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Barikara Narasayya v. Basavana Gowd

Karnataka High Court

Jun 6, 1985

Judgment

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Judgment Summary — Kulkarni, J.

Factual and Procedural Background

This revision arises from a decree dated 10-8-1982 by the Civil Judge, Bellary, in S.C. 308 of 1980, which decreed a suit brought on a promissory note (pronote). The basic facts, as stated in the opinion, are:

On 27-9-1977, one Chinna Ayyanna borrowed Rs. 1,800 from defendant No. 4 and executed a pronote promising repayment with interest at 18% per annum (Exhibit P.1).
Chinna Ayyanna died in the first week of October 1977, leaving behind defendants 1 to 3 as his legal representatives.
Defendant No. 4 assigned the pronote in favour of the plaintiff for valid consideration on 10-9-1980 at Bellary. The plaintiff is a holder in due course.
The defendants (1 to 3) did not pay despite notice; defendant No. 4 remained absent from the proceedings; defendants 1 to 3 resisted the suit.
The trial Court decreed the suit. Defendants 1 to 3 filed the present revision challenging that judgment and decree.

Legal Issues Presented

Whether the Civil Court at Bellary had territorial jurisdiction to entertain the suit when the pronote was allegedly executed and the consideration given at Adoni, but the pronote was assigned at Bellary.
Whether the pronote Exhibit P.1 had been validly executed by Chinna Ayyanna and whether the plaintiff, as assignee, was entitled to decree as a holder in due course.
Whether the contractual interest rate of 18% per annum claimed as past interest was excessive or otherwise objectionable, particularly because the original debtor was deceased and his legal representatives were defendants.
Whether defendants 1 to 3 were personally liable for the debt or liable only to the extent of the property of the deceased that had come to their hands.

Arguments of the Parties

Defendants' Arguments (as advanced by Learned Counsel Smt. Bhushani Kumar)

The pronote had been executed in Adoni and the consideration had been passed to Chinna Ayyanna in Adoni; therefore, under Section 20(c) CPC the only competent Court was the Court at Adoni and not Bellary.
The mere assignment of the pronote by defendant No. 4 in favour of the plaintiff at Bellary did not itself give rise to a cause of action at Bellary and therefore Bellary lacked jurisdiction.
The rate of past interest claimed (18% per annum) was highly obnoxious, particularly because the original debtor was dead and his children (defendants 1 to 3) were being sought to be made liable.
The defendants produced a death certificate (Exhibit D.1) and other documents (including a condolence resolution) to support their position on death and related matters; these were relied upon in their defence but were found suspicious by the trial Court.

Plaintiff's Position / Evidence

The plaintiff produced the pronote (Exhibit P.1) and relied upon the assignment to show title as a holder in due course.
The plaintiff led oral evidence (P.W.1) and produced Linganagowd (P.W.2), the creditor who advanced the money and in whose presence the pronote was said to have been executed; the trial Court accepted this evidence.
The plaintiff relied on comparison of signatures and other documentary evidence to establish that Chinna Ayyanna had executed the pronote and that the assignment to the plaintiff was for consideration.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Rameshwar Lal Ram Karan v. Gulab Chand Puranmal, AIR 1960 Rajasthan 243	Held that assignment of debt cannot be treated as part of cause of action for jurisdictional purposes (as stated in that case).	Cited by counsel; court observed that the facts of that case related to accounts rather than a negotiable instrument and therefore distinguished it. The opinion notes that a subsequent Division Bench refused to follow an earlier contrary view.
Abdul Gafoor v. Sensmal, AIR 1955 Rajasthan 53	Held that in a suit by an assignee the assignment of debt is part of the cause of action and the Court where assignment occurred can have jurisdiction.	Referred to as an earlier Division Bench decision supporting the view that assignment is part of the cause of action; the later Rameshwar Lal decision refused to follow it.
Muzafar Ali Khan v. L. Jawandamal Lala Ditmal, AIR 1966 Punjab 93	Discusses that 'cause of action' includes facts which give rise to the right of action; cites Read v. Brown where assignment formed part of the cause of action.	Used to support the proposition that assignment may form part of the cause of action and hence affect jurisdiction.
Read v. Brown, (1889) 22 QBD 128	Illustrated that assignment of a debt was part of the cause of action where assignment occurred within jurisdictional limits.	Cited within the discussion in Muzafar Ali Khan as an authority for the proposition that assignment can be part of the cause of action.
Manepalli Magamma v. Manepalli Sathiraju, AIR 1917 Madras 221	Held that assignment of a promissory note by the payee is part of the 'cause of action' under Section 20(c), CPC and the assignee can sue where assignment took place.	Cited as an authority supporting the proposition that assignment of negotiable instruments constitutes part of the cause of action for jurisdictional purposes.
Official Receiver of the Estate of Mohandas Chatandas v. Naraindas Lotaram, AIR 1926 Sindh 31	Expressed a view similar to Manepalli Magamma regarding assignment being part of cause of action.	Referred to as supportive authority for the view adopted by the Court that assignment is part of the transaction.
Abdul Hamind v. Prakash Chandra Nandi, AIR 1934 Calcutta 175	Another authority taking a view similar to assignment being part of cause of action.	Referred to among cases supporting the assignment-as-part-of-cause-of-action approach.
Jupiter General Assurance Co. v. Abdul Aziz, I Rang. 231 (1924)	Referenced in academic commentary as an example of the view that assignment is not part of cause of action.	Mentioned in Mulla's discussion to illustrate conflicting judicial opinions; identified as part of the minority view.
Suganchand v. Mulchand, 9 Bombay High Court 272	Cited in academic commentary as authority supporting that assignment is part of cause of action.	Included among authorities relied on to show preponderance of cases supporting assignment-as-part-of-cause-of-action.
Mangamma v. Sathya Raju, 31 M.L.J. 816	Listed as supporting authority for assignment being part of cause of action.	Used as one of several supporting precedents in the scholarly and judicial discussion cited by the Court.
Dilbagh Raj v. Valuram (1933) A. Lah. 940	Listed in commentary as authority consistent with assignment being part of cause of action.	Included among precedents showing the preponderance of authority favouring that view.
Harnath Raj v. Choramani Sha (1934) A.C. 175	Listed as an authority in support of assignment forming part of the cause of action.	Referred to as part of the body of authority relied upon by the Court and commentators.
Gopal v. Narayana (1953) A.N. 192	Listed among cases supporting the view that assignment is part of the cause of action.	Referred to as an authority consistent with the Court's conclusion on jurisdiction.

Court's Reasoning and Analysis

The court reviewed the factual findings of the trial Court and addressed two principal strands of controversy: (a) the factual validity of the pronote and assignment, and (b) the jurisdictional challenge under Section 20(c) CPC raised by defendants.

On the factual question the court summarized the trial Court's findings: the trial Court accepted the evidence of the plaintiff and of P.W.2 (Linganagowd), compared signatures on Exhibit P.1 with admitted signatures of Chinna Ayyanna, and rejected the defendants' claim that Chinna Ayyanna died on 6-8-1977. The trial Court also rejected the death certificate (Exhibit D.1) and found a condolence resolution produced by defendants to be suspicious and concocted. The revisional court found no reason to disbelieve the evidence of the plaintiff and P.W.2 and therefore held that the trial Court rightly concluded that the pronote had been executed by Chinna Ayyanna and that defendant No. 4 had assigned the pronote in favour of the plaintiff for consideration.

On the jurisdictional point the court considered the argument that because the pronote (and the advance) were said to have originated in Adoni, only the Adoni Court had jurisdiction and the assignment at Bellary did not create a cause of action there. The court examined Section 20(c) CPC and the provisions of the Negotiable Instruments Act and surveyed relevant authorities and academic commentary (including Mulla and S. Row). The court observed that while some authorities (for example Rameshwar Lal) take the view that assignment is not part of the cause of action, a preponderance of case law and authoritative commentary supports the converse view — namely, that assignment of a negotiable instrument or of a debt is part of the transaction giving rise to the cause of action and that where part of the cause of action occurs in a place (e.g., where assignment takes place) the Court having jurisdiction over that place can entertain the suit under Section 20(c).

Applying these principles, the court rejected the defendants' contention that Bellary lacked jurisdiction: because the assignment of the pronote at Bellary formed part of the transaction recognised by the Negotiable Instruments Act (and part of the cause of action), the Bellary Court was competent to try the suit. The court therefore dismissed the jurisdictional plea.

On the interest and liability issues the court accepted the defendants' submission that 18% past interest was “highly obnoxious” in the circumstances, especially as the original debtor was dead and his children were being pursued. The court exercised its discretion to reduce past interest from 18% to 9% per annum. For the decree it ordered recovery of Rs. 2,300 from defendants 1 to 3 with future interest on Rs. 1,800 at 6% per annum from the date of suit until recovery. The court clarified that defendants 1 to 3 were not personally liable to pay the debt but were liable only to the extent of the deceased's property that had come to their hands.

Holding and Implications

Core Ruling: The revision is allowed in part; the decree of the trial Court is modified.

Direct consequences and orders made by the Court:

The Court modified the decree so that the plaintiff shall recover Rs. 2,300 from defendants 1 to 3.
Future interest on Rs. 1,800 is fixed at 6% per annum from the date of suit until recovery.
Past interest originally claimed at 18% per annum is reduced to 9% per annum.
Defendants 1 to 3 must pay proportionate costs in the Trial Court; all parties are ordered to bear their own costs in the revision proceedings.
The court made clear that defendants 1 to 3 are not personally liable to pay the debt beyond the extent of the property of the deceased Chinna Ayyanna that has come into their hands.

Implications for precedent and law: The opinion surveys and applies a body of case law and authoritative commentary to adopt the view that assignment of a negotiable instrument or debt can constitute part of the cause of action for purposes of Section 20(c) CPC. The decision resolves the jurisdictional dispute in favour of the assignee's right to sue in the place where assignment occurred, but the opinion itself modifies the decree rather than purporting to lay down a novel legal principle. No new binding precedent is expressly stated to have been created by this decision beyond its application to the facts of the case.

Show all summary ...

Kulkarni, J.:—

This is a revision by defendants 1 to 3 against the judgment and decree dated 10-8-1982 passed by the Civil Judge, Bellary, in S.C 308 of 1980, decreeing the suit.

2. One Chinna Ayyanna, father of defendants 1 to 3, borrowed Rs. 1,800/- from defendant No. 4 on 27-9-1977 and executed the pronote agreeing to repay the loan with interest at 18 percent per annum. Defendant No. 4 assigned the pronote in favour of the plaintiff for valid consideration on 10-9-1980 at Bellary. The plaintiff is a holder of the pronote in due course. Chinna Ayyanna died leaving behind defendants 1 to 3 as his legal representatives, in the first week of October 1977. Notwithstanding the notice, the defendants did not pay the amount. Hence, the suit.

3. Defendants 1 to 3 resisted the suit. Defendant No. 4 remained absent.

4. Ultimately the Court below decreed the suit. Hence, the revision by the defendants.

5. The Court below, on the strength of the evidence of the plaintiff and Linganagowd P.W 2 and on perusal of the pronote Exhibit P. 1 and on comparison of the signature found at the foot of Exhibit P. 1 with the admitted signatures of Chinna Ayyanna, has come to the conclusion that Chinna Ayyanna had executed the pronote on receiving the consideration. The defendants' contention that Chinna Ayyanna died on 6-8-1977, has not been accepted by the Court below. The lower Court has rejected the so called death certificate Exhibit D.1 Even the so called condolence resolution was found by the Court below as highly suspicious and concocted. P.W 2 Linganagowd is the creditor, who advanced the money to Chinna Ayyanna and in whose presence the pronote has been executed. There is no reason to disbelieve the evidence of defendant No. 4, Therefore, the Trial Court, rightly believing the evidence of P.Ws 1 and 2 and disbelieving the evidence of D.Ws 1 and 2, concluded that Chinna Ayyanna had executed the pronote in favour of defendant No. 4 and that defendant No. 4 in turn had assigned the pronote in favour of the plaintiff for consideration.

6. The Learned Counsel Smt. Bhushani Kumar submitted that the pronote had been executed in Adoni and the consideration had passed to Chinna Ayyanna in Adoni and that therefore, it is only the Court at Adoni that had got the jurisdiction. According to her, the simple assignment of the pronote by defendant No. 4 in favour of the plaintiff at Bellary did not give rise to any cause of action at Bellary. Thus, in short, she contended that the Court at Bellary had no jurisdiction. The argument advanced by Smt. Bhushani Kumar, at the first blush, appears to be rather tempting. But on a closer perusal of Section 20(c) of the Code of Civil Procedure and the provisions of the Negotiable Instruments Act, I do not find any substance in the contention raised by her. She placed before me Rameshwar Lal Ram Karan v. Gulab Chand Puranmal . AIR 1960 Rajasthan 243.. It is stated in the said case as:

“An assignment of debt cannot be treated as forming part of a cause of action for the purpose of giving jurisdiction to the Court at the place of the assignment. If this were so, the defendant could be compelled to defend the suit at the choice of the plaintiffs and this would cut at the basic principle underlying Section 20 C.P.C”

The facts in the said case were-

“The defendant had a shop at Kanpur under the name and style of Nanagram Chauthmal. It was alleged that the plaintiff's firm at Karachi had certain dealings with the Kanpur firm, as a result whereof the plaintiffs were entitled to recover Rs. 5,147-6-6 inclusive of interest on their claim.”

Thus, it becomes clear that it was a suit based rather on accounts. It was not at all a case based on Negotiable Instrument.

7. In Abdul Gafoor v. Sensmal . AIR 1955 Rajasthan 53., it has been held as-

“The expression ‘cause of action’ means all that bundle of facts which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court, in the case of assignment of a debt the plaintiff will be bound to prove that the debt was assigned in his favour by the assignor and therefore the assignment is a part of the cause of action. Therefore, in a suit brought by an assignee of a debt, the cause of action partly arises because of the assignment of debt and therefore the Court within whose territorial jurisdiction the assignment is made would be competent to entertain and decide the suit subject of course to the pecuniary and other limitations.”

This decision is rendered by a Division Bench of the Rajasthan High Court. The subsequent Division Bench of the Rajasthan High Court, reported in AIR 1960 Rajasthan, 243, without any reasons has refused to follow this decision.

8. In Muzafar Ali Khan v. L. Jawandamal Lala Ditmal . AIR 1966 Punjab 93., it has been stated as-

“The expression ‘cause of action’, may be defined as being the fact or facts which establish or give rise to a right of action or the existence of which entitles a party to seek redress in a Court of law. The facts which comprise the cause of action are those which must, it traversed, be proved by the plaintiff to enable him to obtain a judgment in his favour. This expression came up for interpretation in the well known case of ‘Read v. Brown’, (1889) 22 QBD 128 (D). In that case the plaintiff brought an action in the Mayor's Court as assignee of a debt alleged to be due in respect of the price of goods sold and delivered to the defendant by the assignor. The sale and delivery had taken place without the City of London, but the debt had been assigned in writing to the plaintiff pursuant to Section 25, sub-section 6, Judicature Act, 1873, within the City of London. It was held that the assignment of the debt was part of the cause of action, and that the cause of action having arisen in part within the City of London there was no ground for a prohibition.”

9. In Manepalli Magamma v. Manepalli Sathiraju . AIR 1917 Madras 221., a Division Bench of the Madras High Court has held that—

“The assignment of a promissory note by the payee is a part of the ‘cause of action’ within the meaning of Section 20(c), Civil Procedure Code and the assignee can sue on it in the Court having jurisdiction where the assignment took place.”

A similar view has been taken in Official Receiver of the Estate of Mohandas Chatandas v. Naraindas Lotaram . AIR 1926 Sindh 31. and Abdul Hamind v. Prakash Chandra Nandi . AIR 1934 Calcutta 175..

10. The Learned author Sri Mulla in his Code of Civil Procedure, Fourteenth Edition, Volume I, on pages 215 and 216 has stated as:

“There has been some conflict of judicial opinion on the question whether a suit can be filed in a Court within whose jurisdiction a negotiable instrument has been assigned, in support of the view that an assignment is not in itself part of the cause of action, it is said that otherwise the provision in Section 20, Clause (c) might be evaded. (Jupiter General Assurance Co. v. Abdul Aziz, I Rang. 231, (1924) A. Rang. 2; Rameshwar Lal v. Gulab Chand (1960) A. Raj. 243) But the preponderance of authority is in favour of the view that the words ‘cause of action’ would, in their accepted sense, include assignment and that the Court where the assignment took place would have jurisdiction under Section 20(c). (Suganchand v. Mulchand, 9 Bombay High Court 272, Mangamma v. Sathya Raju, 31 M.L.J 816; Dilbagh Raj v. Valuram (1933) A. Lah. 940; Harnath Raj v. Choramani Sha (1934) A.C 175; Gopal v. Narayana (1953) A.N 192). This view would bring the law relating to assignment of negotiable instruments in line with that relating to assignment of chooses in action and other rights.”

11. In S. Row's the Negotiable Instruments Act, 6th Edition, 1968, on page 165, it is stated as—

“In a suit by an indorse of a negotiable instrument, the indorsement forms a material part of the cause of action, and, if the indorsement has taken place within the limits of the ordinary original jurisdiction of a High Court, the indorse may institute the suit in that Court, having first obtained the leave of the Court under Clause 12 of the Letters Patent. Where a firm in Benares drew a hundi on its branch firm at Bombay in favour of a firm that was carrying on business at Calcutta and Mirzapur, and the hundi was indorsed at Calcutta and dishonoured by the firm at Bombay. Held, that the indorsement of the hundi constituted a part of the cause of action, and that the indorse could, with the leave of the Court bring a suit on the hundi at Calcutta, under the 12th clause of the Charter of the Calcutta High Court.”

The assignment of a negotiable instrument is a part of the transaction recognised under the Negotiable Instruments Act itself. Even the assignment of debt is also recognised by law. Thus, assignment of a debt or a negotiable instrument is a part of the transaction itself, and therefore, when a part of the cause of action takes place in a particular place, the Court having jurisdiction over that place would have the jurisdiction to entertain and try the suit. Therefore, under these circumstances, the argument advanced by the Learned Counsel Mrs Bhushani Kumar is rejected.

12. Then the Learned Counsel submitted that the past interest at the rate of 18 per cent per annum was highly obnoxious. This is a case where the original debtor himself was dead and his children are now sought to be made liable. Hence, I find some force in her contention. Therefore, the past interest is reduced to 9 per cent per annum.

13. Therefore, under these circumstances, the decree passed by the Court below is modified. The revision is allowed in part. For the purpose of clarification, it is ordered that the plaintiff do recover Rs. 2,300/- from defendants 1 to 3 with future interest on Rs. 1,800/- at the rate of 6 per cent per annum from the date of suit till its recovery from defendants 1 to 3.

14. Defendants 1 to 3 should pay proportionate costs in the Trial Court and should bear their own in the Trial Court. As the revision involves, to a very large extent, consideration of a question of law relating to jurisdiction, it is ordered that all the parties should bear their own costs in the revision. Further, it is made clear that defendants 1 to 3 are not personally liable to pay the debt. They are liable only to the extent of the property of deceased Chinna Ayyanna, that has come to their hands.