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1937 Supreme(SC) 93
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD THANKERTON, SIR SHADI LAL, AND SIR GEORGE RANKIN.
BABU MANMOHAN DAS - Appellant
Versus
BALDEO NARAIN TANDON - Respondents
On appeal from the High Court at Allahabad.
Decided On : December 20, 1937.
Solicitors for the appellant: Nehra & Co.
Solicitors for the first respondent: Douglas Grant & Dold.
Article 58 of the Limitation Act applies only when the lender draws their own cheque. For loans made via endorsed third-party cheques, Article 57 applies, and the limitation period begins from the date the cheque is cashed.
Headnote:(A) Limitation Act, 1908 - Articles 57 and 58 - Recovery of money lent - Lender transferring an endorsed cheque received from a third party - Whether Article 58 applies - Article 58 applies only when the lender draws their own cheque and gives it to the borrower - It does not govern a suit where the lender transfers a cheque drawn by another person and endorsed in their favour - Such suits are governed by Article 57 - The period of limitation begins to run from the date the loan is made, which is the date the cheque is cashed and the money passes into the hands of the borrower.
(B) Partnership - Liability of a partner - A person who is a partner in a firm at the time a loan is contracted is liable for the debt, regardless of whether they later sever their connection with the firm.
Facts of the case:
The plaintiff advanced a loan to a firm by endorsing a cheque he had received from another firm in settlement of accounts. The cheque had been drawn by a third party. The cheque was cashed on August 30, 1923, and a suit for recovery of the loan was instituted on August 27, 1926. The appellant contended that the suit was barred by limitation and that he was not a partner in the firm at the time the loan was contracted.
Findings of Court:
The court found that the loan was evidenced by the account books of the firm and that the appellant was a partner at the time of the transaction, as supported by the firm's balance sheets. The suit was held to be within the limitation period.
Issues: Whether the recovery of a loan made via an endorsed third-party cheque is governed by Article 58 or Article 57 of the Limitation Act, and whether the appellant was a partner in the firm at the time the loan was contracted.
Ratio Decidendi: Article 58 of the Limitation Act is applicable only when the lender draws their own cheque. In cases where a lender transfers a cheque drawn by another and endorsed to them, Article 57 applies. The loan is deemed to be made on the date the cheque is cashed, as that is when the lender's money passes to the borrower.
Result: Appeal dismissed.
Legal Category Hierarchy
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civil law
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limitation
- limitation period
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partnership law
- partner liability
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negotiable instruments
- cheques
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limitation
Judgement
Appeal (No. 93 of 1934) from a decree of the High Court (November 22, 1932), which reversed a decree of the Subordinate Judge, at Allahabad (September 18, 1928).
The firm of Bond Bros., of which the respondent Tandon was a partner, received a cheque for Rs. 14,950, dated August 12, 1923, drawn on the Central Bank of India by the Indian National Congress in payment of work done for the Congress. In a settlement of accounts between the partners Bond Bros, endorsed the cheque to Tandon for moneys due to him. Tandon advanced Rs. 14,950 by the cheque to the United Provinces Aniline Dyes Company, a firm represented by the appellant, Das. The cheque was cashed by the Central Bank on August 30, 1923. Tandon instituted the present suit for the recovery of the loan on August 27, 1926.
Law. Rep. 65 Ind. App. 132 ( 1937- 1938) Babu Manmohan Das V. Baldeo Narain Tandon
253
The Subordinate Judge found there was a seal impressed on the face of the cheque bearing date August 20, 1923, which indicated encashment on that date, and that the suit was, therefore, barred by limitation under art.58 of the Limitation Act.
In the High Court the question of limitation was not argued, and the High Court did not deal with it. The only questions raised were whether the cheque belonged to Bond Bros, or was the property of the plaintiff, and whether Manmohan Das was a partner in Aniline Dyes Company. On these questions the High Court held that the cheque was the property of the plaintiff, and that Manmohan Das was a partner, and reversed the decision of the Subordinate Judge.
1937. July 15, 16. Dunne K.C. and Rashid for the appellant submitted that there was no evidence that the money was lent to the Aniline Dyes Company, and that the High Court was not justified in reversing the finding of the Subordinate Judge on that point. If there was a loan the suit is barred by limitation. The date of the loan would be the date of the payment of the cheque—namely, August 20, 1923. It was so found by the Subordinate Judge, and the onus is on the plaintiff to show that that finding is wrong. The only document antecedent to the bringing of the suit is the notice of October 31, 1924, given by Tandon to the Aniline Company.
Abdul Majid for the first respondent referred to the evidence and submitted there was a loan to the Aniline Dyes Company. The suit was not barred by limitation. The cheque was not cashed till August 30, 1923. The plaint was presented on August 27, 1926. That would be the date of the institution of the suit. Under art.58 of the Limitation Act, limitation runs from the date when the cheque is paid.
[Lord Thankerton. Does art.58 apply where the lender has not given his own cheque but has endorsed a cheque which he has received and given it?]
Abdul Majid. In Komal Prasad v. Savitri Bibi (( 1905) I. L. R. 28 A. 54) on a transfer of a hundi, art.58 was applied.
Chinna Durai followed. An endorsed cheque stands on the same footing as any other cheque under art.58.
The other respondents did not appear.
Dunne K.C. replied. Komal Prasad v. Savitri Bibi (( 1905) I. L. R. 28 A. 54.) was a case of a hundi, and the point was whether the date was the date of handing over of the hundi, and Garden v. Bruce (( 1868) L. R. 3 C. P. 300.) was applied. Handing over the lenders cheque would not be a loan till the cheque was cashed. It might not be cashed; but a negotiable instrument comes under art.57, and the time begins to run when the loan is made. Here what was handed over was a negotiable instrument. A cheque is negotiable when it is made so by endorsement.
1937. Dec. 20. The judgment of their Lordships was delivered by Sir Shadi Lal. This appeal arises out of a suit brought by the plaintiff, Baldeo Narain Tandon (hereinafter referred to as Tandon), against a firm called the United Provinces Aniline Dyes Company (described as "the firm" for convenience), for the recovery of Rs. 14,950, with interest. The High Court of Judicature at Allahabad, dissenting fro
