Expression "holder" defined.

This Second Appeal by the second defendant has to be allowed as the question raised by him is concluded by authority in his favour. That defendant executed a promissory note on 15th February, 1954, for a sum of Rs. 6,000 in favour of the first defendant. On 14th February, 1957, the plaintiff, who is the first respondent in this Court, sued for a declaration that she was the beneficial owner of the promissory note and for a decree for the amount covered by the promissory note against both the defendants. The suit was resisted by the second defendant on the ground that such a suit did not lie. The trial Court accepted that defence and dismissed the suit in so far as it related to the second defendant. The trial Court, however granted a declaration in favour of the plaintiff to the effect that she was the beneficial owner of the promissory note. On appeal by the plaintiff, the lower appellate Court reversed the decree of the trial Court and decreed the suit against the second defendant, affirmed the declaration granted against the first defendant, and dismissed the cross-objections filed by that defendant. The second defendant alone has come up to this Court in Second Appeal.

The point strenuously and forcibly argued by Mr. M. S. Venkatarama Ayya, is that the lower appellate Court entirely misconceived the true position of the law as to the maintainability of the suit in respect of the second defendant. He contends that the plaintiff could in no sense be described as a holder of the promissory note, and the suit, so far as his client was concerned, being wholly rested on the promissory note, she could not, in the absence of an endorsement or transfer of the promissory note in her favour maintain the suit against the second defendant and recover on the basis of the promissory note. I accept this contention. No stranger to a contract can sue upon it. That is a basic principle of law. This principle is applied to Negotiable Instruments Act, which is but a part of the law of contract. Apart from that section 8 of the Negotiable Instruments Act clearly defines a “holder” as a person entitled, be it noted, in his own name to the possession of the promissory note and to receive or recover the amount due thereon from the parties thereto. The rights of an endorsee to sue on the promissory note are rested on special statutory provisions. Though the plaintiff’s case was that she was the beneficial owner of the promissory note as the consideration therefor proceeded from her, inasmuch as she was not the holder of the promissory note, it would follow that she could not, on the basis of merely being the beneficial owner thereof, sue to recover the money due on the promissory note.

This point was decided by Venkatarama Reddiar v. Valli Akkal1 . Varadachariar, J., speaking for the Full Bench, while holding that the beneficial owner could not on the strength of that title, maintain a suit on a promissory note, observed further:

“It may be that even upon getting a declaration to this effect (that he is the beneficial owner), the beneficiary will not directly be able to sue upon the promissory note; but that does not mean that a declaration of this kind will be futile. Under other provisions of the Trusts Act, the beneficiary can sue for the execution of the trust by compelling the trustee to take the necessary steps and have a Receiver appointed in the course of such proceedings so that the Receiver may sue for the debt, or the beneficiary may also insist upon the trustee conveying the legal title to himself and after such transfer there will be no difficulty in his suing upon the promissory note in his own name.”

This decision is clear authority for the proposition that even after getting a declaration by the beneficial owner of his status as such he could not sue upon the note unless he got a transfer of it in his name in a suit to compel the promisees to effect a transfer or he filed a suit on the strength of the declaration to enforce t