Soma Ramanujulu vs Soma Narasimhulu and Others

Seshachalapati, J.—This is an appeal against the judgment and decree of the learned Subordinate Judge, Cuddapah, in O. S. No. 49 of 1954 on the file of his court. The appellant instituted the suit aforesaid against the six respondents in this appeal for the recovery of the money due under a promissory note executed by defendants 1 and 4 in the action on 31-3-1953 marked as Ex. A-3 in the case.

The case of the plaintiff is that the defendants 2 and 5, who are brothers, stared a yarn business under the name and style of "Soma Venkatayya Gari Narasiah" and that they have been carrying on the business for the benefit of their two respective families. Defendants 1 and 3 are the sons of the second defendant. Defendants 4 and 6 are the sons of the 5th defendant. It is the case of the plaintiff that, for the benefit of the said joint family business, the defendants borrowed an amount of Rs.10,000/- on 31-3-1949, though the promissory note executed on that date was actually signed only by defendants 1 and 4. Some payments were made on that promissory note and, eventually, a fresh promissory note was executed on 31-3-1952 by defendants 1 and 4 in renewal of the prior promissory note for the amounts due thereon. The plaintiff alleged that the debt was for the benefit of the partnership business and for the respective joint families of the second and fifth defendants, that defendants 1 and 4 acted only as representatives of their respective joint families and, as such, all the defendants were liable to discharge the debt due on the promissory note. Ex. A-3.

The fourth defendent, one of the executants of the suit promissory note, did not contest the suit and was set ex parte. The first defendant filed a written statement, alleging that he has no concern with the management of the business or family affairs of the second defendant. He, however, confessed to a judgment, but prayed that the amount may be directed to be paid by him in installments of Rs.1000/- per annum. The second defendant filed a written statement, stating that the promissory note was executed only by defendants 1 and 4 for their business and it was not for the benefit of the second defendant, nor was it executed on behalf of and for the benefit of the joint family. He also denied that he and his two sons were joint in status. The third defendant denied all knowledge of the promissory note, and stated that he was not liable to discharge the debt. The fifth defendant in his written statement denied that the debt was incurred for the partnership business started and conducted by defendants 2 and 5, and that it was for the benefit of the respective joint families.

The learned Judge, on a review of the evidence, found that only defendants 1 and 4 who were the executants of Ex. A-1 and its renewal under Ex. A-3 were liable, and that all ether defendants were not. He granted a decree against defendants 1 and 4 and dismissed the suit as regards the other defendants.

In this appeal, Mr. R. Venkata Subba Rao, learned counsel for the appellant contends that the business, for which the loan was taken, was the business of the two joint families represented by the respective branches of defendants 2 and 5. and that as the suit promissory note was executed by defendants 1 and 4 only as representing the partnership and the joint families of their respective branches, a decree should have been granted by the learned Judge against all the defendants.

This is a suit based not upon the original debt but on a promissory note, Ex. A-3. A perusal of the promissory note shows that it was executed on 31-3-1952 by the first and fourth defendants for a sum of Rs.7,910-12-0, repayable with interest at 10 annas per cent per annum, and that it was with reference to the amount due under a prior promissory note executed by them on 31-3-1949, Ex. A-1. Ex. A-1 shows that the money was barrowed by defendants 1 and 4 for their necessity. In neither of the promissory notes, is there any reference whatever to the partnership or any business conducted by the two branches of their families.

In the trial, some attempt was made by the plaintiff to make out that at the time of the execution of Ex. A-1 and A-3. defendants 2 and 5 were present, and that it was at their direction that the two promissory notes were executed by defendants 1 and 4. The learned Judge has not believed this story, and we think, rightly. Nor has he believed the case put forward by the plaintiff that the part payments under Ex. A-1 were made by the second defendant. The evidence shows that actually an endorsement of payment was made by the first defendant.

There is nothing in Exs. A-1 and A-3 to show that the money was being borrowed for the partnership or for the benefit of the two pint families. It is admitted that on the relevant date, the partnership of ''Soma Venkatayya Gari Narasiah stood registered in the names of defendants 1 and 4. The plaintiff has not filed the suit praying for a decree against the firm in accordance with the terms of O. 30 C. P. C. Therefore, there is nothing, in the first place to show that defendants other than defendants 1 and 4 were partners of ''Soma Venkatayya Gari Narsasiah'', and in the second place that the debt was contracted by defendants 1 and 4 in the name of or for the benefit of that partnership.

When a suit is laid on the basis of a promissory note, it is only the maker that is liable thereunder. S. 27 of the Negotiable Instruments Act provides that every person capable of binding himself or of being bound as mentioned in S. 26, may also bind himself or be bound by a duly authorised agent acting in his name. This involves that in regard to making, drawing, acceptance, endorsement, delivery and negotiation of a promissory note, Bill of exchange or Cheque, in order to bind a firm, the aforesaid acts must be done by a partner in the name of the firm. It is not sufficient that the executant is merely a member of the firm or that ''he money was applied for and used for the benefit of the firm. It may be that it is net necessary that the note should be signed by the partner in the name of the firm, but certainly the name of the firm as the party liable on the promissory note must be sufficiently disclosed. Vide Penumatsa Rangaraju Vs. Sait Devichand Bhootaji Firm partner Sait Seshmull Kasturji and Another, Pattabhirama Reddy v. Balliah, 55 Mad LJ 574 : (AIR 1928 M d 1196), Katta Venkatannagari Sreenivasayya Vs. Kutagulla Mudda Nagappa by guardian Mr. C.P. Venugopal (Pleader) and Others,

In Sadasuk Janki Das v. Sir Kishan Pershad, ILR 46 Cal 663 : (AIR 1918 PO 146) the Privy Council had to consider a case where a person other than the executant was sought to be held liable under a promissory note. In that case, an agent of Maharaja Kishen Pershad drew certain hundies and when those hundies were dishonoured recourse was sought against the Maharaja. Lord Buckmaster observed as follows:

It is of the utmost importance that the name of a person or firm to be charged upon a negotiable document should be clearly stated on the face or on the back of the document so that the responsibility is made plain and can be instantly recognized as the document passes from hand to hand. In this case the preliminary words mention no mere than that Mohan Lal has been directed to execute the hundies and they do not necessarily imply that he has been clothed with authority to execute them in any other form than that in which they were actually prepared - a form which it has already been shown constituted nothing more than a personal liability on behalf of Mohan Lal.

...It is not sufficient that the principal''s name should be ''in some way'' disclosed, it must be disclosed in such a way that on any fair interpretation of the instrument his name is the real name of the person liable upon the bills.

In Sivagurunatha Pillai Vs. Padmavathi Ammal and Another, a Full Bench of five judges of the Madras High Court had to consider a question as to when exactly persons other than the maker of a negotiable instrument could be held liable thereunder. The Full Bench had to resolve a conflict between a decision of a Full Bench in Konetti Naicker v. Jatu Gopala Aiyar, ILR 38 Mad 482; (AIR 1916 Mad 293) (FB) and another decision of a Full Bench in Yeluri Satyanarayana (deceased) and Others Vs. Yelluri Mallayya and Others, . The first of the Full Bench cases held, approving the decision of Sadasiva Ayyar, J. that a maker of a negotiable instrument would be personally liable unless in signing, he indicated that he was signing as an agent or had expressly included his personal liability in the body of the note. In Yeluri Satyanarayana (deceased) and Others Vs. Yelluri Mallayya and Others, Ramesam, J. speaking for the Full Bench held, without any qualification, that one must look at all the surrounding circumstances in inferring the intentions of the maker of a negotiable instrument.

After considering all the relevant decisions, the learned Chief Justice observed that in Yeluri Satyanarayana (deceased) and Others Vs. Yelluri Mallayya and Others, , the Court erred in holding that circumstances not disclosed in the instrument could be looked at when deciding whether the maker was personally liable and that the leaned Judges who decided ILR 38 Mad 482 : (AIR 1916 Mad 293)(FB), erred in refusing to follow the line of approach indicated by Sundara Ayyar, J. and that when it was a matter of construing the effect of an instrument written in Tamil or in any other Indian language, the observations of Sundara Ayyar, J., would apply. In other words, the Full Bench has stated that where the maker of a promissory note added to his description in the preamble of the note a statement that he was the agent under a power of attorney of another, he must be taken to have indicated that he executed the instrument in the capacity of an agent, and that the principal and not the executant was liable on the note, although he signed the note without adding the words indicating the capacity in which he signed. But what this decision unmistakably points out is, that there must be such indication in the body of the note itself. In view of these authoritative pronouncements it follows:

that it is only the maker of a negotiable instrument that is liable under it;

if it is sought to make others liable, there must be some indication to that effect in the body of the promissory note, though, it may be that the signature was not subscribed as such.

Applying these principles to the instant case, we find that there is absolutely no indication in the promissory note that it was either for the partner-''ship or for the benefit of the joint family business.

Mr. Venkata Subba Rao has contended that in this case, the debt was contracted for the benefit of the two families by the representatives of the respective branches, and therefore, all the members of their respective branches should be held liable. In support of that contention, he placed strong reliance on a decision of the Madras High Court in Kizhedath Pappi Amma and Others Vs. Rama Iyer and Others, . In that case one of the questions that fell to be decided was, whether a promissory note executed by a Karnavan of a Malabar Tarwad could be binding upon the Tarwad. The note was not made in a representative capacity; it was not signed by the Karnavan as such. The learned Judges observed that it was sufficient that the execution of the note in the character of Karnavan should be clearly indicated somewhere in the note. This decision has absolutely no bearing on the facts of this case. Defendants 1 and 4 are admittedly not the heads of the respective branches of their families.

A reference was also made to Paboodan Goolabchand Vs. M.J. Miller and Another, . That was a suit instituted by a marwari banker against a Tea Estate. The suit was on the footing of certain dealings where under the agent of the proprietor of the Tea Estate made certain borrowings from the plaintiffs. The main question that fell to be decided in that case was. whether the agent was acting within the limits of his authority. Incidentally, the question arose, if the principal has had the benefit of the borrowings whether he should not be rendered liable on the equitable rule against ''unjust enrichment''. That case is far away from the facts of the present case. That was not an action founded on negotiable instrument.

A reference also was made to a decision of the Allahabad High Court in Krishnanand Nath v. Raja Ram Singh, ILR 44 All 393: (AIR 1922 AH 116). There, the suit promissory note was executed by the ''Kartha'' of the Hindu family. The question was whether his undivided brother could also be held liable thereunder. The learned Judges found that an earlier promissory note was executed by both the brothers and the suit promissory note of 1914 was a renewal thereof. In these circumstances, the learned Judges held that a promissory note executed by the ''Kartha'' of the family may be binding upon the other undivided members also. In this case, it is clear, as stated already, the executants of the two notes are not the ''Karthas'' of their respective family branches.

The learned Subordinate Judge has correctly held that the promissory note ex facie does not show that it was borrowed on behalf of the firm by the defendants 1 and 4 as partners. He has also held that there is no evidence worth the name to show that the other defendants are partners of ''Soma Venkatayya Gari Narasiah''. He has further held that there is nothing to indicate ex facie in Ex. A-1 or Ex. A-3 that the borrowing was for and on behalf of the joint family. These findings, in our judgment, are correct and justify no interference. The appeal fails and is dismissed with costs.