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TMI Blog1957 (4) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... iff. It was contended that the plaintiff, not being the holder of the handnote, could not sue on it, and no decree could be passed in his favour even though the person, in whose name the handhotes stood, was made a party to the suit and he supported the claim of the plaintiff. A question was also raised with regard to the liability of defendants 1 to 3 who are the other members of the family of Kamdeo. They were sought to be made liable on the ground that Kamdeo was the karta of the 'joint family. The trial court held that Kamdeo was not the karta of the family and, therefore, the loan was not binding on defendants 1 to 3. It, however, overruled all other objections raised in defence, and decreed the suit as against the petitioner only. On appeal by the petitioner, the lower appellate- court affirmed the finding of the trial court and dismissed the appeal. Defendant No. 4, thus being aggrieved, made an application in revision to this court. In view of the conflicting decisions of this court as regards the maintainability of such a suit, this case, which was first placed for hearing before a single judge of this court, was referred to a division Bench, which, for the same reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im and thus he not being in a position to give a valid discharge, cannot be entitled to recover the debt and sue for its recovery. 3. As against this, counsel for the plaintiff-opposite party has put forward an argument that in view of benami transaction prevalent in this country, the words in his own name should be treated as conveying no special meaning. This argument is barren of substance. The law relating to negotiable instruments is the law of commerce in general and contains mercantile usages which require that the contract appearing on the face of the instrument should be taken as the real contract and the application of the doctrine of benami will introduce an element of uncertainty greatly hampering the free circulation of negotiable instruments. It is, therefore, as already observed, that the legislature used those words purposely to avoid benami transaction in this respect. 4. Counsel for the plaintiff, has then contended that Section 78 of the Act speaks only of an effectual discharge to the debtor under the instrument and does not deal with the question of the right of suit. According to him, there is no prohibition in the Act against the true owner of the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I may better quote with approval the observation of their Lordships which runs as follows:-- The rule that undisclosed principal could not sue or be sued on bills or notes was, as pointed out by Leake, an exception from the rule which allowed an undisclosed principal to sue and be sued on contracts not under seal made by the agent in his own name. We think this, rule was not extended to bills and notes, not so much because of their analogy to deeds, as because they were governed by the law merchant representing the usage of merchants throughout the western world, and because in the case of instruments intended to be negotiable and to pass from hand to hand usage and policy alike required that the real contract should appear on the face of the instrument . The next case is that of the Privy Council, namely, Firm Sadasuk Janki Das v. Sir Kishen Pershad AIR 1913 PC 146 (B). In that case the appellants before their Lordships of the Judicial Committee took proceedings claiming the amounts due upon certain Hund'is against Mohan Lal, the drawer thereof, and the Maharaja Sir Kishen Pershad Bahadur on the allegation that the former drew the Hundis as ah agent and on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1930 Pat 313: 11 Pat LT 255 (C). This is also a single judge decision. In this case a suit was brought to recover the money due on a promissory note executed by defendant No. 1 in the name of defendant No. 2. The plaintiff's case was that the money was advanced by him and the note was taken in the name of defendant no. 2 as his benamidar. One of the pleas, taken in defence was that the suit was not maintainable at the instance of the plaintiff. The trial court gave effect to this plea and dismissed the suit. The plaintiff, therefore, moved this, court in revision. In this court defendant No. 2 appeared through an advocate and admitted that the plaintiff was the real beneficiary and that he was a mere benamidar, and it was, therefore, contended on behalf of the plaintiff that the real beneficiary under a promissory note was not debarred from suing on its basis if he could discharge the maker thereof. This contention was accepted by Kulwant Sahay, J., on the ground that Section 78 of the Act did not debar such a suit. In corning to this conclusion his Lordship ignored to look to the form and-the legalistic view of the section, as will appear from the following observation made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the true owner and that in order to construe the Act it would not be proper to find out what the law Merchant was before the Act was enacted. In my opinion, the above, decision is nothing more than an obiter dictum. Moreover, this case was not followed by a subsequent Division Bench of the Calcutta High Court itself in the case, of Harkishore Barua v. Gura Mia Chowdhry AIR 1931 Cal 387: ILR 53 Cal 752 (P). That was a case exactly similar to the present case. In that case the plaintiff brought a suit on the basis of a promissory note executed by defendant No. 1 in favour of defendant No. 2 on the ground that the money was advanced by the plaintiff and that defendant No. 2 was his benamidar. Defendant No. 2 deposed in the suit and supported the claim of the plaintiff. The trial court dismissed the suit on the ground that the plaintiff had failed to prove that the money belonged to him. The lower -appellate court dismissed the appeal of the plaintiff on the ground that under the provisions of the Act the plaintiff not being the holder of the amount could not sue. The High Court in second appeal confirmed the decision of the lower appellate court; Their Lordships did not feel incline ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o show that the signatory was in reality acting for an undisclosed principal. 9. In AIR 1932 Pat. 346 (D) the plaintiff instituted a suit based upon a promissory note executed by defendant No. 1 in favour of defendant No. 4 who was alleged to be a benamidar of the plaintiff. It was contended on behalf of defendant. No. 1 that the plaintiff had no right to sue. It was held by this Court that in a suit on a pronote in which the holder, though not a plaintiff, is a party and the plaintiff, the real owner, is in a position to give to the drawer through the holder a discharge, the plaintiff can maintain the suit. Their Lordships in coming to this decision relied on the Calcutta case of AIR 1928 Cal 148 (O) and the case of AIR 1930 Pat 313 (C) which followed that Calcutta case. The attention of their Lordships was not drawn to the later decision of the Calcutta High Court in AIR 1931 Cal. 387 (P), which dissented from the case of AIR 1928 Cal. 148 (O). Their Lordships, however, were not prepared to say that a beneficiary can maintain a suit on a pronote without any reservation or restriction but they took the view that different considerations arise where, in effect, the suit is toy t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Judge decision of this Court in! AIR 1930 Pat. 313 (G) his Lordship clearly stated that he disagreed with that decision and would treat it as overruled. 12. The case of (17 Pat LT 919: AIR 1937 Pat 100) (I) is a Full Bench decision of this Court. This Full Bench overruled the decision in (15 Pat LT 576 : AIR 1934 Pat 382) (H) as regards the mode of assignment of a negotiable instrument. The question as to the maintainability of a suit by a beneficiary was not decided in that case. In the course of the judgment, however, their Lordships noticed that there is a current of decisions to the effect that where a handnote is executed in favour of a benamidar, it is not open to the defendant to assert that the holder of the note is not the beneficial owner, and, conversely, that if a suit is to be based on the handnote, it must be instituted by the holder whose name appears on the note, not by another person who alleges that the original holder is his benamidar and that he is the beneficial owner. . 13. In AIR 1939 Pat 347 (J) which is a single Judge decision, the plaintiff instituted a suit on the basis of a handnote executed in his favour. The defence taken was that 'the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle of law. Moreover, in this case the header was a party to the suit though in the capacity of a guardian for the minor son, the plaintiff. 15. In AIR 1950 Pat 493 (L) a suit was Instituted for recovery of money from defendant No. 1 being the amount proportionate to his liability under a handnote executed by him along with other persons who had paid up their respective share of the debt, in favour of defendant N. 4 who was, alleged to be a benamidar for plaintiff No. 1 and his case was that he had actually advanced the money. The suit was contested, inter alia, on the ground that it was not maintainable at the instance of the plaintiffs. It was contended in this Court that the plaintiffs who were not the holders of the promissory note could not maintain a suit for recovery of the, amount due thereon even though the holder who is defendant No. 4 is admittedly the benamidar and is impleaded in the suit. Their Lordships accepted this contention and observed that Section 78 of the Negotiable Instruments Act is imperative and precludes the maker when sued upon the instrument from pleading discharge of payment to any one but 'the holder' and that no one can claim the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruments Act that'a promissory note executed in favour of a named payee is payable to his order, and is a negotiable instrument, and a person who is neither .a payee nor a holder in due course thereof cannot recover on it. In another Division Bench decision of that Court in Krishnaji Shivaji Pawar v. Hanmaraddi Mallaraddi AIR 1934 Bom 385 (R) also it was held that the holder of a promissory note is alone entitled to maintain a suit on the note for the recovery of the money due thereon. 17. On behalf of the plaintiff opposite party, reliance has been placed on the case of Chaitram Chaudhary v. Mohanlal Sarjoo P-rasad (AIR 1957 Nag. 65 (S) and that of Rairam Kishore v. Ram Prasad AIR 1952 All 245 (FB) (T). In the Nagpur case it was held that if the person in whose name the document stands is a party to the litigation even as a defendant, and does not dispute the plaintiff's right to recover the loan and gives a valid discharge, there seems no reason why the suit should not be maintainable and why the decree should not be made in favour of the real owner. Reliance was placed in that case on the earlier decisions of this Court reported in AIR 1930 Pat 313 (C) AIR 1932 Pat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iciary and is prepared to get a valid discharge for the debtor. I have already expressed my opinion in this regard while dealing with earlier decisions of this Court taking similar view and for the reasons given therein I disagree with the view taken in these two cases. 19. On consideration of the authorities as discussed above, I cannot but hold that a person, who is not a holder of a negotiable instrument cannot maintain a suit for recovery of money due under it even though the ostensible holder is made party defendant in the suit and he supports the claim of, the plaintiff. The decisions of this Court taking a contrary view are not, in my opinion, correct, and they are overruled. 20. It was next contended on behalf of the plaintiff opposite party that if a -decree could not be passed in favour of the plaintiff, it may be passed in favour of defendant No. 5 who is the named payee, in the promissory note in question. Since, however, defendant No. 5, did not make any such prayer, nor has he appeared before us to lay any such claim, it is not necessary to deal with this matter in this case. 21. For the reasons given above, the decree of the trial court cannot be maintained. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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