1. On 18th November 1935 Punamchand Bhikamchand of Nagpur who is the owner of the firm Bhikam chand Premchand, which figures here as defendant 7, drew two hundis each for Rs. 1000 at Nagpur on the firm of one Jivraj Agarchand of Bombay in favour of Page: 263defendant 1 Dalsukh Nathmal of Nagpur. Defendant 1 Dalsukh negotiated these hundis in favour of defendant 2 Prabhoodal who resides at Raipur and he in his turn negotiated them in favour of defendant 3 Rhundelal also of Raipur. Khundelal then negotiated them in favour of defendant 4, Kastoorehand, a pleader practising at Nagpur. Kastoorehand negotiated them in favour of defendant 5 Chootanlal of Bazargaon, who in his turn negotiated them to Kastoorehand Sunderlal, defendant 6, and he has negotiated them back to defendant 5 Chootanlal who in his turn negotiated them to the plaintiff who resides at Raipur. These hundis were dishonoured and the drawee refused to accept them. Therefore the plaintiff served notices on each of the prior indorsers on 24th February 1936. They not having paid, the plaintiff instituted the present suit at Raipur on the ground that two of the defendants, viz. defendants 2 and 3, live at Raipur. An objection was taken to the venue of the suit but the lower Court held that it had jurisdiction because in its opinion a part of the cause of action arose at Raipur.
2. This raises an interesting point about the place of payment, but before I deal with that, I will dispose of another question. Under Section 20(b) of the CPC where there are a number of defendants the suit may be instituted at the place where any one of them resides or carries on business for gain provided the leave of the Court is obtained.
3. Of course such leave cannot be given arbitrarily and even when the defendants who reside outside jurisdiction do not appear the Court is bound to consider their position before granting leave. This obligation is in no way lessened when they do appear and object and especially when, as here, the objecting defendant seems to be the real person against whom the plaintiff wants to proceed. The other defendants. I am told, have all admitted his claim so it is clear from the attitude of the plaintiff that the person against whom he really wants a decree is the only defendant who is contesting his claim. The plaintiff did not ask for the necessary leave and even when the contesting defendant, who is the applicant here, expressly raised the point in his written statement the plaintiff did not avail himself of the opportunity thus afforded him to ask for leave to amend his plaint so as to disclose a good cause of action against all the defendants, or otherwise to ask for the requisite leave. In these circumstances he cannot rely upon S. 20(b).
4. Therefore what we have to see is whether any part of the cause of action as against the applicant arose at Raipur. The applicant is the payee in both the hundis and the plaintiff is a subsequent holder. Of course no liability attaches to the applicant in his capacity as payee; he comes in because he indorsed the hundis to another holder. In that capacity he has a double liability. Under Section 37 of the Negotiable Instruments Act he is liable to the plaintiff as a surety for the drawer and under S. 38 he is also liable as a principal debtor. In his capacity as a surety he undertook the same liability as his principal who in this case is the drawer. It is necessary therefore to see what the liability of the drawer is. The hundis were drawn at Nagpur on behalf of defendant 7 on a Bombay firm. They are payable at sight and no place either of presentment or payment is specified in them. The drawer therefore undertook that the hundis would be accepted by the drawee within a reasonable time within business hours and on a business day (S. 61); provided they were presented at the place of business or the usual residence of the drawee (S. 71). Of course the drawer is not a surety for acceptance because the drawee does not become liable until he accepts. Therefore unless and until he does that there is no debt for which he can be held responsible. It follows that there is no principal for whom the drawer can stand surety. Therefore when there is no acceptance, the liability of the drawer is as principal debtor under an implied contract of indemnity (Section 124 of the Contract Act). His undertaking is conditional only and his liability does not arise unless the instrument is dishonoured either by non-acceptance or by non-payment: see Section 30 of the Negotiable Instruments Act, and 19 Cal 146 (1892) 19 Cal 146 at p. 158.
5. In addition to this the drawer also undertakes that the drawee will pay at maturity provided the instrument is properly presented for payment. Here also the drawer's position as surety cannot arise unless there has been acceptance. In the present case there has been no acceptance therefore the drawer is not liable as surety and so no question about any cause of action under that head arises. Under S. 38 Page: 264the drawer is also liable as principal debtor to each subsequent party provided “due notice of dishonour has been given to or received by the drawer as hereinafter provided” (S. 30). These provisions are to be found in Ss. 93, 94 and 98. The only point of importance so far as the present case is concerned, where the exceptions mentioned in S. 98 have not been pleaded, is that the notice must be given “at the place of business or (in case such party has no place of business) at the residence of the party for whom it is intended” (S. 94). It is only then that the liability of the drawer arises. Up to this point then there is no difficulty. The hundis were drawn at Nagpur, that is to say the contract as between the drawer and the payee was made at Nagpur. Notice of dishonour had also to be given at Nagpur where the drawer has his place of business and also his residence. These facts constitute two of the ingredients in the cause of action against the drawer as principal debtor and so against the applicant in his capacity as surety for the drawer. Neither arose at Raipur. The only other ingredient under this head is the place of payment.
6. Under S. 78 payment has to be made to the holder, but, on the other hand, under S. 81 the person liable has to be “called upon by the holder to pay.” He is also entitled to have the instrument shown to him before he need pay (unless it has been lost) and upon payment to have it delivered to him, or in the case of loss, to be indemnified. Therefore it is clear that the ordinary rule under which the debtor must seek his creditor does not apply in the case of a negotiable instrument. Expressing it as a, formula the drawer here contracted with the payee as follows: “If the drawee does not accept and pay in due course at Bombay, I will compensate you at Nagpur where I carry on business and reside, upon your calling upon me to do so and upon your delivering up the instrument when I pay, provided the requisite proceedings on dishonour are duly taken.”
7. It is to be observed that S. 30 uses the word ‘compensate.’ The drawer does not Undertake to fulfil the original contract but to compensate the holder for its breach and S. 81 indicates that this compensation is payable at the place of business or residence of the drawer. It follows that the applicant's liability as surety for the drawer is the same and so also is that of every subsequent party in his capacity as surety. There is one more ingredient which has to be considered in connexion with the applicant's liability as surety for the drawer when he is sued alone, namely the place where the contract of suretyship was made. In the present case, that was-at Nagpur where the applicant's endorsement was signed. The applicant is also liable as principal debtor under S. 38 in his capacity as an indorser. By indorseing the hundis he engaged that on due-presentment the instrument would be accepted and paid according to its tenor and that if it was dishonoured he would compensate the holder or any subsequent indorser who was compelled to pay it provided the requisite proceedings on dishonour were duly taken. The ingredients here are much the same as before. The place where this contract was made was Nagpur, which was the place of indorsement. Notice of dishonour had to be given as before, this time under S. 35 and this again would be at Nagpur. The place of payment would also in this case be at Nagpur where the applicant has his place of business and residence.
8. It will be seen then that when there are several parties to a negotiable instrument the instrument does not constitute one contract but a series of contracts which are gathered round the principal contract also that a party to the instrument may be liable in different capacities; that is to say that the instrument may give rise to a number of different causes of action and also that there may be several distinct causes of action against any one party to it. Now under O. 2, R. 3 of the CPC, a plaintiff may unite several causes of action against the same defendant or the same defendants-jointly, but he cannot join in the same: suit different causes of action against different defendants when they are not jointly liable on them. The only cause of action in which all the defendants in this case are jointly liable is the cause of action on the principal contract, that is to say the contract in which the drawer is liable as the principal debtor. The rest are all liable as sureties and their liability being co-extensive with that of the principal, debtor the cause of action against them when sued along with the principal debtor: is the cause of action against the principal and no other. That is the only cause of action on which they are all jointly liable and therefore the only cause of action upon which they can all be proceeded Page: 265against is one suit. This rule was applied to negotiable instruments in 57 PR 1900. (1900) 57 PR 1900 (FB) I respectfully agree. As I have shown above the cause of action on the principal contract under which the drawer is liable as principal debtor arose exclusively at Nagpur and no part of it arose at Raipur. Therefore the lower Court had no jurisdiction to try this suit. The application for revision is allowed. The order of the lower Court is set aside and the plaint will now be returned by the lower Court for presentation to the proper Court. Costs here to be paid by the non-applicant.
D.S/R.K
9. Application allowed.