Lachmi Chand v. Madanlal Khemka AIR 1947 All. 52
FACTS-
- A promissory note was executed by Lala Lachhmi Chand(dead), defendant 1, on 25-3-1928 for a sum of Rs. 10,000. It was in favour of Shri 108 Baba Kali Kamliwala Ramnath Maniramji of Rishikesh.
- The promissory note was renewed on various dates. Lastly, on 14-11-1939.
- As the amount was not paid by the defendants. The plaintiff, B. Madan Lal Khemka (respondent), as Secretary of Baba Kali Kamliwala Panchaiti Kshetra, Rishikesh, sued Lala Lachmi Chand and his son Onkar Prasad(appellant) based on a promissory note dated 25-8-1928.
- Civil judge held in favour of plaintiff-respondent, without considering main issue, whether the plaintiff was debarred from suing on the pro-note.
- Learned counsel for the appellant has strongly contended that the plaintiff not being the “payee” of the pro-note could not, by reason of S. 78 read with S. 8, Negotiable Instruments Act, successfully enforce the liability of the defendants under the pro-note
ISSUE-
- Whether the plaintiff, not being the payee of the promissory note, could enforce the liability of the defendants under the note.
RULE-
- The term “holder” u/s 8 of the ACT, 1881 doesn’t include the person having mere possession of a promissory note. The holder will be the person having name on the promissory note.
HELD-
- The "holder" of a promissory note is the person entitled to it in their own name, preventing mere name-lenders from claiming holder rights.
- In Sadasukh Janki Das [AIR 1918 PC 146]: “It is of the utmost importance that the name of a person or firm to be charged upon a negotiable document should be clearly stated on the face or on the back of the document, so that the responsibility is made plain and can be instantly recognised as the document passes from hand to hand ...It is not sufficient that the principal‟s name should be “in some way” disclosed, it must be disclosed in such a way that on any fair interpretation of the instrument his name is the real name of the person liable upon the bills.”
- The contention that the real creditor, the holder of the promissory note being his benamidar, is precluded from maintaining a suit for enforcement of the liability incurred by the maker under the pro-note was repelled.
- In the Nagpur case, however, the promissory notes in question were in favour of Khudai Dad Khan and not in favour of the firm of partnership that had instituted the suit. the decree was given in favour of partnership firm as khudai das was presented as witness in the case stating the liability was towards firm.
- The promissory notes were in favor of Ramnath Maniramji, but the suit was filed by a registered body without him as a party.
- Despite possible funding from the registered society, they couldn't secure discharge of the defendant from liability under the note.
- The suit filed by the plaintiff-respondent cannot succeed due to inability to secure discharge.
- The appeal is allowed, and the lower court's decree is set aside.
COMMENTARIES RATIO/NOTE-
[s 8.2] Sections 8 and 78 – Applicability
The rules of law contained in sections 8 and 78 of the Act are not applicable to cases where a pronote, Bill of Exchange or any other negotiable instrument devolves by operation of law or is transferred to another by assignment [Champalal Gajanand v Padam Chand Sheolal Jain, AIR 1971 MP 133].
[s 8.5] ‘Entitled in his own Name’
The holder of the promissory note is essentially a person who is ‘entitled in his own name’. But these words are wide enough to include a person whose assumed name is given in the promissory note as payee. The words ‘in his own name’ do not and cannot mean the personal name of the person and there is no reason to suppose that any alias or assumed trade name would not fall within the meaning these words [Syed Sayeed Hasan Razvi v Mohommed Sultanuddin Khan, ILR 1951 Hyd 448].