Uppalapati Hemadri vs Kodali Seshamma and Others

Sundaram Chetty, J.—This second appeal arises out of a suit filed by the plaintiff-appellant for the recovery of a sum of money, alleged to

be due on a promissory-note payable on demand (Ex. A), which was executed by defendant 1 in favour of defendant 2, who subsequently

endorsed it to the plaintiff. A decree was passed against defendant 1, the maker of the pro-note, and defendant 2. The lower appellate Court

dismissed the suit as against the endorser (defendant 2) as no notice of dishonour was given to her by the plaintiff. The correctness of that view is

now questioned by the appellant. There is no allegation in the plaint that any notice of dishonour was given to the endorser (defendant 2) nor is

there an iota of proof in respect of it. The only allegation in the plaint is, that in spite of demands made by defendant 2 prior to the transfer and by

plaintiff subsequent to the transfer, defendant 1 did not pay the amount of the note. It is urged, that if an opportunity is given, the plaintiff is

prepared to prove the dishonour of the note prior to its transfer by defendant 2. But the appeal was argued on the assumption of the truth of that

allegation, and the question is whether the plaintiff is entitled to a decree against defendant 2 as the endorser of a promissory note payable on

demand, without having given a notice of dishonour to her (defendant 2) inasmuch as there was a dishonour of the pro-note even before the

endorsement.

In support of his contention the learned advocate for the appellant relied on the last portion of Section 35, Negotiable Instruments Act. That

section runs thus:

In the absence of a contract to the contrary, whoever endorses and delivers a negotiable instrument before maturity....is bound thereby to every

subsequent holder, in case of dishonour by the drawee, acceptor or maker to compensate such holder for any loss or damage caused to him by

such dishonour, provided due notice of dishonour has been given to, or received by, such endorser as hereinafter provided. Every indorser after

dishonour is liable as upon an instrument payable on demand.

This section distinctly deals with the transfer of a negotiable instrument before maturity. We have to refer to Section 22 of the Act, to see what is

meant by maturity"" and to what kind of negotiable instruments, is that expression applied. That section is:

The maturity of a promissory note or bill of exchange is the date at which it falls due. Every promissory note or bill of exchange which is not

expressed to be payable on demand at sight or on presentation is at maturity on the third day after the day on which it is ex-pressed to be payable.

The wording of this section makes it clear, that a promissory note or a bill of exchange can be said to be at maturity, only when it specifies a

date on which the amount is payable. Therefore the term '' maturity"" used in this Act, can have no application to a promissory note payable on

demand. That being so, it seems to me, that Section 35, which deals with the transfer by endorsement and delivery of a negotiable instrument

before maturity does not apply to a promissory note payable on demand. This ''view has for its support the decisions of two learned Judges of this

High Court. In the decision reported in Jagannadha Reddiyar Vs. Lakshmana Reddiyar, Ramesam, J., has held that the extent and nature of the

liability of the endorser of note payable on demand is not governed by Section 35 of the Act. In a later decision (unreported) in Civil Revision

Petition No. 301 of 1927, Anantakrishna Ayyar, J., has held that Section 35 could not apply to'' the case of a promissory note payable; on

demand, because no question of maturity mentioned in the section could arise in the case of such promissory notes.

Even assuming that Section 35 applies (but I am clear, that it does not apply) I have to state that the last clause of that section does not really

help the appellant''s contention. There is some ambiguity in that clause, but after some careful scrutiny it vanishes. It is urged by the learned

advocate for the appellant that the last clause of Section 35 refers to an endorser of a dishonoured promissory note or bill of exchange, and

declares his liability as upon an instrument payable on demand. He contends that no notice of dishonour is needed to enforce the liability of such an

indorser. If this should be the correct interpretation, the last paragraph of Section 35 would be in conflict with the mandatory provision in Section

93, which says that when a promissory note is dishonoured the holder thereof must give notice of dishonour to all other parties whom the holder

seeks to make severally liable thereon, except the maker, of the note. The. wording of Section 93 is general and wide enough to cover the case of

an endorsement of a promissory note before or after dishonour, and the obligation of an endorsee to give notice of dishonour, by non-acceptance

or nonpayment,: to the endorser, exists, whether the promissory note was. dishonoured or not before the indorsement. The last paragraph of

Section 35 cannot be taken to mean that the endorser is liable, even without a notice of dishonour being given to him by the endorsee.

It is oven doubtful whether the last clause of Section 35 really refers to the case of an endorsement of a negotiable instrument after its dishonour.

The previous portion of the section relates to the endorser''s liability for compensation for any loss or damage caused to the endorsee of a

negotiable instrument before its maturity (and consequently before its dishonour) by reason of its dishonour sub-sequent to the endorsement. The

latter clause of the section may be understood to mean that after the aforesaid dishonour the endorser is liable as upon an instrument payable on

demand, and that liability is akin to that of the maker. But this liability is subject to the condition fixed in the proviso embodied in the first part of the

section. In this view also, there would be no conflict between Section 93 and the last paragraph of Section 35 of the Act.

For the foregoing reasons I hold that the liability of defendant 2 as endorser, is not enforceable, as no notice of dishonour was given to her by

the plaintiff, even if there was dishonour of the pro-note prior to its endorsement to him.

Another ground urged by the learned advocate for respondent 3 for non-liability of the endorser in this case is that there was no presentment of

the pro-note for payment as required by Section 64 of the Act. There is no allegation in the plaint about the presentment of the note. Section 64

lays down that in default of such presentment the other parties thereto (an endorser comes within this category) are not liable thereon to such

holder. Exception is made in the case of the maker whore a pro-note is payable on demand and is not payable at a specified place. In the decision

in Civil Revn. Petn. No. 301 of 1927, referred to above,, the view expressed by the learned Judge is that presentment for payment is necessary to

make the endorser of a pro-note payable on demand liable to the endorses: vide also Section 74. In the result this second appeal fails and is

dismissed with costs of respondent 3.