Kottan vs K.V. Kannan and Another

Krishnaswami Nayudu, J.—The point for determination in this revision petition is whether an endorsee of a simple on demand promissory

note will be entitled to a decree against an endorser without proof of presentment for payment to the maker and without notice of dishonour to the

endorser.

The suit was on a promissory note for Rs. 240 executed on the 12th March, 1944, by the first defendant in favour of the second defendant. On

the 14th April, 1944, the second defendant endorsed in favour of the plaintiff for consideration. The suit was filed on the 13th February, 1947. The

allegation in the plaint is that the defendants failed to pay the amount on several oral demands and the registered notice sent to the defendants by

the plaintiff on the 10th February, 1946, proved of no avail and hence the plaintiff was constrained to file this suit. The first defendant was ex parte.

The second defendant pleaded that the moneys paid under the promissory note belonged to the plaintiff and that he was a name-lender to the

promissory note and that at the request of the plaintiff it was endorsed over to him. A decree was passed against both defendants.

The counsel for the petitioner argues that there was no presentment of the pronote for payment and no notice of dishonour in order to make the

endorser liable. This plea was not raised in the written statement, but however this appears to have been raised in arguments and the lower Court

simply referred to Sections 35, 93 and 106 of the Negotiable Instruments Act and the decision in Jagannadha Reddiar Vs. Lakshmana Reddiar,

which held that the liability of the endorser of a promissory note was not governed by Section 35 of the Negotiable Instruments Act and that in

order to make the endorser liable it must be presented for payment within a reasonable time after the endorsement; but however did not deal with

the question whether notice of dishonour was necessary or was given in order to make the second defendant liable. The lower Court finds that

there was a written, :demand made by the plaintiff to the endorser, the second; defendant and also found that there were several demands now and

then to the defendants in respect of the promissory note. There is no evidence of any oral demand; but I am not prepared to go behind the finding

of the lower Court that there were several demands in view of the failure of the second defendant to deny the allegations in the plaint where the

plaintiff specifically stated that he made several demands on the defendants. It is however to be considered whether there was presentment for

payment and notice of dishonour in order to make the endorser liable on the pronote.

In view of my accepting the finding of the lower Court that there were several oral demands and also that there was a written demand, Ex. A-2,

it is to be examined whether the oral demands about which there was no evidence as to when they were made and under what circumstances, and

Ex. A-a would be sufficient to satisfy the requirements of presentment for payment and notice of dishonour as provided in the Negotiable

Instruments Act. u/s 74 of the Negotiable Instruments Act, a negotiable instrument payable on demand must be presented for payment within a

reasonable time after it is received by the holder. There is however no evidence to that effect in this case, excepting some demands made without

any further particulars. Section 64 lays down that promissory notes, bills of exchange and cheques must be presented for payment to the maker,

acceptor or drawee thereof respectively by or on behalf of the holder as hereinafter provided. In default of such presentment the other parties

thereto are not liable thereon to such holder. The learned Counsel for the petitioner referred me to Uppalapati Hemadri Vs. Kodali Seshamma and

Others, where it was held that such presentment for payment u/s 64 was necessary if the endorser is to be made liable. But the question is in what

manner the presentment is to be made. Prima facie it appears to me, reading the language of the sections that the presentment must be made

personally and the note has to be produced. In this case the learned Counsel for the respondent argues that when there is an oral demand it must

be presumed that he must have had the promissory note ready with him to be discharged when demand was made by the maker. I would be

inclined to accept this contention if only there was some evidence in the case that an oral demand was made at a particular time and the

circumstances under which it was made. Further to satisfy the requirements of Section 74 it is necessary that the negotiable instrument which was in

this case a promissory note must be presented for payment within a reasonable time. In the absence of evidence it is impossible to say whether it

was presented, if so, within a reasonable time. I do not think therefore that the note was presented for payment to the maker in order to make the

endorser liable.

In this connection it is necessary to consider whether in the case of a simple on demand promissory note the presentment for payment should be

made and the note produced when the demand is made. It is argued relying on (1938) M.L.J., Short Notes, page 4, that a registered notice of

demand by a pleader demanding payment is not a presentment in law. The learned Judges relied on decisions in Mahomed Rowthan v. Mahomed

Hussain (1899) 9 M.L.J. 135 : ILR 22 Mad. 337 and Simulu Ebrahim Rowthan Vs. Abdul Rahiman Mahomed and Others, . But there the

question of the manner or method of presentment did not arise. Even in 1938 M.L.J. when I looked into the original judgment I find that it was a

case which arose under the Stamp Act. But however the learned Judges observed with reference to a letter of demand written by the vakil to the

maker of the promissory note that

this is not good presentment unless the note or instrument is actually shown or exhibited to the person required to pay or to honour it; merely

making a demand cannot be said to be equivalent to presentment.

No doubt this seems to be the meaning of the word "" presentment,"" under Sections 64 and 74. It is no doubt correct that a notice of demand on

behalf of the holder would not amount to sufficient presentment since the promissory note could not have been sent along with the notice. The

following passage from Bhashyam and Adiga''s ''Commentarieson Negotiable Instruments Act may be cited : however, not necessary that the

presenter should carry the instrument in his hand at the time of the demand, provided the bill is in fact near and accessible, though not in his

personal custody. In fact, it seems that a demand otherwise valid is not vitiated, simply because the note or bill is not exhibited, unless the maker or

the acceptor should refuse to pay on that account.

That passage appears to have been taken from Parson''s Book on Negotiable Instruments, Volume I, page 368. I am inclined to agree with this

view. If only it is shown that demand was made and the person making the demand was in possession of the note and was in a position to hand it

over on payment, it should be sufficient for a presentment for payment especially in the case of on demand promissory note. It must be proved in

such a case that there has been a demand and the person making the demand had the promissory note with him or was in a position to produce it

on payment being made. That does not however arise in this case where there is no evidence as to the oral demand having been made within a

reasonable time after endorsement.

The next point argued by the learned Counsel for the petitioner is whether there was any notice of dishonour. The lower Court relies on Ex. A-2

but however does not say it amounts to a notice of dishonour. I do not think that the terms of that notice would be sufficient to be a notice of

dishonour as required by law. Section 93 of the Negotiable Instruments Act makes it incumbent on the holder of a promissory note which has been

dishonoured by non-payment to give notice that the instrument has been so dishonoured to all other parties whom the holder seeks to make

severally liable thereon and in this case the endorser.

The learned Counsel for the petitioner relied on the decision in DeSouza v. Coles (1868) 3 M.H.C.R. 384, where the question arose as to the

place of cause of action, the learned Judges observed that the obligation of the maker of promissory note, or of the endorser of bill of exchange

and probably of the acceptor also, is not complete without delivery of the instrument to the payee, endorsee, or drawer, and in a suit against the

maker, or endorser, or acceptor, the whole cause of action does arise where the complete contract is made but not elsewhere, subject to this

qualification as regards actions against endorsers, in which notice of dishonour is necessary, that such notice is also a material part of the cause of

action and must also be given within the jurisdiction. In Hartley v. Richard Jesson Case the Younger (1825) 107 E.R. 1085 it was held that a

notice of a dishonour of bill of exchange must contain an intimation that payment of the bill has been refused by the acceptor, and, therefore, a

letter merely containing a demand of payment was held not to be a sufficient notice. The following passage from the judgment of Abbot, C.J., will

be relevant:

There is no precise form of words necessary to be used in giving notice of the dishonour of a bill of exchange, but the language used must be such

as to convey notice to the party what the bill is, and that payment has been refused by the acceptor.

In this case apart from the oral demands reference is made in the plaint to the notice Ex. A-2, dated 10th December, 1946. It is only a notice

calling upon both the maker and the endorser to make the payment. There is also a reference in it that whenever the demand was made the

amounts, principal and interest, were not paid and that defendants were saying that it will be given and that they were evading. The learned

Counsel wants me to assume from these words that there must have been oral demands, presentment of the promissory note should have been

made and the fact of dishonour should also have been intimated to the endorser. I am unable to imply all these from the language of Ex. A-2.

Moreover as pointed out by Abbot, C.J., in Hartley v. Richard Jesson Case the Younger (1825) 107 E.R. 1085 there should be something to

indicate in the notice itself that there has been failure of payment on presentment and therefore dishonour of the promissory note. There is no such

indication in Ex. A-2 to that effect. It is no doubt correct that the notice of dishonour need not be in writing because Section 94 states that a notice

of dishonour may be oral or written. But there is no such proof of even a oral notice of dishonour in this case. It is therefore necessary that in case

where the endorsee of a promissory note seeks to make the endorser liable, the fact of presentment and issue of notice of dishonour should be

made clear in the plaint itself as notice of dishonour has been held to be a material part of the cause of action. There is no such allegation in the

plaint nor is there any proof of the same. In the circumstances, I think, the judgment of the lower Court cannot stand and I allow the petition but in

the circumstances without costs.