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(Munaluri) Narayanamoorthi v. (Dwadasi) Vumamaheswaram
Factual and Procedural Background
This second appeal arises from a dispute concerning a promissory note dated 9th June 1920, executed by defendant 1 in favour of plaintiff 1 on behalf of a joint family. In a prior partition suit decree, the promissory note was allotted to the share of Balkrishnayya, although the note remained physically with plaintiff 1. Subsequently, on 14th September 1922, Balkrishnayya executed a release deed relinquishing his rights in the promissory note to both plaintiffs. Both plaintiffs filed suit to recover the full amount due on the note. The defendants pleaded discharge of the note to Balkrishnayya by partial cash payment and execution of another promissory note. The trial court accepted the defendants’ payment defence but held it was not binding on the plaintiffs. The lower appellate court agreed the payment took place but held the plaintiffs lacked title to sue as they were not holders in due course, and accordingly dismissed the suit. The plaintiffs then appealed to this court.
Legal Issues Presented
- Whether plaintiff 1, as the named payee on the promissory note and without endorsement, is entitled to sue the defendants.
- Whether plaintiffs, through the release deed from Balkrishnayya, are holders in due course entitled to sue on the promissory note.
- Whether plaintiffs can sue as assignees of a chose in action deriving rights from Balkrishnayya despite not being holders or holders in due course.
- Whether the discharge of the promissory note by partial payment and execution of a fresh note precludes plaintiffs’ claim.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| James R.R Skinner v. Nannihal Singh, A.I.R 1929 P.C 158 | Condemnation of assuming undisputed material facts or drawing inferences without evidence. | Used to reject a new case raised for the first time in second appeal without giving the opposing party an opportunity to meet it. |
| Subba Narayana Vathiyar v. Ramaswami Ayyar, [1907] 30 Mad. 88 | Only a named payee, endorsee, or bearer can sue on a negotiable instrument. | Held that plaintiff 2, not named on the note and not an endorsee, cannot sue as a holder. |
| Pattal Ambadi v. Krishna, [1888] 11 Mad. 290; Abhoy Chetti v. Ramachandra Rao, [1894] 17 Mad. 461; Arunaehala Reddi v. Reddy Subba, [1907] 17 M.L.J 393 | Early cases holding an assignee of a chose in action cannot sue on a promissory note. | Referenced as part of the difference of opinion regarding assignees' rights to sue. |
| K. M. U. R. Ulagappa Chetty v. Ramanathan Chetty, [1916] 3 M.L.W 171; Muhammad v. Ranga Rao, [1901] 24 Mad. 654; Muthar Sahib v. Kadir Sahib, [1905] 28 Mad. 544; Venkatadri v. Lakshminarasimha, [1910] 21 M.L.J 80; Kutaltngum Pillai v. Pakiyam Fernandez, [1910] 21 M.L.J 422 | Later cases holding that an assignee can sue subject to taking over the equities of the assignor. | Considered in the court's analysis of plaintiffs' rights as assignees. |
| Subramanian Chetty v. Alagappa Chetty, [1907] 30 Mad. 441; Sowcar Lodd Govindoss v. Munappa Naidu, [1908] 31 Mad. 534; Ramnathan Chetty v. Katha Velan, [1918] 41 Mad. 353 | Negotiable instruments may pass by operation of law without endorsement. | Referenced to explain that the plaintiffs' claim as assignees is possible in principle but not sufficient here. |
Court's Reasoning and Analysis
The court first rejected the plaintiffs’ new contention that plaintiff 1 alone, as the named payee on the promissory note, was entitled to sue, noting this was a new case not previously pleaded or argued and that the defendants had no opportunity to meet it. Citing the Privy Council in James R.R Skinner v. Nannihal Singh, the court emphasized the impropriety of raising new material facts or legal issues without evidence or prior notice.
The court then examined the joint rights of the plaintiffs deriving from the release deed executed by Balkrishnayya. It found that Balkrishnayya was not a holder in due course because the note was payable to plaintiff 1, was never endorsed to Balkrishnayya, and he never possessed the note. Consequently, the plaintiffs could not be holders in due course either. Plaintiff 2’s absence from the promissory note as payee or endorsee further disqualified him from suing as a holder.
The court acknowledged the legal principle that an assignee of a chose in action may sue on a negotiable instrument, but noted there is conflicting authority on this point. Regardless, even if plaintiffs could sue as assignees, they would only acquire the rights held by Balkrishnayya at the time, which did not include the right to recover on the note since it had been fully discharged by part payment and the execution of a fresh promissory note—a fact accepted by both lower courts and not seriously disputed on appeal.
The court observed that the original promissory note was "dead in law" and could not serve as a basis for recovery. It noted that relief would require either cancellation of the fresh note or its endorsement to the plaintiffs, but Balkrishnayya was not a party to the suit, precluding such remedies. The court also pointed out that this claim was not raised in the lower appellate court or in the grounds of appeal.
Accordingly, the court concluded the plaintiffs’ appeal must fail entirely.
Holding and Implications
The appeal is dismissed with costs.
The direct effect of this decision is that the plaintiffs are not entitled to recover on the promissory note either as holders or as assignees, given the discharge of the note and the absence of any valid endorsement or assignment conferring holder status. No new precedent is established, and the ruling affirms the lower courts’ findings regarding discharge and title to sue.
1. This second appeal is against the decision of the lower appellate Court in the matter of a promissory note claim. The promissory note dated 9th June 1920 was executed by defendant 1 in favour of plaintiff 1 on behalf of the joint family of which he was the manager. In a partition suit decree, this promissory note was allotted to the share of one Balkrishnayya although the promissory note appears to have remained with plaintiff 1. On 14th September 1922, Balkrishnayya executed a release deed relinquishing his rights in the suit note in favour of both the plaintiffs. Both the plaintiffs filed this suit to recover the full amount due upon the note. The defence pleaded was a discharge to Balakrishnayya partly by cash and partly by execution of another promissory note. The trial Court held that the payment pleaded by the defendants was true but that it was not binding on the plaintiffs. The lower appellate Court agreed in holding that the payment was true but held further that the plaintiffs had no title to sue, not being holders in due course. It therefore dismissed the suit and the plaintiffs appeal.
2. The first contention urged by them is that as the promissory note is in the name of plaintiff 1 and has not been endorsed by him to any one else, he is the holder and entitled to recover from the defendants. This to my mind is entirely a new case set up here for the first time. It may be a good case or a bad case, but the defendants have never been given an opportunity of meeting it.
3. It is argued that this is a pure question of law but clearly that is not so. I cannot speculate as to what would have been the defendants' defence if plaintiff 1 alone had sued upon the note. Attempts to raise in second appeal points which are not even in the pleadings and which the other side has never been called upon to meet are not to be lightly permitted in second appeal. The Privy Council has lately cendemned such a practice:
“It appears to their Lordships to be highly irregular for any Court either to assume without the admission of all parties that material facts are not in dispute or to proceed to draw inferences from those facts where no evidence of them has been placed before the Court.” James R.R Skinner v. Nannihal Singh . A.I.R 1929 P.C 158.
4. That this present contention is a new case is clear from a perusal of the pleadings and the judgment of the lower Courts. There is no hint in the plaint that plaintiff 1 has any cause of action apart from that of plaintiff 2. The manner in which the plaintiffs became “absolute hukdars” of the promissory note is stated in paragraph 6 to be the release deed. The only prayer in the plaint is to pay the suit amount to both the plaintiffs. There is no issue whatever on this present point and the frame of the only issue shows that it was never raised. The only issue is:
“whether the discharge set up by the defendants is true and binding on the plaintiffs.”
5. If there had been any case that plaintiff 1 alone was entitled to sue as holder the plea of discharge to some one else who never was holder was irrelevant and could not have arisen. A perusal of the judgments of both Courts shows also that the present contention was never raised there, and neither Court has given any finding which car remotely be related to; such a ???. I therefore refuse to allowed contention to be raised at this stage.
6. We are then concerned with the joint rights of both plaintiffs to sue ??? the footing of the release deed. Plaintiff 1's rights in this matter are ??? more than plaintiff 2's. So it will ??? convenient to ask what rights plaintiff 2 now has to sue upon the ??? note. His right is derivable anywhere, from the release deed which canveyed to him the right which Balakrishnayya had in the promissory note. What right had Balakrishnayya? The note was not endorsed to him, so that he is not a holder by endorsements. Is he otherwise a holder in due course? It must be held, that he clearly was not. A holder in due course must have come into possession of the note if payable to bearer or be an endorsee or payee if payable to the payee. Balakrishnayya never came into possession of the note and in any case the note is payable to plaintiff 1 and not to bearer, and the note was never endorsed to him. He cannot therefore be a holder in due course. That being so, he cannot make his assignees by a release deed, holders in due course. The lower appellate Court is therefore quite correct in deciding that the plaintiffs are not holders in due course.
7. Nor are they joint holders. Plaintiff 2's name does not appear upon the promissory note. No one can sue on a negotiable instrument as holder unless he is named therein as the payee or unless he becomes entitled to it as endorsee or bearer: see Subba Narayana Vathiyar…(Plaintiff) v. Ramaswami Ayyar…(Defendant) .* . [1907] 30 Mad. 88 which is a binding authority on me.
8. The only right that plaintiff 2 and therefore plaintiff 1 can have is any right which he may have acquired from Balakrishnayya by the assignment itself. That a party can acquire such rights in a negotiable instrument has been held by this Court in several reported cases, the ratio decidendi being that such an assignment is an assignment of a chose in auction. No doubt there has been some difference of opinion in this Court as to whether a suit lies on a promissory note by a party as an assignee of a chose in ???: early cases, Pattal Ambadi ??? v. Krishna . [1888] 11 Mad. 290. Abhoy Chetti v. Ramachandra Rao . [1894] 17 Mad. 461. Arunaehala Reddi v. Reddy Subba . [1907] 17 M.L.J 393., and K. M. U. R. Ulagappa Chetty v. Ramanathan Chetty . [1916] 3 M.L.W 171 saying that he cannot sue, later cases Muhammad ??? v. Ranga Rao . [1901] 24 Mad. 654., Muthar Sahib v. Kadir Sahib . [1905] 28 Mad. 544, and Venkatadri v. Lakshminarasimha . [1910] 21 M.L.J 80 and Kutaltngum Pillai v. Pakiyam Fernandez . [1910] 21 M.L.J 422 saying that he can sue, subject to the condition that he takes over the equities to which his assignor was subject. Subramanian Chetty v. Alagappa Chetty . [1907] 30 Mad. 441, Sowcar Lodd Govindoss v. Munappa Naidu . [1908] 31 Mad. 534 and Ramnathan Chetty v. Katha Velan . [1918] 41 Mad. 353, lay down that a negotiable instrument may pass by operation of law without endorsement. The plaintiffs ask me in consequence of this difference of opinion to refer the present appeal to a Full Bench, but clearly that is not necessary for a decision of this case since on neither view can the plaintiffs succeed in their claim. If they cannot sue on the assignment as assignees, they cannot sue at all, since they are not suing as holders, nor was their assignor, Balakrishnayya, from whom they derived their rights as holders. The plaintiffs therefore must sue as assignees of a chose in action or be non-suited and it is only if I follow the cases which rule that they can that the plaintiffs have any case.
9. Such an assignment only tranfers to the assignee such rights as the assignor had at the time and not the full rights of a holder or of a holder in due course. If the plaintiffs are to be given any relief as assignees of a chose in action, they can only take what Balakrishnnayya had to give, namely the right to recover the unpaid balance of the promissory note amount. But again the question arises if they can be given that relief in this suit, and I do not see how that can be done. Both the lower Courts have found on the facts that the suit promissory note has been fully discharged by part payment and by the execution of a fresh promissory note, and in the lower appellate Court the present appellants did not seriously dispute that. Therefore the promissory note on which they now take their stand has been discharged and is no longer in force. It is not a case where a mere part payment has been made and the balance is still owing on the note itself. It is a case where the note sued upon is dead in law and therefore cannot be a source of any legal rights. Any relief on the footing of the balance still due on the original note can only be granted either by having the fresh note in favour of Balakrishnayya cancelled or by having it endorsed to the plaintiffs. But Balakrishnayya is not a party to this suit, so that neither course is open to me here. I may observe also that this present claim was never raised before the lower appellate Court and has not been raised in the grounds of appeal here.
10. The appeal must therefore fail in toto and is dismissed with costs.
P.R.S/V.S
11. Appeal dismissed.
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