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(R. R. Bhole J.)
BANDULAL RADHAKISAN (Defendant No. 1) -Applicant.
v.
HARIHAR RAMCHANDRA SANSTHAN, Akola and 3 others (Defendant No.2 and Plantiffs Nos. 2 to 4) -Opponents.
Advocates appeared
For applicant-G. M. Joshi
For opponent No. 1-K. H. Deshpande.
For opponent No. 2-M. W. Samudra.
Opponent No.3 and 4 were not represented.
A trustee who executes a promissory note without excluding his personal liability is personally liable on the note.
Headnote:
NEGOTIABLE INSTRUMENTS ACT, 1881 - SECTION 28 - PERSONAL LIABILITY OF TRUSTEE - PROMISSORY NOTE EXECUTED BY TRUSTEE - LIABILITY OF TRUSTEE.
Fact of the Case:
The plaintiff filed a suit on the basis of a promissory note executed by the defendant, who was the Vahiwatdar of a Sansthan. The defendant contested the suit, stating that he was not personally liable for the claim and that he had incurred the loan as a Vahiwatdar of the Sansthan and had utilized the money for the liabilities of the Sansthan. The trial court found that the loan was incurred for the necessity of the Sansthan but also found that the defendant was personally liable for the suit claim and decreed in favor of the plaintiff.
Finding of the Court:
The court held that the defendant was personally liable on the promissory note because he had not excluded his personal liability on the face of the note. The court relied on the principle that a promissory note is an unconditional undertaking to pay a sum of money and that when such a note is executed, it necessarily involves a promise to pay by or on behalf of a person who is binding himself by such promise. The court also held that the description of the defendant as "Vahiwatdar" in the promissory note was merely a descriptive or decorative word and did not exclude his personal liability.
Issues: Whether the defendant was personally liable on the promissory note.
Ratio Decidendi: The court held that the defendant was personally liable on the promissory note because he had not excluded his personal liability on the face of the note. The court relied on the principle that a promissory note is an unconditional undertaking to pay a sum of money and that when such a note is executed, it necessarily involves a promise to pay by or on behalf of a person who is binding himself by such promise. The court also held that the description of the defendant as "Vahiwatdar" in the promissory note was merely a descriptive or decorative word and did not exclude his personal liability.
Final Decision: The court dismissed the defendant's revision application and confirmed the decree of the trial court.
2. The learned advocate for the applicant contends here that the learned Small Causes Court Judge relied only on the rulings in P. Balavenkatarama Chettiar v. Maruthamuthu Chettiar1 as well as on the rulings in The Chikkottil Rama Variar v. Ananthanarayana Pattar2|, and decreed the claim of the plaintiff. According to him, this decree by the trial Court on the basis of these two Madras cases is erroneous. On the other hand, the learned advocates for the two opponents here contend that the principles laid down in those two Madras Cases are now settled and, therefore, the learned Small Causes Court Judge was right in following the principles laid down there. Let us see whether the contention of the learned advocate for the applicant is correct.
3. Mr. Justice Patanjali Sastri in P. Balavenkatarama Chettiar v. Maruthamuthu Chettiar (Supra), was considering section 28 of the Negotiable Instruments Act. He was considering the promissory notes executed by the trustees or managers of a temple who had borrowed money. It was contended before that Court that though section 28 of the Negotiable Instruments Act did not in terms cover promissory notes executed by trustees, the principle underlying the provision applied to such cases. Section 28 provides that an agent who signs his name to a promissory note, bill of exchange or cheque without indicating thereon that he signs as agent or that he does not intend thereby to incur personal responsibility, he is liable personally on the instrument, to those, who induced him to sign upon the plea that the principal only would be held liable. The learned Judge, in that case, has observed, while dealing with this contention, as follows:-
It is plain that section 28 deals only with the liability of agents executing promissory notes and does not in terms refer to trustees signing such instruments, but it is urged that the section is based upon a principle of wider application, namely, that a person can, by indicating on the instrument that he is signing only in a representative character, exclude his personal responsibility, and that if a trustee accordingly uses appropriate language in a promissory note to indicate that he is executing it only as trustee he will not be personally liable on the note. I find it difficult to accept this contention. It has to be remembered that a promissory note is an unconditional undertaking to pay a certain sum of money and when such an instrument is given it necessarily involves a promise to pay by or on behalf of some person who is capable of binding himself by such promise. When a duly authori6ed agent executes the note in the name of the principal, the principal is of course the person bound by the unconditional undertaking to pay and
