Bhagayanagar Cloth Stores. By Partner Parcathala Antiah and others vs Peesumal Harbhagyandas by Manager Vishan Das

Chandra Reddy, J.—This appeal is by the defendants against the Judgment of the Subordinate.judge, Secundrabad, decreeing the claim q f the plaintiff to an extent of Rs. 6,750 (I. G.) The suit giving rise to this appeal was filed on some hundies executed by the defendants 3 to 5 who are carrying on business under the name and style of BhagyaNagar Cloth Stores and Damodar Cloth Stores. Defendants 1 and 2 respectively. The defendants borrowed Rs. 4.800 on 13-3-1947 on four hundies and another sum of Rs. 7,000 on five hundies in favour of plaintiff subsequently.

All the hundies were payable three months after sight. Various sums aggregating to Rs. 5.800 were paid towards these hundies and the balance remained unpaid. The payee under the hirodies endorse them In favour of the state Bank of Hyderabad on receipt of the amount dure on the hundies. When the bills were presented at maturity, thev were dishonored. When the plaintiff was informed of tnis he paid the amounts and the hundies were handed back to the plaintiff.

The suit was resisted inter alia on the plea which is the only relevant one for the present enquiry that the plaintiff could not maintain a suit on the basis of the hundies as they were not endorsed back to him

The trial Court negatived : the defence and decreed the suit. It allowed interest only at 6% per annum as per the concession made on behalf of plaintiff though 12% per annum was claimed in the plaint.

In This appeal filed by the aggrieved defendants, the only point urged by Mr. Raja Rama Aiyar is that without a re-endorsement by the endorsee the plaintiff had no right to recover the amounts due on the hundies. The argument pressed upon us by the learned counsel is that as the property, in the hundies had passed to the endorsee by virtue of the endorsement made by the plaintiff the only mode by which the plaintiff could acquire a right to any relief on the basis of the hundies was by these hundies being endorsed back the original endorser. In support of this contention some judgments of the Matiras High Court are called in aid In Kunhiparambath Parkum Kunhi Koranath Chandu Alias Appa Vs. Antholi Thoovakunnon Ramunni, , an action was laid by a person claiming to be an alienee of a promissory note drawn In favour of alter native payee. The basis of the claim was an acknowledgment of payment of a, sum of money signed by one of the alternative payees. It was held that the plaintiff was. not entitled to sue for the reason that it was not a negotiable instrument since it was in favour of alternative payees and executed before the passing of the Act V of 1914 and also as there was no.direction to pay the amount in the instrument to a specified per son The ruling of P.V. Govindan Vs. Thavarayil Kinathi Narayanan and Others, embodies the principle that to constitute an indorsement within the purview of S. 16,of the Negotiable Instruments Act there should, be an endorsement to pay the amount due on the note to a named individual. The ruie stated in Arunachala Reddy v. Subba Reddy, 17 Mad LJ 393 (C) is to thg same effected A judgment rendered by one of us in Vaddadi Venkataswami Vs. Hanura Noor Muhamad Beegum and Another was also called in aid.

We do not think that the doctrine of these cases could govern the present one In the last-mentioned case what was decided was that an assignment of a promissory note could be made otherwise than by endorsement, the other methods being transfer as chose-in-action as con- template under S. 130 of the Transfer of Property act by operation of law. The other cases eited relate only to the right of an assignee of promissory moters which did not contain the in orsements. The transactions involved in these cases could not be regarded as transfer of choses-in-action for the reasons contained therein, nor was any right put forward by way of any devolution of interest etc. These rulings deal with the effect of the absence of the operative words as indicated in S. 16 of the Negotiable Instrument Act. An assignment of the instrument an be affected either by the. indorsement or by other forms known to law. If it is by way of indorsement it should be in terms of S. 16 of the Negotiable Instruments Act.

The form of endorsement is immaterial provided the intention to be gathered from the words in the instrument is clear. Without substantial compliance with the requirements of the law on the subject, a right to the instrument as an indorsee cannot be obtained. It is this principle that is enshrined in those pronouncements.

The same could not be said of the payee under a negotiable instrument who endorses it to a third party & gets it back, discharging his liability to the indorsee alter it is dishonoured. In this case, it is not disputed that the amount due to the indorsee was paid by the plaintiff and it Is evidenced by writing on the back of the hundi. Despite this, could it be said that the plaintiff could not due for recovery of the amount due on the hundies? The hundi contains a contract between the maker and the payee for the payment of the money and the later is entitled to sue on the basis of it It is no doubt true that by endorsing it to another he loses the property in it. But, when the negotiable instrument is dishonoured and the indorser gets back after satisfying the claim of the indorsee, he is remitted to his original right and falls again within the definition of a holder and the indorsee ceases to have any right under the bill. This has placed the parties in precisely the same position as before the first indorsement. By receiving the full amount mentioned in the document, the indorsee has lost his property in the note and it is vested in the endorser. Such being the case, it is not essential that there should be re-indorsement and there is no need to have recourse to S. 15 or 16 of the Negotiable Instruments Act. The acknowledgment of payment of the money by the indorsee has the same effect as the words operating to reconvey the property to the endorser.

We are reinforced in our opinion by decided cases. The principle illustrated by Marimuthu Pillai v. Krishnasami Chettv. I L R 17 Mad 197 (E), is that when the original indorsement was invalid it should be deemed to be can celled and indorser gets back the property in the document and could recover the amount from the maker. In Subrahmanyam Chetty v. Alagappa Chetty, ILR 30 Mad 441 (P), it was laid down that when a drawer or indorser took up a bill by paying the holder he was entitled to main tain a suit on the bill against the parties antecedent to himself and to strike out the subsequent parties, the latter having ceased to have any right. That the striking out or the cancellation of the indorsement is not a condition precedent to the property revesting in the holder of the document is evident from Muthar Sahib v. Kadir Sahib, ILR 28 Mad 544 (G), Subrahmanvam Iyer O. C. J, and Boddam, J., held that the indorser of a promissory note paying off his immediate indorsee and obtaining possession of the document was entitled without re-indorsement to himself of sue on the note. The learned Judges extracted with approval from a judgment of the Supreme Court of the United States in Dugan v. United States, (1859) 3 Wheaton 172 at D. 183 (H), in which Livingstone J., speaking for the Court said:

If any person who indorses a bill of exchange to another whether for value or for purposes of collection, shall come to the possession thereof again, he shall be regarded, unless the contrary appears in evidence, as the bona fide holder and proprietor of such bill and shall be entitled. to recover, notwithstanding there may be on it one or more indorsement in full subsequent to the one to him, without producing any receipt or indorsement back from either of such indorsees whose names he may strike from the bill or not as he may think proper.

If we may say so with respect, the passage contains the correct law on the subject. The view taken by Harington J. in Jameson and Co. v. Scott, ILR 36 Cal 291 (I), accords with the principle enunciated above. The learned Judge thought that the drawer was entitled to sue the acceptor who has failed to carry out the agreement entered into under the terms of the bill when the former has discharged his liability to HIS immediate indorsee.

The principle that emerges from the above discussion is that the holder of a negotiable instrument who has indorsed it to a third party could maintain a suit on the basis of it without its being re-indorsed to him if it appears that the bill was dishonoured when presented on maturity by the indorsee and the holder pays back the amount to the indorsee, and comes into the possession of the document as the property in the note has reverted in him. It follows that the absence of re-indorsement in this case is not fatal to the claim of the plaintiff and the judgement under appeal is correct and does not call for interference.

In the result, the appeal is dismissed with coste.