Madras High Court
Kadarkarai Reddiar vs Arumugam Nadar on 10 January, 1992
Equivalent citations: AIR1992MAD346, AIR 1992 MADRAS 346, (1993) 2 BANKLJ 108, (1993) 1 CIVLJ 154, (1992) 2 MAD LW 307
JUDGMENT
1. This appeal by the plaintiff is against the dismissal of his suit O.S. No. 523 of 1979 on the file of Sub Court, Tirunelveli. The suit is for recovery of Rupees 10,000/- as principal with interest due on a promissory note alleged to have been executed by the defendant.
2. The case of the plaintiff as found in the plaint is that he lent Rs. 10,000/- to the defendant on 5-10-1975 and obtained from him a promissory note, wherein he agreed to pay interest at the rate of 12% per annum along with principal on demand, that the defendant did not choose to discharge the promissory note in spite of the plaintiff's written demand by notice dated 6-10-79 and that the suit is filed belatedly only in view of the operation of stay and bar of suit against the defendant by virtue of Act 15 of 1976.
3. The plea in the written statement may be summarised as follows: The defendant borrowed only a sum of Rs. 2,000/- from the plaintiff and signed two blank papers affixed with stamps as a result of compulsion of the circumstances. He agreed to pay 36% interest for the sum of Rs. 2,000/- acting under acute necessity. He did not receive Rs. 10,000/-from the plaintiff. He has paid the total interest of Rs. 60/- to the plaintiff due for several months and finally paid back the principal of Rs. 2,000/ - in March, 1979. Then he requested the plaintiff to return the stamped and signed papers kept by him. The plaintiff explained that he has kept the papers in a safe place during the period of stringent execution of MISA, that he found ii difficult to get back the papers and promised to trace and return them to the defendant in due course. The plaintiff did not issue receipt for having received Rs. 2,000/- in repayment. The plaintiff has fabricated the promissory note upon the blank papers containing the defendant's signature. He sent a reply notice describing the real position.
4. On the above pleadings, the trial Court has come to the conclusion that the plaintiff has not proved the execution of the abovesaid promissory note Ex. A. 1 after it was completely written and that Ex. A. 1 is not a genuine promissory note.
5. The learned Counsel for the appellant made only the following three submissions before me. The first submission is that the Court below erred in coming to the conclusion that the promissory note was not executed after it was completely written. The second submission is, even assuming that at the time when the defendant affixed his signature on the stamp of Ex. A. 1, it was blank, the plaintiff gets authority to complete the promissory note under Section 20 of the Negotiable Instruments Act (hereinafter referred to as 'the Act') and that hence, the plaintiff can maintain this action. He also argues as his third submission that at any rate, the Court below ought to have granted a decree for Rs. 2,000/- with interest at the rate of 36% per annum since the defendant has admitted the borrowing of the said amount on the said rate of interest and since there is absolutely no documentary proof of the alleged discharge of the said borrowing with interest.
5A. On the other hand the learned Counsel for the respondent reiterates the correctness of the findings of the Court below and also contends that Section 20 of the Act will not make the plaintiff holder in due course. He maintains that there can be no decree even for the abovesaid sum of Rs. 2,000/- with interest since the said sum and interest due thereon every month had been repaid as per the evidence given by the defendant as D.W. 3.
6. I shall first deal with the first of the abovesaid three submissions of the learned Counsel for the appellant. Even at the outset, I must state that though Ex. A. 1 dated 5-10-1975, there is no evidence of any demand for the sum due under the promissory note till 6-10-1979, when the suit notice Ex. A.2 was issued by the plaintiff. P.W. 1, the plaintiff did not even depose that there was at least some oral demand for the amount due under Ex. A.1 any time prior to Ex. A.2 suit notice. There is also no explanation by P.W. 1 as to why a belated notice of demand was made only 4 years after 5-10-1975 under Ex. A.2. No doubt, the learned Counsel for the appellant submits that the debt relief Act prevented the plaintiff from filing the suit. But those Acts did not prevent the plaintiff from making the demand for the return of the amount borrowed by the defendant. It cannot be said that in view of the bar under the said Acts for filing a suit, the plaintiff would have simply kept quite, without making demands for the return of the amount by the defendant. On the other hand, in view of the abovesaid bar, the plaintiff would have indeed thought of making more demands on the defendant and of somehow trying to realise the amount without resorting to Court. That apart, both the attestors to Ex. A. 1, viz. D.Ws. 1 and 2 have deposed against the case of the plaintiff. In other words they both deposed that Exh. A.1 was blank at the time when they attested Ex. A.1.
Further, it must be noted that both the said witnesses have given evidence pursuant to the summons went to them from the court. No doubt the learned Counsel for the appellant points that only because of threat or com plaint by one Alagu Thevar at the instigation of the defendant, both the said witnesses deposed in favour of the defendant. But, I am unable to believe this version since there is no evidence as to who this Alagu Thevar is and how actually he or the defendant had any power or control over both the said witnesses.
If really the said Alagu Thevar or the defendant had any control or influence over the said witnesses, the defendant would have himself produced the said witnesses for examination instead of seeking summons from the Court. Further, both the witnesses have denied the suggestion by the learned Counsel for the plaintiff regarding the above-
said Alagu Thevar's threat. Further, D.W. 1 had deposed that when he came to the Court earlier along with the plaintiff, he only wanted to tell the truth.
7. Further, as the trial Court also points out, I also find the following features :-- The scribe P.W. 2 has put his signature at the extreme bottom of the front page of Ex, A.I. D.Ws. 1 and 2 have put their signatures two inches on the top of the scribe's signature. The signaturte of the defendant affixed over the stamps in Ex. A.1 occupies the position just as inch below the last full line of the contents of the promissory note and about an inch on the top of the attestators' signatures. The lines making up the last part of the contents of Ex. A.1 are very sparsely written with greater interspace between the lines. Wider spacing between the last lines contrast itself with narrower spacing left between the ones in the earlier part of the body of Ex. A.1. The size and ink of the letters in defendant's signature in Ex. A. 1 differ from the size and ink of the said signature.
8. The learned Counsel for the respondent contends that the plaintiff was also in the habit' of taking such signatures on blank papers affixed with stamp. In this connection he relied on the evidence given by D. Ws. 5 and 6 and Exh, B.1 and B.12, But, in the absence of a specific plea in the written statement, this contention of the said Counsel that the plaintiff was in the habit of taking such signatures on blank papers affixed with stamps, cannot be accepted. However in the light of the abovesaid other factors of the case, I am unable to differ from the conclusion reached by the trial Court that Ex. A. 1 was blank when the defendant put his signature on the stamps affixed to Ex. A.1.
9. Then, let me take the second legal submission of the learned Counsel for the appellant based on Section 20 of the Act. The said Section 20 runs as follows :
"20. INCHOATE STAMPED INSTRUMENTS.-- Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in India, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount. Provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder."
Rut, all that Section 20 confers on the delivery of the stamp paper is an implied prima facie statutory authority authorising him to complete the instrument or to write up full text of the instrument delivered to him and the Section does not say that by the very act of his filling up the blanks, the person to whom the paper is delivered acquires the right of a promisee under a promissory note. Such a person cannot be regarded as a holder in due course of that document. Therefore, he cannot render liable the maker or the person who signed that blank document as a person who is liable under the Act, within the meaning of the second part of Section 20. It has been so held by V. Balasubramnyan, J. in Ramiah Thevar v. Balasundaram, (1982) 1 Mad LJ 431. For holding so, the said learned Judge of this Court relied on a Division Bench judgment of the Bombay High Court in Tarachand v. Sikri Brothers, . That was a case where one Hariram gave the plaintiff therein an inchoate hundi drawn by the defendants therein. The plaintiff discounted the hundi with the Central Bank, and when the Central Bank presented the hundi to the defendants, the defendants dishonoured it. Thereupon, the Central Bank recovered the sum of Rs, 5,000/- from the plaintiff. The plaintiff, thereafter filed the suit against the defendants therein to recover Rs. 5,000/-. In that context, the Division Bench of the Bombay High Court held that the plaintiff therein had no right under Section 20 of the Act to recover the amount from the defendant. The Bench of the Bombay High Court points out that the abovesaid Section 20 provides for two rights in respect of two different persons. One is, right given to the holder of the document, the person who is in possession of the document, the document being all inchoate document and that right is the right to complete it. The other right conferred is upon the holder in due course and that right is that even though the holder in due course might come into possession of negotiable instrument which was not wholly completed by the maker, he has the same right against the maker as if the maker had himself written out the whole of the document if the document has been completed by the person who has come into possession of it as contemplated by Section 20. The Bombay High Court further points out that it is only where a person comes into possession of an instrument, having paid the consideration for it and being a bona fide transferee, he can be regarded as a holder in due course within the meaning of Section 9 of the Act and that the transfer and the negotiation must be of a negotiable instrument and not the transfer of an inchoate document, which is not a negotiable instrument under the Act. Based in the same reasoning as that of the Bombay High Court, V. Balasubramanian, J. in the above-said decision of this Court, also concludes that a person who makes himself the payee of an inchoate document by writing up or completing the negotiable instrument in a blank paper cannot be regarded as a holder in due course of that document. The facts in the above referred (1982) 1 Mad LJ 431 are similar to the present facts. There also the suit was brought for the recovery of a sum due on a promissory note. Inter alia, the defendant pleaded that the suit promissory note could not be sued upon because he merely signed his name on a stamped paper which was blank and which had been filled up at the instance of the plaintiff to make it appear that it was for the abovesaid sum. In the context, V. Bala-subramanian, J., held (concurring with the view expressed in the abovesaid Bombay decision), that the dismissal of the suit therein was quite justified.
10. I also agree with the (view) expressed by V. Balasubramanian, J., and the abovesaid Division Bench of the Bombay High Court. As pointed out by the said decisions, the important point to be noted is that even as per the abovesaid Section 20, the person signing the stamped paper, "shall be liable upon such instrument, in the capacity in which he signed the same to any holder in due course for such amount". So, in the present case also, the defendant, even as per Section 20 of the Act, shall be liable only to any holder in due course for the amount mentioned in Ex. A.1 and the only question to be seen is whether the plaintiff herein is such a holder in due course. Section 9 of the Act defines the term "holder in due course" as follows :--
" '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 indorsee 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."
So, under the abovesaid Section, inter alia, it is necessary for a person to be a holder in due course that he should get possession of the promissory note, bill of exchange or cheque if it is payble to bearer or he must be payee or the indorsee thereof, if payable to order or to the order of payee. In the later case also delivery of the instrument to the payee or to the indorsee is necessary for, no contract on a negotiable instrument is complete without such delivery. [Vide Chapman v. Cottrel, (1865)34 LJ Ex 186, Venkalaramiah v. Official Assignee of Madras, (1910) 1LR 33 Mad 196 (FB) and Bashyam & Adiga -- The Negotiable Instruments Act, 14th Edition, page 163]. But a payee, who lakes an incomplete instrument cannot be said to be a holder in due course because the transfer and negotiation in such a case, to the payee is not of a negotiable instrument, but only of an inchoate instrument, which is not a negotiable instrument.
11. The learned Counsel for the appellant no doubt sought to make a distinction between the abovesaid decision of the Bom-buy High Court and the abovesaid decision of V. Balasubramanian, J. It is indeed strange that the said Counsel while approving the view expressed in the Bombay decision, contends that the said Bombay ruling cannot be applied to the facts of the Madras decision decided by V. Balasubramanian, J. In the Bombay decision, the defendants signed the concerned inchoate instrument and gave it to one Hariram. But, the said Hariram did not fill up the blanks therein but, as it is, gave it to the plaintiff. In such a context only, the Bombay High Court held that the plaintiff cannot recover the amount from the defendants in view of the reasoning already mentioned. The only difference in the abovesaid Madras decision is that the defendant therein gave such an inchoate instrument to the plaintiff therein and the plaintiff sued against the defendant therein. On this alleged difference in the facts, the learned Counsel sought to make a distinction between the Bombay decision and the Madras decision. But, there is absolutely no difference on principle between the two decisions.
12. The said learned Counsel also contends that S. Ahmed Ibrahim v. D. Ramadas, has taken a view different from that of V. Balasubramaniam, J. in the above said (1982) 1 Mad LJ 431 and the view expressed by the above referred to must be followed in the present case. First of all the facts in the above referred to were different from the present case. Ratio decidenti of the said case is where an incomplete instrument, in which the name of the payee was left blank and was signed by A and delivered to B and subsequently A paid the amount due on the note to B and thereafter B in collusion with his brother C and with his full knowledge that the instrument had been discharged inserted the name of the latter in the blank space and completed instrument, A would not be liable on the instrument to C who could not be said to be holder in due course. It was further held, there, that the authority of B as agent of A to complete the instrument under S. 20 of the Act came to an end when the amount of the note was paid to him and the subsequent insertion of C's name as payee was without authority and, therefore, no claim could be founded on the instrument by C. The facts in the above said case were thus different. No doubt, while applying the iaw to the facts in that case, incidentally the learned Judge who decided the said case also observed as follows (at p. 533 of AIR) :--
"These decisions lay down what indeed is clear on the language of S. 20 of the Act that when an incomplete negetiable instrument is executed and delivered, it is open to the holder to complete the instrument by entering his name or that of any other person, that such a person will be a holder under the Act and that he has a right to sue on the instrument as such holder and that in that suit the defendant cannot be heard to contend that he did not execute the instrument in favour of the plaintiff or deliver it to him. If that were the only defence to the suit, it must be held that the written statement does not disclose a defence".
But, this observation of the learned Judge who decided the above said is only an obiter. Further, there is no discussion regarding the implication of the use of the expression "holder in due course" in S. 20. That discussion in there only in the above said, . So, with due respect to the learned Judge who decided , I am unable to agree with the view expressed in the above said passage. No doubt in the above said passage, before the above said observation was made, certain other decisions were referred to by the learned Judge Venkatarama Aiyar, J. particularly Hriday Singh v. Kailash Singh, AIR 1940 Patna 377. But for the reasons already stated, 1 am unable to agree with the view expressed in the above said, AIR 1940 Patna 377 also, regarding the above said question at issue. The other decision Subba Narayana Vathiyar v. Ramaswami Aiyar (1907) ILR 30 Mad 88 (FB) referred to in also, did not decide the point at issue here, but the point decided there was different, viz., that in a suit of negotiable instrument by the payee, it is not open to the defendant to plead that such payee was a mere benamidar.
13. Even in the other decision relied on by the learned counsel for the appellant, viz., Hari Prasad v. Nathuni Sahu, , the facts are different from the present case. That apart, the said also relies on the above referred to AIR 1940 Patna 377. However, in these cases, there is no discussion regarding the expression "holder in due course" used in S. 20 and the implication thereof. Therefore, I am unable to concur with the view expressed in the above referred to Patna decision or the obiter dictum in the above referred to (1982) 1 Mad LJ 431, which relies on the above said decision in .
14. I may also add that in the above referred it was also observed as follows (at P. 291 of AIR) :
"It will be noticed that the right given to complete the document is given to the holder and the holder contemplated in this section is not the holder as defined in the Act itself because it is clear that the definition cannot apply to this expression in S. 20, but "holder" is used in this section in the literal sense of that word, viz., the person who actually holds the document".
In this connection, while referring to this Bombay case, Bashyam and Adiga's The Negotiable Instruments Act, 14th Edition also says at the foot-note No. 9 at page 217 as follows :
"This has been accepted by the Law Commission as correct and for the word "holder" the words, "person who receives the paper, have been suggested to make the position clear --" vide Law Commission, Eleventh Report, pages 34 and 81".
15. So, the net result is, there cannot be a decree in favour of the plaintiff based on Ex. A-1. But it has to be seen whether any decree could be given in favour of the plaintiff on the basis of the above referred to plea taken up in the written statement admitting the borrowing of Rs. 2000/- from the plaintiff, repayable with interest at 36% per annum. In this regard, no doubt, the further plea of the defendant is that he was every month paying the interest due on the above said borrowing, that finally he paid the principal also in March, 1979 and that thereby the said debt had been discharged. But, there is absolutely no documentary proof showing the payment of interest every month on the above said Rs. 2,000/- at the rate of 36% per annum, nor is there any documentary proof of the final repayment of the above said Rs. 2,000/- in March, 1979. There is only the ipse dixit of the defendant as D.W. 3, regarding the same. No doubt D.W. 3 deposed that when he finally repaid the above said Rs. 2,000/- principal to the plaintiff, he demanded Ex.A-1 back but that the plaintiff did not give it back. The Court could believe this version if at least the defendant filed some documentary proof at least for the monthly payments of interest at Rs. 60/- per month for nearly 3 1/2 years from 5-10-1975. He, having not done so, I am unable to accept the mere ipsc dixit of D.W. 3 since, for all the different repayments made during the course of the above said 3 1/2 years, it is difficult to believe that the defendant did not insist receipts from the plaintiff. At least, he should have produced his own accounts or other relevant documents to prove the above said repayments. So, I do not believe the version of the defendant regarding the discharge of the above said admitted loan of Rs. 2,000/- together with interest at the above said rate of 36% per annum. Therefore, I think it would be fair to grant a decree in favour of the plaintiff for the above said sum of Rs. 2,000/- with interest. But the interest rate cannot be as much 36% per annum as it will be usurious and excessive. I think in the circumstances, 12% per annum-interest can be fairly granted till this date and thereafter at the rate of 6% per annum till realisation.
16. In the result, the judgment and decree of the Court below are set aside and a decree is hereby given against the defendant and in favour of the plaintiff for a sum of Rs. 2,000/-with interest at 12% per annum on the said sum from 5-10-1975 till today and thereafter at 6% per annum till realisation. The appeal is allowed to the extent indicated above with proportionate costs throughout.
17. Appeal allowed.