Patna High Court
Bank Of Behar Ltd. vs Madhusudan Lal And Anr. on 16 March, 1937
Equivalent citations: 170IND. CAS.451, AIR 1937 PATNA 428
JUDGMENT Wort, J.
1. This is a very clear case and in my judgment quite hopeless from the point of view of the defendant-respondents. The plaintiff, the Behar Bank, sued two parties, defendant No. 1 and defendant No. 2. Defendant No. 1 executed a promissory note for Rs. 1,690 which it is now said was executed for a loan made to defendant No. 2. It may very well be that the loan was for defendant No. 2, but in the circumstances pi the case, as will be seen, that question' is quite immaterial. The Judge in the Court below has given judgment against defendant No. 2 on the footing that the loan was advanced to him and he has said that the decision of their Lordships of the Judicial Committee of the Privy Council in Sadasuk Janki Das v. Sir Kishen Pershad 46 C 663 : 50 Ind Cas. 216 : AIR 1918 PC 146 : 46 IA 33 : 29 Cr. LJ 340 : 17 ALJ 405 : 25 MLT 25 : 36 MLJ 429 : 21 Bom. LR 605 : 1 UPLR (PC) 37 : (1929) MWN 310 : 23 CWN 937 :10 LW 143 : 12 Bur. LT 160 (PC), is applicable to oases where the creditor advances money under the belief that, the executant of the document is the real debtor or in cases where he is led to believe like that.
2. That is a completely erroneous statement of the law. Under the ordinary law of contract if an agent acts on behalf of the principal, the principal being disclosed, the creditor is entitled to sue the principal: Section 230, Contract Act, would apply. But that is not this case. The law under the Negotiable Instruments Act is an exception and Section 28, Negotiable Instruments Act, 1881, applies, that is to say, the person liable is the person whose name appears on the face of the bill and no other person can be held liable unless it is clearly indicated on the face of the instrument that the agent is acting in his behalf. This statement is supported by a large number of decisions on the Bills of Exchange Act, 1882, in England and at Common Law, and in India specially by the case reported in Sadasvk Janki Das v. Sir Kishen Pershad 46 C 663 : 50 Ind Cas. 216 : AIR 1918 PC 146 : 46 IA 33 : 29 Cr. LJ 340 : 17 ALJ 405 : 25 MLT 25 : 36 MLJ 429 : 21 Bom. LR 605 : 1 UPLR (PC) 37 : (1929) MWN 310 : 23 CWN 937 :10 LW 143 : 12 Bur. LT 160 (PC), to which I have already referred. The promissory note here admittedly was executed by defendant No. 1 and there is no suggestion by either party that there was any indication on the face of the bill that defendant No- 2 was the real debtor. The only way to get out of that was for the plaintiff, if he desired, to make defendant No. 2 liable or to have sued the defendant on the loan and not on the promissory note. That raises the first question which is argued before me.
3. It is contended by the learned Advocate appearing on behalf of the respondents that the action was on the debt and not on the promissory note. It is true that it was for the balance due en the promissory note, to say the least of it. But I think it is abundantly clear, when the pleadings are looked into, that tie action was on the bill or promissory note. Paragraph 1 of the plaint alleges that the defendant executed the promissory note in lieu of the said loan: Paragraph 7 gives the date of the promissory note as the date of the cause of action; and pare. 7 of the written statement avers that defendant No. 2 requested this defendant to execute a promissory note and assured this defendant that as the ornaments were valued at much more than Rs. 1,800 there was no risk in this defendant executing the promissory note. If the plaint had been a plaint in an action on the debt, and if the defendant had understood that to be, the written statement would be quite different from what it was. The defendant would have ignored the promissory note and stated that be was acting in the matter of the loan on behalf of the defendant and that the plaintiff knew that to be the case. There is no suggestion in the written statement which would entitle (if the matter was dealt with strictly as it ought to be) the defendant to raise the question of the exception under Section 28, Negotiable Instruments Act, that is to say, inducement by the plaintiff to sign the bill on the footing that he 'defendant No. 1) would not be liable. There is no such suggestion in the written statement whatever. It is not surprising, therefore, that no cross-examination of the plaintiff's only witness was directed to that point, nor was any evidence given by the defendant himself. His only suggestion was that there was some sort of understanding between him and defendant No. 2. When those facts are stated there could be no way out of giving judgment against defendant No. 1. To put it shortly, defendant No. 1, was liable on the face of the promissory note; it was an action on the promissory note; it was not ah action on the debt; and lastly the defendant neither alleged nor did he prove those facts which would entitle him to take advantage of the exception under Section 28.
4. I have listened to an extraordinary argument to the effect that as the defendant alleged it and as the plaintiff did not deny, it must be taken to be1 proved. What holds good as regards the allegations in the plaint does not hold good as regards the averments in the written statement, and indeed as I have already pointed out, the defendant made no attempt to prove any inducement. The next point was that the appeal was incompetent as judgment had been given against defendant No. 2. The case of the plaintiff was that defendant No. 1 was liable and I suppose he had reason for making him liable. The Court was asked to make both or either of them liable. As the plaintiff has got a grievance the appeal to the lower Appellate Court and to this Court is quite competent. Lastly it is suggested that the matter should go back for the determination of the question of ornaments. Ordinarily speaking defendant No. 1 has got no rights with regard to these ornaments whatever. He was not in the position of a surety. A surety, if security is given for the principal debtor's debt, has certain rights if the security is in any way affected. If there was any fraud on the part of defendant No. 2, the plaintiff may have (I do not say that he has, nor do I wish it to be understood that he has) some grievance; but certainly the defendant has got no action or right against the Bank. The question whether the matter should go back depends very largely upon the evidence of the defendant himself. He makes no grievance in his evidence as to the handing back of the ornaments, for they have been handed back to defendant No. 2. He says in his evidence that the ornaments were worth at least Rs. 3,000: gold was dear in 1931. 'Defendant No. 2', says the witness Hold me that the ornaments were worth Rs. 2,500. I believed what he said. At that time I had no idea that I might be deceived.' He then says:
On July 7,1931, I did not ask defendant No. 2 or Haridas to show me ornaments that were pledged in March 1927, I kept no list of the ornaments or their weights. I have no recollection of their weights As the ornaments were sold for much lesser price, I infer that they must have been changed.
5. There are several passages to the effect that the witness knew nothing about the ornaments at all. He had gone entirely on the statement or alleged statement made by defendant No. 1, and in the circumstances it would be waste of public time to allow the case to go back for a decision whether by collusion (by that I understand the argument to mean fraud of the Bank and defendant No. 2) defendant No. 1 has been in some way cheated. If he has got any rights he has got against defendant No. 2, but certainly not against the Bank. Defendant No. 1 (respondent) is the principal debtor and not a surety. I would add one thing further which makes the matter as a point of law beyond any doubt. The allegation of defendant No. 1 was that he was induced either actively by defendant No. 2 or by his own consideration of the matter to execute this hand-note because he thought that there was sufficient security. There is no suggestion that the Bank made any allegation about the security which they held, and it would be impossible, therefore, even if the learned Judge held to the contrary, to hold that as a matter of law the defendant was entitled to set up this defence to an action on the promissory note which I have held this to be. I have already pointed out and I repeat that this is to my mind a very clear case indeed and the judgment of the Court below must be set aside and there must be a decree against defendant No. 1 with interest pendente lite and costs throughout. Leave to appeal is refused.