LAWS(BOM)-1952-9-7

TARACHAND KEVALRAM Vs. SIKRI BROTHERS

Decided On September 18, 1952
TARACHAND KEVALRAM Appellant
V/S
SIKRI BROTHERS Respondents

JUDGEMENT

(1.) A very interesting question under the Negotiable Instruments Act arises in this appeal, and the facts giving rise to this appeal may be shortly stated. One Harirarn, who is a finance broker approached the plaintiff on 4-2-1949, representing to him that a loan of Rs. 5,000 was required by the defendants, and the plaintiff's ease was that on that representation he gave a bearer cheque fpr that amount to Hariram. This cheque was cashed by Hariram on the following day, i.e., 5-2-1949. On 11-2-1949, Hariram gave to the plaintiff a hundi drawn by the defendants which was an incomplete document, in that the necessary parts of the document were not filled in by the defendants themselves, and this hundi was brought by Hariram and given to the plaintiff in consideration of the loan of Rs. 5,000 which the plaintiff had advanced on 4-2-1949. The plaintiff filled in the blanks in this hundi and made this incomplete document into a negotiable instrument, the makers of which were the defendants and the payee of which, was the plaintiff. This hundi was discounted with the Central Bank, and when the Central Bank presented the hundi to the defendants for acceptance, the defendants dishonoured it. Thereupon the Central Bank recovered from the plaintiff the sum of Rs. 5,000 which the Bank had paid to the plaintiff for discounting the hundi. The plaintiff, therefore, filed the suit against the defendants to recover this sum of Rs. 5,000. The case of the defendants was that no consideration had been received by them from the plaintiff, that Hariram had brought a cheque for Rs. 10,000 to them on 11-2-1949, the cheque being signed by one H.K. Gvalani who, Hariram represented, was a financier. The cheque was sent to the Bank, and on that very afternoon, viz., February 11, Hariram represented to the defendants that as this financier was leaving Bombay, he required hundis in respect of this cheque. Thereupon the defendants gave to Hariram two blank hundis for Rs. 5,000 each. This cheque for Rs. 10,000 was ultimately dishonoured. It was found that there was no such financier as Gvalani in existence, that the cheque which was given by Hariram was his own cheque and that there were no moneys in the Bank to meet that cheque. The defendants filed a complaint against Hariram on 24-2-1949, and on that complaint Hariram was convicted.

(2.) Now, the question that arises is, what are the rights of the plaintiff under Section 20, Negotiable Instruments Act? That section deals with inchoate stamped instruments, and the scheme of that section is that when a person signs and delivers to another person an inchoate document which is properly stamped in accordance with the law relating to negotiable instruments, then by doing so he gives a prima facie authority to the holder to complete the document, the authority being restricted to filling the amount not exceeding that which would be covered by the stamp upon the document. When the document is completed and becomes a negotiable instrument, then the maker of the document is liable to any holder in due course for the amount which has been filled in the document. The proviso to Section 20 lays down that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid there under. It will be noticed that the right given to complete the document is given to the holder and the holder contemplated in this section is not the holder as defined in the Act itself because it is clear that that definition cannot apply to this expression in Section 20, but "holder" is used in this section in the literal sense of that word, viz., the person who actually holds the document. The section further contemplates that if the holder having completed the document negotiates it, then the person who by reason of such negotiation becomes A holder in due course has a right to proceed against the maker and recover the amount mentioned in the document. Therefore, the section provides for two rights in respect of two different persons. One is the right given to the holder of the document, the person who is in possession of the document, the document being an inchoate document, and that right is the right to complete it. The other right conferred is upon the holder in due course, and that right is that even though the holder in due course might coma in possession of a negotiable instrument which was not wholly completed by the maker, he has the same right against the maker as if he had himself written out the whole of the document, if the document has been completed by a person who has come into possession of it as contemplated by Section 20. Therefore, a person who permits an incomplete document to go out into the world by giving and delivering it to any person, takes the risk of having to discharge the liability, which may be provided under the document by the amount being filled in, to the person who bona fide and for consideration conies into possession of that document. That seems to be the scheme of Section 20.

(3.) Now, it is clear that in this case the plaintiff was the holder of the negotiable instrument. He came in possession of the incomplete document and he completed it as he had the right to do by virtue of the prima facie authority conferred upon him by the maker. The interesting question that arises is whether the fact that he himself filled in the document by making himself the payee made him a holder in due course, assuming for the sake of this argument that the plaintiff had given consideration for the document. It is possible to take the view, and there is considerable force in that contention, that under Section 20 it is impossible for the holder himself ever to become a holder in due course, and for this purpose attention may be drawn to the definition of "holder in due course" under the Act given in S, 0. "Holder in due course" means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof, if payable to order before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title. Therefore, it is only a person who comes into possession of a negotiable instrument having paid consideration for it and being a bona fide transferee that can be a holder in due course within the meaning of Section 9. Section 9 seems to imply and contemplate that there must be a negotiation or a transfer to the holder in due course by someone who had the authority to transfer or negotiate the negotiable instrument. The transfer and the negotiation must be of a negotiable instrument, not the transfer of an inchoate document which is not a negotiable instrument at all under the Act. Therefore, as far as the plaintiff is concerned, there was never at any stage a negotiation or transfer in his favour of a negotiable instrument which would entitle him to consider himself as a holder in due course. He paid consideration for an inchoate document. What he got on the 11th was an inchoate document, he having given consideration on February 4. When he filled in the document and thereby became the payee, he merely exercised the right and authority given to him under Section 20, but there was no negotiation or transfer in his favour of a negotiable instrument and no question arose of his having given consideration for a negotiable instrument. If that be the true position, then it is clear that in this case the plaintiff was not a holder in due course.