A holder in due course is not protected under Section 58 of the Negotiable Instruments Act, 1881, if the promissory note is forged.

( 1 ) THIS is a defendants second appeal from a decree of the lower appellate court for recovery of rs. 9,520/- only, with costs from the appellant alone who was the third defendant in the suit. The decree under appeal further directs for the issue of a notice to the third defendant who is the appellant in this Court, to show cause why he should not be prosecuted for forgery which was, according to the lower appellate court, committed in the promissory note and receipt on which the suit was based. The lower appellate court dismissed the suit against defendants Nos. 1 and 2, who are defendant-respondents Nos. 2 and 3 in this Court and who are supposed to have executed the said promissory note and receipt. The trial court had found the promissory note and receipt to be genuine and had decreed the suit against defendants Nos. 1 and 2 (defendant-respondents Nos. 2 and 3 in this Court) for recovery of Rs. 9,520/- with costs and pendente lite and future interest at 3 per cent per annum on Rs. 7000/- but had not passed any decree against defendant No. 3. Defendants Nos. 1 and 2 were the appellants before the lower appellate court. The plaintiff has not appealed from the decree of the lower appellate court and is the first respondent to this, the third defendants appeal in this Court.

( 2 ) I shall now state the relevant facts. The plaintiff pleaded that on 1st Sept. 1963 defendants NOS. 1 and 2 borrowed the sum of Rs. 7000/- from defendant No. 3 and promised to pay it on demand with interest at 1 per cent per mensem, and, for the satisfaction of defendant No. 3, executed a promissory note and receipt for the said amount in his favour and delivered it to him, that on 5th April, 1966, defendant No. 3 transferred the promissory note to the plaintiff in good faith and for consideration; that the plaintiff was thus a holder in due course and entitled to sue on the promissory note for the recovery of the principal with interest from defendants Nos. 1 and 2; that defendants Nos. 1 and 2 did not pay the amount in spite of demands hence the suit. The amount of Rs. 9,520/- claimed by the plaintiff consisted of Rs. 7000/-on account of principal and Rs. 2,520/-on account of interest from 1st Sept. 1963 to 1st Sept. 1966 which was the date on which the suit was filed.

( 3 ) THE suit was contested by defendants Nos. 1 and 2 alone. Defendant No. 3 appeared as a witness for the plaintiff and proved the execution of the promissory note and receipt by defendants Nos. 1 and 2 and stated that he had sold the promissory note to the plaintiff for a cash consideration of Rs. 8000/-, the receipt of which he acknowledged. According to his statement, defendants Nos. 1 and 2 wanted to set up a tubewell and purchase bullocks and that was the purpose for which the loan was taken.

( 4 ) DEFENDANTS Nos. 1 and 2 denied the plaintiffs claim in its entirety and pleaded that neither any amount of loan was taken by them from the third defendant nor was any promissory note or receipt executed by them in his favour on 1st Sept. 1963: and that the promissory note and receipt were forged and fictitious. It was further pleaded that there was enmity and litigation between the plantiff and the first defendant for the last about 10 years; that defendant No. 3 was a close acquaintance of the plaintiff and he is also inimical towards defendant No. 1 and the plaintiff and the third defendant were since long threatening to harass and ruin the defendants and it appears that the plaintiff in league with the third defendant and in conspiracy with Shanker lal and others, forged the promissory note and receipt to harass and ruin the defendants. It was then said that the plaintiff was not a holder in due course of the promissory note and was not entitled to sue, and the case set up by him was wholly false.

( 5 ) THE following were the issues on which the parties went to trial:-

"1. Whether the defendants 1 and 2 executed the pronote and receipt in question in favour of d