Kanhyalal Upadhaya vs Sree Nand Dubey

P.N. Mookerjee, J.—In this Rule two questions of law arise for consideration, one relating to the effect of the presumptions enjoined by Section 118 of the Negotiable Instruments Act and the other relating to the interpretation of Section 43 of the said Act, particularly its latter part, and the scope thereof.

Civil Revision Case, No. 1227 of 1951, against the decision of Charu Chandra Gang li, Chief Judge, and S.N. Bhattacharjee, Judge, Special Bench, Small Cause Court, Calcutta, dated Feb. 14, 1951, upholding the judgment and decree of B.P. Bukshi, Judge, Fourth Bench, Small Cause Court, Calcutta, dated Dec. 8, 1949.

The suit which has given, rise to the present Rule was a simple suit for recovery of dues on an alleged promissory note. It was instituted in the Court of Small Causes, Calcutta, on April 5, 1949, and was dismissed by the learned trial Judge on December 8, 1949. Then followed an application for new trial u/s 38 of the Presidency Small Cause Courts Act, and the same having proved unsuccessful, the present Rule was obtained by the Plaintiff on May 28, 1951.

In the suit the Plaintiff Kanhyalal Upadhaya, who is the Petitioner before me, claimed a decree for Rs. 2,000 with costs and interest at the rate of six per cent, per annum on the basis of a promissory note, alleged to have been executed by the Defendant Sree Nand Dubey on December 5, 1947, in favour of one Md. Serajuddin Khan for Rs. 2,000 for value received in cash and later on endorsed, so runs the plaint, by the said Md. Serajuddin Khan in the Plaintiff''s favour on March 5, 1949, or valuable consideration. The defence, inter alia, was that the promissory note and its endorsement in Plaintiff''s favour on which the Plaintiff''s claim was founded were both without consideration and as such the suit ought to be dismissed. The earned trial Judge accepted the said two-fold defence and dismissed the Plaintiff''s suit. The application for new trial was also rejected On February 14, 1951, the Special Bench affirming the findings of the learned trial Judge on both the defences, enumerated above.

Before me two contentions have been urged by Mr. Bhose, appearing for the Plaintiff-Petitioner. These contentions are cased on Sections 118 and 43 of the Negotiable Instruments Act. Mr. Bhose contends that in deciding the case before them both he learned trial Judge and the learned Special Bench failed to live proper effect to the presumptions arising u/s 118 of the Negotiable Instruments Act, and, by reason of such failure, the Plaintiff was denied the relief to which he was in law entitled under the latter part of Section 43 of the said Act. In newer to these contentions a three-fold submission has been made by Mr. Dutta on behalf of the Defendant-opposite party and the substance of his submission is that, in the facts and circumstances of this case, there has been no violation of the (sic)le of presumptions, embodied in Section 118 of the Negotiable Instruments Act, or of Section 43 of the said Act. The merits of (sic)ese respective arguments in all their necessary details will be considered by me in appropriate places.

Both the courts below have concurrently found that the promissory note in suit as also its endorsement in Plaintiff''s favour were without consideration and, on such findings, relied has been refused to the Plaintiff. It appears, however, that is coming to the above findings, the learned trial Judge overlooked altogether the statutory presumption u/s 118 of the Negotiable Instruments Act and decide the case on the evidence before him without adverting at all to the said presumption Before the Special Bench, that is what appears from its judgment, this aspect did not altogether pass unnoticed but there the learned Judges felt that, as the statutory presumption merely shifted the onus of proof and as, when evidence had been adduced by both parties, the question of onus became wholly immaterial, Section 118 was of no practical importance in the present case. In taking this view the learned Judges of the Special Bench were greatly influenced by the decision of the Madras High Court in the case of In re Kannusaicmi Pillai (1910) 9 Ind. Cas. 79.

As already indicated, the Petitioner''s main contention is that the courts below have failed to apply properly Section 118 of the Negotiable Instruments Act to the present case and to give proper effect to the presumption arising under it. This contentiontion seems to be well-founded to a certain extent but, even then it seems to me that the Petitioner is not entitled, in th circumstances of this case, to reopen the whole thing.

As has been pointed out by Mr. Dutta and also confirmed by the records before me-the Petitioner''s case in the plaint was that the promissory note in suit was executed for cash consideration but in evidence he shifted ground and tried to make on that the consideration was not cash but in some Other form In these circumstances, I am not inclined in the exercise of m discretionary powers u/s 115 of the CPC to set aside the concurrent finding of the two courts below that the promissory note in suit was without consideration. Then can be little doubt that, in the face of this change of case is the Plaintiff''s own evidence, the statutory presumption will have very little effect so far as consideration for the promissory not is concerned and, in such circumstances, the negative finding the two courts below on this part of the case ought not to 1 interfered with in revision. That finding is, therefore maintained.

I come next to the other part of the case, namely, the question of endorsement in Plaintiff''s favour. This endorsement was challenged by the defence as fraudulent and collusive an without consideration. The learned trial Judge accepted the said defence in full and the learned Special Bench also appeal to have been of the same opinion though its specific finding is only with regard to want of consideration for the endorsement in question. In arriving, however, at this finding and deciding the case upon the same, the Special Bench almost ignored the statutory presumption u/s 118 in favour of consideration, the said statutory presumption lost all practical when evidence had been led by both parties on the question of consideration the said statutory presumption lost all practical importance. In my opinion, on this part of the case the Special Bench has made a wrong approach and the Madras decision In re Kannusawmi Pillai (supra) relied on by it, is not strictly correct in its enunciation of true legal position with regard to the above statutory presumption. To accept the view expressed by the Special Bench in the present case and by the learned Judge of the Madras High Court in the case cited, would be to nullify the purpose of Section 118 of the Negotiable Instruments Act and to deny, in effect, the raising of the statutory presumptions which Clauses (a) and (g) of Sub-section (1) of that section enjoin. Here there is no inconsistency between pleading and proof and I would not be justified in exercising my discretion u/s 115 of the CPC against the Petitioner so far as this question of endorsement is concerned.

At this stage it is necessary to consider one special argument, pressed by Mr. Dutta with considerable vigour. He contended that, even giving the Plaintiff the full benefit of the presumptions u/s 118(i)(a) and (g) of the Negotiable Instruments Act, the position would merely be that u/s 118(i)(a) the endorsement in Plaintiff''s favour would be deemed to have been made for consideration so that, under the combined operation of that section and Sections 8 and 48 and 118(7) (g) of the Negotiable Instruments Act, the Plaintiff would be, at the most, a "holder "in due course" within the meaning of Section 9, or, in other words, a "holder for consideration" u/s 43 of that Act. That, however, so argued Mr. Dutta, would not entitle the Plaintiff to a decree in the present suit in view of the other finding, now affirmed by me, that the promissory note itself was without consideration. The obvious answer to this argument of Mr. Dutta appears to be contained in the latter part of Section 43 of the Act unless Mr. Dutta''s submission that the said provision deals not with the liability of the executant of the promissory note for which no consideration passed, but only with the liability of intermediate transferors for consideration between the said executant and the "holder in due course" or "holder for "consideration" whose rights are now under discussion, be accepted. This latter submission of Mr. Dutta, if correct, would certainly exclude the Plaintiff from any benefit u/s 43 against the Defendant opposite party and Would thus be sufficient for dismissal of the present suit as, in view of the finding, now affirmed, that the promissory note was without consideration, the Plaintiff must fail straightaway in his present action and there will be no point in making a remand- unless Section 43 comes to his aid and enables him to get a decree against the Defendant notwithstanding the said adverse finding on the question of consideration for the impugned promissory note. Section 43, therefore, requires a closer examination before this Rule can be disposed of one way or the other.

Turning now to Section 43 and omitting its irrelevant part, it will be found, on the language used therein, that, when any party to a negotiable instrument made without consideration, has transferred the instrument with endorsement to a holder for consideration such holder may recover the amount due on such instrument from the transferor for consideration or any prior party thereto.

Mr. Dutta argues that the words "any prior party thereto" do not include the original maker who made the instrument without consideration or any other party who received no consideration as such party. In support of his argument Mr. Dutta pointedly refers to, and relies on, the words "for "consideration" which occur in the preceding phrase "transferor "for consideration", and strongly urges that the said words "for "consideration" qualify not only the expression "transferor" which precedes them but also the expression "any prior party "thereto" which follows the same after the intervening word "or". The argument of Mr. Dutta, though prima facie attractive, can hardly be accepted as basically sound. It is plainly against the language, used in the statute, which significantly omits the words "for consideration" after the subsequent phrase "any prior party thereto". It is also against the scheme and purpose of this particular provision, namely, the latter part of Section 43, which aims at fully protecting bona fide transferees for value, that is, protecting them against all persons. Under this latter part of Section 43 the test seems to be not the receipt of consideration by the party sought to be bound or made liable but the payment of consideration by the persons claiming the benefit of that provision and seeking to fasten liability on the party, just above referred to. That being the position, the maker of the instrument, whether with or without consideration, is liable to the "holder in due course" or the "holder for consideration", he (the maker) being a party to the instrument and thus coming within the description "any prior "party thereto" in the latter part of Section 43 and the liability under that provision not being avoidable, as explained above, by mere non-receipt of consideration on his part. The argument of Mr. Dutta cannot, therefore, be accepted and the latter part of Section 43 cannot be held inapplicable against the Defendant opposite party merely on the ground that he is the original executant of the promissory note in suit and received no consideration therefore. This view is amply supported by the decision of the Bombay High Court in the case of Sakharam Mansaram v. Golabchand Tarachand (1914) 27 Ind. Cas. 362, with which I respectfully agree.

My next conclusion, therefore, is that the finding of the Special Bench that the promissory note in suit was without consideration is to be maintained but its other finding that the endorsement thereof in the Plaintiff''s favour was also without consideration is to be set aside and the case is to be remitted to the Special Bench for a fresh consideration of this question and the decision of the suit in accordance with law and in the light of the observations which I have made above, and I order accordingly.

The Rule, therefore, is made absolute in part and the case is sent back to the Special Bench to be dealt with by it in accordance with the directions given above. Costs of this Rule will abide the final result.