In Re: R.P. Konetti Naiker and Others

Sundara Aiyar J.

In this case the plaintiffs instituted a suit against the defendants to recover a debt due to them. The plaint alleged that the plaintiffs, who were

dealers in cloths and other things, supplied cloths to the mother of the 1st defendant for the benefit and use of the 1st and second defendants who

were then minors; that the, 1st defendant executed, after attaining majority, a power of attorney,in favour of the 3rd defendant; and that the latter

acting under the power of attorney executed a pro-note to the plaintiffs for R.S., 694-6-0, the price of the goods supplied by them. Paragraph 4 of

the plaint alleged that the 2nd defendant was also liable, as the debt was incurred for the common expenditure of the joint family of the 1st and 2nd

dsfendants; and, if the Court should be of opinion that for any reason the 1st and 2nd defendants were not liable, the 3rd to 5th defendants must be

made liable, the 4th and 5th defendants being the sons of the 3rd defendant.

The 1st defendant pleaded that the purchase of the cloth was not for the benefit of the family, that the power of attorney was not acted on and

that the 3rd defendant had no power to execute the pro-note under the power of attorney. The 2nd defendant repudiated liability and contended

that the power of attorney executed by the 1st defendant was not valid and was not binding on him. The 3rd defendant dented personal liability on

the ground that the note was executed by him as agent under the power of attorney executed by the 1st defendant.

The issues raised the question of the 3rd defendant''s liability for the amount due under the note. Issues were also raised to try the question of his

power to execute the note and of its validity as against the 1st and ''2nd defendants.

Now according to the plaintiffs, the suit as against the 3rd defendant was not framed on the ground that he was liable as the maker of a

negotiable instrument. It was admitted that he acted as the agent of the 1st defendant; and that the cloths were purchased for the use of the 1st and

2nd defendants. Relief appears to have been claimed against him on the footing that he would be personally liable for executing the note as agent if

he had no authority to do so. At the trial of the suit, it was contended that the 3rd defendant was personally liable as the executant of a negotiable

instrument and an additional issue was framed to raise this new question. The District Munsif held that he was personally liable and passed a

decree against defendants Nos. 3 to 5; the 4th and 5th defendants were also held liable to the extent of the joint family property in their hands.

Defendants Nos. 3 to 5 appealed to the District Court against the Munsif''s decision. The District Judge agreed with the Munsif and held that the

suit was rightly dismissed against the 1st and,2nd defendants. It was represented to us that at the hearing of the appeal the plaintiffs applied that the

1st and 2nd defendants should also be made parties to the appeal in order that a decree might be passed against them if the 3rd defendant was

held to be""not liable. As the District Judge agreed with the Munsif on the question of the 3rd defendant''s liability, the 1st and 2nd defendants were

not made parties. Defendants Nos. 3 to 5 have preferred this second appeal; and the question raised for decision is whether the judgment holding

the 3rd defendant personally liable for the debt is correct in law. I cannot but think that the District Munsif ought not to have allowed the plaintiffs

at the trial to set up a case which was in reality entirely different from that which they put forward in their plaint. They admitted there that they dealt

with the 3rd defendant as the agent of the 1st defendant and that their right to recover the money was primarily against the 1st and 2nd defendents.

They sought to make the 3rd defendant liable in case the 1st and 2nd defendants were exonerated. In consequence of the procedure adopted by

the Munsif, no witnesses were examined for either the plaintiffs or the defendants. The suit was allowed to be converted into one on a negotiable

instrument against the 3rd defendant as the executant and the liability of the first and 2nd defendants for the debt was really not tried at all. I am of

opinion that this course ought not to have been permitted having regard to the ""allegations in the plaint. The plaintiffs did not allege that they were

mistaken in making those allegations. They should not have been permitted to throw entirely on the 3rd defendant a liability which they themselves

admitted really lay on defendants Nos. 1 and P2. I would therefore reverse the decrees of both Courts on this ground, strike out the additional

issue framed by the District Munsif and remand the suit to the Munsif''s Court for fresh disposal according to law on the issue originally framed.

As the question of the liability of the 3rd defendant as the maker of the note was fully discussed at the hearing, I consider it desirable that I

should make a few observations as to the state of the law on the point. Section 28 of the Negotiable Instruments Act enacts that ""an agent who

signs his name to a promissory note, bill of exchange or cheque without indicating thereon that he signs as agent, or that he does not intend thereby

to incur personal responsibility is liable personally on the instrument, except to those who induced him to sign upon the belief that the principal only

would be held liable."" According to the language of the section, a person who executes a promissory note as an agent, would be personally liable,

unless he does one of two things : he must either indicate '' thereon '' (that is on the note) that he signs as agent or he must indicate on the note that

he does not intend thereby to incur personal responsibility. An indication of either of the two things will do. Now, has the 3rd defendant done so in

this case? The note is executed by Konetti Naidu, that is the 3rd defendant, ""holding power of attorney from the Zemindar Durai Raja Avergal

(that is the 1st defendant). Then the consideration for the note is set out. ""Amount due to you including principal and interest up-to-date upon

settlement of account of dealings which was standing against the name of Rani Chakkani Ammal on cloths, etc., having been purchased ere this for

the Vellikurichi palace is Rs. 694-6-0."" Now the debt is said to have been incurred by the 1st defendant''s mother and for the Vellikurichi palace,

that is, the palace of the 1st defendant. It is contended that it was not stated who Chakkani Ammal was. That is entirely unnecessary. The plaintiffs

well knew who she was and they well knew that the Vellikurichi palace was the palace of the 1st defendant. Then follow the words of promise: ""I

promise to pay this sum of rupees six hundred and ninety-four and annas six."" The question is, has or has not the 3rd defendant indicated on the

note that he does not intend to incur personal responsibility for the debt? He has described himself as the agent of the 1st defendant holding a

power of attorney from him. He has described the debt as one binding on the 1st defendant and incurred by the 1st defendant''s mother. In

instruments executed by the people of this country, it is, in my opinion, very uncommon for the executant to describe himself as agent of another,

unless the contract is entered into by him as an agent. In this case, the justification for his acting as an agent is also referred to, namely, that he holds

a power of attorney from the 1st defendant. The question whether the 3rd defendant executed the document as agent and whether he has indicated

that be did not intend to be personally responsible for the amount of the note is one of construction. In construing the instrument, I think it is proper

and necessary to put oneself in the position of the executant and to take into consideration the habits of the poeple of this country in the matter of

conveyancing. These habits may not be the same as those of people in England or elsewhere and the construction to be put on an instrument

executed by a Hindu here should not necessarily be made to depend on the construction of a similarly worded instrument executed by an

Englishman. It is contended that decisions u/s 28 of the Negotiable Instruments Act should follow the English decisions which have placed a

construction on similar instruments in England and on Section 26 of the Bills of Exchange Act, 45 and 46. Vic. C. 61. Now this (section 26) runs

as follows :?--

(1) "" Where a person signs a bill as drawer, indorser or acceptor and adds words to his signature, indicating that he signs for or on behalf of a

principal, or in a representative character, he is not personally liable thereon : but the mere addition to his signature of words describing him as an

agent or as filling a representative character does not exempt him from personal liability.

(2) In determining whether a signature on a bill is that of the principal or that of the agent by whose hand it is written, the construction most

favourable to the validity of the instrument shall be adopted."" In my opinion, these words are materially different from the language of Section 28 of

the Indian Negotiable Instruments Act. According to the English Act, words should be added to the signature indicating that the executant signs for

or on behalf of a principal; but the Indian Act does not require this but only an indication, not in the signature but anywhere on the note, that the

executant signs as agent. Then an alternative requirement is regarded as sufficient by the Indian Act. It is enough if it is indicated in the note that the

executant does not intend to incur personal responsibility. I do not see any reason for not giving to the words of Section 28 their plain and ordinary

meaning. I do: not think it is justifiable to require in India that, there should be words added to the signature to show that it is that of the principal

and not that of the man who puts his hand to it. In my opinion, construing the instrument in the light of my experience as to the habits of the people

of this Presidency in conveyancing, the 3rd defendant has indicated in the promissory note both that he signed it as agent and that he did not intend

to incur any personal liability on it. In C.R.P. No. 816 of 1909, 12 Indian Cases, page 421 a note was executed in favour of one Chellappa

Chettiar described as the agent of another person. The payee endorsed it in favour of another and described himself merely as Chellappa Chetty

without any words indicating that he made the endorsement as agent. It was not contended that he made the endorsement as agent. But it was

argued that the note must be taken to have been executed in his own favour personally and that the endorsement by him personally was ''sufficient

to transfer the note to the indorsee who instituted a suit upon it. The judgment in that case to which I was a party held that firima facie the note must

be taken to have been executed to Chellappa Chetty in his character as agent and that he was not the beneficial owner of it. The respondent relies

on a judgment of Krishnaswami Aiyar J., in Aiyathurai Iyer v. Dhannasiva Iyer (1911) 1 M.W.N. 143. There the executant of the note was

described in the body of the note as an honorary manager. The signature to it was not made as the agent of anybody. The learned Judge held that

there was no indication that the executant did not intend to make himself personally liable. It was,found that he,had no authority to make the note

so as to bind either the principal, who was a trustee of a temple or the temple itself. On these facts the executant would be clearly liable, as he

purported to act as agent when he had no authority to do so. The decision, however, proceeded apparently on the construction of Section 28 of

the Negotiable Instruments Act. The learned Judge held that ""the description of the first defendant in the body of the pro-note as honorary manager

is not an indication on the face of the pro-note that he does not make himself liable."" I should myself think that the description of the executant as

honorary manager would be an indication that he was not to be personally liable. Of course an agent might contract to be personally liable and it

would be open to the payee to prove such an agreement. But apart from such agreement, I think that in this country the description itself should be

taken to be an indication that the executant should not be personally liable. The decision in the particular case as to the liability of the executant for

the debt was obviously right, though, in my opinion, the learned Judge did not attach sufficient weight to the import of the description of the maker

as the agent of the trustee of the temple.

Having regard to the language of Section 26 of the English Act, I think the English decisions cited at the hearing are hardly in point. In Chapman

v. Smethnrst (1909) 1 K.B. 73 C.A. the promissory note was signed by the managing director of a Company thus:--""J.H. Smethurst''s Laundry

and Dye Works Limited, J.M. Smethurst, Managing Director."" The maker was held to be personally liable. Channel J., held, referring to the earlier

cases on the point, that the note was not signed by the maker as an agent of the Company. His attention was directed to the fact that the name of

the Company and the words '' managing director ""were put on the document by means of a stamp. But he observed. ""I must look at the document

as a whole and so looking at it, I must give to the stamped words the same eflect as if they had been written. * * It is not sufficient for the party

signing to describe himself as agent; he must show that he signs as agent and contracts as agent."" I believe the learned Judge meant that there must

be words in the signature showing that it was made as agent. But section ''28 of the Indian Act, as already stated, does not require this. Great

importance was attached by the learned Judge to the use of the word ""I."" The decision of Channell J., was reversed on appeal, see Chapman v.

Smethurst (1909) 1 K.B. 73. the court of appeal being of opinion that the note was practically the note of the Company. In Alexander v. Sizer

(1869) L.R. 4 Ex. 102 a less strict view was taken, Kelly, C.B. observed : ""Now, looking at the terms of the note itself, it seems to me that it does

not, on its face purport to be a personal contract. If it had been so and had been made on some consideration moving towards him personally, it

would have been signed, ""John Sizer,"" and no more. But we find that although in the body of it the personal pronoun '' I'' is used, it is signed '' John

Sizer, Secretary '' for the Company. Unless intended to be the Company''s note and not his own it is difficult to see why it was signed as ''

Secretary '' at all or why the Company''s name was introduced into it. I have no doubt it was signed by the defendant only as Secretary and was

intended as the note of the Company."" He distinguished Leadbitter v. Farrow (1816) 6 M & S 345 as bsing a case in which the indication was

merely to the effect that the debt was to be placed to a particular account, which did not therefore show that the executant was not to be liable

personally. As stated by Channell, J. the question is one to be decided by interpreting the instrument taken as a whole. And in this country

importance is not to be attached solely to the way in which the signature is made. I consider it unnecessary to refer to one or two other English

decisions that were relied on at the hearing. There is no doubt that the view taken in English cases is stricter than would be warranted by the

language of Section 28. The English view is embodied in Section 26 of the English Act which undoubtedly throws a heavier responsibility on a

person who wishes not to make himself personally liable on a pro-note. The governing principle is laid down in Halsbury''s Laws of England, Vol. I

paragraph 463, pp. 219 and 220. ""Prima facie a party is personally liable on a contract if he puts his unqualified signature to it. In order, therefore,

to exonerate the agent from liability, the contract must show, when construed as a whole, that he contracted as agent only and did not undertake

any personal liability. It is not sufficient that he should have described himself in the contract as an agent whether as part of his signature or

otherwise. But if he states in the contract, or indicates by an addition to his signature that he is contracting as agent only on behalf of a principal, he

is not liable, unless the rest of the contract clearly involves his personal liability, or unless he is shown to be the real principal."" Mr. Sitarama Rao

referred to paragraphs 289 and 290 page 301 of Volume 1 of Daniel''s Negotiable Instruments; but I do not think they carry the case any further.

He also relied on Subbanarayana Vathiyar v. Ramaswami Aiyer ILR (1906) M. 88 but all that was decided in that case was that payee of a

negotiable instrument was entitled to-sue on it even though he was only a benamidar for the person really intended to be the payee. I do not think

that that case is an authority which helps the respondent in this case. Section 27 of the Indian Act provides that ""every person capable of binding

himself or of being bound as mentioned in Section 26 may so bind himself or be bound by a duly authorized agent acting in his name."" The section

does not require that the agent should sign in his name. It is enough if the instrument shows that the agent acts for him, even if it be held that

evidence de hors the instrument is not admissible to prove the fact. In V. Sesha Aiyar Vs. Bhavaji Mangal Doss Jee Varu and Another, . Munro

and Abdur Rahim JJ., held that the maker of a promissory note could plead and prove that he executed it merely as a benamidar for another and

that no consideration flowed in his favour from the payee. The note had not been negotiated. If it is open to the maker to prove that he was only a

benamidar for a third person, I see no reason why he should not be entitled to show that he was only an agent for another. But perhaps Section 28

will not allow going so far, because it provides that the note itself must indicate that the executant acted only as the agent of another in making it. I

am prepared to hold that in this case the note indicates that the 3rd defendant was not to be personally liable for the amount. But as already stated

the question does not arise here as the plaintiffs admitted in the plaint that the 3rd defendant was not liable as the maker of a negotiable instrument

and that he acted only as the agent of the 1st defendant. The plaintiffs are themselves the payees under the note and do not claim any rights as

holders in due course who were misled by the words of the instrument. I would reverse the decree against the 3rd defendant as the maker of a

negotiable instrument. The suit must be remanded to the Munsif in order that it may be tried on the other issues. The respondents must pay the

appellants'' costs.

Sadasiva Aiyar, J.

The short question in this appeal is whether 3rd defendant who signed the negotiable pro-note Exhibit A without indicating in the signature that

he signed as agent and without expressly stating in the preliminary recitals in the body of the note that he did not intend to make himself personally

liable can escape liability to the holders of the note by contending that as he described himself in the beginning of the note as agent of 1st defendant

and as the debt for which the pro-note was executed is recited to have been incurred by a lady whom the holders know to be 1st defendant''s

mother, he is not legally liable on the pro-note.

It has been held in the Full Bench case in Subba Narayana Vathiyar v. Ramasioami Aiyar (1906) I.L. 30 that ""before the passing of the

(Negotiable Instruments) ""Act, negotiable instruments were governed in this country as in England by the law merchant and as stated in Leake on

Contracts (4th Edition, page 337) ""according to the Law merchant, no person could be sued unless he appeared as party by name or designation

on the face of the instrument'' and that the Negotiable Instruments Act presumably reproduced the pre-existing law ""as was to be expected in a

codifying Act."" The learned District Munsif (Mr. K.V. Desikacharry) has in this case dealt very ably with the question of law and I am glad to be

able to adopt his whole reasoning on the point. As stated in Halsbury''s Laws of England (Vol. I, paragraph 463), a man putting '' his unqualified

signature '' to a negotiable instrument as in this case'' cannot be allowed to escape personal liability unless he clearly and unmistakeably indicates on

the instrument taken as a whole that he did not undertake any personal liability. As remarked in the Munsif s Judgment, ""It is quite consistent with

the language of the pro-note that as between the plaintiffs and the executant of the pro-note the executant was to be liable and the executant was to

adjust the accounts between him and the principal the amount of the pro-note."" ""A. mere description in the body of the pro-note"" (that the maker is

an agent) ""will not exempt"" him from personal liability. ""The body of the pro-note only sets out the occasion on which the pro-note came to be

executed."" Why should a holder of a negotiable instrument be driven to make inquiries whether a man who puts his unequivocal signature to it is

really an agent of some other person as he described himself in the body or whether he had authority to bind that principal? The very object of the

law merchant might be defeated if, when the executant does not choose expressly to repudiate his own personal liability to the holder (whoever he

may be) according to the law merchant, he should be allowed to spell out an implied non-liability on his part by involved arguments and by appeals

to the negligent practices of people in the mofussil. V. Sesha Aiyar Vs. Bhavaji Mangal Doss Jee Varu and Another, has no applicability as the

maker of the note in that case set up want of consideration as against the original payee himself. The decision in C.R.P. 816 of 1909 turned upon

the question whether the payee who was described as an agent of another was the real holder of the note or whether his principal was the real

holder and that decision did not affect the question of the liability of a maker who signs as maker without indicating that he does not intend to make

himself personally liable. The fact that the note has not been negotiated, to a stranger without notice can become important only when fraud or

want of consideration or like defence is set up but is not relevant when considering the legal liability of the maker of the note.

I think that I am fully supported in the above view by the judgment of that learned Judge, the late Krishnaswamy Iyer J., in the case reported in

Madras Weekly Notes, 1911 Vol. I, page 143. That case was even stronger for the defendant and weaker for the plaintiff than this case. I have

looked into the printed papers in that case and I find that not only did the executant describe himself in the body of the note as an honorary

manager but he expressly said that the debt for which he was executing the pro-note was incurred ""for the January kist of the Devastanam ""of

which he was honorary manager. And yet, the learned Judge held that there was no indication that the executant did not intend to make himself

personally liable. The learned Judge reversed the judgment of the lower Court which held that the honorary manager was not personally liable. The

following passages of the judgment are important:--"" The 1st defendant is the executant of the pro-note. He has not signed that pro-note as agent

on behalf or anybody else. The description of the 1st defendant in the body of the pro-note as honorary manager is not an indication on the face of

the pro-note that the does not make himself liable."" In the present case, the recital in the pro-note is to the effect that some lady had incurred some

debt and that the executant of the pro-note is the agent of some gentleman (whose connection with the lady who originally incurred debt does not

appear from the note itself) and then the executant signs the pro-note in his own name, agreeing peisonlly to pay the money. ("" I shall pay to you or

to your order * * * and obtain back the pro-note."") Though I am not bound by the decision of Knshnaswamy Iyer J. sitting singly, I see no reason

to dissent from his considered opinion as it is in evident conformity with the English Law which was intended (according to the Full Bench case in

30 Mad. page 88) to be reproduced in the Negotiable Instruments Act.

The 3rd defendant does not allege that plaintiffs had induced the 3rd defendant by misrepresentation or fraud into executing the pro-note with

the terms in which it runs. The honest narrative given by the plaintiffs in their plaint as to the circumstances which led to the execution of the pro-

note or the ignorance of the plaintiffs and of the 3rd defendant as to their respective mutual rights and liabilities under iixhibit A cannot, in my

opinion, deprive the plaintiffs of their legal rights or exonerate the 3rd defendant from his legal liabilities. The questions--(a) Whether a person

whose name does not appear in a pro-note as obligee or endorsee could be allowed to sue on it, (b) Whether a person who is really a benamidar

for an undisclosed owner but who is the apparent holder of a note is entitled to sue on it, (c) Whether a person who is liable on the face of the note

as the maker could escape liability, by pleading that somebody else is alone liable and that he did not intend to make himself liable and (d) Whether

a person who is not liable on the face of the instrument could be made liable as the real obligor (or a co-obligor) except in cases in which the Hindu

Law could also be applied supple-mentarily, all these questions have to be decided by Courts according to the law Merchant which modifies the

ordinary law of contracts in some respects in order to promote the paramount interests of the trade and commerce of the country and the general

convenience of merchants:--Whether, in any individual case, justice might not suffer by applying the Law Merchant seems to me to be a subsidiary

consideration--The Full Bench case in 30 Madras page 88 itself shows that the learned Judges did not allow any such subsidiary consideration to

affect their decision in that case.

As regards the technical objection that the plaintiffs in thair plaint as originally framed prayed primarily for a decree against defendants Nos. 1

and 2 and only in the alternative against defendants Nos. 3 to 5 I do not find that the plaintiffs put forward misrepresentation about the 3rd

defendant''s authority from the alleged principal (1st defendant) as their cause of action against 3rd defendant. The plaintiffs merely said that if on

any grounds, the Court considered that the defendants Nos. 1 and 2 could not be held liable under the negotiable instrument sued on, defendants

Nos. 3 to 5 may be made liable. Before the trial, their vakil evidently put forward the definite ground of 3rd defendant''s liability based on the Law

Merchant and hence an additional issue was framed and the parties went to trial after the additional issue was framed. The plaintiffs could not bring

a fresh suit against defendants Nos. 3 to 5 based on 3rd defendant''s liability as maker if this suit was dismissed against them and I think that the

learned Munsif did not act improperly (having regard to the ordinary character of pleadings in the mofussil) in allowing plaintiffs to put forward

definitely a ground of attack against 3rd defendant which was not inconsistent with the plaint allegations and in raising an issue thereon. Having in

view the great uncertainty of the law on the point, the vagueness or incompleteness in the plaint in respect of the grounds of 3rd defendant''s liability

on the pro-note and the short delay of plaintiffs in getting a definite issue on the legal liability of 3rd defendant, should not, in my opinion, be

allowed at this stage to defeat the plaintiffs'' claim as against him. It is even now not at all certain that defendants Nos. 1 and 2 (more especially 2nd

defendant) could be made liable on the pro-note, even if plaintiffs are able to prove that 3rd defendant had authority from 1st defendant to execute

the plaint pro-note. Under such circumstances, I am not disposed to defeat plaintiffs'' suit against 3rd defendant on the ground that plaintiffs could

not rely on 3rd defendant''s legal liability as maker but should be allowed to succeed only if they prove that he was guilty of misrepresentation in

respect of his alleged authority from 1st defendant. The conduct of defendants Nos. 3 to 5 in scrupulously refraining from making defendants Nos.

1 and 2 parties not only to the regular appeal in the District Court but also to this Second Appeal in this Court (though plaintiffs had expressly

prayed to the District Court to make defendants Nos. 1 and ''A parties to the appeal before the District Court, if the District Court was inclined to

exonerate defendants Nos. 3 to 5 indicates to my mind that defendants Nos. 3 to 5 are probably acting in collusion with defendants Nos. 1 and 2

to defeat and delay the plaintiffs'' claims.

In the result, I would dismiss the Second Appeal with costs.

Sundara Aiyar J.

As my learned brother has come to the conclusion that the decision of the lower Courts is correct, the appeal is dismissed with costs u/s 98 of

the Civil Procedure Code.