RAGHUBIR MAHTO Vs. RAMASRAY BHAGAT

JUDGEMENT

(1.) The petitioner instituted a suit in the Small Cause Court of Samastipur based on a handnote which had been executed by Ramasray Bhagat, defendant 2 of the suit. The petitioner's name appears in the handnote as the payee, but the defendant took the plea that the petitioner was a mere benamidar. According to the defendant, the loan was advanced by one Munshi Lai Bhagat who at the time was joint with his brother Earn Prasad Bhagat. He gave to Munshi Lai Bhagat a blank paper, wherein he acknowledged receipt of the loan and liability to repay, which was to be filled up as a handnote. He said that he had subsequently repaid the loan to Munshi Lal's brother Ram Prasad Bhagat, but that Ram Prasad Bhagat said at the time of repayment that the handnote was missing and so he did not get back the handnote, nor did he obtain any receipt from Earn Prasad.

(2.) The Small Cause Court Judge found that the loan had been taken from Munshi Lal Bhagat and that the handnote had been drawn up by Munshi Lal Bhagat in accordance with Section 20, Negotiable Instruments Act, but the defendant had not repaid the amount of the loan to Ram Prasad Bhagat. At the same time he held that the plaintiff could not recover the amount of the handnote in accordance with the provisions of Section 20, Negotiable Instruments Act, because he was not the holder in due course.

(3.) Mr. Baldeo Sahay on behalf of the plaintiff petitioner argues that it was not open to the defendant to take the objection that the payee whose name appeared in the handnote was a mere benamidar, citing the decision of the Pull Bench of the Madras High Court in Subba Narayan Vathiyar V/s. Ramaswami Aiyar (1907) 30 Mad. 88. He does not accept the findings of the learned Small Cause Court Judge to the effect that the plaintiff was a mere benamidar and that Munshi Lal Bhagat was the real person who advanced the loan; but he argues that even on those findings the plaintiff was entitled to a decree. Mr. Janak Kishore on behalf of the opposite party suggests that the payee named in an instrument which has been drawn up under Section 20, Negotiable Instruments Act, cannot be treated as holder in due course unless he proves that consideration passed from him to the original person who was the first holder under Section 20 of the Act. Mr. Baldeo Sahay is in my judgment justified in the criticism which he makes of the findings of the learned Small Cause Court Judge to the effect that Munshi Lal Bhagat was the original holder and that it was he who advanced the money. The manner in which the defendant attempted to prove these facts and the fact of repayment is certainly open to suspicion. Munshi Lai Bhagat was called to support the statement that it was he who made the original loan, but the person to whom the payment was said to have been made was not examined, and Munshi Lal gave no explanation of why the handnote had been drawn up in the name of the plaintiff and not in his own name.