Promissory note executed if enforceable as a negotiable instrument.

The plaintiff appeals from the judgment and decree of the Additional City Civil Judge, Madras, in A.S. No. 29 of 1956 on his file. The learned Judge allowed the appeal preferred by the defendant from the judgment and decree of the Sixth Assistant Judge on the file of that Court in O.S. No. 1462 of 1953, and dismissed the plaintiff’s suit with costs.

There was a public limited company known as the Conjeevaram Funds, Limited. The company was conducting chits. The defendant was subscribing to a chit conducted by the company in the years I949-53. The chit commenced in April, 1949. The defendant subscribed to five tickets in that chit. The amount payable per ticket per month was Rs. 30. The duration of the chit was for forty months. The defendant paid the amount for the five tickets for five months. In September, 1949, he purchased the chit and had to pay Rs. 5,250 on account of the remaining 35 instalments of the chit. He had to pay Rs. 150 per instalment. The total sum payable by him was Rs. 5,250. For that sum of Rs. 5,250, he executed a promissory note, Exhibit A-1, in favour of the company.

The plaintiff was another subscriber in the same chit. He had subscribed to the chit fully and had not been paid the money due to him. On 13th October, 1952, he instituted an Original Petition on the file of this Court for having the company wound up. The petition was being adjourned from time to time for settlement. On nth March, 1953, the company endorsed in favour of the plaintiff the promissory note for Rs. 5,250 which the defendant had executed on 5th September, 1949. The plaintiff reported to this Court on 12th March, 1953, that his petition for having the company wound up was not pressed. The petition was dismissed on that date.

The plaintiff instituted the suit out of which the second appeal arises, for recovery of the sum due on the promissory note. After the execution of the promissory note, the defendant paid some instalments of the chit. The amount payable on the promissory note on the date of the endorsement, 11th March, 1953, was Rs. 2,395. The plaintiff prayed for recovery of that sum with interest from the date of the endorsement.

The learned Sixth Assistant Judge, City Civil Court, Madras, decreed the suit as prayed for. The decree was reversed in appeal by the learned Additional Judge, City Civil Court at Madras. The suit was dismissed.

The learned Additional Judge held that the plaintiff was not entitled to sue on the promissory note and recover any money. The learned Judge’s view was that the promissory note was executed as security for the payment of the money due on the future instalments of the chit and that the plaintiff, by obtaining the promissory note on endorsement, obtained nothing. The learned Additional Judge thought that, while the Fund might have been entitled to sue on the debt due on the chit and secured by the promissory note, the defendant could be sued by the plaintiff for the recovery of the money in the event only of his obtaining an assignment of the debt in addition to getting the promissory note endorsed. That is a view which is plainly wrong.

The defendant executed the promissory note for money payable to the chit fund. It is an error to call the promissory note, security. It is a grievous error to say that, being mere security, the promissory note could not be enforced at all. The liability to the Company to pay Rs. 5,250 in 35 instalments was converted into the promissory note which the company took from the defendant. Thereafter, there was no liability on the part of the defendant to the company other than the liability which could be enforced under the promissory note. There was no independent written agreement on the part of the defendant to pay any sum of money to the Company on account of the future instalments of the chit. There was, however, an oral agreement that the promissory note would be deemed to be discharged in the event of payment of Rs. 150 every month during the next 35 mon