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Andhra Pradesh High Court
Judges : GOPALRAO EKBOLE
ACHANTA SUBBARAJU - Appellant
Versus
CH.SURYANARAYANA MURTY - Respondent
Decided On : 06-20-65
NEGOTIABLE INSTRUMENTS ACT, 1881 - ENDORSEMENT - VALIDITY - PARTNERSHIP FIRM - AUTHORITY OF PARTNER - TRANSFER OF ACTIONABLE CLAIM - STAMP DUTY - ADMISSIBILITY OF EVIDENCE.
Fact of the Case:
Plaintiff, styling himself as holder in due course, instituted suits on the foot of promissory notes against several defendants for recovery of the amount due on those promissory notes together with interest thereon. The written statement of all the defendants was that the endorsements made by one of the partners in favor of the other partner and the subsequent endorsements made by the other partner in favor of the plaintiff were not valid, that there was no dissolution of partnership, that the partnership firm was not entitled to the entire amount but only to a commission, and that therefore the other partner could not have transferred the promissory notes in favor of the plaintiff.
Finding of the Court:
The court held that the endorsements made by one partner in his own name could not be said to be valid endorsements under the Negotiable Instruments Act, 1881, as the partnership firm was a non-trading firm and the partner had no express authority to make or endorse the promissory notes. The court also held that the endorsements made by the other partner in his individual capacity were also invalid as he did not have the requisite authority to endorse the promissory notes as a managing partner. The court further held that the endorsements could not be given effect to as transfers of actionable claims as they did not bear the necessary stamps and were therefore inadmissible in evidence.
Issues: 1. Whether the endorsements made by one partner in his own name were valid endorsements under the Negotiable Instruments Act, 1881? 2. Whether the endorsements made by the other partner in his individual capacity were valid endorsements under the Negotiable Instruments Act, 1881? 3. Whether the endorsements could be given effect to as transfers of actionable claims?
Ratio Decidendi: 1. A partner of a non-trading firm cannot bind the firm by either executing a promissory note or endorsing the same unless he has express authority to make or endorse the promissory note. 2. An endorsement of a promissory note must strictly follow the description given in the instrument. A promissory note payable to a firm must be endorsed by the firm as such. 3. For the purpose of effecting a transfer of an actionable claim, it is necessary under Section 130 of the Transfer of Property Act to transfer the claim in writing. Such a writing requires necessary stamps.
Final Decision: The court dismissed the plaintiff's suits, holding that the endorsements made by both partners were invalid and that the plaintiff did not get any right to sue as there was no valid transfer of actionable claim in his favor.
( 1 ) THESE seventeen Revision Petitions arise out of common judgment given by the District Munsif, Razole on 30th January, 1962 whereby he dismissed seventeen suits filed by the plaintiff on the foot of promissory notes as holder in due course. The essential facts in order to appreciate the contentions raised before me may briefly be stated : sri Anantha Lakshmi Commercial Syndicate (hereinafter called the Svndicate) is a registered firm under the Indian Partnership Act. It was constituted solely for the purpose of running a chit fund business. There are two partners of the said firm one S. Trimurty and the other Bapanayya. It was alleged that on 8-11-58 the firm was dissolved. Bapanayya left the firm entrusting the whole business to S. Tnmurty. On that date, he endorsed the suit promissory notes in favour of S. Tnmurty. S. Trimurty thereafter endorsed all these promissory notes in favour of the plaintiff. The plaintiff therefore styling himself as holder in due course instituted the present suits on the foot of those promissory notes against several defendants for recovery of the amount due on those promissory notes together with interst thereon.
( 2 ) THE written statement of all the defendants was that the endorsements made by Bapanayya in favour of S. Tnmurty were not valid, that there was no dissolutron of partnership and the endorsements made by S. Trimurty in iavoi of the plaintitf were also not valid, that the plaintitf is the co-son in law of s. Trimurty, that the chit fund was abruptly stopped by the two partners and in collusion with each other the promissory notes were transferred ultimatelv to the plaintiff, that the partnership firm was not entitled to the entire amount but only to a commission and that therefore S. Trimurty could not have tram ferred the promissory notes in favour of the plaintiff.
( 3 ) ON these pleadings proper enquiry was made. The learned District Munsif dismissed all the suits holding that the endorsements made by Bapanyya in favour of S. Tnmurty were invalid. He also held that the endorsements made bv S Trimurty in favour of the plaintiff were invalid, He found that the firm was only entitled to a commission and the entire amount was meant to be distributed amongst the subscribers of the chit fund, It was also held that the dissoluton deed, Ex. A-19, was brought up into existence subsequently in order to suppert the endorsements made by Bapanayya on 8-11-1958. It is this view of the learned district Munsif that is now disputed before me in these Revision Petitions the first contention of the learned Counsel for the petitioner is that endosements made by Bapanyya ware valid under the NEGOTIABLE INSTRUMENTS ACT, 1881. Bapanayya was one of the partners and he could make an endorsement in favour of S. Trimurty. It was also contended that S. Trimurty in any casecould endorse and transfer the promissory notes as managing partner of the firm in favour oi the plaintiff even if it is held that the firm was not dissolved and that Ex. A-19 was a subsequently got-up document. Is was also argued that if the endorsements are not valid under the NEGOTIABLE INSTRUMENTS ACT, 1881, they can in any case be treated as transfers of actionable claims under Section 130 of the Transfer of property Act and the plaintiff would thus get the right to sue for the debt for which promissory notes were taken.
( 4 ) IN order to appreciate these contentions, it is necessary to refer to a few provisions of the NEGOTIABLE INSTRUMENTS ACT, 1881 iherainafter called Act ). It is not in dispute that the promissory note is a negotiable document within the meaning of Section 13 of the Act. Section 14 relates to negotiation. According to that Section, when a promissory note is transfened to any person so as to constitute that person the holder thereof, the instrument would be said to have been negotiated. Section 8 defines holder . According to that definition, the holder of a promissory note means any person
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