The necessity of notice of dishonour in a money suit based on the original consideration and the liability of an endorser under the Negotiable Instruments Act, 1881.

1. In this appeal by the defendant from a decree obtained against him by the plaintiff bank, the State Bank of Travancore, in a suit for money, on the basis of an overdraft agreement the appellant had entered into with the predecessor-in-interest of the plaintiff bank, a very important question of law has been raised. This question of law, as is often the ;case, depends on questions of fact and regarding these questions of fact there is no specific pleading and the evidence is unsatisfactory. But we have to decide the question particularly in view of the direction in the order of remand passed by this Court in A. S. No, 164 of 1964.

2. The question of law is whether the want of a notice of dishonour to an endorser would exonerate him from liability not only on an action on the negotiable instrument, but even on an action on the original consideration. This question must necessarily depend on the further factual questions as to whether a notice of dishonour was in fact given and if such a notice bad not been given, circumstances existed which excused the issue of such a notice.

3. The pleadings are cursory in this regard. The defendant contended himself by stating in Para.5 of the written statement that he had paid several amounts to the bank, and bad endorsed a cheque drawn in his favour, for Rs. 8500/- to the bank and that deducting all the amounts paid, as well as the amount of the cheque referred to, be owed the plaintiff bank, as on 14 7 58, only Rs. 887.50. The reply to this is contained in Para.4 of the replication. Therein it was asserted by the plaintiff that the statements in Para.5 were totally incorrect. "The payment as contended by him is denied. A certified copy of the account is produced along with the Plaint."

4. In this unsatisfactory state of pleadings in regard to a technical contention that materialised later the parties proceeded to lead evidence and the plaintiff's evidence was confined to the examination of an accountant of the plaintiff bank. The dealings that the appellant bad were with the Kottayam Bank, The cheque in question was admittedly endorsed by the appellant is favour of the Kottayam Bank and handed over to that bank. The Kottayam Bank was amalgamated with the Kottayam Oriental Bank Ltd. which was later amalgamated with the plaintiff bank and there is no dispute that the plaintiff bank stood in the shoes of the Kottayam Bank. The cheque had been drawn by one Narayanaswamy in favour of the appellant on the Coimbatore branch of the then Travancore Forward Bank Ltd. On receipt of the cheque, the Kottayam Bank sent it for collection to the Central Bank, Coimbatore which bank sent it to the payee bank, and it appears payment was refused for lack of funds, on the 24th December, 1952. There is no evidence in the case when this information was conveyed to the Central Bank or by the Central Bank to the Kottayam Bank. Ext. P2 accounts kept by the Kottayam Bank in the name of the appellant showed that a credit entry had been made in favour of the appellant on the 24th December, 1952 to cover the amount of the cheque. This entry, it is seen from the same accounts, Ext. P2, was reversed on the 3rd January, 1953. The appellant in his evidence stated that no notice of dishonour had been issued to him. He proceeded to state that no statement of account was ever sent to him from the bank and his signature obtained after the 3rd January, 1953. Regarding the assertion by the appellant in his chief-examination as dw.1 that no notice of dishonour was issued to him, there is at the end of his cross-examination a question which is in these terms:

5. This was denied by the defendant by stating . Apart from this, there was no other cross-examination on the assertions of the appellant that he was not aware, at any material time, of the cheque having been dishonoured and of a debit having been made in his account by reversing the credit entry made on 24-12-52-The trial court accepted the contention of the appell