SURVE KEDARAPPA Vs. D GBHIMAPPA

JUDGEMENT

(1.) The Plaintiff in O.S. No. 387 of 1953 on the file of the learned Munsiff at Davanagere is the appellant in this Court. He sued the Defendants on the basis of Exhibit P-1, a demand promissory note for a sum of Rs. 1000/-. The said promissory note had been executed by Defendants 1 to 3 in favour of a Company by name "Universal and Engineering Co. Ltd." Bangalore City. That Company had a Branch at Davanagere. The 5th Defendant was the Manager of the Davanagere Branch. He endorsed the promissory note in question in favour of the plaintiff as per Exhibit P. 1(a). Both the Courts below have come to the conclusion that the pronote in question is genuine and supported by consideration. They have opined that the assignment Exhibit P. 1(a) is a genuine one. The trial Court decreed the suit as prayed for. The first Appellate Court came to the conclusion that out of the consideration of Rs. 1000/- included in Exhibit P. 1, a sum of Rs. 400/- had been discharged by the first Defendant even prior to the assignment Exhibit P. 1(a) and that this fact was known to the plaintiff at the time of the assignment in question. This is a finding of fact and is conclusive.

(2.) The first Appellate Court dismissed the suit against Defendants 1 to 3 on the ground that the 5th Defendant had no authority to assign the Pronote in question. The Company in whose favour Exhibit P. 1 had been executed is a registered Company and its liability is limited. Its affairs are governed by its Articles of Association. The relevant Article so far as this case is concerned is Article 59. I shall quote the relevant portion of this Article 59:

(3.) In Hindustan Assurance and Mutual Benefit Society, Ltd. Gujranwala, v. Gurdit Singh, reported in AIR 1921 Lahore 462 a Bench of the Lahore High Court held that under Section 118 (Negotiable Instruments Act) there is a legal presumption that every negotiable instrument is made or drawn for consideration and that every transfer is also for consideration; further, that the holder of a negotiable instrument is a holder in due course. The onus is upon the person challenging the rights of the transferee to prove the facts which would show that such transferee was not in fact a holder in due course. This is the true position of the law. In the instant case it is on Defendants 1 to 3 to establish that the 5th Defendant had no authority to endorse the pronote in question and that the Plaintiff is not a holder in due course. The contention advanced on behalf of the Plaintiff is that ho assumed that the 5th Defendant who was managing the affairs of the Davanagere Branch had authority to assign the pronote in question. The plaintiff proceeded on the footing that necessary delegation had been made to him under Article 59(f) of the Articles of Association. In Dey v. Pullinger Engineering Co., reported in 1921-1 K.B. 77, this point was considered. The facts of that case were that the articles of association of a company empowered the Directors to authorise one of their body as managing-director to draw Bills of Exchange on behalf of the company. The managing director drew it bill on behalf of the company without having in fact received any authority from the directors to draw bills. In an action on the bill against the company on the drawers, their Lordships held as follows :