Andhra HC (Pre-Telangana)
Somisetty Subbarao vs Mynampati Ramakrishna Rao on 24 October, 2007
Equivalent citations: AIR2008AP129, 2008(2)ALT177, AIR 2008 ANDHRA PRADESH 129, 2008 (4) ALL LJ NOC 928, 2008 A I H C (NOC) 501 (AP), (2008) 65 ALLINDCAS 737 (AP), (2008) 4 BANKCAS 229, (2008) 2 ICC 439, 2008 (65) ALLINDCAS 737, 2008 (61) ALLCRIC 28 SOC, (2008) 2 ANDH LT 177, (2008) 3 BANKCLR 204
ORDER G. Yethirajulu, J.
1. This is a revision petition filed by the defendant in O.S. No. 192 of 1990 on the file of the Principal Junior Civil Judge, Ongole.
2. The suit was filed by the plaintiff for recovery of the money. The suit was decreed by the trial Court through the judgment dated 19.1.2000. Being aggrieved by the same, the defendant preferred A.S. No. 27 of 2000 on the file of IV Additional District and Sessions Judge, Ongole and the said appeal was dismissed by confirming the judgment of the trial Court. Being aggrieved by the same, the present appeal is preferred by contending that the plaintiff got the suit promissory note transferred for consideration from the original creditor. Later, he filed the suit against the defendant for recovery of the money. In the revision petition, the defendant took two grounds to convince this Court, that the suit itself is not maintainable as it was filed before the wrong Court, which has no jurisdiction to entertain the suit. It is further contended by the revision petitioner that even though there is a transfer endorsement in favour of the plaintiff, it was made subsequent to the demand made by the original creditor to the defendant through a registered notice. Therefore, the plaintiff cannot become the holder in due course. Therefore, he cannot have better rights than the transferor. Therefore, the suit filed at Ongole is not maintainable.
3. The point for consideration is whether the Court at Ongole has jurisdiction to entertain the suit and whether the suit is liable to be dismissed?
It is an undisputed fact that the transferee of the promissory note issued a legal notice to the defendant on 24.8.1989 demanding the payment of the money covered by the suit promissory note and subsequent to the demand notice the pronote was transferred in favour of the plaintiff on 31.12.1989 through an endorsement for consideration. In order to get the status of holder in due course, the plaintiff has to get the transfer of the promissory note in his favour before making the demand for payment from the defendant.
4. Section 9 of the Negotiable Instruments Act defines holder in due course reads as follows:
"Holder in due course": "Holder in due course" means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or indorse thereof, if payable to order, before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.
According to this section there is a difference between a holder for collection and a holder in due course. A holder in due course is entitled to claim better rights than the transferor. Any defect in the title of the transferor will not affect the rights of the holder in due course. It is only where the transferee of the payee wants to claim higher rights than the transferor that he must satisfy the requirements of a holder in due course as laid down in Section 9. Basavaiah v. Venkamma .
5. Section 9 mentions that when a consideration become payable to the possessor of the promissory note and before the amount becomes payable to the transferee becomes holder in due course. But in the present case, in view of the legal notice issued by the transferor to the defendant on 24.8.1989, he has lost the status of holder in due course as the transfer endorsement obtained by the plaintiff was only on 31.12.1989, which is subsequent to the date of legal notice. So far as the original creditor is concerned, it is an undisputed fact that the suit promissory note was executed at Kandukuru and the, transferor belongs to Kandukuru so also, the defendant. Therefore, the Kandukuru Court was the proper Court to present the plaintiff for the purpose of adjudication of the dispute. But the plaintiff filed the suit at Ongole on the basis of endorsement that the consideration for the endorsement was paid at Ongole and the endorsement was also obtained there.
6. The learned Counsel for the respondent-plaintiff submits that even prior to the endorsement, the transferor and the transferee went to the defendant on several occasions and demanded the money but the defendant failed to pay the amount, ultimately the transferor having felt inconvenient to come from Hyderabad on every occasion therefore transferred the promissory note for consideration in favour of the plaintiff. He also submitted that subsequent to the notice also, the transferor and transferee went and demanded the defendant to pay the amount. Therefore, the cause of action to file the suit at Ongole arose and as the plaintiff became the holder in due course, he has every right to file the suit at Ongole.
7. The learned Counsel for the revision petitioner submitted that the Court at Ongole has no jurisdiction to entertain the suit and he relied on certain judgments in support of his contention in Nunna Gopalan v. Vuppuluri Lakkshminarasamma , a Division Bench of Madras High Court held as follows:
Where a maker of promissory note payable on demand has before there being any demand made by the payee paid the amount without asking for the return of the promissory note and the note is endorsed by the payee to a third person without latter's knowledge of the fact of payment, the endorsee is entitled as holder in due course, to sue the maker on the promissory note.
8. In Braja Kishore Dikshit v. Purna Chandra Panda A.I.R. 1957 Ori. 153 (V44 C42 Aug.), while considering the scope of Section 9, the Court held as follows:
(b) Negotiable Instruments Act (1881), Section 9 - "Holder in due course" - Conditions necessary stated.
Under Section 9, in order to be a holder in due course three conditions are necessary, viz.-
(1) that the endorsee becomes the holder in due course when it is for consideration.
(2) he can be an indorsee before the amount mentioned in the promissory note became payable; and (3) without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.
As regards the second condition, that the indorsee can only be a holder in due course when it is endorsed before the amount became payable it can be said that the amount under a promissory note becomes payable either on demand or at maturity.
In S.S.V. Prasad v. Y. Suresh Ktikar , a learned Judge of this High Court held as follows:
Therefore, it is held that the holder in due course of a negotiable instrument can present a suit to recover the amount, covered by it, only in a Court within whose territorial jurisdiction the defendants therein reside, or carry on business; or in a Court within whose territorial jurisdiction, the place at which such negotiable instrument, can be presented, under Sections 68 to 70 of the N.I. Act, is situated.
In Guntupalli Basavaiah v. Nallamothu Venkamma , a learned Single Judge of this High Court held as follows:
The trial Court had not understood the difference between a holder for collection and a holder in due course, which is well established in law. A holder in due course will be entitled to claim better rights than the transferor i.e., any defect in title of the transferor will not affect the rights of the holder in due course. It is only where the transferee wants to claim higher rights than the transferor that he must satisfy the requirements of a holder in due course as laid down in Section 9 of the Negotiable Instruments Act, i.e., for consideration he became the possessor for the instrument from the payee or endorsee before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect in the title of the transferor existed.
In the instant case, it is not the defendant's contention that the suit amount or any part of it was paid to the transferor. Therefore, the transferor herself was entitled to recover the amount due under the promissory note; that being so, the plaintiff-transferee, even though he had not parted with consideration, the learned District Munisif had carefully read the endorsement he would have realized that it is only for collection, and not for consideration. Hence there was no need for the plaintiff to have proved that he parted with consideration. It is also in evidence that the payee, Kotamma, got herself examined as P.W.I and she has no objection to the plaintiff.
9. In the light of the above judgments, the plaintiff cannot be treated as holder in due course, therefore, he cannot acquire better rights than the transferor. When once he has no better rights no part of the transaction regarding the execution of the promissory note passing of the consideration took place at Ongole. Therefore, the Court at Ongole has no jurisdiction to entertain the suit. Therefore, the suit is liable to be dismissed. In the result, the revision petition is allowed. The judgments of the Courts below are set aside. The decrees and judgments passed by the lower Courts decreeing the suit in favour of the plaintiff is set aside. The suit covered by O.S. No. 192 of 1990, on the file of the Principal Junior Civil Judge, Ongole, is dismissed. No costs.