Voruganti Seshireddi vs Vanka Venkata Subbayya and Others

Venkatarama Aiyar, J.—This second appeal raises a question u/s 51, Negotiable Instruments Act. The first defendant is the appellant. On

23-10-1943 he executed a promissory note for Rs. 2500 (Ex. P-1) in favour of the fourth defendant Illuri Yallamanda Reddi and his three sons,

defendants 5 and 6 and one Koti Reddi since deceased. The plaintiff sued as endorsee of this promissory note, to recover the balance of the

amount due thereunder. The appellant resisted the suit on various grounds. But the only defence that is now material is that there was no proper

endorsement or negotiation of the promissory note in favour of the plaintiff and that in consequence, no action is maintainable thereon This

contention is based on the fact that on 17-4-1944 the 4th defendant alone made the endorsement (Ex. P-3) and delivered the promissory note to

the plaintiff and that the other payees Koti Reddi and defendants 5 and 6 endorsed (Ex. P-4) and redelivered the promissory note to the plaintiff

on 29-12-1945. The contention is that u/s 51, Negotiable Instruments Act where there are several payees, all of them should endorse and deliver

the instrument and there having been one endorsement and delivery by the 4th defendant on 17-4-1944 and another by his sons on 29-12-1945,

the requirements of the section have not been complied with.

Section 51, Negotiable Instruments Act runs as follows :

Every sole maker, dravver, payee or indorsee or all of several joint makers, drawers, payees or indorsees, of a negotiable instrument may, if the

negotiability of such instrument has not been restricted or excluded as mentioned in Section 50, indorse and negotiate the same.

This section requires that where there are several payees, all of them should endorse the instrument. Here, there is an endorsement by all the

payees, though on different dates. The section, however, does not require that all of them should endorse at the same time. In --''Muhammad

Khumarali v. Rangarao'', 24 Mad 654 (A), the defendant had executed a promissory note in favour of the plaintiff and one Maligiri Rao. The latter

endorsed it to the plaintiff who sued to recover the amount due on the note. It was held that to operate as a valid endorsement u/s 51, it must have

been endorsed by all the payees and that the plaintiff could not recover as the endorsee of the instrument. Bhashyam Aiyangar J. went on to

observe :

If, in the present case, the plaintiff also had signed the endorsement in his favour at the time of the endorsement or even prior to the institution of

the suit, the action would have been maintainable by him as endorsee.

These observations were followed in -- Annamalai Chetty Vs. Muthiah Chetty and Others, . In that case the first defendant had executed a

promissory note in favour of the second defendant who had endorsed it to defendants 3, 4 and 5. The third defendant then endorsed the note in

blank and delivered it to defendants 4 and 5 who subsequently endorsed and delivered it to the plaintiff. The suit was contested by the maker on

the ground that as defendants 3 to 5 had endorsed the promissory note on two different dates, the same was not valid u/s 51, Negotiable

Instruments Act and conferred no title on the plaintiff as endorsee. Following the observations in 24 Mad 654 (A), Kumarswami Sastri and

Devadoss JJ. held that there was a valid endorsement. It must, therefore, be held that the endorsement on the suit promissory note under Exs. P-3

and P-4 on 17-4-1944 and 29-12-1945 is valid and entitles the plaintiff to sue as endorsee of the instrument.

It was next contended that in any event there was no valid negotiation of the promissory note in favour of the plaintiff, as there was no delivery

of the instrument by defendants 5 and 6 and Koti Reddi on 29-12-1945. Section 48, Negotiable Instruments Act is as follows :

Subject to the provisions of Section 58, a promissory note, bill of exchange or cheque payable to order, is negotiable by the holder by

indorsement and delivery thereof.

That section requires both endorsement and delivery for a valid negotiation and what is argued is that as the promissory note had been delivered by

the fourth defendant to the plaintiff on 17-4-1944, there was on 29-12-1945 only an endorsement by defendants 5, 6 and Koti Reddi and no

delivery by them and that therefore, there was no valid negotiation. The decision in Annamalai Chetty Vs. Muthiah Chetty and Others, on which

the respondent relied was distinguished on the ground that the delivery of the promissory note by the third defendant in that case was not to the

plaintiff but to his joint endorsees defendants 4 and 5 and that when the latter endorsed and delivered the note to the plaintiff, the requirements of

Sections 48 and 51, Negotiable Instruments Act were complied with whereas in the present case there was a delivery to the plaintiff by the 4th

defendant on 17-4-1944 without a valid endorsement as required by law and an endorsement in favour of the plaintiff on 29-12-1945, by

defendants 5, 6 and Koti Reddi without delivery of the instrument. The plaintiff did not therefore acquire a valid title as endorsee. That is the

contention.

But the delivery of the promissory note on 17-4-1944 by the 4th defendant cannot be held to be a delivery constituting negotiation of the

instrument as that could be done only if there was a valid endorsement. If on 17-4-1944 there was no valid endorsement and there was no valid

endorsement because it was only by the 4th defendant -- the delivery of the promissory note by the latter to the plaintiff could not be regarded as

delivery vesting in him the title to the promissory note as a negotiable instrument. Such delivery being ineffectual to operate as a negotiation of the

promissory note, it was open to the payees at any time thereafter to make a fresh and valid endorsement and negotiation. When the other payees

decided on 29-12-1945 to join in the endorsement and the promissory note was handed over by the plaintiff to them for that purpose, they had the

right to make an endorsement in accordance with Section 51 of the Act and deliver the promissory note to the plaintiff.

Therefore, when defendants 5, 6 and Koti Reddi made the endorsement on 29-12-1945 and then delivered the promissory note to the plaintiff,

there was a valid endorsement and negotiation of the promissory note to the plaintiff so as to vest the title in him as holder. There is the further fact

found in this case that the endorsement dated 29-12-1945 was made by defendants 5, 6 and Koti Reddi under the directions of the fourth

defendant. It must therefore be held that the requirements of the statute as to endorsement and delivery have been satisfied and that the plaintiff is

entitled to recover as an endorsee of the promissory note. In this view, it is unnecessary to discuss the question whether the endorsements could

operate as assignment of choses in action.

In the result, the second appeal fails and is dismissed with costs. No leave.