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Smart Summary

Concise Analytical Summary of the Opinion

Factual and Procedural Background

This is a defendant's regular first appeal from a judgment of the learned District Judge that decreed the plaintiffs' suit for Rs. 5,800 with costs.

The underlying events began in 1941 in Calcutta. The defendant, Madangopal Kabra, then acting as Managing Director of Film Corporation of India Ltd., drew three hundies (bills of exchange) in May–June 1941: Rs. 1,200 in favour of Mrs. S. Devi (31-5-1941), Rs. 1,200 in favour of Narsinghdas Agarwal and Sons (31-5-1941), and Rs. 2,500 in favour of Narsingdas Agarwal and Sons (24-6-1941). The drawee, Madangopal Kabra of 1 Motisil Street, Calcutta, accepted all three hundies, signing his name and adding "M. D." after his signature. The hundies were payable after sixty days; payment was not made by 1-5-1944. Notice demanding Rs. 4,900 (principal) and Rs. 800 (interest) was sent; on no response, the plaintiffs instituted suit claiming Rs. 6,800 (including interest to date at 6% p.a.).

The defendant pleaded that the hundies were executed and accepted by him in his capacity as Managing Director (i.e., not personally liable) and also contested entitlement to interest. The District Judge held that the defendant, by his acceptance, had undertaken personal liability and decreed principal and interest (including interest by force of Section 80, Negotiable Instruments Act), awarding interest pendente lite and future interest at 6% p.a. This appeal challenges primarily (1) personal liability and (2) the award of interest under Section 80 where the Negotiable Instruments Act was not in force in Marwar when the suit was instituted.

Legal Issues Presented

  1. Whether the defendant, having accepted the hundies and appending "M. D." after his signature, incurred personal liability or whether the acceptance was in his capacity as Managing Director only (i.e., no personal liability).
  2. Whether the learned District Judge erred in awarding interest under Section 80 of the Negotiable Instruments Act and in awarding interest pendente lite and future interest at 6% p.a., given that the Negotiable Instruments Act was not in force in Marwar at the time the suit was instituted and the hundies were silent as to interest.

Arguments of the Parties

Appellant's (Defendant's) Arguments

  • The defendant was not personally liable because he accepted the hundies in his capacity as Managing Director; the addition of "M. D." after his signature indicates acceptance on behalf of the company, not personally.
  • The Negotiable Instruments Act was not in force in Marwar when the suit was instituted; therefore the District Judge erred in awarding interest under Section 80 of the Act and in awarding interest pendente lite and future interest.
  • The certified copy of the defendant's purported affidavit from the Calcutta High Court was not properly proved (it lacked the seal/certificate of a notary public or of a British Consul/diplomatic agent). Relying on Section 78(6) of the Evidence Act, counsel argued the copy was inadmissible and could not be used to show the defendant admitted personal liability.
  • The discretion to award interest during litigation should not be exercised in favour of a person who omitted to specify interest in the instrument itself.

Plaintiffs' / Respondents' Arguments and Evidence

  • P. W. 1, Dharamdeo, who arranged the loan for the plaintiffs, stated that the money had been advanced on the guarantee of the defendant and that the defendant had accepted all three hundies in his personal capacity; this testimony was relied upon to establish personal acceptance.
  • The plaintiffs relied on the fact that the hundies were executed in Calcutta where the Negotiable Instruments Act was in force, implying parties were aware interest could be claimed under Section 80 even if not expressly stated in the instruments.
  • It was conceded by the learned counsel for the respondents that plaintiffs could not claim interest up to the date of the suit because the Negotiable Instruments Act was not in force in Marwar on the suit date and the hundies were silent as to interest.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Jhandumal v. Official Liquidators, Dehra Dun Mussoorie Electric Tramway Co., 52 ALL. 883 : A.I.R. (17) 1930 ALL 778 The addition of a descriptive title (e.g., "Managing Agent") after a signatory's name on a negotiable instrument is a mere description of the signatory and is not sufficient to show that the signatory signed on behalf of the principal; the instrument binds the person who signed. The court relied on this authority to support the proposition that adding "M. D." after the defendant's name did not exclude personal liability because the principal (the company) was not clearly named on the face of the acceptance.
Sree Lal Mangtulal v. Lister Antiseptic Dressing Co., 52 Cal. 802 : A.I.R. (12) 1925 Cal. 1062 Words appended after a signatory's name describing him as "Managing Agents" were held to be merely descriptive of the signatory and insufficient to bind the company; the company was not liable where the maker's name (not the company's name) appeared on the instrument. The court applied the same reasoning: descriptive words following the defendant's signature ("M. D.") did not show that acceptance was on behalf of the company and therefore did not exclude personal liability.
Sitaram Krishna v. Chimandas Fatehchand, 52 Bom. 640 : A.I.R. (15) 1928 Bom. 516 Where the signatory appended a descriptive capacity after his name (e.g., "Managing Proprietor"), those words were held to be mere descriptions and did not show that the signatory was signing solely as agent; the signatory remained personally liable. The court cited this decision to reinforce the principle that an undisclosed principal cannot be substituted by way of defence and that descriptive appendages do not negate personal liability.

Court's Reasoning and Analysis

The court examined the admissible evidence and the applicable general legal principles on negotiable instruments (noting that the Negotiable Instruments Act was not in force in Marwar, so reliance on its sections would be futile for that jurisdiction). The key analytical steps were:

  1. Evidence assessment:
    • The certified copy of the defendant's purported affidavit from the Calcutta High Court was not admissible because it lacked certification by a notary public or British Consul/diplomatic agent as required by Section 78(6) of the Evidence Act for proof of certain foreign public documents; consequently, the document could not be relied upon.
    • Oral evidence available included P. W. 1 Dharamdeo's statement that the money had been advanced on the defendant's guarantee and that the defendant had accepted the hundies in his personal capacity, plus the defendant's own limited statement that he accepted them as Managing Director (which did not itself explain that he accepted on behalf of the company and not personally).
  2. Principle on signatures and agency in negotiable instruments:
    • The court reiterated the established general principle: ordinarily, when a person signs a negotiable instrument without clearly indicating on its face that he signs as an agent for a named principal, he will be personally bound.
    • Mere addition of a title (e.g., "Managing Director" or "M.D.") after a signature is insufficient to show that the signatory intended to bind only the principal. To exclude personal liability an agent must clearly indicate the principal's name on the instrument and that the signature is made as agent for that principal.
    • The court emphasized that an undisclosed principal is not recognized as a defence in an action on a bill of exchange: the face of the instrument must disclose agency and the principal's identity.
  3. Application to the facts:
    • The defendant had appended "M. D." after his signature when accepting the hundies, but had not named the principal (the company) on the acceptance nor explicitly stated that he was signing on behalf of that principal. Therefore, the addition of "M. D." was a mere description and insufficient to negate personal liability.
    • P. W. 1's testimony that the loans were advanced on the defendant's guarantee and that the defendant accepted in his personal capacity supported the inference of personal liability; no admissible documentary evidence contradicted that showing.
  4. On interest:
    • It was common ground (conceded by respondents' counsel) that, because the Negotiable Instruments Act was not in force in Marwar at the suit's institution date and the hundies were silent on interest, plaintiffs could not claim interest up to the date of the suit.
    • However, the hundies had been executed in Calcutta, where the Negotiable Instruments Act was in force; the court reasoned the parties were aware that even if the instruments did not specify an interest rate, Section 80 of the Act (in force in Calcutta) would permit an award of interest. This contextual fact supported awarding interest pendente lite and future interest.
    • The court further noted the defendant had resisted the suit on a ground the court found frivolous, prolonging litigation for roughly six years with no payments made since 1941. Given these circumstances, the court found it a proper exercise of discretion to award interest during pendency and until realization and upheld the District Judge's exercise of discretion on this point.

Holding and Implications

Holding: The appeal partially succeeds. The decree of the learned District Judge is modified: the decretal amount is reduced to Rs. 4,900 with costs on this amount, and interest pendente lite and future interest at 6% per annum is maintained until realization.

Consequences and practical effects on the parties (as directed by the court):

  • The defendant (appellant) remains personally liable for the amount of Rs. 4,900 (principal) under the accepted hundies because adding "M. D." did not exclude personal liability.
  • The decree is reduced by Rs. 900 from the original; the appellant succeeds to the extent of Rs. 900 and will recover costs from the respondents on that amount in this Court.
  • The respondents, who had already been awarded costs on Rs. 4,900 in the Court below, will also receive their costs on that amount in this Court.
  • Interest pendente lite and future interest at 6% p.a. is affirmed until realization, reflecting the court's exercise of discretion given execution of the hundies in Calcutta and the protracted litigation.

The opinion does not purport to lay down a novel legal principle; it applies well-established authorities on the effect of descriptive additions to signatures on negotiable instruments and the established approach to awarding interest in the exercise of judicial discretion. No broader precedent beyond the application of these established principles is claimed.

    Madangopal v. Narsinghdas & Sons

    1. This is a defendant's regular first appeal from the judgment of the learned District Judge decreeing the plaintiffs' suit for Rs. 5800 with costs.

    2. The various events in this case date back to 1941 when the defendant was carrying on business in Calcutta and acting as the Managing Director of a firm by the name of Film Corporation of India Ltd. In the months of May and June 1941, he drew three Hundies in his capacity as Managing Director of the above mentioned firm as per detail below (1) On 31-5-1941 he drew a Hundi for Rs. 1200 in favour of Mt. S. Devi. (2) Again on 31-5-1941 he drew a Hundi for Rs. 1200 in favour of Narsinghdas Agarwal and Sons. (3) On 24-6-1941 he drew a third Hundi for Rs. 2500 in favour of Narsingdas Agarwal and Sons.

    3. The drawee of these Hundies was Mdangopal Kabra, l Motisil Street, Calcutta. All these Hundies were payable after sixty days and when they were presented to him, he accepted them. Under the acceptance he signed his own name but also added M. D. after his signature. The Hundi in favour of Mt. Devi was endorsed to Narsingdas Agarwal and Sons. Accordingly, since payment due under these Hundies was not made on 1-5-1944, notice was sent to Madangopal Kabra calling upon him to pay the sum of Rs. 4900 due on account of principal and Rs. 800 as interest under the three Hundies and later on, since there was no response to this notice, the suit, out of which this appeal arises, was instituted for the recovery of Rs. 6800 including interest up to date at 6% per annum. The defendant pleaded that the Hundies had indeed been executed by him as Managing Director of the Company but that they had also been accepted by him in the same capacity and not in his personal capacity. He accordingly pleaded that he was not personally liable under these Hundies. He also pleaded that the plaintiff was not entitled to interest. Several other pleas were raised but they are not material for purposes of this appeal. The learned District Judge, who tried this suit, came to the conclusion that the defendant had by accepting the Hundies undertaken a personal liability. Accordingly, he passed a decree for the principal amount due and also awarded interest at 6% per annum by force of Section 80, Negotiable Instruments Act. Interest pendente lite and future interest at 6% per annum was also awarded till the date of payment.

    4. The learned counsel for the defendant-appellant has confined his arguments in this appeal to two points only namely (l) That the defendant was not personally liable. (2) That since Negotiable Instruments Act was not in force in Marwar at the time the suit was instituted, the learned District Judge erred in awarding interest under Section 80 of the Act and also in awarding interest pendente lite and future interest. So far as the first point is concerned, after hearing the learned counsel for the parties, we are firmly of the view that the learned District Judge has arrived at a correct conclusion. As will be clear from the detail given above, the Handies were executed by Madangopal Kabra as Managing Director of the Company but the drawee of these Hundies and the person accepting them was not the defendant in his capacity as Managing Director. Undoubtedly, when he accepted these Hundies, he added M D., obviously meaning "Managing Director" after his signature but it is a question whether this addition of M. D. is by itself sufficient to indicate that the defendant had not undertaken a personal liability. This is a point concerning general legal principles surrounding negotiable instruments and we will deal with it presently. It may be pointed out here that P. W. 1 Dharamdeo, who had arranged the loan, stated that the money had been advanced on the guarantee of the defendant Madangopal and that he had accepted all the three Hundies in his personal capacity. This witness also produced a certified copy of what purports to be the defendant's affidavit in the Calcutta High Court in case no. 1357 of 1941. It had been argued on behalf of the appellant in connection with this document that it had not been duly proved, inasmuch as the certified copy did not bear the seal of a notary public or of a British Consul or diplomatic agent. The learned counsel argues that at the utmost, it was a public document, in a foreign country as indeed Calcutta was at the time of the institution of the suit vis-a-vis Jodhpur, and, therefore, according to Section 78(6), Evidence Act, it could be proved either by the production of the original or of a copy certified by the legal keeper thereof, with a certificate under the seal of a notary public, or of a British Consul or diplomatic agent, that the copy is duly certified by the officer having the legal custody of the original, and upon proof of the character of the document according to the law of the foreign country. A perusal of the copy shows that although it had been certified by the Registrar of the High Court of Judicature at Calcutta to be a true copy of the original in his custody, it does not bear either a certificate under the seal of a notary public or one from a British Consul or diplomatic agent. In the circumstances there is no escape from the conclusion that the document was neither admissible in evidence nor can it be said to have been proved. The learned District Judge has drawn upon this document for supporting the conclusion arrived at by him but it is obvious that in view of what has been stated above, it must be kept completely out of consideration. On the record as it stands, the only other statement which might have been material is that of the defendant himself but he did not mention anything substantial except that the hundies had been accepted by him as Managing Director of the Film Corporation of India Limited. Accordingly, so far as oral evidence is concerned, we we left with the statement of P. W. 1 Dharamdeo only. The important question which now arises is whether there was any force in the con. tention put forward on behalf of the defendant that since he had added the words "M. D "after his signature while accepting the bundles, he could not be held to be personally liable. Undoubtedly, since the Negotiable Instruments Act was not in force in Marwar, reference to the various sections of this Statute would be futile. But on general principles it may be stated that Ordinarily when a person signs a negotiable instalment without showing on the face of it that he signs as an agent, he will be personally bound. It is well established that it must be clear on the face of a negotiable instrument who has executed it and whose estate is liable on it. Accordingly, if it is not made clear on the face of the note that the parson signing it is binding not himself but someone else, he must himself take the consequences. In order to exclude personal liability, an agent should indicate on the instrument that he signs at an agent. Merely signing as an agent has been held to be insufficient to indicate that the person signs as an agent only. In other words, he must clearly indicate the name of the principal on the instrument itself and state that he is doing it for or on behalf of such principal as agent and not in his personal capacity. An undisclosed principal is unknown in the case of negotiable instrument. Accordingly, it has been held that where a person after signing his name adds Managing Director or Managing Agent, it is not sufficient to indicate that he is making the Company liable and thereby excluding his personal liability. In Jhandumal v. Official Liquidators, Dehra Dun Mussoorie Electric Tramway Co., 52 ALL. 883 : (A. I. R. (17) 1930 ALL 778), a promissory note was signed by T. B. Gilani, Managing Agent, Dehra Dun Mussoorie Electric Tramway Company but it was held that it was not binding on the Company as the name of the maker of the promissory note was Gilani and not that of the Company and the words appended after his name were a mere description of Gilani. Similarly, in Sree Lal Mangtulal v. Lister Antiseptic Dressing Go., 52 Cal. 802 : (A. I. R. (12) 1925 Cal. 1062), a hundi was drawn in favour of the firm Mitra and Sons and was endorsed twice by them, "Mitra and Sons" and again "Mitra and Sons" Managing agents, Lister Antiseptics and Dressing Company Limited. It was held that the words "Managing Agents, Lister Antiseptics and Dressing Company Limited" were merely descriptive of Mitra and sons and did not bind the Company. In Sitaram Krishna v. Chimandas Fatehchand, 52 Bom. 640 : (A. I. R. (15) 1928 Bom. 516), the Managing Proprietor of a firm signed the hundi as "G. V. Athale, Managing Proprietor, Gangadhar and B. Friends, Sandhurst Road, Bombay." It was held that the firm Gangadhar and B. Friends was not liable but Athale was personally liable as the words following his name were mere description and did not show that he had signed as agent merely. In the case before us, the defendant has accepted the hundies, indeed mentioning after his signature that he was doing so as Managing Director, but he has not added afterwards that he was accepting them on behalf of the firm in his capacity as an agent of that firm. In fact, while accepting the hundies, the principal for whom he was acting was not disclosed and it is well established that in an action on a bill of exchange, it is not open by way of a defence to show that the signatory was in reality acting for an undisclosed principal. It might well be urged in this case that the principal for whom the agent was acting was already well-known and could be no other than the Film Corporation of India Limited bat this fact must actually appear after the acceptance so that no doubt whatsoever may be left of the fact that the acceptance had been made by the person making it, not in his personal capacity but as an agent for the principal expressly mentioned. In view of the above, there is no escape from the conclusion that the defendant had undertaken a personal liability for the payment of the amount due under the handles.

    5. The next question that has been agitated on behalf of the appellant relates to interest. IS- is common ground, since it is conceded by the learned counsel for the respondents, that inasmuch as Negotiable Instruments Act was not in force in Marwar on the date the suit was instituted and the hundies themselves are silent as to the rate of interest chargeable on the amount advanced, the plaintiffs could not claim any interest up to the date of the suit. The learned counsel for the appellant further urges that the learned District Judge also erred in awarding interest pendente lite and future interest at 6% per annum till repayment and has based his argument on the ground that the discretion should not be exercised in favour of a person who has not chosen to specifically charge interest in the instruments themselves. It must be remembered that these hundies were executed in Calcutta where the Negotiable Instruments Act is in force and accordingly, the parties were fully aware that even if they did not specify the rate of interest in the instruments themselves interest would be awarded to them according to the provisions of Section 80 of the Act. In the circumstances, the contention put forward by the learned counsel for the appellant for not awarding interest pendente lite and future interest has no force. The amount was advanced sometime in 1941 and nothing whatsoever has been paid till now and on the top of it, when a suit for the recovery of this amount was actually instituted sometime in 1944, it was resisted by the defendant on a ground which has turned out to be altogether frivolous. He has succeeded in keeping this litigation going for about six years. Accordingly, it seems to be a fit case in which the Court would be fully justified, in exercising its discretion in favour of awarding interest both during the pendency of the suit and till the amount is paid. In our opinion, this discretion has been properly exercised by the learned District Judge.

    6. The result is that this appeal partially succeeds and is accepted as such and the decree passed by the learned District Judge is hereby modified by reducing the decretal amount to Rs. 4900 with costs on this amount and interest pendente like and future interest at 6% per annum till realization. Since the appellant has succeeded to the extent of Rs. 900, he will get his costs from the respondents on this amount in this Court while the respondents who have already been awarded costs on Rs. 4900 in the Court below will get their costs on this amount in this Court as well.

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    Madangopal v. Narsinghdas & Sons
    (Aug 2, 1950)