Payment of a debt before a promissory note is completed is not a discharge of the debt under Section 78 of the Negotiable Instruments Act because there is no promissory note in existence at that time.

ORDER :- This revision arises out of a suit instituted by the petitioner, S.C. No. 2527 of 1950, on the file of the Small Cause Court, Madurai, for the recovery of a sum of Rs. 488-5-1 on foot of a promissory note dated 23-6-1949. The defendant admitted execution of the pronote and the receipt of consideration therefor, but contested the suit on the ground that there was no transaction between him and the plaintiff, that it was one Ismail, the brother of the plaintiff who had advanced the loan, that the promissory note was executed in his account book leaving the name of the payee blank, that it was delivered not to the plaintiff but to Ismail, that subsequently the amount due under the note was repaid to Ismail on 8-2-1950 and a receipt also taken, that the debt had thus become discharged, that owing to misunderstandings which had arisen subsequently, Ismail had in collusion with the plaintiff entered his name as payee in the instrument and that the plaintiff was not a holder in due course and was not entitled to recover under the promissory note. The Court below held on a consideration of the evidence that the facts were as stated by the defendant in the written statement, that, the plaintiff knew of the true nature of the instrument when it was executed on 23-6-1949 and that of its discharge on 8-2-1950 and that his name was entered as a result of collusion between him and his brother Ismail, only about a been prior to the institution of the suit which was on 1-11-1950. On these findings, the suit was dismissed and it is against that dismissal that this revision is preferred by the plaintiff.

2. Mr. K. Vaitheeswaran, the learned advocate for the petitioner, contends that the written statement does not disclose a defence, that it is not open to the defendant to plead that the real payee under the promissory note is not the plaintiff whose name appears on the face of to but Ismail and that the payment of the amount to Ismail cannot, under S. 78 of the Negotiable Instruments Act, operate to discharge him from his liability under the note.

In - Subbsnarayana Vathiar v. K. Ramaswami Iyer, 30 Mad 88 (FB) (A), it was held by a Full Bench of this court that it was not open to the maker of a promissory note to plead that the payee named in the instrument was a benamidar and that it had become discharged by payment to the real payee. The ground of this decision is that "holder" is defined in S. 8 of the Act as "any person entitled in his own name to the possession of the note and to receive or recover the amount due thereon from the parties thereto and that under S. 78 a payment in order to discharge the maker must be to the holder. The contention of the petitioner is that if on 23-6-1949 when Ismail advanced Rs. 420 to the defendant he had taken the promissory note in the name of the plaintiff, it would not have been open to the defendant to resist the suit on the ground that payment of the amount due under the note had peen made to Ismail that it should make no difference in the legal position that when Ismail took the note, the name of the payee had not been entered thereon, because S. 20 of the Negotiable Instruments Act conferred on him an authority to complete the instrument and that when in exercise of that authority he entered the name of the plaintiff the rights of the latter under the note would precisely be the same as if it had been entered at the time of its execution on 23-8-1949.

Reliance was placed on the decisions in - Cruchley v. Clarance, (1813) 105 ER 316 (B) and - Hriday Singh v. Kailash Singh, AIR 1940 Pat 377 (C). In - (1813) 105 ER 316 (B), the facts were that the defendant who was in Jamaica drew a bill on one Hendry, man of London leaving the name of the payee blank; that subsequently the bill was negotiated by one V. Ashon who endorsed it in blank to the plaintiff. The plaintiff thereupon entered his own name in the bill and sued on it. The suit was resisted on the ground that the plaintiff had no rig