Sattamuthu Chettiar vs Abdul Kareem Maracayar

Pandalai, J.—The petitioner is the plaintiff. His suit was brought on a promissory note executed by defendant 1 in favour of the father of the

plaintiff and defendants 2 to 4 and endorsed by the father to the plaintiff as one of the family assets allotted to the plaintiff on the latter''s releasing

his rights in the family properties. The only point now arising for consideration is whether the lower Court was right in dismissing the suit as against

defendants 2 to 4, or whether it should have given a decree against them also on the ground alleged by the plaintiff that the father having indorsed

the note to the plaintiff and the maker having defaulted payment, the father was himself personally responsible as the indorser and defendants 2 to 4

are liable as his legal representatives to the extent of his assets in their hands. The ground on which, while giving a decree against the maker of the

note, defendant 1, the learned Judge in the Court below refused to give a decree against the assets of the father in the hands of defendants 2 to 4 is

that the note was endorsed to the plaintiff as part of a partition, and it is to be presumed that the learned Judge thought that in those circumstances

the personal liability of the indorser was negatived by the nature of the transaction.

In this Court the petitioner''s learned advocate has urged first, that u/s 35, Negotiable Instruments Act, the only way in which the father could

have excluded personal liability as indorser of the note was by expressly endorsing it ""without recourse"" and that not having been done, it is not

open to the Court to infer any other ground of exemption from liability. It was also urged that there was nothing in the nature of the transaction that

the endorsement was part of a family partition wherefrom it may be inferred that the indorser intended to exclude personal liability.

On the first question the words of Section 35, Negotiable Instruments Act, are clear enough. It says that

in the absence of a contract to the contrary, whoever indorsees and delivers a negotiable instrument before maturity, without in such indorsement

expressly excluding or making conditional his own liability, is bound thereby to every subsequent holder in case of dishonour by the drawee,

acceptor or maker to compensate such holder for any loss or damage by such dishonour, etc.

The words make it clear that the rule whereby the indorser of a negotiable instrument who indorsees without restricting his liability in the

endorsement by express words makes himself liable to the indorsee as surety for the amount of the instrument in case of dishonour is subject to

there having been no contract to the contrary, i.e., that although the indorsement is ex facie unrestricted, the indorser as between himself and the

indorsee, by agreement either express or to be inferred from the nature of the transaction, excluded personal liability to the latter. No Indian

authority was cited on this point; but English authorities are ample. In Denton v. Peters (1871) 5 QB 475, a partner indorsed to his co-partner a

bill accepted by a person who was indebted to them for goods sold, On the debtor defaulting payment the indorsee brought a suit against the

indorser and pleaded that the indorsement being on its face absolute and unrestricted he was entitled to a decree. But when it appeared that the

parties had been partners and the indorsement was made to enable the plaintiff to collect the money from the debtor for their joint benefit, the

Court held that the form of the indorsement notwithstanding, the defendant was not liable to the plaintiffs That decision was in 1870 before the Bills

of Exchange Act. In Macdonald v. Whitefield (1884) 8 AC 733, a case from Canada where the law on this point is the same as that of England,

the directors of a company in order to make themselves personally liable to a bank from which the company was borrowing money made

successive indorsements of the bill on which the money was borrowed. And the indorsements by one director to another and by him to a third and

by him to a fourth and so on were on their face unconditional and unrestricted. But it was proved that the purpose of the indorsements and the

arrangement in pursuance of which they were made was not that they might stand surety to each other but that they might all as between

themselves and the bank be surety for the debt advanced to the company. On those facts it was held that far from the indorser being liable for the

whole amount to his indorsee and that indorsee in his turn as indorser to his indorsee and so on, they were all liable equally to contribute to the

debt if one of them had paid it. Lord Watson stated:

It is a well-established rule of law that the whole facts and circumstances attendant upon the making, issue and transference of a bill or note may be

legitimately referred to for the purpose of ascertaining the true relation to each other of the parties who put their signatures upon it either as makers

or as indorsers, and that reasonable inferences derived from the facts and circumstances, are admitted to the effect of qualifying, altering or even

inverting the relative liabilities which the law-merchant would otherwise assign to them.

This decision was in 1883 soon after the English Bills of Exchange Act. Nothing has been cited to show that these decisions which are of the

highest authority are not good law according to Section 35, Negotiable Instruments Act. It follows that the lower Court was right in looking at the

nature of the transaction to ascertain whether there was in fact any undertaking by the father of the plaintiff to stand guarantee for the payment of

the note indorsed to the plaintiff.

It appears to me that the only answer possible upon the facts which are admitted is in the negative. The family was a trading family, the plaintiff

was a son by the first wife of the father; and defendants 2 to 4, who are minors, are the children of the second wife. It was found necessary to

effect a partition and the plaintiff was given a share. Thereupon he withdrew from the family by Ex. 1 which recites quite explicitly that he had no

longer any rights in the family properties and took for his share the assets therein stated altogether amounting to Rs. 35,500. One of these assets

was the suit note for Rs. 550 executed by a stranger, defendant 1, to the head of the family, the father. Besides this, there were four other notes,

which were similarly indorsed, of the total value of Rs. 5,000, and the rest of the amount was made up of Rs. 18,950 paid in cash, Rs. 5000 by

credit opened in the plaintiff''s name in the firm at Negapatam and Rs. 11,000 secured by a promissory note given by the father. Having regard to

the nature of this transaction it is impossible to understand how the father, who was handing over family assets, should have made himself

personally liable-and he could only do so out of his own share of the family property-to the plaintiff in case any of the outstandings were not duly

paid. Where at a partition family properties are divided and the parties, being majors and able to look after themselves accept the properties

allotted for their share of the assets, it is too much to say that there is as between them a covenant for title or a guarantee of payment by strangers

to the family. In my opinion the learned Judge drew the correct inference from the facts that there was no such undertaking between the plaintiff''s

father and himself.

It was urged that this question was res judicata by a decision given in respect of another promissory note on which the plaintiff succeeded in

getting a decree against defendants 2 to 4. If the plaintiff was fortunate enough to get such a decree, I cannot deprive him of it, but certainly it is not

res judicata in this case. The civil revision petition must be dismissed with costs.