Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
Acts
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
Acts
Smart Summary

Factual and Procedural Background

This appeal arises under clause 15 of the Letters Patent from a judgment by Mr. Justice Fletcher in a suit for recovery of money due on a promissory note. On 28th August 1912, the defendant firm executed a promissory note in favor of B.N Das & Co. for Rs. 2,500 with 12% interest per annum payable on demand. Around 10th January 1914, B.N Das & Co. endorsed the note in favor of the plaintiff Bank for valuable consideration. The Bank gave notice to the defendant firm, but no payment was made despite repeated demands. The Bank then instituted the suit on 27th August 1915. The defendant firm contended that the Bank was not a bona fide holder in due course and that the note had been discharged prior to endorsement. The trial court overruled these defenses and decreed the suit in favor of the Bank. The present appeal challenges that decree.

Legal Issues Presented

  1. Whether the plaintiff Bank was a bona fide holder in due course of the promissory note under the Negotiable Instruments Act.
  2. When the amount mentioned in the promissory note became payable—whether from the moment of execution or only upon demand.
  3. Whether the promissory note was discharged before endorsement to the Bank.

Arguments of the Parties

Appellant's Arguments

  • The promissory note became payable immediately upon execution, making the Bank not a holder in due course.
  • The Bank was not a bona fide holder for value as the note had been discharged before endorsement.
  • Relied on the decision in Brajendra Kishore Roy Chowdhury v. Hindustan Co-Operative Insurance Society, Ltd. to argue that the note was due and payable at once without demand.

Respondent's Arguments

  • The Bank was a holder in due course for value, having obtained the note before it became payable and without notice of any defect.
  • The note was not overdue at the time of endorsement as a reasonable time for presentation had not elapsed.
  • Distinguished the appellant’s cited precedent by clarifying the difference between limitation law and negotiability principles under the Negotiable Instruments Act.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Brajendra Kishore Roy Chowdhury v. Hindustan Co-Operative Insurance Society, Ltd. Rule that a note payable on demand is a present debt due at once without demand for limitation purposes. Distinguished on facts; the court held that limitation principles do not govern negotiability and holder in due course status under section 9 of the Negotiable Instruments Act.
Norton v. Ellam, Rowe v. Young, Maltby v. Murrels No demand necessary before action on a note payable on demand; payment obligation arises immediately. Used to illustrate limitation law principles which do not apply to holder in due course status.
Brooks v. Mitchell A promissory note payable on demand is a continuing security and not overdue simply because payment is not immediately demanded. Supported the view that the note was not overdue and remained negotiable at the time of endorsement.
Barough v. White A note made payable with interest implies it is intended to remain in negotiation for some time. Reinforced the understanding that the note was not overdue when transferred to the Bank.
Glasscock v. Balls Affirmed the principle that a note payable on demand is not rendered overdue without demand within a reasonable time. Adopted to confirm the Bank’s status as holder in due course.

Court's Reasoning and Analysis

The court examined the status of the plaintiff Bank as holder in due course under section 138(a) and section 9 of the Negotiable Instruments Act. It found undisputed evidence that B.N Das & Co. endorsed the note to the Bank for value while heavily indebted to the Bank, establishing the Bank's holder in due course status. The court rejected the appellant's contention that the note became payable immediately upon execution by distinguishing the cited limitation law cases. It emphasized that limitation principles concerning when a cause of action arises do not govern the negotiability or holder in due course status of a note under the Negotiable Instruments Act. The court relied on authoritative precedents which held that a promissory note payable on demand is a continuing security and is not overdue merely because payment has not been demanded within a certain time. The interest provision in the note further indicated an intention for it to remain negotiable for some time. Consequently, the note was not overdue at endorsement, and the Bank was a bona fide holder in due course. The trial court's decree was thus affirmed.

Holding and Implications

The appeal is dismissed with costs.

The court upheld the trial court’s decree in favor of the plaintiff Bank, confirming its status as a bona fide holder in due course of the promissory note. The decision clarifies that, for the purpose of negotiability and holder in due course status under the Negotiable Instruments Act, a promissory note payable on demand is not considered overdue merely because payment has not been demanded immediately. This ruling distinguishes negotiability principles from limitation law and affirms the protection of holders in due course who acquire negotiable instruments for value without notice of defects. No new precedent beyond the affirmance of these established principles was set by this decision.

    D.N Shaha & Co. v. The Bengal National Bank, Ltd.

    Mookerjee, J.:— This is an appeal under clause 15 of the Letters Patent from the judgment of Mr. Justice Fletcher in a suit for recovery of money due on a promissory note.

    On the 28th August, 1912, the defendant firm executed a promissory note in favour of B.N Das & Co. in the following terms:

    “On demand I promise to pay to B.N Das and Company or order the sum of Rs. 2,500 only, with interest thereon at the rate of 12 per cent, per annum till the date of realisation, for value received in cash.”

    On or about the 10th January, 1914, B.N Das & Co. for valuable consideration endorsed the promissory note in favour of the plaintiff Bank. Notice was duly given by the plaintiff Bank to the defendant firm, but as no payment was made in response to repeated demands, the Bank instituted this suit on the 27th August, 1915. The defendant firm urged that the Bank were not bonâ fide holders in due course and for value, and that the note had been discharged by the firm before the endorsement to the Bank. Mr. Justice Fletcher has overruled these contentions and has decreed the suit.

    The evidence leaves no room for doubt that, at the date of the endorsement, B.N Das & Co. were heavily indebted to the Bank and that the Bank were endorsees for value. This, indeed, would be the presumption under section 138, clause (a) of the Negotiable Instruments Act (1881). Section 9 shows that the Bank became holders in due course if they obtained the note before the amount became payable and without having sufficient cause to believe that any defect existed in the title of the person from whom they derived title. There can be no question, we think, that the Bank acted in good faith, and the controversy has centred round the question, when did the amount mentioned in the promissory note become payable? Mr. Avetoom has contended that the promissory note became payable from the moment of execution, and has relied upon the decision in Brajendra Kishore Roy Chowdhury v. Hindustan Co-Operative Insurance Society, Ld.* . In our opinion, that case is clearly distinguishable. There it was ruled that, for purposes of the law of limitation, a note payable on demand is a present debt and is due and payable at once without demand. As explained in Norton v. Ellam , Rowe v. Young , Maltby v. Murrels no demand is necessary before bringing an action upon a note payable on demand, because its payment is a duty which attaches the moment the loan is given and the note is made. To put the matter differently, the creditor cannot extend the period of limitation by omission to make a demand and time runs against him from the date of the note, on the principle that the cause of action arises instantly on the loan and the contract on the note is in a state of being broken perpetually. Clearly, these principles have no application to a case under section 9 of the Negotiable Instruments Act. The true rule applicable is that where a note payable on demand is negotiated, it is not deemed to be overdue, for the purpose of affecting the holder with defects of title, of which he had no notice, by reason that it appears that a reasonable time for presenting it for payment has elapsed since its issue. In Brooks v. Mitchell Baron Parke observed: “if a promissory note payable on demand is after a certain time to be treated as overdue, although payment has not been demanded, it is no longer a negotiable instrument. Bnt a promissory note payable on demand is intended to be a continuing security; it is quite unlike the case of a cheque which is intended to be presented speedily.” The Court accordingly overruled the contention based on the analogy of the rule applicable to the decision of the question of limitation. Similarly, in Barough v. White , Bayley, J. observed that the fact that the note was made payable with interest implied that it would be in negotiation for sometime. The same view was adopted by the Court of Appeal in Glasscock v. Balls . Consequently, this promissory note was not overdue when it was transferred to the Bank who became holders in due course. The suit has been rightly decreed by Mr. Justice Fletcher and the appeal must be dismissed with costs.

    Chaudhuri, J.:— I agree.

    N.G

    Attorney for the appellant: P.N Sen.

    Attorneys for the respondents: Dutt & Sen.

    Use AI to get other relevant cases.

    Comments

    D.N Shaha & Co. v. The Bengal National Bank, Ltd.
    (Mar 16, 1920)