V. Bapu Kalingarayar vs Rajam and Another

Varadarajan, J.—The defendant, who failed in the Lower Appellate Court, is the appellant. The respondents filed the suit for the recovery of

money due on the promissory note Ex. A-1 dated 26-8-1966 executed by the appellant and his brother''s son Chockalingam in favour of one

Ramanatha Iyer for Rs. 3,100/- alleged to have been advanced by the respondents, according to whom Ramanatha Iyer was their power of

attorney agent. The respondents filed the suit through another power of attorney agent on 17-1-1972 and relied upon the letter Ex. A-2 dated 14-

1-1969 given by the appellant to them as an acknowledgment of liability for the purpose of limitation.

The appellant''s defence was that the letter Ex. A-2 was executed only in Jan. 1970 after the claim had become barred by limitation, though it is

dated 14-1-1969, and that the suit is, therefore, barred by limitation. After arguments were advanced and judgment was reserved the respondents

filed an application for amendment of the plaint on the date on which the suit was posted for judgment. The amendment prayed for was to the

effect that the appellant had acknowledged the liability by another letter Ex. A-3 bearing the postal date seal 23-8-1968 and addressed to

Ramnatha Iyer and that, in any event, Ex. A-2 cannot be construed as an acknowledgment and it constitutes an express promise to pay the barred

debt and it is not a void agreement in view of Section 25(3) of the Contract Act. The trial Court dismissed that application and another application

filed on the same date to reopen the case observing that the proposed amendment seeking to rely upon Ex. A-2 as an agreement to pay a barred

debt introduces a new case, which has not been pleaded in the original plaint. The learned District Munsif found that Ex. A-2 had been executed in

Jan. 1970 as contended by the appellant more than 3 years after the date of the suit promissory note Ex. A-1 and would not save limitation and he

dismissed the suit without costs holding that the suit was barred by limitation. But on appeal, the learned District Judge, agreed with the trial Court

in coming to the conclusion that Ex. A-2 was executed only in Jan. 1970, but however, held that it amounted to an agreement to pay the barred

debt and would enable the respondents to recover the amount in view of Section 25(3) of the Contract Act and he allowed the appeal with costs

throughout.

Two points were urged before me by Mr. T.R. Srinivasan, the learned counsel for the appellant and they are: (1) that the letter Ex. A-3 bearing

the postal date seal of 23-8-1968 is addressed to Ramanatha Iyer and has not been relied upon as an acknowledgment of liability for the purpose

of limitation and the letter Ex. A-2 having been admittedly obtained only in Jan. 1970 would not save limitation and (2) that the respondents, who

are not the payees in the promissory note, Ex. A-1, are not entitled to maintain the suit on the promissory note. The letter Ex. A-3 had not been

relied upon in the Lower Appellate Court even in the memorandum of grounds of appeal and the learned District Judge has not relied upon it, as

saving limitation in his judgment where he has proceeded on the basis that Ex. A-2 would amount to a promise in writing, signed by the person

charged therewith to pay wholly the debt of which the creditor might have enforced payment but for the law of limitation of suits as required by

Section 25(3) of the Contract Act and that the suit is, therefore, in time. The learned counsel for the appellant submitted that there is no allegation

in the plaint that by Ex. A-2 the appellant had promised to pay wholly or in part the promissory note debt, that the claim in respect whereof would

otherwise be barred by limitation and that it is, therefore, not open to the Court to give relief to the respondents on the basis of Ex. A-2. But the

learned counsel for the respondents relied upon some decisions which would be referred to presently and submitted that the trial Court ought to

have allowed the amendment prayed for and that it is open to the court to take note of Ex. A-2 as a promise to pay the barred debt and give relief

to the respondents. The first decision relied upon by the learned counsel for the respondents in this connection is of a Bench of the Lahore High

Court in Parmeshri Das v. Fakiria 60 Ind Cas 772 ; AIR 1922 Lah 230 where the learned Judges had observed:

Gobinda Mal v. Santa 26 Ind Cas 441 : AIR 1914 Lah 337 followed Jogeshwar Roy v. Raj Narain Mitter ILR (1904) Cal 195 and held that

under Order VII, Rule 6. C. P. C. the plaintiffs were bound to show in the plaint, the grounds upon which exemption from the law of limitation was

claimed and that, as there was no mention in the plaint of the alleged acknowledgment of liability by the defendants, plaintiffs ""could not be allowed

to rely on it ............... In Hingu Miya v. Heramba Chandra (1911) 13 Cal LJ 139 it was pointed out that the case of Jogeshwar Roy v. Raj Narain

Mitter ILR 31 (1904) Cal. 195 did not lay down any inflexible rule of law, and it was held that if the plaint shows the ground of exemption the

requirements of the Code were satisfied, but this does not preclude the plaintiff from taking another and an inconsistent ground to get over the bar

of limitation if he believes that the latter is the true ground; and the Court allowed the plaintiff to urge that the suit was not barred by limitation for a

reason different from the one assigned in the plaint ......... We agree with the interpretation put upon the law in Yakub Ebrahim Sayani Vs. Bat

Rahimatbai, and Hingu Miah v. Heramba Chandra (1911) 13 Cal LJ 139 and consider that the plaintiffs should not be debarred from putting

forward the admission of the defendants made by them in their written statement of the 25th June, 1906"".

This decision of the Lahore High Court has been followed by Achhru Ram, J., of the East Punjab High Court in AIR 1949 219 (P & H.) in

rejecting the contention urged before him that the plaintiff having claimed exemption from the law of limitation only u/s 20 on the ground of part

payment of the principal cannot be permitted to claim exemption on the ground of acknowledgment u/s 19 of the Limitation Act.

The next decision relied upon by the learned counsel for the respondents is of a Bench of the Bombay High Court in Gunnaji Bhavaji v. Makanji

Khushal Chand ILR(1910) 34 Bom 250. In that case, as in the present case, after hearing of the suit brought by the plaintiff for the recovery of a

sum due on the foot of an account the defendant raised the plea of limitation. The plaintiff thereupon applied for leave to amend his plaint by setting

out an acknowledgment in writing signed by the defendant within the period of limitation. The trial Court presided over by Russell, J. refused the

application. But on appeal, it was held by the Bench that the view of Russell, J. that the amendment asked for would convert the suit into one of a

different and inconsistent character was incorrect and that it would remain the same based upon exactly the same cause of action except for the

addition of one allegation and that the amendment should be allowed as shown in paragraph I of the memorandum of appeal. The learned Judges

allowed the amendment and granted leave to the defendants to file a supplemental written statement if they were so advised. No doubt, the course

adopted by the learned Judges in that case had not been adopted by the learned District Judge in the present case, for he had remained content

with criticising the trial court for not allowing the amendment, but did not specifically allow the amendment and grant an opportunity to the appellant

to file a supplemental written statement if he was so advised. Though, as already stated, he had proceeded on the basis that the letter Ex. A-2

would amount to a promise to pay the barred debt within the meaning of Section 25(3) of the Contract Act, it is not necessary to go into this

question in greater detail having regard to the view which I am going to take about the maintainability of the suit filed by the respondents on the

promissory note in which they are not the payees or indorsees. However, it may be necessary to say that it was open to the learned District Judge

to consider the question whether the amendment should have been allowed even though no revision or appeal had been filed against the order of

the trial Court disallowing the application for amendment. The learned counsel for the respondents submitted that it was open to the Lower

Appellate Court to go into that question under the provisions of Section 105(1) C. P. C. In Seth Nanak Chand Shadiram Vs. Amin Chand

Pyarilal, , Ray, J., as he then was, who spoke for the Bench had observed (at p. 10):

The recent decision of the Supreme Court in Satyadhyan Ghosal and Others Vs. Sm. Deorajin Debi and Another, considered the scope and

meaning of Section 105, C. P. C. The Supreme Court said that an interlocutory order which had not been appealed from either because no appeal

lay or even though an appeal lay an appeal was not taken, could be challenged in an appeal from the final decree or order. This decision is an

authority for the proposition that though an appeal could have been taken from the order refusing the application for amendment on the ground of

limitation, yet the question could be agitated in appeal from the decree inasmuch as the order affects the decision from which an appeal has been

preferred. The Supreme Court referred to the decision of the Judicial Committee in Maharajah Moheshur Singh v. Bengal Govt. (1859) 7 Moo

Ind App 283 where the Judicial Committee said that it would be the duty of the Court to correct erroneous interlocutory orders though not brought

under their consideration until the whole cause had been decided and brought by appeal for adjudication. I am therefore of opinion that it is open

to appellants to contend that the amendment should have been allowed"".

In view of this decision I agree with the learned counsel for the respondents that it was open to the learned District Judge to consider the question

whether the amendment of the plaint prayed for by the respondents and disallowed by the trial court could be allowed and that the Lower

Appellate Court had the right to allow the amendment. The learned counsel for the appellant relied unon a decision of Veeraswami, J., as he then

was in Chinnaswami Naicker Vs. Kandasami Gounder and Others, . There the learned Judge observed thus: (At P. 81). ""No doubt amendment of

pleading should be freely allowed, at whatever stage it is asked for. But this can only be subject to the pleas as to limitation or other prejudice to

the other party. If the suit had been instituted on 21st July 1967, it would undoubtedly be barred by limitation. Mr. Desikan for the petitioner urges

that Madina Bibi Sahiba Vs. The Ismail Durga Association and Another, is distinguishable on the ground that there application for amendment of

the plaint was taken out after issues had been framed and the trial held thereon. But I see no difference in principle, whether the amendment is

sought for after the expiry of the period of limitation and at the stage of trial, before or after. The principle is that an application for amendment of

the pleading should be within the time allowed for the institution of the suit.

This decision does not help the appellant, for the amendment petition in the present case which was filed on 22-11-1972 did not seek to rely upon

any new ground, but only sought to make it appear that the letter Ex. A-2 which had already been relied upon for the purpose of limitation would

amount to an agreement to pay a barred debt, a valid agreement, within the meaning of Section 25(3) of the Contract Act. In this connection the

learned counsel for the appellant relied also upon a decision of the Privy Council in Ma Shwe Mya v. Maung Mo Hnaung ILR Cal 832: AIR 1922

PC 249 where it was observed that the real question in controversy between the parties in those proceedings was the existence and the character

of an agreement alleged to have been made in 1912 for the delivery of certain sites of oil wells specified and identified by the numbers stated in the

plaint, which could only have been delivered in respect of that subsequent bargain and that when once that contract has been negatived, to permit

the plaintiff to set up and establish another and an independent contract altogether would, in the opinion of their Lordships of the Privy Council be

to go outside the provisions established by the Code of Civil Procedure, to which reference has been made before them. This decision also will not

apply to the facts of the present case where the respondents did not seek to set up a new contract or a new ground, but only sought to contend

that Ex. A-2 which had been relied upon for the purpose of limitation is a valid agreement within the meaning of Section 25(3) of the Contract Act

to pay the entire amount due under the barred promissory note, Ex. A-1.

The learned counsel for the appellant relied upon a decision of the Full Bench of this Court in Subba Narayana Vathiyar v. Ramaswami Iyer,

ILR (1907) Mad 88 where the question for consideration was whether it was open to the defendant in a suit on a negotiable instrument to plead

that the payee named in the instrument, or the indorsee, as the case may be, is a mere benamidar, and not entitled to recover the amount due under

the promissory note. It was observed in that decision thus:

In Paramasiva Mudali v. Kannikuthu (S. A. No. 182 of 1891 (Mad) Unreported) as already stated it was held, we think rightly, that an

undisclosed principal cannot be used on a negotiable instrument. In Ganapati Naiken v. Saminatha Pillai (CRP No. 578 of 1895 (Mad) --

unreported) it was held that a benamidar cannot sue on a negotiable instrument and in Guru-Murthi v. Sivayya ((1898) ILR 21 Mad 391) it was

held (but without referring to the terms of the Act) that an infant was entitled to sue by his next friend on a note taken by his mother in her own

name on account of his estate. These decisions have not been followed until the present case and must in our opinion be overruled. On the other

hand, it was held in Bojjamma v. Venkataramayya ILR(1898) Mad 30 dissenting from Ganapathi Naicken v. Saminatha Pillai (CRP No. 578 of

1895 (Mad) -- unreported) that it was not open to the defendant to plead that the payee or indorsee was a mere benamidar. and quite recently it

has been held, we think rightly, in Ramanuja Aiyangar v. Sadagopa Aiyangar ILR(1905) Mad 205 that a minor cannot sue on a promissory note

taken in the name of his adoptive mother. The decision in Krishna Ayyar v. Krishnasami Ayyar ILR (1900) Mad 597 as to the liability of the other

members of a joint family on a bill accepted by the managing member proceeded upon considerations of Hindu Law and does not affect the

present question."" Yet another decision relied upon by the learned counsel for the appellant in this connection is of Veeraswami, J., as he then was,

in K.M.K. Subbaraya Chettiar Vs. Abirami Ammal and Another, where the learned Judge has observed (at P. 158):

He contends that the plaintiff could in no sense be described as a holder of the promissory note, and the suit, so far as his client was concerned,

being wholly vested on the promissory note, she could not, in the absence of an endorsement or transfer of the promissory note in her favour,

maintain the suit against the second defendant and recover on the basis of the promissory note. I accept this contention. No stranger to a contract

can sue upon it. That is a basic principle of law. This principle is applied to Negotiable Instruments Act, which is but a part of the law of contract.

Apart from that, Section 8 of the Negotiable Instruments Act clearly defines a holder as a person entitled, be it noted, in his own name to the

possession of the promissory note and to receive or recover the amount due thereon from the parties thereto. The rights of an endorsee to sue on

the promissory note vested on special statutory provisions. Though the plaintiff''s case was that she was the beneficial owner of the promissory

note as the consideration therefore proceeded from her, inasmuch as she was not the holder of the promissory note, it would follow that she could

not, on the basis of merely being the beneficial owner thereof, sue to recover the money due on the promissory note.

This point was decided by Venkatarama Reddiar and Another Vs. Valli Akkal and Others, .Varadachariar, J., speaking for the Full Bench,

while holding that the ""beneficial owner could not, on the strength of that title, maintain a suit on a promissory note, observed further:

It may be that even upon getting a declaration to this effect (that he is the beneficial owner), the beneficiary will not directly be able to sue upon the

promissory note; but that does not mean that a declaration of this kind will be futile. Under other provisions of the Trustee Act, the beneficiary can

sue for the execution of the trust by compelling the trustee to take the necessary steps and have a Receiver appointed in the course of such

proceedings so that the Receiver may sue for the debt, or the beneficiary may also insist upon the trustee conveying the legal title to himself and

after such transfer there will be no difficulty in his suing upon the promissory note in his own name.

This decision is clear authority for the proposition that even after getting a declaration by the beneficial owner of his status as such, he could not

sue upon the note unless he got a transfer of it in his name in a suit to compel the promisee to effect a transfer or he filed a suit on the strength of the

declaration to enforce the trust in an appropriate manner. This principle has been followed in Chinnakuzhandai Ammal Vs. Kuzhandai Veerasami

Mudaliar and Another, and Maddali Tirumala Ananta Venkata Veeraraghavaswami Vs. Srimat Kilambi Mangamma and Another, in both of which

the facts were more or less similar.

These two decisions amply support the contention of the learned counsel for the appellant that the respondents, who are not the payees in the suit

promissory note, Ex. A-1, and had not filed the suit as the endorsees thereof, are not entitled to maintain the suit on the promissory note, though

the consideration for the same proceeded from them and the promissory note, Ex. A-1 had been executed in favour of one Ramanatha Iyer, who

appears to have been the power of attorney agent of the respondents, though he has not been described as such in Ex. A-1.

The learned counsel for the respondents contended that it is open to the respondents, the beneficiaries, to file the suit on the promissory note. In

this connection, he relied upon a decision of the Full Bench of this Court in Muthuveeran Chetty Vs. Govindan Chetty, . But that decision does not

help the respondents, for that was a case where a promissory note which had been executed in favour of one member of a joint family, had been

allotted to another member of a joint family at a partition of the joint family properties without any endorsement of transfer or deed of assignment

and it has been held that the suit filed on the note by the member to whose share the promissory note had been allotted at a partition was

maintainable. It is not the case of the respondents that in any partition between themselves and the promisee, Ramanatha Iyer, the suit promissory

note had been allotted to their share and they have thereby become entitled to recover the amount.

The learned counsel for the respondents next relied upon a decision of the Supreme Court in C. Mackertich Vs. Steuart and Co., Ltd, where it

has been observed that a point not raised in the written statement cannot be allowed to be raised during the trial. The learned counsel for the

respondents submitted that the appellant had not taken the plea in the written statement that it was not open to the respondents, who are not the

payees or the endorsees of the suit promissory note to maintain the suit on the promissory note. It is not possible to accept this contention having

regard to the fact that the question raised by the learned counsel for the appellant is one of law and a mere perusal of the promissory note and the

plaint would show that it has been executed in favour of Ramanatha Iyer and that the respondents are not payees or endorsees, and it is only

necessary for the appellant to bring this fact to the notice of the Court in connection with the legal submission that the suit by the respondents, who

are not either the payees or endorsees of the promissory note is not maintainable. Under the circumstances, I agree with the learned counsel for the

appellant that the suit, which has been filed on the promissory note by the respondents, who are not either the payees or endorsees is not

maintainable.

The Second Appeal is, therefore, allowed, but in the circumstances of the case without costs throughout, and the suit is dismissed.