Vaddadi Venkataswami vs Hanura Noor Muhamad Beegum and Another

Chandra Reddy, J.—The Defendant has been this Second Appeal against the judgment Subordinate Judge of Srikakulam confirming of the District Munsif of Rajam.

The Plaintiff instituted a suit in Court of the District Munsif of Rajam can basis of a promissory note executed by the dependant on 8-5-1946 in favour of her husband doing to be an assignee of tire promissory note the latter. The consideration for this promissory note is the amount due under a contract ed into between her husband and the defense on 12-10-1945 for the supply of 400 be groundnut.

It was made up of Rs. 1,000/- being ance of the advance received by the defense and a sum of Rs. 920/- being the difference between the then market rate and the which the goods were agreed to be said Plaintiff became entitled to the suit promissory note by virtue of a settlement deed execute her husband in her favour under which'' assets were transferred to her.

The suit was resisted mainly on defenses: (1) that the contract upon which the promissory note was founded was hit at Oil Seeds (Forward Contract) Prohibits of 1943, and therefore, the consideration, promissory note had failed, and (2) that suit promissory note was not endorsed in of the Plaintiff, she could not maintained in a on the promissory note.

The trial Court decreed the suit regarded both the objections and it was confirmed appeal, by the Subordinate Judge. In this appeal filed by the aggrieved then against that judgment, the pleas which successfully put forward before the Court below have again been raised.

I will first take up the argument on the Oil Seeds (Forward Contract) Order, 1943.

Section 3 of the Ordinance present ward contracts by enacting:

No person shall after the specifications any class of oil seeds; enter into any for contract in any of those Oil Seeds.

In the schedule to that Order and was included, which means that there no forward contracts from 315-1943 even pect of groundnuts. Subsequently, a Se by the Government of India in its Section specification No. 1161 dated 16-2-1944 excluded the operation of Section 3 the contracts for groundnut, linseed, seed, rapeseed or to ria seed of specified or types and for specific delivery at a price not transferable to third parties". It is manifest from (his Notification that contracts which are not transferable are therefore, the question for consideration whether the suit contract is one, falling the notification. As laid down in a number settings of the Madras High Court, Uma yana Murthy v. Sitramaya & Co., 1950 LJ 557 (A), Seetharamaswami v. Bha-Co. 1951 1 Mad LJ 147 (B), Hussain Kasam Dada, represented by Sakoor Dawood, agent and Another Vs. Vijayanagaram Commercial Association (Regd.) and Another, , to get the referred by the notification, it should be that the non-transferability is a term contract.

There words, if it could not be gathered document itself that it was not intend transferred, such a contract offends provisions of Section 3, and would, there- field to be void and unenforceable. In Hussain Kasam Dada, represented by Sakoor Dawood, agent and Another Vs. Vijayanagaram Commercial Association (Regd.) and Another, down that the contract was ''ab initio'' leering in mind principles stated in I have to see whether this contract the notification in question. It has to ned that there is a rubber stamp on of the document with the words "not blew and reliance is placed by the on these words to claim exemption from ''ions of Section 3.

Venkatesam the learned Counsel for the contends that as the rubber stamp is the document, and does not form part setting of the document, it should be the addition, and the burden is on to show how and when this stamp affixed. The learned Counsel continue being no definite evidence adduc of the Plaintiff in this respect the does not come within the ambit of on.

10.The Courts below considered this as-matter and came to the conclusion paper stamp was affixed at the time on addition of the document, and these words from the beginning i.e., from the time asking of the contract. In support of ton several circumstances were relied power appellate Court as can be seen of the judgment, and it is not necessary to recapitulate all of them.

would like to stress one fact which way against the contentions of the while P.W. 2 stated that although seeds (Forward Contract) Prohibition 1943 was in force at the time of the contract it was not affected by it, because of its falling under the no Defendant, who went into the wit-towards, had not chosen to say that mp was not affixed at the time of the contract and came into exist-His silence is significant.

Circumstances, I cannot say that the Courts below is perverse or not the evidence on record or erroneous Concurring in the opinion of the it hold that this contract is saved its not being transferable to third parties and does not violate Section 3 of the Order This contention, therefore, fails.

There remains the question whether the suit is maintainable on the promissory, note. According to Mr. Venkatesam, the Plaintiff could not sue on the suit promissory note as there was no valid assignment. The only method of assigning a promissory note is by endorsing it, raid no other method of transfer would entitle the assignee to base his cause of action on the promissory note itself. This argument is founded on Section 40, Negotiable Instruments Act, and is reinforer by indo''sement and delivery thereof".

Before examining the cases for and against this contention, it is useful to refer to the lelevant terms of Section 46, Negotiable Instruments Act.

A promissory note, Bill of Exchange or Cheque payable to order is negotiable by the holder by indorsement and delivery thereof.

It is urged for the Appellant that it is only in cases, where this provision of law is complied with; the assignee gets the rights under the promissory note. This interpretation of the clause receives support from a ruling of the Madras High Court in ''Pattat Ambadi Marar v. Krisbnun 11 Mad 200 (D).

There Muthuswamy Ayyar and Brandt JJ. field that in a case where the suit was laid on a promissory note by a person who claimed right thereto under an agreement in writing but was not endorsed, the suit did not lie on the promissory note, that the promissory note could not be negotiated by mere execution of a deed of assignment, and that the only method of negotiating a promissory note was by endorsement and delivery.

In ''Abboy Chetty v. Rama Chandra Rau 17 Mad 431 (D), Muthuswamy Ayyar ), who was a party to the above case followed it without any discussion of the matter.

Reliance was next placed by Mr. Venkatesam on ''Arunachala Reddy v. Subba Reddy 17 Mad LJ. 393 (F), I do not think that this really advances the case of the Appellant. What happened there was that the Plaintiff, sued on a promissory note which was alleged to have been allotted to him verbally at a partition. There was no writing assigning this promissory note to the Plaintiff.

The learned Judges Benson and Wallis JJ., dismissed the suit holding that such a promissory note would not come within the exceptions to Section 137, Transfer of Property Act. It was not laid down there, that a transfer could be effected only by means of negotiation as contemplated under G. 46, Negotiable Instruments Act.

On the other hand, the following remarks of the learned Judges are significant, and which, in my opinion, negative the contention put forward on behalf of the Appellant.

Consequently, the assignment of the chose in action on which he relies is bad for want of writing u/s 130, Transfer of Property Act". This clearly shows that if the promissory note was transferred as a chose in action complying with the provisions of Section 130, Transfer of Property Act, it would have been a valid assignment which would enable the transferee to maintain the suit on the promissory note itself.

Mr. Venkatesam then called, in aid a ruling of Coutts-Trotter J. in ''Ulagappa Chetty v. Ramanathan Chetty AIR 1917 Mad.512 (1) (G). Here again the Appellant does not derive any benefit from it. It does not appear from the report that there was any document assigning the promissory note involved in that suit. The learned Judges relying on 17 Mad LJ 393 (F) and refusing to follow Lodd Govind Dass v. Muneppa Naidu 31 Mad 534 (H) decided that a suit on a promissory note which had not been endorsed to the Plaintiff was not maintainable.

As already remarked, in 17 Mad LJ 393 (F) there was no transfer of the promissory note as a chose in action within the meaning of Section 130 of the Transfer of Property Act. In 31 Mad 534 (H) the promissory notes executed in favour of the Manager of the Court of Wards was handed over by him to the father of the Plaintiff without any endorsement. The Plaintiff instituted a suit on the death of his father for recovering the amount due under the promissory note.

The defense that the suit was not maintainable on the basis of the promissory note for the reason that there was no endorsement in favour of the father of the Plaintiff was overcome on the he reasoning that though the document was executed in the name of the Court of Wards, it must be deemed to have been executed in favour of the landlord, the promissory note having been executed for arrears of rent, and the Plaintiff being the holder at the time of the filing of the suit, he must be deemed to be a payee.

Coutts Trotter J., in ''Ulagapa Chetty v. Ramanathan Chetty (G),observed that to accept the doctrine embodied in ''Lodd Govind Dass v. Mupeppa Naidu (H)'', would be to ''protanto'' repeals the provisions of the Negotiable Instruments Act. I am not hereconcerned with the correctness of the ruling in ''Lodd Govinda Dass v. Muneppa Naidu'' (H), Suffice it, to say that the decision in ''Ulagappa Chetty v. Ramanathan Chetty'', (G) does not really assist the Appellant.

I would refer to two other cases of the Allahabad High Court cited by Mr. Venkatesam aa supporting his contention. In L. Parsotam Saran Vs. L. Bankey Lal, , Sulaiman C.J., and Bennet J., ruled that a transferee of a promissory note claiming it under a sale deed is not a holder of the negotiable instrument with in the meaningof Section 8, and so cannot enforce the rights, conferred upon such a holder in due course u/s 43, Negotiable Instruments Act.

Under Section 43, Negotiable Instruments Act, a holder in due course is entitled to recover the money paid by him from the transferor if the negotiable instrument was found to have been executed without any Consideration. The learned Judges ruled that to derive the benefit conferred by the section, it is necessary that one should be a holder within the meaning of Section 8 e.g., by the document being indorsed in his favour, and a person who claims title to the promissory note under a sale deed is not entitled to invoke Section 43.

It is thus seen that the question for determination there was not whether a promissory note could be transferred otherwise than by endorsement and the suit could be maintained by a person who claimed a right to the promissory note under a deed of assignment. It is interesting to note that dealing with Surath Chandra Saha Vs. Kripanath Chowdhury and Others, , the learned Judges said that that observation was not necessary for the purposes of that case because to be transferee of the instrument was certainly entitled to maintain the suit for the recovery of the amount due on the promissory note on the strength of the sale deed in his favour when it was established that the promisor has not made the payment".

In my opinion, these remarks show that the learned Judges assented to the view that a promissory note could be assigned otherwise than by an endorsement. All that they decided was that such an assignee cannot enforce the holder in due course derived from Section 48 able Instruments Act.

To the same effect is the rulling other Bench of the same Court in Jang Bahadur Singh Vs. Chander Bali Singh and Another, question that fell to be determined in that was whether a person to whom a promissory note was transferred for consideration, by need a sale deed could recover from the transferred der Section 43, Negotiable Instruments Act. Consideration paid by him when it was pro the document was executed originally with receiving consideration.

Another case relied on by Mr. tesam is Virappa v. Mahadevappa'', AIR, Bom 356 (L). There a promissory new ed in favour of a manager of the family lotted to the share of another member family petition. The question arose where allotted could sue on the promissory was held that so long as the document endorsed by the payee in favourof the latter could not sue on the promissory note.

The point that arises in this instant not fall for consideration in the case the other hand, the passage occurring 358 seems to have the effect of holding promissory note could be assigned others by endorsement.

The Statutory Law is contained and explanation, and Section 48, Negotiable ments Act and Section 130, Transfer of proper and there are three possible modes of the conceivable by endorsement, by assignment chose in action, and by operation of law. This makes it abundantly clear are modes of transfer other than by Thus this ruling does not contain any tion that would support the Appellant ed examination of the various case shows that there are only two desicion Mad 290 (D) and 17 Mad 461 (E) which tiate the submission made on behalf Appellant.

I shall now proceed to notice have expressed a contrary view. The series is ''Muhammad Khumarali Rao 24 Mad 654 (M). There, the plaintifs on a promissory note claiming under an ment made only by one of the two ejection was taken that u/s 51. Instruments Act, the endorsement made by each of the payees individual The learned Judges held that the Plaintiff could not maintain the suit as dorsee, he could recover the amount in the note if there be no other defenses to as assignee of the chose in action, be the other joint payee having transferred terest therein to him. They pointed out deference between the two modes of the following words:

The important difference between by endorsement and transfer otherwise endorsement of a negotiable instrument the latter case, the assignee will section bill or note as a, chattel no more that title and interest of his assignor, when former case the assignee by and have all the rights and advantage of the due course of a negotiable instrument.

In support of their contract learned Judges relied on Ramachandran Abeeb Rowthan'', Appeal No, 175 of 1877 pointed in the foot note to this decision as observed in the last-mentioned judgment follows:

argued that, by the Negotiable Instrument , any other mode of transfer than by it is excluded. We can see nothing in justify this contention.

These two cases were relied on by an such the Madras High Court Subra Offig. C.J. and Boddam J.) in said ib Maraikayar v. Kadir Saheb Marai Mad 544 (O). In the cited case, the judges declined to accept that ratio deinvolved in ''Pattate Ambadi Marar v. (D) and ''Abboy Chetty v. Ramachand'', as a sound one.

In ''Narayanamurthy v. Vumamaheswa 1930 Mad 197 (P), it was stated that a doing on a promissory note as an assig- chose in action could get only such rights assignor had at the time and not the full of a holder or of a holder in due course. The observations of the Pull Bench in ashna Aiyar v. Veeraraghava Iyer AIR 1031 (Q), also seem to throw some light sion involved in this enquiry. In that Defendant mortgaged to the Plaintiffs and| a promissory note executed in favour former by a third party, as security for by the Defendants to the Plaintiffs. Promissory note was endorsed to the Plaintiffs.

Plaintiffs having allowed the note to be the barred, the question arose as to whe Plaintiffs should be debited with the due on the promissory note. In dealing point, the Full Bench stated:

mortgage there of, was in my opinion of an actionable claim within the of Section 130, Transfer of Property Act, in the transferee the rights and re of the transferor, subject to the equities trained in the transferor by reason ofthat the transfer was by way of securl-my opinion, the doctrine embodied in is in consonance with the principle 24 Mad 654 (M); 11 Mad 290 (D) and 17 (E) as it recognizes an assignment of a note as a transfer of a chose in action meaning of Section 130, Transfer of Pro-Opinion expressed in Perumal Ammal by Mother and Next Friend, Krishnammal Vs. Perumal Naicker and Another, , by Sir C. J. and Hughes J. seems to ac-the statement of law containing in the referred to above. One of the points that period there was whether a gift of mort-book-debts and promissory notes fell VIII, Transfer of Property Act and vered In the affirmative.

The View of another Bench of the Mad-Court in ''Venkatarama Aiyar v. Krish-chettiar AIR 1933 Mad 133 (1) (S),with that expressed in (Munaluri) Narayanamoorthi and Another Vs. (Dwadasi) Vumamaheswarm and Others, also in ''Muhammad Kumarali v. Ranga and 28 Mad 544 (O). The learned the clash of Judicial opinion, but follow the later course of decisions drang Row J. in Thangatur Subbarayudu Vs. Nichanametla Subbarayudu and Another, came to conclusion. It is true that the learned to referred to any of the rulings in view but that does not make any the purpose of our case Surath Chandra Saha Vs. Kripanath Chowdhury and Others, the Calcutta and that a hand-note could be transferred otherwise than by endorsement but the transferee could only get such title as the transferor had in the same note and could not claim the rights which he would have been entitled on a transfer by endorsement.

A Special Bench (of five Judges) of the Patna High Court in Ghanshyam Das Marwari Vs. Ragho Sahu and Others, took the same view. There is an elaborate discussion on this question in the judgment. The decision was reached after referring to almost all the available cases on the topic, including those of the Burma Chief Court and the Chief Court of Punjab which took the same view. In my opinion, the principle adumberated in those several cases is a sound one, if I may say so with respect, and I express my respectful accord with it.

Apart from the overwhelming authority, my opinion seems to be strengthened by the very provisions of the Negotiable Instruments Act. In my opinion, Section 46 provides for only one mode'' of transfer, that is, by negotiating the instrument by means of endorsement and delivery. This does not mean that there is no other method of assignment of a promissory note.

If the contention of Mr. Venkatesam that the only way of assigning a bill of exchange is by endorsing it, is to be accepted, the assignment by operation of law, also cannot take effect. I have already referred to the statement in AIR 1934 Bom 35G (L) which negatives such theory it was not seriously disputed by Mr. Venkatesam that a person claiming the bill of exchange by operation of law has a right to maintain an action on the promissory note.

That apart, there is authority for this position in ''Ramanadhan Chetty v. Katha Velair, AIR 1918 Mad 482 (V). The support for this theory can be found in Sections 43 and 118 Negotiable Instruments Act. Section 43 enacts that a negotiable instruments made, drawn, accepted, ''indorsed or transferred'' without consideration or for a consideration which fails, creates no obligation, of payment between the parties to the transaction. In my judgment, the two expressions ''indorsed'' and ''transferred'' contemplates two'' modes of transfer of a promissory note.

It could not be assumed that the Legislature used the expression "transferred" by way of redundancy. If meaning is to be given to both the expressions, it means the negotiable, instrument could be assigned either by indorsement or by other ways i.e., other modes of transfer are recognised.

Similarly, Section 118, Negotiable Instruments Act which deals with certain presumptions as to negotiable instruments provides that every negotiable instrument was made or drawn for consideration and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration.

Here again the expressions use are ''indorsed'' ''negotiated'' and, ''transferred'', which in my considered view support the theory that transfer otherwise than by negotiation is permissible and that the Negotiable Instruments Act does not prohibit the other modes of assignment. If a negotiable instrument could be assigned, otherwise than by an indorsement, the assignee thereof is certainly entitled to sue on the note.

As already stated, the two other methods are by operation of law, and transfer as a chose in action as contemplated by Section 130, Transfer of Property Act. A comparison of Section 130 with Section 137, Transfer of Property Act clearly shows that the transfer of a promissory note by means of writing is not barred. Section 137, Transfer of Property Act saves negotiable instruments from the operation of Section 130.

This does not mean that Section 130, Transfer of Property Act: cannot be availed of for a transfer of a negotiable instrument nor does Section 46, Negotiable Instruments Act debar a party from resorting to the provisions of Section 130, Transfer of Property Act. The only difference between the two modes of transfer is that while the transfer by negotiation of a document clothes the transferee with certain rights the assignment of it as a chose-in-action u/s 130 is limited to such rights as the transferor had in the document i.e. he takes only subject to the equities in favour of the maker of the document.

Recently, Umaniaheswaram J. following the decisions cited above expressed the same view in ''Seshachalam Naidu v. Venkatachallam Chetty AIR 1954 Mad 820 (W). It is thus seen that the weight of authority is in favour of the decision reached by me, supported as it is, by the terns of the relevant provisions of the Negotiable Instruments Act itself, What emerges from this discussion is, an assignee of a promissory note otherwise than by in decrement such as a transfer by means of writing u/s 130, Transfer of Property Act, can file suit on the promissory note. It follows that the second contention has also to be repelled.

In the result, the judgment and decree under appeal have to be confirmed and the Second Appeal dismissed with costs. The Government Pleader''s fee is fixed at Rs. 150/-. For consideration of grant of leave adjourned to Tuesday.

This case having been set down this day for further orders, the Court made the following order: Leave granted.