VENKATA NARAYANA Vs. VENKATESWARA RAO

JUDGEMENT

(1.) The appellant is the plaintiff. He laid the suit on the basis of Ex. A-2 transfer for consideration of the payment of the promissory note, Ex. A-1, dated July 20, 1975, to' recover the suit debt. The suit notice was issued on February 4, 1978, and reply thereto Ex. A-4 dated March 1, 1978 was issued denying the liability thereof. The defence raised by the respondents is that Ex, A-1 is not supported by'consideration. It was executed only as a collateral security to another transaction and, therefore, he is not a 'holder in due course'. Since the appellant is only a 'holder' for collection, the court below has no territorial jurisdiction to entertain the suit. The trial court framed appropriate issues and negatived the respondents' contention that it is not supported by consideration and held that the promissory note Ex. A-l is supported by consideration but it held that the appellant is not a 'holder in due course' under Ex. A-2, dated February 1, 1978. Since the endorsement was made at Pamarru, the court below has no jurisdiction to entertain the suit. On that premise, dismissed the suit.

(2.) Shri Venkat Rao, the learned counsel appearing for the appellant has strenuously contended that even assuming that the appellant is not a 'holder in due course', he is a "holder" within the meaning of Sec. 8 of the NEGOTIABLE INSTRUMENTS ACT, 1881, 1881 (Act No. XXVI of 1881) for short 'the act'). The court below has to consider not only the effect of the endorsement but also the failure of justice. Unless these two facts are considered, the suit cannot be dismissed. Ultimately, it has to be transferred only for presentation to the proper court. That recourse was not adopted by the court below. Thereby, the decree, of the court below is vitiated. The question, therefore, is whether the appellant is a 'holder' within the meaning of Sec. 8 of the Act. The specific case of the appellant is that he is a 'holder in due course' having obtained the endorsement by paying the consideration. Section 9 of the Act defines 'holder in due course' thus : "Holder in due course" means any person who for consideration became the possessor of a promissory note, bill cf exchange or cheque if payable to bearer, or the payee or indorsee thereof, if payable to order, before the amount mentioned in it became payable, and without having sufficient cause to believe that any detect existed in the title of the person from whom he derived his title." Therefore, a person who becomes a 'holder in due course' is the person who makes payment as consideration mentioned in the promissory note. On endorsement thereof in the promissory note, bill of exchange or cheque he become possessor of the promissory note or bill of exchange or cheque and then he becomes entitled to lay the suit in his own right as 'holder in due course' to recover the debt. Thereby, the title in the promissory note gets transferred to him and he becomes the owner of the money in the promissory note, the bill of exchange or cheque to recover the amount in his own right as owner and possessor thereof, but whereas a 'holder' has been defined in Section 8 of the Act thus : "The 'holder' of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto." It would mean that he is a beneficial owner and becomes possessor thereof on making an endorsement for collection as an agent' on behalf of the real owner. He is not having any title to the property. In Mothireddy vs. Pothireddy 1 Chandra Reddy, C.J., was to consider a case where a person had an endorsement in his favour for collection as a 'holder' within the meaning of Section 8 of the Act. In that context, the learned Chief Justice considered the effect of Section 50 of the Act which says that the title in the document passes to the indorsee but it is only restricted to the receipt of the contents. The indorsee will continue to be the beneficial owner thereof and the indorsee is liable to account to the promisee under the promissory note in that case it is not a case of 'holder in due course' but it is merely a case of a 'holder'. Therefore, the ratio therein does not apply to the facts in this case. In K.Durga Prasad vs. Y.V. Krishna Rao 2 my learned brother Jagannadha Rao J. has to consider the case of a 'holder'' but a 'holder in due course'. Therein, two questions, namely, what is the effect of the endorsement and whether the suit is liable to be dismissed on the ground that the court has no territorial jurisdiction consequent on the endorsement, were considered. Therefore, the ratio therein also is of little assistance to the appella'nt.

(3.) It is seen that the court below found, and, in fairness, it was not disputed across the bar, that the appellant has laid the suit on July 17, 1978, in his own right as a 'holder in due course'. It is now found as a fact that no consideration has been paid under the endorsement, Ex. A-2. Thereby, he is not a 'holder in due course'. When the appellant came to the court in his own right as a 'holder in due course' but not as a 'holder' and having the finding that he is not a 'holder in due course' undisputed, then it is not open to him to fall back upon the plea that he is still continuing to be a 'holder' as a beneficial owner, for the benefit of the original owner, promisee, under Ex. A-1 This stand was not taken earlier nor pleaded in the plaint and there was no opportunity for the respondents to contest this stand. Under those circumstances, having become unsuccessful in his stand that he is a 'holder in due course', it is not open to him to fall back upon the plea that he continues to be a 'holder', namely, beneficial owner for the benefit of the original promisee under Ex. A-l Promissory note'On that promise, the second question, namely, whether the suit should be transferred to the court having pecuniary jurisdiction is redundant. Accordingly, I need not go into that question. A. The appeal is accordingly dismissed but, in the circumstances, each party is directed to bear its own costs.