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of <h1>Court Upholds Promissory Notes Validity and Liability, Awards Interest</h1> <h3>K.A. Lona etc. Versus Dada Haji Ibrahim Hilari And Co. and Ors.</h3> K.A. Lona etc. Versus Dada Haji Ibrahim Hilari And Co. and Ors. - AIR 1981 Ker 86 Issues Involved:1. Admissibility and nature of the documents as promissory notes.2. Authenticity and consideration of the promissory notes.3. Material alteration of the promissory notes.4. Authority of the third defendant to execute the promissory notes on behalf of the firm.5. Liability of the firm and the second defendant.6. Entitlement to interest on the amounts claimed.Detailed Analysis:1. Admissibility and Nature of the Documents as Promissory Notes:- Contention: The defendants argued that the documents (Exts. A1, A2, and A37) were not promissory notes because they did not mention the 'promisee' and were not executed to the 'order' of the payee.- Judgment: The court held that the documents satisfied the definition of promissory notes under Section 4 of the Negotiable Instruments Act. It was not necessary for the promise to include the words 'to order' or explicitly name the payee in the body of the document. The documents were addressed to the respective promisees and clearly indicated the payee with certainty.2. Authenticity and Consideration of the Promissory Notes:- Contention: The defendants claimed the promissory notes were collusive, without consideration, and merely letters of security.- Judgment: The court found that the transactions were genuine and supported by consideration. The evidence of the plaintiffs (PWs 1 and 4) and the corroborative entries in the account books were sufficient to establish the authenticity of the transactions. The court dismissed the defendants' claims of collusion and lack of consideration.3. Material Alteration of the Promissory Notes:- Contention: The defendants alleged that the stamps on the promissory notes were affixed and canceled after execution, constituting material alteration.- Judgment: The court held that there was no material alteration. The stamps were affixed and canceled in an effectual manner as required by Section 12 of the Stamp Act. The court found no suspicious circumstances or evidence of tampering. The cancellation by drawing lines across the stamps was deemed lawful and effective.4. Authority of the Third Defendant to Execute the Promissory Notes on Behalf of the Firm:- Contention: The second defendant argued that the third defendant had no authority to borrow money on behalf of the firm without his consent, as per the partnership agreement (Ext. B1).- Judgment: The court held that the third defendant, as the Managing Partner, had the implied authority to borrow money for the firm under Sections 18 and 19 of the Partnership Act. The court found no substantial restriction on this authority in Ext. B1. The promisees (PWs 1 and 4) were not aware of any restrictions, and the third defendant represented that he had the authority to borrow.5. Liability of the Firm and the Second Defendant:- Contention: The second defendant contended that the promissory notes did not bind the firm as they were not executed in the firm's name.- Judgment: The court held that the promissory notes were executed in a manner that bound the firm. The use of the expression 'we promise to pay' and the letterheads containing the firm's name indicated that the third defendant acted on behalf of the firm. The court found that the firm and the second defendant were liable under the promissory notes.6. Entitlement to Interest on the Amounts Claimed:- Contention: The trial court denied interest as there was no agreement to pay interest.- Judgment: The court held that even if there was no agreement to pay interest, the plaintiffs were entitled to interest under Section 80 of the Negotiable Instruments Act at the rate of 6% per annum from the date the money was due until realization.Conclusion:The High Court set aside the trial court's judgment and decreed the suits as prayed for by the plaintiffs with costs. The plaintiffs were entitled to the amounts claimed under the promissory notes along with interest at 6% per annum from the dates of the promissory notes until recovery. The appeals were allowed with costs.
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