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Rajasthan High Court
Bhandari, J.
Hiralal - Appellant
Versus
Ratanlal - Respondents
S.B. Civil Regular Second Appeal No. 748 of 1960
Decided On : May 13, 1966
The suit is for the recovery of Rs. 6,215/- and is based on a cheque executed by J. directing the Bank of Jaipur Ltd. to pay Rs. 6,000/- to the plaintiff out of the joint account of Defendants Nos. 1 and 5.
The case of the plaintiff is that Defendants Nos. 1 and 2 carried on business under the name and style of the Motor Exchange Company, Jodhpur of which H. Defendant No. 3 was the sub-partner of R. The plaintiff had dealings with H. who had from time to time borrowed Rs. 8,000/- for purchasing a . house. H. when pressed by the plaintiff to pay the said amount represented that he had invested the aforesaid amount in the aforesaid Firm and on 28/12/1947, he executed a ruqqa in favour of the plaintiff for Rs. 8,000/-. When the plaintiff demanded this amount he took a false stand that out of this amount, Rs. 2000/- had been paid to the plaintiff. Later on, Defendants Nos. 1 and 2 intervened and informed the plaintiff that H. defendant had suffered loss in the business and that the plaintiff should reduce his claim by Rs 2 000/- and also forbear to file the suit, and they would pay Rs. 6,000/- to the plaintiff. On this, the plaintiff relinquished Rs. 2,000/- and agreed to accept Rs. 6,000/-. In pursuance of the aforesaid agreement, J. Defendant No. 2 on 6/03/1949 handed over the cheque (Ex. p/1) for Rs. 6,000/-which the plaintiff accepted. The cheque was not honoured by the Jaipur Bank Ltd.
Held that forbearance may be inferred from the circumstances of case and forbearance even for a reasonable time was sufficient to be called a good consideration in law. In the circumstances of present case, it was at the instance of J and R that the plaintiff had forborne to sue the defendant or had at least forborne to sue defendant H till the date of honouring the cheque arrived. So far as J is concerned, the cheque being with consideration, he cannot be exonerated.
The important point for distinction bet ween sec. 22 of the Indian Partnership Act and sec 27 of the Negotiable Instruments Act is that under sec. 22 of the Indian Partnership Act, an act or instrument executed by a partner or other person on behalf of the firm if executed in any manner expressing or implying an intention to bind the firm will bind the firm but sec. 27 of the Negotiable Instruments Act lays down that the principal is bound when his duly authorised agent has acted in his name. Sec. 28 of the Negotiable Instruments Act warns 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, that he shall be liable personally on the instrument, except to those who induced him to sign upon the belief that the principal only would be held liable.
When a suit has been filed on the basis of a negotiable instrument, the rights and liabilities of the party are governed by the special provisions of the Negotiable Instruments Act and if any of the provisions of the Partnership Act or Contract Act are in conflict, the provisions contained in the Negotiable Instrument Act must prevail. What sec. 27 of that Act says is that if a duly authorised agent has acted in the name of the principal the principal is liable on the instrument, otherwise not. It is, therefore, essential that from the instrument, it must be plain that the agent was acting in the name of the principal. The name of the principal must be disclosed in a definite manner in the instrument and not in some manner. Mere reference to the joint account cannot be held sufficient to hold that on its face Ex. P/1 was made by Jeth Mal defendant on behalf of the firm. Extrinsic evidence may be considered only to interpret the contents of the instrument and not for any other purpose. (Paras 1, 15, 16, 21, 24, 25, 27, 28)
2. Ratanlal defendant No. 1 denied the allegation made in the plaint. He also pleaded that he had not signed the cheque and was not liable. Alternatively he pleaded that even if it; be held that he carried on business in partnership with Jethmal, he was not liable as Jethmal has acted beyond his authority.
3. Jethmal Defendant No. 2 admitted that he and Ratanlal Defendant No. 1 carried on the business of the Motor Exchange Company. He, however, denied the other allegations, except that he had signed the cheque(Ex. P/l). His case is that the plaintiff required money to be sent to his agent and he approached Ratanlal Defendant No. 1 to give him a post-dated cheque. He also promised that he would deposit within one month the amount of the cheque in the account of Defendant No. 1 Ratanlal. He, therefore, handed over the cheque(Ex. P/l) to be paid from the joint account of Defendants Nos. 1 and 2. The defendant also pleaded that the cheque was without consideration.
4. Himmat Ram Defendant No. 3 admitted that from time to time he had borrowed Rs, 8,000/- which, however, were not invested in the Motor Exchange Company. He denied that there was ever an agreement for giving up Rs. 2,000/-as alleged by the plaintiff and forbearing to sue him. He stated that Rs. 2,000/-had in fact been paid. Relating to the handing over of the cheque, he took the stand taken by Defendant No. 2. He also pleaded that as Defendants Nos. 1 & 2 had taken upon themselves the liability to pay the amount due against him, he stood discharged and the suit could not be filed against him. He however, also prayed for fixing up instalments in case a decree was passed against him.
5. The trial court decreed the suit for the recovery of Rs. 6,000/- against Ratanlal and Jethmal and dismissed the suit against Himmat Ram holding that Himmatram stood discharged as a result of what took place between the parties on 6th March 1949. It
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