Sarjug Singh vs Deosaran Singh and Another

Kulwant Sahay, J.—This is an application on behalf of the plaintiff in a Small Cause Court suit The suit was to recover the principal and interest due on a promissory note alleged to have been executed by defendant 1 in the name of defendant 2. The plaintiff''s case was that defendant 2 was his benamidar and the money was actually advanced by him and the promissory note was taken by him in the name of his benamidar, defendant 2. One of the pleas taken by the defendants was that the suit was not maintainable at the instance of the plaintiff, and reliance was placed on Section 78, Negotiable Instruments Act, read with Section 8 of the Act. The learned Judge accepted the objection of the defendant and held that the suit was not maintainable, and he accordingly dismissed the suit.

The only question for consideration is whether the plaintiff can maintain, the suit Section 78, Negotiable Instruments Act, provides that "subject to the provisions of Section 82, Clause (c)" (which does not apply to the facts of the present case) :

payment of the amount due on a promissory note, bill of exchange, or cheque, must, in order to discharge the maker or acceptor, be made to the holder of the instrument,

and Section 8 of the Act defines the holder of a promissory note as a :

person entitled in his own name to the possession thereof, and to receive or recover the amount due thereon from the parties thereto.

In the present case the promissory note in suit stands in the names of defendant 2, and it is contended that the plaintiff cannot be considered to be the holder of the instrument. To my mind, Section 78 does not debar the real beneficiary under the promissory note from suing on the basis of the note if he can give a discharge to the maker of the promissory note. The object of Section 78 is to secure a valid discharge to the maker of the note. If the person who is ostensibly the holder of the promissory note is made a party to the suit, and in his presence it is alleged that the plaintiff is the real beneficiary and that the ostensible holder was not the real holder of the instrument, and he can prove his allegation by evidence or by the admission of the ostensible holder of the instrument, I see no reason why such a suit should not be maintainable.

In the present case defendant 2 has appeared in this Court through an advocate and he admits that the plaintiff is the real beneficiary and that he is a mere benamidar. If defendant 1 had taken the plea that he had obtained a valid discharge by making payment to the holder of the instrument, then it is true that under the terms of Section 78 the plaintiff could not make defendant 1 again liable on the allegation that defendant 2 was not the real holder of the instrument. It does not appear that any such defence was taken by defendant 1. I am therefore of opinion that. Section 78, Negotiable Instruments Act, does not debar the maintainability of the suit.

Reference has been made on behalf of defendant 1 to several reported cases, ln 1897 the Madras High Court in Gurumurti v. Sivayya [1897] 21 Mad. 391 held that a suit by an infant represented by his next friend to recover the balance due on a promissory note alleged to have been made on account of his estate to his mother and guardian was maintainable. In this case the promissory note stood in the name of the mother of the plaintiff and the plaintiff''s case was that the mother took the promissory note on behalf of the plaintiff''s estate and the suit was instituted by the plaintiff as the real beneficiary under the hand note. It was held that such a suit was maintainable. It is true that no reference was made to the provisions of the Negotiable Instruments Act, but the case was decided on general principles. In Ramanuja Ayyangar v. Sadagopa Ayyangar [1904] 28 Mad. 205 a contrary view was taken and it was held that under circumstances similar to the case of Gurumurti v. Sivayya [1897] 21 Mad. 391 the suit was not maintainable. The matter came to be considered by a Full Bench of the Madras High. Court in Subba Narayan Vathiyar v. Ramaswami Aiyar [1906] 30 Mad. 78. This was a suit on a promissory note by the person named therein. The defence of the defendant was that the plaintiff was a benamidar for another person and that payment had been made to that person.

It was held that such a plea was not maintainable. The learned Judges, how ever, made certain observations which go to support the contention of defendant 1 in the present case to the effect that a suit by a person not named in the instrument cannot be maintained, and the decision in Gurumurti v. Sivayya [1897] 21 Mad. 391 was expressly overruled. This Full Bench decision was followed in a later case in the Allahabad High Court in Reoti Lal and Another Vs. Manna Kunwar, . The Full Bench decision of the Madras High Court and the decision of the Allahabad High Court in Reoti Lal and Another Vs. Manna Kunwar, were considered by a Division Bench of the Calcutta High Court in Brojo Lal Saha Banikya Vs. Budh Nath-Pyari Lal Das, and the learned Judges expressed their inability to accept the decision of the Full Bench of the Madras High Court and the decision of the Allahabad High Court in Beoti Lal v. Manna Kunwar AIR 1922 All.70. I feel inclined to agree with the view taken by the learned Judges of the Calcutta High Court in the case of Brojo Lal Saha Banikya Vs. Budh Nath-Pyari Lal Das, . In Ram Das v. Chhot Lal AIR 1928 Pat. 24 it appears to have been conceded on behalf of the plaintiff that a suit on a promissory note on the allegation that the person in whose name the instrument stood was a benainidar of the plaintiff was not maintainable. The question was not discussed and considered but was decided on the concession made by the learned advocate for the plaintiff in that suit. I am of opinion that there is nothing in the provisions of the Negotiable Instruments Act to make a suit like the one now before us not maintainable. It may be that under the English Law a person not named in the instrument would be debarred from maintaining a suit on the allegation that he was the real beneficiary and that the person named was his trustee or agent, but in India benami transactions are recognized, and there is no reason why a suit like the one now before us should be held to be not maintainable if the plaintiff can give a valid discharge to defendant 1, defendant 2 in whose name the document stands having appeared in this Court and stated that he was a mere benamidar for the plaintiff. I see no reason why the suit should not proceed.

I would therefore set aside the order of the learned Judge and remand the case to him for decision of the other points arising in the case and for disposal according to law. Costs will abide the result; hearing fee two gold, mohurs.