MOHAMMAD KHUMARALI Vs. RANGA RAO

JUDGEMENT

(1.) It is objected that Rule 428 is ultra vires for the reason that it is in conflict with Section 69 of the Presidency Small Cause Courts Act. But this is not so. The rule and the section proceed on different lines, the rule providing for cases in which the Judge is in doubt and not for cases covered by the section.

(2.) I am of opinion that as endorsee the plaintiff cannot sue on the note, but that as assignee of the actionable claim he may sue to enforce it. Accordingly I answer the question referred in the affirmative. Bhashyam Ayyangar, J.

(3.) I concur with my learned colleague that the rule is not ultra vires. The plaintiff, one of the two joint payees of a negotiable promissory note payable on demand made by the defendant on 11 July 1889, sues the defendant for the recovery of the sum of Rs. 261-7-0, being the principal and interest due on the note. The plaintiff sues alone on the strength of the other joint payee V. Miligiri Rao having endorsed the notes in his favour on the 5 January 1900. The defendant takes the preliminary objection that the suit is not maintainable, as one of two joint payees cannot endorse the note, notwithstanding that the endorses is the other joint payee. This objection is, in my opinion, well founded under Section 51 of the Negotiable Instruments Act, which in this respect is in accordance with the English law. The plaintiff therefore cannot sue upon the note as endorsee nor can he sue upon it as one of two joint payees. Every endorsement of a negotiable promissory note operating in contemplation of law between the parties thereto as the drawing of a bill of exchange by the endorser, in favour of the endorsees, such endorsement being only a request of the endorser that the maker of the promissory note (who stands in this respect vary much in the position of an acceptor) would pay the amount to the endorsee or to any other holder in due course (vide Story on Promissory Notes , 7 edition, Section 129, and Byles on Bills, 16 edition page 180), there is nothing to preclude a payee endorsing it in his own favour or two joint payees endorsing it in favour of one of themselves just as a drawer of a bill of exchange may draw it payable to himself. If, in the present case, the plaintiff also has signed the endorsement in his favour at the time of the endorsement, or even prior to the institution of the suit, the action would have been maintainable by him as endorsee. But though the action may not be maintainable by him as endorsee, he can recover the amount due under the note, if there be no other defence to the suit, as assignee of the chose in action by reason of the other joint payee having transferred his interest therein to him. Though the endorsement cannot operate as such under the law merchant, it can be relied upon as evidence of an assignment by way of release, vide Chester V/s. Willan 2 Saund. 96 and Eustace V/s. Scawan Cro. Jac. 696 of Miligiri Rao's interest in the promissory note in favour of the plaintiff without a valid endorsement. The important difference between transfer by endorsement and transfer otherwise than by endorsement of a negotiable instrument is that in the latter case, the assignee will acquire in the bill or note as a chattel no more than the right, title and interest of his assignor, whereas in the former case the assignee by endorsement will have all the rights and advantages of a holder in due course of a negotiable instrument vide Whistler Vs. Forster 32 L.J. (C.P.) 161, Harrop V/s. Fisher 30 L.J. (C.P.) 283 at p. 286 per Byles J. at page 286, and Ramachandra Rao V/s. Abeeb Rowthandecided by Shephard and Moore, JJ., on the 26 September 1898, and Chalmer's Bills of Exchange , 3 edition, page 129]. In the present case the actionable claim under the promissory note was transferred before the 2 February, 1900 on which date Act II of 1900 amending the Transfer of Property Act, 1882, came into force. It is therefore unnecessary to consider whether the transfer otherwise than by endorsement of an actionable claim under a negotiable instrument can, having regard to the saving Section 137, be effected, otherwise than by an instrument in writing as required by Section 130 and, if so, whether an endorsement in the shape of an order or request to the maker to pay the amount of the note to the endorsee can, subject to the payment of the duty and penalty leviable under the General Stamp Act, be regarded and treated as a transfer by the endorser to the endorsee of the actionable claim "by an instrument in writing" within the meaning of Section 130. Appeal No. 175 of 1897 (unreported). The judgment in this case was delivered by Shephard Offg. C.J , and Moore, J., as follows: "In Patta Ambadi Marar V/s. Krishnan I.L.R. 11 Mad. 290, it was held that without endorsement there could not be negotiation of a promissory note payable to order. Here the point taken is that there was a valid transfer or assignment of the chose in action and it is not contended that there was any negotiation of the note. According to English law it is clear that a promissory note may be assigned by the holder just like any other chose in action, the assignee taking the rights which his assignor has to convey and no more Whistler V/s. Forster 32 L.J. (C.P.) 163. He does not obtain the title according to law merchant which an endorsement would give him, nor could he before the Judicature Act, sue in his own name, but the transfer is nevertheless valid as an equitable assignment. There is no reason why in this country an assignee of this particular sort of chose in action should not enjoy the rights which attach to the assignee of a debt and be allowed to sue in his own name. It is argued that by the Negotiable Instruments Act, any other mode of transfer than by endorsement is excluded. We can see nothing in the Act to justify this contention."