Nunna Gopalan v. Vuppuluri Lakshminarasamma AIR 1940 Mad. 631

Nunna Gopalan v. Vuppuluri Lakshminarasamma AIR 1940 Mad. 631

FACTS-

• On 10th December 1933 the respondent executed a promissory note in favour of one Maddipati Tattabayi, alias Tata, defendant 2 in the suit out of which this petition arises. 
• The respondent says that she paid the amount due on the promissory note two days later, but the instrument was left in the hands of the payee, who the next day endorsed it to the petitioner.
• The District Munsif passed a decree against the respondent and the payee.
• The Subordinate Judge ruled against the petitioner, stating that since the respondent had already paid the amount to the original payee, the petitioner couldn't recover.
• Hence, the present appeal before HC.

ISSUE-

• Whether the payee is liable to pay the holder in due course of a promissory note, where amount is already paid towards the holder and promissory note was not returned to the payee?

RULE-

• The court observed that the respondent in the case had paid the amount due on the promissory note to the payee without insisting on its return or obtaining a guarantee. This action exposed the respondent to the risk, as per Section 81 of the Negotiable Instruments Act.
• S 9. “Holder in due course”.—

“Holder in due course” means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or indorsee thereof, if 1[payable to order], before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.

HELD-

• In Glasscock v. Balls, the Court of Appeal considered the position of a person who was a holder of a promissory note. The court held that a negotiable instrument, even if payable on demand and bearing a date some time back, remains current until it is paid or returned to the maker. Therefore, a person who receives such a note for value without knowledge that it has been paid can still sue on it.
• In Muthureddi v. Velu Asari, the court held that the maker of a promissory note cannot plead against a holder in due course that they had paid the money to the payee before the endorsement.
• The court emphasized that the petitioner was a holder in due course and had the right to recover from the respondent, who had paid the amount due on the promissory note to the payee without insisting on its return or obtaining a guarantee.

 

• The petition was allowed and the decision of the Subordinate Judge was set aside restoring the decision of District munsif.