Mellepeddi Pitchamma vs Medabalimi Venkataramayya

Abdur Rahman, J.—The suit out of which this revision arises was brought on the basis of a promissory note (Ex. A) executed by the

defendant-petitioner on 20th November 1932 in favour of one Ratamma. It was indorsed on 20th June 1934 by the said Ratamma to her sister''s

son Venkataramayya Garu for collection. The indorsement (Ex. A-2) reads as follows:

An order (transfer) has been made in favour of Venkataramayya Garu son of Gummadi Rattayya Garu, for collection of the principal and interest

due on this note.

Venkataramayya Garu instead of collecting the amount from the defendant indorsed the promissory note in favour of one Medabalimi

Venkataramayya who happened to be the defendant''s son-in-law. The endorsement contains a statement that Venkataramayya Garu has received

a bull-calf and a sum of Rs. 110 from the indorsed to whom the hundi has been indorsed for collection. On the suit being instituted by Medabalimi

Venkataramayya it was contended on behalf of the defendant that the note had been discharged by him by making payment to Ratamma. This

contention did not prevail in the trial Court and the suit was decreed. The other plea specially raised in para. 2(a) of the written statement was to

the effect that G. Venkataramayya was only an agent for collection and was not authorized to indorse the promissory note in favour of the plaintiff.

This plea was not considered by the lower Court. It was therefore contended here that the plaintiff had obtained no rights under the indorsement

and he was not entitled to maintain the suit. Since the facts necessary to determine this question of law are not in dispute, it is unnecessary to

remand the case.

The promissory note which formed the basis of the suit is undoubtedly a negotiable instrument and an indorsement of the same, followed as it

was by delivery, would, unless it was restricted, transfer the property to G. Venkataramayya with the right of further negotiation. The only question

then is whether the indorsement (Ex. A-2) restricted G. Venkataramayya''s rights in the note. A reference to Ex. A-2 would show that the

indorsement was apparently for collection and could not have conferred any property in the promissory note upon G. Venkataramayya. In other

words, he, i.e. G. Venkataramayya, could be regarded only as an agent for collecting the money due under the promissory note from its maker and

could not deal with it in any other manner. Not having the property in the promissory note himself, G. Venkataramayya was not in a position to

transfer any to the plaintiff. The transfer to the plaintiff being unauthorized must consequently be held to be ineffectual : see Lloyd v. Howard

(1850) 15 Q.B. 995. It was contended on behalf of the respondent that if G. Venkataramayya was entitled to realize the amount due on the

promissory note from the maker, he must be held to have been empowered to bring a suit as well. To this extent the contention appears to be

unobjectionable but it is obviously useless to the respondent. It was therefore contended on his behalf that of the indorsee for collection could

institute a suit against the maker, he could also indorse the note in favour of another person. This contention is in my opinion unsound and must be

repelled. An indorsee for collection must be held to be an agent for collecting the money due on the promissory note. He might have been able to

indorse it for that purpose if expressly authorized by his principal, but G. Venkataramayya, as Ex. A-2 would show, was not authorized to delegate

the authority given to him. In any case he was not authorized to negotiate the note to any other person. The cases cited on behalf of the respondent

are not relevant to the point which has to be determined here.

The plaintiff must be presumed to have knowledge of the indorsement made in favour of G. Venkataramayya and should have known that the

promissory note could not have been negotiated. In view of the express words in the indorsement Ex. A-2 it must be held that the endorsement

and negotiation by G. Venkataramayya were beyond his powers and could not confer any rights on the plaintiff and that he was not entitled to

maintain the suit on the basis of the promissory note. The revision must therefore be and is hereby accepted and the suit ordered to be dismissed.

The petitioner will have his costs both in this and in the trial Court.