Patna High Court
Bacha Prasad vs Janki Rai And Ors. on 10 April, 1957
Equivalent citations: AIR1957PAT380, 1957(5)BLJR331, AIR 1957 PATNA 380, ILR 36 PAT 724
Author: Chief Justice
Bench: Chief Justice
JUDGMENT Choudhary, J.
1. This application by defendant No. 4 arises out of a suit instituted by the plaintiff-Opposite Party No. 1 on the basis of a handnote alleged to have been executed by Kamdeo, since deceased, father of the petitioner, on the 15th of November, " 1946, in the name of defendant No. 5, who is opposite party No. 2, on the allegation that the plaintiff was the real beneficiary under the hand note as the money was advanced by him and that defendant No. 5 was merely his benamidar. Defendant no. 5 did not file any written statement, but gave evidence in the suit on, behalf of the plaintiff and supported his claim. The suit was contested by the petitioner on various' grounds one of which with which only we are concerned in this application was that it was not maintainable at the instance of the plaintiff. 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 reasons, referred the same to a larger Bench.
2. In this court the finding of the courts below regarding the genuineness of the hand-note and the liability of the petitioner under it have not been challenged. It may also be noted that, admittedly, the suit is based only on the handnote and not on the original consideration. The only question, therefore, that has been raised before us is whether the plaintiff could sue as a beneficiary for recovery of money due under the handnote executed in the name of defendant, No. 5 whom he alleges to be his benamidar. Mr. Verma appearing for the petitioner has contended that in view of the provisions of Section 78 read with Section 8 of the Negotiable Instruments Act, hereinafter to be referred to as the Act, the plaintiff had no right to maintain the suit. His contention is that the plaintiff, not -being the holder of the handnote in question, was not entitled in law to institute a suit on its basis. The argument seems to be we'll founded. Section 78 of the Act lays down that subject to the provision of Section 82, Clause (c), payment of the amount due on a promissory note, bill of exchange or cheque must, in order to discharge the maker or acceptor, be made to the holder of the instrument. It is admitted that clause (c) of Section 82 has no application to the present case. Therefore, under this section, a discharge could be given in this case to the maker of the promissory note only by making, a payment to the holder thereof. The term holder . of a promissory note, bill of exchange or cheque has been defined in Section 8 of the Act to mean 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 use of the words "any person entitled in his own name" is very significant. They were inserted by the legislature with a view to prevent any one from claiming the rights of a holder under the Act, on the ground that the ostensible holder is his benamidar. Thus, a beneficiary cannot be called a holder of the instrument and a payment to him cannot discharge the maker thereof. The plaintiff in the present case is not entitled in his own name to the possession of the handnote in question and to receive or recover the amount due thereon from the petitioner. Therefore, no valid discharge could be given to the maker of the note by making payment to him 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 aviod 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 instrument bringing a suit thereon. It has, therefore, been argued that if a beneficiary under a promissory note can secure a valid discharge for the debtor, there is no bar to the maintainability of a suit thereon by him. This argument has found favour in some of the decisions to which reference will be made later on. To me, it seems to be a novel proposition. II this is accepted, then any stranger may institute a suit on a negotiable instrument and say that he is prepared to secure a discharge from the holder of the note and a decree may be passed in his favour. An interpretation of the section in favour of this proposition will sacrifice both the spirit and the form of the law on negotiable instruments and it will be wrong to say that the object of section 78 is only to secure effectual discharge. In my opinion, the provision of this section for securing discharge by payment to a holder only necessarily, even as a matter of construction, prohibits any one but a holder to sue on the instrument.
5. The English law of negotiable instruments is founded upon the law Merchant of England and the Negotiable Instruments Act has been moulded upon the English Act with slight modification. According to the law Merchant, no person could sue unless he was a named payee promisee or was entitled as indorsee or bearer or could" be sued unless on the face of the instrument he appeared as party by name or designation. The above principle, therefore, equally applies to a" case coming under the provisions of the Negotiable Instruments Act.
6. The earliest case on the point under consideration brought to our notice is a Full Bench decision of the Madras High Court in Subba Narayana Vathiyar v. Ramaswami Aiyar, ILR 30 Mad 88 (A). In that case the payee named in a promissory note instituted a suit for recovery of money due under it. The plea taken by the defence was that the plaintiff was only a benamidar for another person who had advanced the consideration for the promissory note and that the sum had been discharged by payment to him. It was held that under the provisions of Sections 78 and 8 of the Act the maker of a negotiable instrument, when sued on it, is precluded from pleading discharge by payment to any one but "the holder" and that no one could claim the rights of a "holder" under that Act on the ground that ostensible holder was a mere benamidar. In that connection 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 latter. The question raised was that the form in Which the Hundis were drawn could not charge the Maharaja.' Their Lordships did not find anything in the Hundig by which the Maharaja could be bound and rejected the contention to the contrary. In that connection their Lordships held that 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 recognised as the document passes from hand to hand. Their Lordships further held that it 'is contrary to established rules to contend that in an action on a bill of exchange or a promissory note against a person whose name properly appears as party to the instrument, it is open either by way of claim or defence to show that the signatory was in reality acting for an undisclosed principal.
7. The decisions of this court are conflicting. Cases reported in 'Sarjug Singh v. Deosaran Singh, AIR 1930 Pat 313 (C), Surajman Prasad v. Sadanand Misra, AIR 1932 Pat 346 (D); Ram Nagina v. Bishwanath Prasad, 15 Pat LT 102: (AIR 1934 Pat 85) (E) and Anathabandhu v. Babu Lal, AIR 1943 Pat 79 (F), have been relied upon on behalf of the plaintiff in support of his contention, whereas, on behalf of the petitioner, reliance has been placed on the cases reported in Ram Das Sahu v. Chhota Lal,, AIR 1928 Pat 24 (G), Pearey Pasi v. Gauri Lal, 15 Pat LT 576; (AIR 1934 Pat 382) (H), Ghanshyam Das v. Ragho Sahu, 17 Pat LT 910: (AIR 1937 Pat 100) (FB) (I) Raghubir Mahto v. Ramasra Bhagut, AIR 1939 Pat 347 (J), Hriday Singh v. Kailash Singh. ILR 19 Pat 404: (AIR 1940 Pat 377) (K), Sarajoo Prasad v. Sm. Rampayari Debi AIR 1950 Pat 493 (L) and Awadhihari Singh v. Sheoshankar, AIR 1955 Pat 451 (M) in support of his contention. I will deal with these cases according to their chronological order.
8. The first case on the point is that of AIR 1928 Pat 24 (G) which is a single Judge decision. In that case the plaintiff claiming as beneficial owner instituted a suit on a promissory note executed by defendant No. 1 in the name of defendant No. 2. It was conceded that the plaintiff could not maintain such a suit under the Act.' Thus, there was no decision of this court on the point and it is of no assistance for deelding the question . The next case is that of AIR 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 fol-loving observation made by him:--
"The object of section 78 is to secure a valid discharge to the maker of the note. If the person who is, ostensibly the holder of the promissory note, is made a party to the suit, and in his presence it is alleged that the plaintiff is the real beneficiary and that the ostensible holder was not, the real holder of the instrument, and he can prove his allegation by evidence or by the admission of the ostensible holder of the instrument, I see no reason why such a suit should not be maintainable.'' I have already rejected the argument to this effect and I am unable to agree with this reasoning. His Lordship referred to the Full Bench decision of the Madras High Court in ILR 30 Mad. 88 (A), and a decision of the Allahabad High Court in Reoti Lal v. Manna Kunwar ILR 44 ' All 290: AIR 1922 All 70 (N) which followed the above Madras Full Bench decision, but relying on a Division Bench decision of the Calcutta High Court in Brojo Lal Sana. v. Budh Nath AIR 1928 Cal 148: ILR 55 Cal 551 (O), which did not accept the correctness of the above decisions, disagreed with the view taken in those cases. The facts of the Calcutta case are these; There was a firm in the name and style of Budh Nath Peari Lal Das of which Peari Lal Das was one of the partners. This firm brought a suit for recovery of a sum of money alleged to have been lent to, the defendant for which a promissory note was made by him in favour of Peari Lal Das. The plaint was ' signed and verified by Peari Lal Das as being one of the partners of the firm. The plea taken was that the plaintiff had no right to sue for the debt. It was contended that, having regard to the provision of Section 78 read with Section 8 of the Act, the plaintiff-firm was incompetent to institute the suit. In reply to this contention, it was urged on behalf of the plaintiffs-respondents that, as a matter of fact, the holder of the note is one of the plaintiffs in the cause and the objection raised by the appellant is not maintainable. Their Lordships accepted this contention of the respondents and observed that that was sufficient for the purpose of deciding the case. After that, since the parties had elaborately argued the point, their Lordships decided the further question raised in the case and held that Section 78 does not prohibit any person, other than the holder to bring a suit if that that person is 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 inclined to accept the view taken in the case of AIR 1928 Cal 148 (O) as the opinion expressed in that case on the point under consideration was purely an obiter dictum. Suhrawardy, 'J., in his concurring judgment made the following observation in reference to that case;
"If the view taken in AIR 1928 Cal 148 (O) be adopted, the result will be that the maker of a promissory note would be liable to pay the amount to the true owner, but he would not obtain discharge under Section 78, and would still remain liable on the promissory note to the holder even though he is a benamidar. Further, to hold that the beneficial owner, though not the holder, can maintain an action on a promissory note will do away with the necessity of endorsement which is the only mode of transfer of title to it under Section 48 of the Act. The fact that the benaraidar in the present case is a party and is estopped from claiming payment on the promissory note from the debtor by his conduct is another matter and has nothing to do with the statutory law as enacted by the negotiable instru-merits Act. It is further observed in this connection in AIR 1928 Cal. 148 (O) that there is no harm if a decree is made in favour of the true owner. That may be so, but you cannot ignore statutory law in favour of justice and equity."
On consideration of the various authorities and provisions of law in different enactments including the Negotiable Instruments Act their Lordships held that a person even if he is the true owner is not competent to prosecute the suit, if he is not the holder of the note, and the fact that the holder of the note has been made a party and has admitted that he is only the plaintiff's benamidar, makes no difference, and that the property in the note, including the right to receive or recover the amount due thereon is vested in the holder and cannot be transferred to the plaintiff except by the process prescribed by law. Thus, the authority of the Calcutta case on which much reliance was placed by his Lordship in the above Patna case was itself, shaken by a subsequent decision of that court. Moreover, the Privy Council case of AIR 1918 PC 146 (B) does not seem to have been brought to the notice of his Lordship in which there was a clear observation to the effect that in an action on a bill of exchange or a promissory note, it was not open either by way of claim or defence to 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 the holder himself. The Sections of the Act, however, do not warrant, in my opinion, any such conclusion or differentiation. With great respect to the learned Judge who decided that case, I do Rot agree with the view taken by them.
10. In 15 Pat LT 102 : (AIR 1934 Pat 85) (E) the suit was for recovery of a sum of money advanced by the joint family of the plaintiff and the handnote was taken in the name of his mother (defendant No. 6) who was then acting as the guardian of her minor son. The question, raised was whether the plaintiff could sue on the handnote standing in the name of his mother. Kulwant Sahay, J., who delivered the judgment, Courtney-Terrell, C. J., agreeing relied on his own decision in AIR 1930 Pat. 313 (C) and on the Bench decision of this Court in AIR 1932 Pat. 346 (D) and held that the suit was maintainable.
11. In 15 Pat. LT 576: (AIR 1934 Pat 382) (H) defendant No. 1 borrowed money from his aunt since deceased and executed a handnote' in
-favour of defendant No. 2. The plaintiff took an assignment of that handnote from the aunt and defendant No. 2 executed a document acknowledging that the aunt was the real beneficiary of the handnote and he assented to the assignment. The plaintiff instituted a suit on the basis of the handnote. The Plea taken in defence that defendant No. 1 had paid the amount of the note to defendant No. 2 was not accepted by the trial court which decreed the suit. In revision, defendant No. 1 contended in this Court that the plaintiff, not being either the payee or a holder in due course had no title to sue on the note. Their Lordships accepted this contention and relied on the Full Bench decision of the Madras High Court in ILR 30 Mad. 83 (FB) (A) and the Bench decision of the Calcutta High Court in AIR 1931 Cal 387 (P). The suit of the plaintiff was accordingly dismissed. Courtney-Terrell, C. J., who delivered the Judgment and who was a party to the case of 15 Pat LT 102: (AIR 1934 Pat 85) (E) distinguished that case and the case of AIR 1932 Pat 346 (D) on the ground that they only purported to decide that if a suit is brought nominally by a person: other than the holder, but really on behalf of the holder who is also a party to the suit, there is no reason why the suit should not succeed and observed that they were rightly decided, although in the earlier portion of the judgment in reference to the single 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 plaintiff was a mere benamidar. It was held, following the . Full Bench decision of the Madras High Court in ILR 30 Mad 88 (A) and the Bench decision of the Calcutta High Court in AIR 1931 Cal 387 (P); that the only person who is entitled to sue upon a note is the person whose name appears oh the note as payee and any other person alleged to ba entitled to bring a suit must first obtain an endorsement from the payee making such other person the holder in due course and that in a suit brought by the payee on a note having no endorsement it is not open to the opposite party to plead that the payee is a mere benamidar. In ILR 19 Pat 404: (AIR 1940 Pat 377) (K) it was held by a Bench of this Court, following the Full Bench decision of the Madras High Court referred to above that in a suit based on a negotiable instrument it is not open to the defendant to plead that the holder of the note, namely, the payee, is not the person entitled to recover on it, that is to say, the defendant cannot plead that the person to whom the money is due is not the plaintiff who is the specified payee, but someone else. With regard to the decision in AIR 1930 Pat 313 (C) their Lordships observed as follows:
"Kulwant Sahay, J., sitting singly, disagreed with this decision' (the decision of ILR 30 Mad. 88 (FB) (A) in AIR 1930 Pat 313, (C), but the decision of Kulwant Sahay, J., was disapproved by a Division Bench in 15 PLT 576: (AIR 1934 Pat 382) (H). Although this last mentioned case has been overruled on another point by the Special Bench in 17 Pat LT 919: (AIR 1937 Pat 100) (I) it is still good authority for the view that the decision in AIR 1930 Pat 3J3 (C) is not good law."
14. In AIR 1943 Pat 79 (F) which is a single Judge decision, a suit was brought by a minor through his father as his guardian on the basis of a handnote executed in the name of his 'father. The question raised was that the plaintiff, not being the holder of the handnote, could not sue on it. Chatterji, J. relying on some of the earlier decisions of this. Court discussed above, held that the suit was maintainable. In that connection his Lordship observed that to hold that under Section 78, Negotiable Instruments Act, the present suit is not maintainable will be sacrificing the spirit of the section to its form. For the reasons already given, the view taken in this pase cannot be accepted to be enunciating a correct 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 right of a holder under the Act on the ground that the ostensible holder is a mere name lender. Their Lordships further observed that it is manifest that the maker of a promissory note can obtain the discharge of a debt by payment to the holder alone and to none else and it makes no difference whether the holder is a benamidar or is a- true owner and that to say that payment to any one except the holder of the handnote will not discharge the debt is tantamount to saying that no one can recover the debt from the maker of the promissory note except the person in whose favour it is made or, who is the holder thereof. It was, therefore, held that a person who is not the holder of the promissory note cannot maintain a suit for the recovery of the amount due thereon even though the holder is admittedly the benamidar and is impleaded in the suit. In coming to this conclusion their Lordships relied on the Law Merchant and on the decisions in ILR 30 Mad. 88, (FB) (A); ILR 44 All 290: (AIR 1922 All 70) (N); AIR 1931 Cal 387 (P), AIR 1918 PC 146 (B) and ILR 19 Pat 404 : (AIR 1940 Pat 377) (K) with regard to the case of AIR 1930 Pat 313 (C) their Lordships observed that it was disapproved in ILR 19 Pat 404: (AIR 1940 Pat 377) (K) and with -regard to the decisions in AIR 1932 Pat 346 (D) and 15 Pat LT 102: (AIR 1934 Pat 85) (E) they observed that in view of the decision of the Judicial Committee in AIR 1918 PC 146 (B) their authority is very doubtful. In my opinion, the view taken in this case on the point under consideration is, if I may say so with respect, the most natural and rational view, and I fully agree with the same. This case was followed in a subsequent Bench decision of this Court in AIR 1955 Pat 451, (M) wherein it was held that it is the holder of the promissory note who alone is entitled to maintain a suit on the note for the recovery of the money due thereon and that the true owner who is not a holder cannot maintain a suit on a promissory note even : though the holder is his benamidar.
16. The view taken by the Bombay High court is also in favour of the non-maintainability of a suit on a promissory note at the instance of a person who is neither a payee nor a holder thereof, but claims to be a beneficiary under it.
In Virappa Andandaneppa Manvi v. Mahadevappa AIR 1934 Bom 356 (Q) it was held that it is quite clear by the definition in the Negotiable Instruments 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 346 (D) and 15 Pat LT 102: (AIR 1934 Pat 85) (E) which have already been discussed above. No notice however, seems to have been taken of the later- decisions of this Court reported in 15 Pat LT 576: (AIR 1934 Pat 382 (H); ILR 19 Pat 404: (AIR 1940 Pat 377) (K); AIR 1950 Pat 493(L) and AIR 1955 Pat 451 (M) in which, as already stated, a contrary view" Was taken.
18. In the Allahabad Full Bench case the plaintiff formed a joint Hindu family with his brothers. They had a joint family firm under the name and style of Piru Lal Radha Ravan. The respondent executed four promissory notes in the name of one of the two brothers of the plaintiff as payee. This brother was the karta of the joint family and the money was advanced from the joint family fund. On partition by a decree of the court, these promissory notes fell to the share of the plaintiff and the payee named in the notes filed them in court to be delivered to the, plaintiff who took them back from the court and instituted a suit for recovery of the money due under them. It was pleaded that the plaintiff not being a holder of the notes could not sue on them. It was held that the plaintiff alone was entitled to recover the amount and the suit at his instance was maintainable. In that case their Lordships took the view that after the allotment of the promissory notes to the plaintiff in partition by a decree of the court the payee named in the notes ceased to be a holder thereof and at the time of the filing of the suit there was no holder of these notes. Consequently, their Lordships came to the conclusion that in case of there being no holder of a promissory note the person who is entitled to the money due under it has a right to institute a suit to recover it. Their Lordships, thereafter, supported their view on analogy of a case where the sole payee is dead and his heirs or legal representatives sue on the note as well as of cases where the persons suing have acquired the right to recover the money by opera-lion of law. The case of devolution of interest by inheritance or by operation of any other law, in my opinion, stands entirely on a different footing. The Act does not purport to affect devolution of rights by operation of law. The principles of these cases cannot by analogy apply to a case where a payee named in the note is alive and a stranger comes and sues on the ground that he is the real beneficiary 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. It is accordingly set aside and the suit of the plaintiff is dismissed with costs throughout. Hearing fee: Rs. 64.
Ramaswami, C.J.
22. I fully agree with the reasoning and conclusion of my learned brother R. K. Chaudhary, J.
Jamuar, J.
23. I agree, and have nothing to add.