S. Guruswami Achari vs Vengiduswami Achari

Anantanarayanan, J.—This second appeal involves a question of some interest, with regard to the applicability of the exception or proviso

enacted as the last part of Section 28 of the Negotiable Instruments Act, 1881. The brief facts are as follows:

The suit was instituted by the plaintiff (respondent) in the court of the learned Subordinate Judge of Dindigul for recovery of a sum of Rs. 5000

on a promissory note executed on 9th February 1953 by the defendant in favour of the plaintiff. The plaintiff further alleged that the suit was in

time, for a sum of Rs. 250 had been paid and endorsed on the instrument on 5th January 1956. I may immediately state that the case of the plaintiff

presents no difficulty, ex facie, for it is not disputed that the promissory note was executed, and that it was supported by consideration in the shape

of a loan advanced by the plaintiff.

The very important question is whether the defendant (appellant) did or did not take the plea which would entitle him to invoke the benefit of the

principle enacted as the last part of Section 28 of the Negotiable Instruments Act. I might immediately state that the learned District Judge differed

from the trial court, in the first appeal, and came to the conclusion that the defendant (appellant) could not raise this plea at all, as the necessary

averments had not been made at the trial. Since this is the single cardinal issue upon which the entire appeal turns, I think it is important to extract

and set forth the observations of the learned District Judge in the first appeal. They occur in paragraph 116 of his judgment and are as follows:

..... the learned counsel for the defendant refers to Section 28 of the Negotiable Instruments Act and argues that the defendant was induced to

sign the suit promissory note upon the belief that the plaintiff will hold only the company liable. It must however be pointed out that there is no such

express plea taken in the written statement filed by the defendant and no evidence to show that the plaintiff induced the defendant to sign the

promissory note upon the belief that the principal alone that is, the company would be held liable.

In other words, the learned District Judge was clearly of the view that the plea itself could not be taken because, essentially, it was a plea of fact.

The necessary averments were not advanced, the issue was not raised and the matter could not be, therefore, agitated in that form. Incidentally the

learned District Judge also expressed his opinion that there was no evidence in support of the plea.

I shall come to the question of the existence of evidence in support of the plea, a little later. For the moment I shall deal with the first of the

grounds assigned by the learned District Judge for reversing the judgment and decree of the learned Subordinate Judge who held that the plea was

substantiated, and granted a decree not against the defendant (appellant) in person, but only In his capacity as a director of Sarvodaya Pictures

Co., Ltd. This ground, as I have earlier emphasised was that the question being essentially one of fact, the necessary averments had not been

advanced, and the necessary issue was not there. The learned District Judge seems to be totally mistaken in this view. Even in the summary of the

pleadings, to be found in paragraph 2 of the judgment of the learned Subordinate Judge at the trial, the following pleas are ascribed to the

defendant.

So, Sarvodaya Pictures alone is liable to pay Rs. 4500 to the knowledge of the plaintiff. That is the understanding between the parties. So there

cannot be any personal liability as regards Rs. 4500.

I have carefully scrutinised the Tamil text of paragraph of the written statement and find that it is even more explicit. There are definite averments

that, as far as the sum of Rs. 4500 is concerned (which is alone the subject matter of the present contest in the second appeal), this sum was

advanced as a loan by the plaintiff on the definite understanding that the company alone was liable for the loan, and not the defendant personally.

We must, after all, recollect that a party is bound to plead the facts, but not the law. It is for the court to apply the legal principles in the light of the

facts pleaded by the party and established by him in evidence. It is true that the defendant did not say that it was the plaintiff who induced him to

sign the instrument in the belief that the company alone would be liable. But this is the gist and substance of the averments to be found in paragraph

In that view, the question of the applicability of the principle of the last part of Section 28 of the Act specifically arose on the pleadings between

the parties. As regards the issues, they have not been very happily framed; it is difficult now to ascertain whether learned counsel then appearing

were responsible for this; or whether the court adopted that particular frame of the issues. But as the issues stand, there is issue 1, whether the

defendant was not personally liable for Rs. 4500 and issue 2, whether the suit was bad for nonjoinder of the company Sarvodaya Pictures Ltd.

Between the two issues, taken together the plea was virtually one of the principle of Section 28 of the Act.

After an elaborate discussion of the merits, the learned Subordinate Judge held that the case fell within the exception to. Section 28, that there

was adequate evidence to that effect, and that the plea of the defendant was substantiated. I think it is sufficient for me to observe that I am unable

to follow the remark of the learned District Judge, in the light of these findings of the trial court based on a discussion of the evidence, that in his

view, there was simply no evidence on the aspect. It is totally a different matter whether the trial court finds that evidence adequate and accepts it,

or rejects it as inadequate or untrue. I purposely refrain from making any comment on the merits of the available evidence, on the plea relating to

the exception to Section 28. But it is clearly impossible, in the light of the discussion and the findings of the trial court, and without further

canvassing them, to dismiss the matter simply by the observation that there was no evidence on the aspect.

In these circumstances, in the interests of justice, I am constrained to allow the second appeal to set aside the decree of the first appellate court

and remand the entire appeal to that court for proper and full hearing and determination. It is needless for me to state that no observations of mine

earlier in this judgment, are at all intended as any indication of the merits of the matter. The first appellate court is perfectly at liberty to arrive at its

Independent finding with regard to the merits of the evidence on the plea of the defendant that he was not personally liable; the evidence has to be

canvassed and the findings given after such analysis and discussion. The costs here will abide by and follow the result of this remand. Court fee

paid will be refunded. No leave.