S AHMED IBRAHIM Vs. D RAMADAS

JUDGEMENT

(1.) This revision arises out of a suit instituted by the petitioner, S.C. No. 2527 of 1950, on the file of the Small Cause Court, Madurai, for the recovery of a sum of Rs. 488-5-1 on foot of a promissory note dated 23-6-1949. The defendant admitted execution of the pronote and the receipt of consideration therefor, but contested the suit on the ground that there was no transaction between him and the plaintiff, that it was one Ismail, the brother of the plaintiff who had advanced the loan, that the promissory note was executed in his account book leaving the name of the payee blank, that it was delivered not to the plaintiif but to Ismail, that subsequently the amount due under the note was repaid to Ismail on 8-21950 and a receipt also taken, that the debt had thus become discharged, that owing to misunderstandings which had arisen subsequently, Ismail had in collusion with the plaintiff entered his name as payee in the instrument and that the plaintiff was not a holder in due course and was not entitled to recover under the promissory note. The Court below held on a consideration of the evidence that the tacts were as stated by the defendant in the written statement, that the plaintiff knew of the true nature of the instrument when it was executed on 23-6-1949 and that of its discharge on 8-2-1950 and that his name was entered as a result of collusion between him and his brother Ismail, only about a week prior to the institution of the suit which was on 1-11-1950. On these findings, the suit was dismissed and it is against that dismissal that this revision is preferred by the plaintiff.

(2.) Mr. K. Vaitheeswaran, the learned advocate for the petitioner, contends that the written statement does not disclose a defence, that it is not open to the defendant to plead that the real payee under the promissory note is not the plaintiff whose name appears on the face of but Ismail and that the payment of the amount to Ismail cannot, under Section 78 of the Negotiable Instruments Act, operate to discharge him from his liability under the note. In -- 'Subbanarayana Vathiar v. K. Ramaswami Iyer', 30 Mad 88 (FB) (A), it was held by a Full Bencn of this court that it was not open to the maker of a promissory note to plead that the payee named in the instrument was a benamidar and that it had become discharged by payment to the real payee. The ground of this decision is that "holder" is denned in Section 8 of the Act as "any person entitled in his own name to the possession of the note and to receive or recover the amount due thereon from the parties thereto"; and that under Section 78 a payment in order to discharge the maker must be to the holder. The contention of the petitioner is that if on 23-6-1949 when Ismail advanced Rs. 420 to the defendant he had taken the promissory note in the name of the plaintiff, it would not have been open to the defendant to resist the suit on the ground that payment of the amount due under the note had been made to Ismail; that it should make no difference in the legal position that when Ismail took the note, the name of the payee had not been entered thereon, because Section 20 of the Negotiable Instruments Act conferred on him an authority to complete the instrument; and that when in exercise of that authority he entered the name of the plaintiff the rights of the latter under the note would precisely be the same as if it had been entered at the time of its execution on 23-6-1949. Reliance was placed on the decisions in --'Cruchley v. Clarance', (1813) 105 ER 316 (B) and -- 'Hriday Singh v. Kailash Singh', AIR 1940 Pat 377 (C). In -- '(1813) 105 ER 316 (S)', the facts were that the defendant who was in Jamaica drew a bill on one Hendry, man of London leaving the name of the payee blank; that subsequently the bill was negotiated by one V. Ashon who endorsed it in blank to the plaintiff. The plaintiff thereupon entered his own name in the bill and sued on it. The suit was resisted on the ground that the plaintiff had no right to enter his own name on the bill. In overruling this contention, Lord Ellenborough C. J. observed: "As the defendant has chosen to send the bill into the world in this form, the world ought not to be deceived by his acts. The defendant by leaving the blank undertook to be answerable for it when filled up in the shape of a bill." Le Blanc J. stated:

(3.) It was contended on behalf of the petitioner that in view of Section 78 of the Act, the payment to Ismail could not be recognised as valid as he was not a holder of the promissory note. But the short answer to this contention is that there was no promissory note at all in existence at the time when the payments were made and that Section 78 accordingly has no application. Section 4 defines "promissory note" as an instrument containing an unconditional undertaking to pay a certain sum of money to, or to the order of, a certain person. Until, therefore, the name of the payee was entered on the instrument, there was no promissory note as defined in Section 4 of the Act. The instrument might be converted into a promissory note by exercise of the authority conferred by Section 20 of the Act. But, until that is done, there is no promissory note in existence, but only an instrument which is capable of being converted into a promissory note. The character of an imperfect instrument before it is completed is thus stated by Bramwell L. J. in -- 'Hogarth v. Latham & Co' (1878) 3 QBD 643 at p 647 (E), "It was said by Mr. Cohen that this was a negotiable instrument even before the holder's name was put into it. I am of opinion that it was not, end that the cases do not show that it was. -- 'Harvey v. Cane', (1876) 34 LT 64 (F) has been relied upon. But that case wholly differs from the present, for there was only one acceptor who himself accepted in blank. There are, however, some cases that show that an incompleted instrument may be made complete by a person to whom it was not originally handed, not on the ground that it was a negotiable instrument, but on the ground that the defendant when he parted with it, must be taken to have given authority to any one into whose hands it might come to fill up the blank, it is not, there lore, a negotiable instrument but authority has been given to every bona fide holder into whose hands it may come to make it a perfect instrument." Mr. K. Vaitheeswaran, the learned advocate for the petitioner relied on the following observations occurring in 'AIR 1940 Pat 3, at 379 (C)' as supporting his contention that when once the instrument has been completed and is a promissory note as defined in Section 4, any plea of discharge in an action based on that instrument will be governed by Section 78 of the Act. "The defendant in the present suit also pleaded that he had made certain payments to Shamnandan Prasad Singh in respect of the amount for which he is now sued. In a suit by the payee of a handnote against the drawer the defence that payments have been made to someone who is" not the payee cannot be taken into consideration. See Section 78 of the Negotiable Instruments Act. We are, therefore, not concerned with the truth of the defendant's allegations regarding these payments." It does not appear from the statement of facts whether the payments pleaded were made before the name of the plaintiff was entered or after. If the latter, the decision would clearly be correct because on completion, the instrument became a promissory note and therefore, the rights of the parties would thereafter be governed by the provisions of the Negotiable Instruments Act. But if the payments were made before the instrument was completed and before it had acquired the status of a negotiable instrument, it is difficult to see how Section 78 could have any application.