A holder of a negotiable instrument who has indorsed it to a third party can maintain a suit on the basis of it without its being re-indorsed to him if the bill was dishonoured and the holder pays back the amount to the indorsee.

( 1 ) THIS Appeal is by the defendants against the judgment of the Subordinate Judge, Secunderabad, decreeing the claim of the plaintiff to an extent of Rs. 6,750- (I. C. ). The suit giving rise to this appeal was filed on some hundies executed by the defendants 3 to 5 who are carrying on business under the name and style of Bhagyanagar Cloth Stores and Damodar Cloth Stores, defendants 1 and 2, respectively. The defendants borrowed Rs. 4,800 on 13th March, 1947, on four hundies and another sum of Rs. 7,000 on five hundies in favour of plaintiff subsequently. All the hundies were payabl e three months after sight. Various sums aggregating to Rs. 5,800 were paid towards these hundies and the balance remained unpaid. The payee under the hundies endorsed them in favour of the State Bank of Hyderabad on receipt of the amount due on the hundies. When the bills were presented at maturity, they were dishonoured. When the plaintiff was informed of this he paid the amounts and the hundies were handed back to the plaintiff.

( 2 ) THE suit was resisted inter alia on the plea (which is the only relevant one for the present enquiry) that the plaintiff could not maintain a suit on the basis of the hundies as they were not endorsed back to him. The trial Court negatived the defence and decreed the suit. It allowed interest only at six per cent, per annum as per the concession made on behalf of plaintiff, though 12 per cent, per annum was claimed in the plaint.

( 3 ) IN this Appeal filed by the aggrieved defendants, the only point urged by mr. Rajarama Ayyar is that without a re-endorsement by the endorsee the plaintiff had no right to recover the amounts due on the bundles. The argument pressed upon us by the learned counsel is that as the property in the hundies had passed to the endorsee by virtue of the endorsement made by the plaintiff the only mode by which the plaintiff could acquire a right to any relief on the basis of the hundies was by these hundies being endorsed back to the original endorser. In support of this contention, some judgments of the Madras High Court are called in aid. In Chandu v. Ramunni, (1920)39 M. L. J. 273, an action was laid by a person claiming to be an alienee of a promissory note drawn in favour of alternative payees. The basis of the claim was an acknowledgment of payment of a sum of money signed by one of the alternative payees.

( 4 ) IT was held that the plaintiff was not entitled to sue for the reason that it was not a negotiable instrument since it was in favour of alternative payees and executed before the passing of the Act V of 1914 and also as there was no direction to pay the amount in the instrument to a specified person. The ruling of Justice Venkataramana rao in Govindan v. Narayanan, (1935) 70 M. L. J. 467, embodies the principle that to constitute an indorsement within the purview of section 16 of the Negotiable Instruments act there should be an indorsement to pay the amount due on the note to a named individual. The rule stated in Arunachala Reddy v. Subbareddy, (1907)17 M. L. J. 393, is to the same effect. A judgment rendered by one of us in Venkataswamy v. Hanura Moor, (1955) An. W. R. 9, was also called in aid.

( 5 ) WE do not think that the doctrine of these cases could govern the present one. In the last mentioned case what was decided was that an assignment of a promissory note could be made otherwise than by indorsement, the other methods being transfer as chose-in-action as contemplated under section 130 of the Transfer of Property act or by operation of law. The other cases cited relate only to the right of an assignee of promissory notes which did not contain the indorsement. The transactions involved in those cases could not be regarded as transfer of choses-in action for the reasons contained therein, nor was any right put forward by way of any devolution of interest, etc. These rulings deal with the effect of the absence of the operative words as indicated in se