RADHA RUKMINI AMMAL Vs. SWAMINATHA MUDALIAR

JUDGEMENT

(1.) The plaintiff, whose decree for recovery of Rs.17,590/- was reversed by the appellate Court on the ground that the 2nd defendant / 1st respondent is not liable to satisfy the suit claim, has filed the present second appeal.

(2.) The two respondents had business transactions with each other. The 1st respondent was due to pay some amount to the 2nd respondent. Therefore, the 1st respondent issued on 15.1.1987, a post-dated cheque bearing the date 28.2.1987, Ex.A2 for a sum of Rs.15,000/- drawn on Madurai Central Bank. The 2nd respondent endorsed it in favour of the appellant herein and received a cheque for Rs.14,520/-. This cheque was encashed by the 2nd respondent. When the appellant presented the cheque, Ex.A2, it was dis-honoured because the 1st respondent had issued instructions to stop payment. Notice of dis-honour was given and the suit was filed. The 2nd respondent remained ex parte. The 1st respondent claimed that on account of non-delivery of the goods, which is subject matter of the transaction between the respondents 1 and 2, instructions to stop payment was issued. These transactions are between the respondents and the appellant is a third party to this contract. There is no privity of contract between the appellant and the 1st respondent and any amount must be claimed only from the 2nd respondent and not from the 1st respondent. The trial Court decreed that suit as prayed for. The appellate Court held that under the provisions of the Negotiable Instruments Act (hereinafter referred to as "the Act"), the 1st respondent will be liable only in the absence of a contract to the contrary, but since there was a contract to the contrary between the 1st and the 2nd respondents, the 1st respondent is not liable to pay any amount.

(3.) The learned counsel for the appellant raised as questions of law, the applicability of Sections 35 and 36 of the Negotiable Instruments Act. The learned counsel submitted that under Section 35 of the Negotiable Instruments Act, the endorser was liable to pay, subject to due notice of dishonour. Under Section 36, every prior party to a negotiable instrument is liable to a holder in due course until the instrument is duly satisfied. Learned counsel for the appellant also submitted that the appellant is a holder in due course and therefore, reliance by the appellate Court on Section 37 to absolve the liability of the 1st respondent is not in accordance with law. According to the learned counsel, the provisions "contract to the contrary" will not refer to the contract or failure of contract between the 1st and the 2nd respondent. The learned counsel also submitted that Ex.A6 which is the reply of D2 does not refer to any contract to the contrary and therefore, it was not open to the appellate Court to cite that as a reason for rejecting the suit claim since it was not pleaded. Learned counsel relied on the case of M/S.U.PONNAPPA MOOTHAN SONS, PALGHAT vs. CATHOLIC SYRIAN BANK LTD. reported in A.I.R.1991 SC 441 to show that unless there is patent gross negligence on the part of the holder in due course, his claim cannot be negatived.