Ponmalal Goundar vs Kailasa Goundar

Veeraswami, J.—The respondent laid a suit to recover certain moneys from the petitioner due on a promissory note of which the

respondent, as per plaint allegations, had taken an assignment for full consideration. In the plaint he stated that in spice of repeated demands, the

defendant had not paid any amount to the original payee, either towards principal or interest. The defence in the written statement was that no cash

consideration passed for the promissory note but it had been executed by way of a security and that after maturity, the plaintiff had taken an

assignment with knowledge of it and that, therefore, the plaintiff was not a bona fide holder In due course. On those pleadings the issue was

framed, whether the plaintiff was a holder In due course. He applied to amend the issue to read : ""Whether the plaintiff is not a holder in due

course?"" and this amendment was allowed. The petitioner, in this court seeks to revise the order. It is argued that since the plaintiff, as admitted by

him in the plaint, was aware of the repeated demands made on the defendant, by the original payee, the plaintiff cannot be regarded as a holder in.

due course and therefore, the order of the court below is erroneous.

S. 118 of the Negotiable Instruments Act, contains certain statutory presumptions which include that every transfer of a negotiable instrument

was made before its maturity and that the holder of a negotiable Instrument was a holder in due course. Mr. Desikan for the petitioner argues that

the first of these presumptions cannot apply and for that reason the second too. He refers to Sec. 22 which defines maturity of a promissory note

as the date at which it falls due. That means, literally speaking, that the maturity is respect of a promissory note arises even on the day it is

executed, for, where the promissory note is payable on demand, it becomes payable immediately. S. 9 defines a holder in due course in two parts.

The first part says that the expression means a person who for consideration became the possessor of a promissory note, bill of exchange or

cheque if payable to bearer. The second part is that a holder in due course means also the payee or endorsee of a promissory note, if payable to

order, before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the

person from whom he derived his title. One other provision which is relevant is Sec. 59 which says that the holder of a negotiable instrument who

has acquired it after dishonour, whether by non-payment, with notice thereof, or after maturity, has only, as against the other parties, the rights

thereon of his transferor.

In the light of these provisions, the question is whether the assignment of the promissory note was after its maturity and therefore, in that sense,

the plaintiff cannot be regarded as a holder in due course. It seems to me that the doctrine of maturity in relation to a holder in due course is, in the

nature of things inapplicable to a promissory note. It sounds strange to one''s judicial sense that a promissory note which payable on demand, and

therefore, immediately reached maturity at the moment of its execution, and at the same time a holder in due course in respect of the promissory

note should be one who gets an assignment thereof before its maturity. Such a view involves contradictory premises. With due respect, I find

myself In entire agreement with the observations of Pandrang Row, J. m Venkataramam v. Kanakasundara Rao 44 L.W. 456 namely :

The question of maturity does not arise In the case of a promissory note payable on demand; it cannot be said that a promissory note becomes

mature the moment after it is executed and that any endorsement thereafter even for consideration does not constitute the transferee or endorsee

holder in due course even if he acted in good faith.

The second part of S. 9, therefore, in my view, will not apply to a promissory note, which is payable on demand and, therefore, becomes due

the day it is executed. But Mr. Desikan contends that on that construction and in view of the language employed by the first part of S. 9, a case

like this will not be covered by S. 9 at all. According him, the words ""if payable to bearer"" would apply to a promissory note as well and in support

of this view he refers to the definition of a promissory note It is true that a promissory note may be one payable to a bearer. But because of that, I

do not think, those words in the first part of S. 9 quality the promissory note. In my opinion, they have reference only to the cheque. Mr. Desikan

then invited may attention to Nunna Gopalan Vs. Vuppuluri Lakshminarasamma, and particularly to the following observation :

It is to be observed that in the case of a promissory note which is payable on demand (as in this case) it does not become payable until demand is

made. On demand being made it falls due immediately.

This observation does not appear to be necessary for decision of that case. In any case I do not understand it as laying down that such a

promissory note is not due for payment the moment it is executed. The limitation, In respect of a promissory note, starts from the date of its

execution, not from the date of demand. A promissory note executed with an obligation to pay unconditionally and on demand becomes payable

the moment it is executed. That is clear from S. 22, itself The maturity of a promissory note under that section is the date on which it falls due and

in my view, it falls due the moment the promissory note is executed. It follows that the order of the court below is correct. the presumption in S.

118 would apply and it is not neutralised by any of the provisions which I have above referred to. I may, however, observe that I have formed the

view merely on the statutory provisions without any reference to the facts which may have a bearing on the claim in the suit. This order should not,

therefore, be taken to be a pronouncement on the issue itself but should be understood as having a reference to its frame and the burden of proof.

The petition is dismissed but with no costs.