1957 (4) TMI 85 - HC - Indian Laws

Beneficiary not holder of negotiable instrument under NI Act; Plaintiff suit dismissed.

The High Court concluded that a beneficiary cannot be considered a holder of a negotiable instrument under the Negotiable Instruments Act. As the ... - Issues Involved:1. Maintainability of the suit by the plaintiff as a beneficiary under a handnote.2. Liability of defendants 1 to 3 as members of the family of the deceased Kamdeo.3. Validity of the trial court's decree against the petitioner (defendant No. 4).Detailed Analysis:1. Maintainability of the Suit by the Plaintiff as a Beneficiary under a Handnote:The primary issue in this case was whether the plaintiff could sue as a beneficiary for recovery of money due under a handnote executed in the name of defendant No. 5, who was alleged to be a benamidar. The court examined the provisions of Sections 78 and 8 of the Negotiable Instruments Act. Section 78 mandates that payment to discharge a promissory note must be made to the holder of the instrument. Section 8 defines a holder as any person entitled in his own name to the possession of the instrument and to receive or recover the amount due thereon. The court emphasized the significance of the words 'in his own name,' which were intended to prevent claims by those asserting that the ostensible holder is their benamidar. The court concluded that a beneficiary cannot be called a holder of the instrument, and therefore, the plaintiff, not being the holder, could not maintain the suit.2. Liability of Defendants 1 to 3 as Members of the Family of the Deceased Kamdeo:The trial court had held that Kamdeo was not the karta of the family, and thus, the loan was not binding on defendants 1 to 3. This finding was affirmed by the lower appellate court and was not challenged in the High Court. Therefore, the liability of defendants 1 to 3 was not a significant issue in the High Court's judgment.3. Validity of the Trial Court's Decree Against the Petitioner (Defendant No. 4):The trial court had decreed the suit against the petitioner (defendant No. 4) only, which was affirmed by the lower appellate court. The High Court, however, found that the plaintiff, not being the holder of the handnote, could not maintain the suit. The court relied on various precedents, including the Full Bench decision of the Madras High Court in Subba Narayana Vathiyar v. Ramaswami Aiyar, which held that only the holder of a negotiable instrument could sue on it. The court also referred to the Privy Council decision in Firm Sadasuk Janki Das v. Sir Kishen Pershad, which emphasized the importance of the name of the person to be charged appearing clearly on the face of the document. The High Court overruled earlier conflicting decisions of the Patna High Court that had allowed beneficiaries to sue on promissory notes if they could secure a valid discharge for the debtor.Conclusion:The High Court held that a person who is not the holder of a negotiable instrument cannot maintain a suit for recovery of money due under it, even if the ostensible holder is made a party to the suit and supports the claim of the plaintiff. Consequently, the decree of the trial court was set aside, and the suit of the plaintiff was dismissed with costs.