M GEORGE AND BROS Vs. CHERIAN

JUDGEMENT

(1.) Defendants l and 2 in a suit for realisation of money are the appellants. The plaintiff filed the suit alleging that he is a holder in due course in respect of Exts.A1 and A2 cheques drawn on the Kozhencherry Branch of the Federal Bank Ltd. First defendant firm issued two post dated cheques in favour of the third defendant who endorsed it in favour of 4th defendant and who in turn discounted the same on 1-2-1977 and received the entire amount due thereunder. Plaintiff later presented these cheques for collection. The cheques were dishonoured by the bank stating that payment was stopped by drawer. According to the plaintiff first defendant being the drawer and defendants 3 and 4 being the endorsees are jointly and severally liable to the plaintiff for the amount due under the two cheques.

(2.) Defendants l and 2 filed a joint written statement, wherein they urged that 3rd defendant used to get post dated cheques from the first defendant with the specific understanding that the cheques will not be endorsed to any one or discounted. There cheques were without any consideration. These was further understanding between the first defendant and the 3rd defendant to the effect that the latter would pay to the first defendant the amount shown in the cheque in case it is presented for collection. This practice was known to the plaintiff. 3rd defendant being a business man was having several transactions and huge amounts were due to him from various parties and he too was also liable to pay amounts to others. The post dated cheques were issued by the first defendant to the 3rd defendant as a security for payment of amount due to him. Defendants 1 and 2 also contended that cheques were not negotiable and the plaintiff is not a holder in due course. The 3rd defendant filed written statement stating that there was no money dealing between himself and defendants 1 and 2 and the 4th defendant obtained these cheques in the name of the 3rd defendant. 3rd defendant would also contend that he signed the cheques at the instance of the 4th defendant and he was not aware of the discounting of the cheques. 4th defendant mainly contended that there was no proper notice of discounting. The court below decreed the suit against-defendants 1 to 4 with interest at 6% per annum.

(3.) The main contention urged by the learned counsel for the appellants is that Exts. Al and A2 cheques are not negotiable instruments within the definition of S.13 of the Negotiable Instruments Act The appellants' contention is that at the time when these two cheques were issued the drawer of the cheque, viz, the first defendant scored off the word "bearer" and thereby indicating that the intention of the drawer is that it shall not be transferable and therefore it is not a negotiable instrument as defined in the Negotiable Instruments Act (for short the Act). The question to be considered is whether the mere scoring off the word "bearer" will make the instrument non transferable and the endorsee therein will not become a holder in due course.