Arathil Kandoth Madhathil Balakrishnan Nambiar vs P.K. Chathu and Others

Alfred Henry Lionel Leach, C.J.—The appellant appeals from a decree of the Court of the Subordinate Judge of Tellicherry holding him

liable as the endorser of a promissory note exec.uted by the second and third respondents and also as a guarantor of payment. In 1929 the first

respondent had money which he wished to invest and got in touch with the appellant. On the 2nd May, 1929, the appellant wrote to the first

respondent advising him to invest his money on the security of immovable property and assuring him that he could make safe investments on his

behalf. On the 11th May, 1929, the first respondent wrote to the appellant stating that if he could get proper security, he would leave the matter of

the investment of his monies entirely to the appellant. He stipulated that there should be interest at 12 percent, per annum and, the investment

should be for six or twelve months. The correspondence clearly shows that the appellant''s instructions were to invest on the security of immovable

property. Instead of carrying out his instructions the appellant lent Rs. 4,500.of the first respondent''s money to the second and third respondents

on the promissory note in suit, without any security apart from the promissory note. The promissory note was drawn by the second and third

respondents in the name of the appellant, who a month later endorsed it over to the first respondent.

On the 12th June, 1929, the appellant wrote to the first respondent a letter in which he said:

The money is as safe as in any bank and you can have it at a week or ten days'' notice. You can rest assured on that point. To-day the party

(merchants) is clearing Rs. 10,000 to Mr. M. Kannan Nambiar as it is the due date and I am arranging another loan for them. All is well; please

don''t worry in the least. Now, 27th is the due date of your money and you can be sure that I will come to Coorg with these men and clear the loan

and interest after which you will be convinced about the safety of the transaction. This is the first of such a transaction you do, but this is not the

10th or 15th that I saw being done. Your money is quite safe. Please don''t worry.

The second and third respondents did not pay when called upon to do so and the first respondent instituted a suit against them and the appellant

on the 20th June, 1932. The claim against the appellant was not limited to his liability as an endorser. The plaint was sufficiently widely drawn to

include a claim against him as a guarantor.

Section 35 of the Negotiable Instruments Act provides that in the absence of a contract to the contrary a person who indorses and delivers a

negotiable instrument before maturity without expressly excluding his liability is liable to the holder. There was here no contract between the

appellant and the first respondent when the endorsement was made. The promissory note was endorsed without any stipulation and without any

communication with the first respondent. In these circumstances the appellant is liable on the instrument in suit. His learned advocate has argued,

that he is not liable on the ground that there was no consideration for the endorsement, and has relied on the provisions of Section 43 of the

Negotiable Instruments Act. We are unable to accept this contention. The consideration for the promissory note was the Rs. 4,500 paid by the

first respondent and the endorsement of the instrument to the first respondent was part and parcel of the same transaction.

The appellant had deliberately disobeyed his instructions and had lent money on this promissory note without security. We consider that the fact

that he had the instrument drawn in his own name shows that he intended to share the liability. He knew full well that if the first respondent was not

satisfied with the security the blame would be on his shoulders as he had not carried out his instructions. Moreover, the fact that the appellant

wrote to the first respondent saying that he would come with the borrowers and ""clear the loan"" leaves no doubt in our minds that he accepted the

position of guarantor. In these circumstances the appellant cannot say that he is not liable.

For these reasons the appeal will be dismissed with costs.