer, J., on the one hand and several other Judges of this Court on the other, led by Anantanarayanan, O.C.J., regarding the issue of a third party notice by the maker of a promissory note to the promisee who had assigned the document by suppressing earlier payments or the true nature of the document from the knowledge of the assignee. While Ramachandra Iyer, J., is positive that the maker of a promissory note who is in the position of a principal debtor has no right to indemnity against the original payee or endorser and that the only remedy open to an aggrieved maker of the promissory note was to file a suit for damages and not to claim indemnity, the other learned Judges have taken a less stringent attitude and held that, in such cases, the offending promisee or endorser has an equitable duty to pay indemnity to the aggrieved maker and that the provisions of Order 8-A, Civil Procedure Code, would be properly attracted. It is seen that the observations of Lord Wrenbury in Eastern Skipping Co. v. Quah Bang Kee L.R. (1924) A.C. 177 relied on by Ramaprasada Rao, J., and other learned Judges are quoted by Ramachandra Iyer, J., also, but the learned Judge does not appear to have given weight due to them.

10. On the whole I am inclined to agree with Anantanarayanan, O.C.J. and other learned Judges. Ramachandra Iyer, J., has taken the view that the relationship between the maker and the endorser vis-a-vis the assignee is that of a principal debtor and a surety, that where the assignee has recovered the money from the endorser, the latter as surety has had a right of recourse for indemnity to the maker and that in the converse case where the assignee had recovered the money from the maker the latter had no such right of recourse to the endorser. The learned Judge evidently proceeds on, the footing that the relationship between the parties is governed only be contract and that the right of indemnity is therefore not available to the maker against the endorser on any account. It appears to me that the learned Judge has, while quoting the observations of Lord Wrenbury in Eastern Skipping Company's case L.R. (1924) A.C. 177, had not given due consideration to the last observation of the learned Law Lord that 'the right to indemnity may arise, to use Lord Eldon's words in Waring v. Ward 7 Ves. 322 (a case of vendor and purchaser) in a case in which the Court will 'independent of contract' raise upon his (purchasers') conscience an obligation to indemnify the vendor against the personal obligation of the vendor.'

11. In my view these observations were not meant by the learned Law Lord to be confined only to cases of vendor and purchaser. The principle is of general efficacy and can properly be extended to cases of negotiable instruments as well. The fact that there was no contractual liability on the part of the endorser to indemnify the aggrieved maker does not necessarily mean that there is no equitable obligation on the part of the erring endorser to indemnify, that is, to compensate, the maker for the loss and damage sustained by him as a result of his action. It is true that the endorser who negotiates the promissory note for the full value without giving credit to any payment that he might have received from the maker, may be said to have fraudulently negotiated the note for the full value and that the maker in such an event would have a remedy in the nature of damages; but it will be difficult to say that he had no equitable duty to indemnify the aggrieved maker. It appears to me, to quote the words of Lord Wrenbury in Eastern Shipping Company's case L.R. (1924) A.C. 177, that the Court will 'independent of contract' raise upon the endorser's conscience an obligation to indemnify the aggrieved maker who is put to loss on account of the fraudulent act of the former.

12. For the foregoing reasons I am satisfied that, in the present instance, Govindaraja the endorser who had assigned the promissory notes which accord-to the petitioners are without consideration, has an equitable duty to indemnify the petitioners for the loss which they may sustain if the suits are decreed in favour of the plaintiff-assignee.

13. In the result, the Civil Revision Petitions are allowed, but, under the circumstances, without costs. The applications filed by the petitioners under Rule 1 of Order 8-A, Civil Procedure Code, are allowed but without costs.


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