Madras High Court
M/S. Sri Muruhavel Finance vs Muthusami on 9 September, 2021
A.S.Nos.824 and 825 of 2008
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 09.09.2021
CORAM
THE HONOURABLE Ms. JUSTICE P.T. ASHA
A.S.Nos.824 and 825 of 2008
A.S.No.824 of 2008:
M/s. Sri Muruhavel Finance,
A Registered Firm,
Rep. by its Partner K. Venkatesh
20, Thiruvenkatasamy Street,
Erode ...Plaintiff/ Appellant
Vs.
1.Muthusami
2.M/s Sri Laxmi Saraswathi Textiles rep. by its
Partner Murugesan
134/B, Salem Road,
T.Kailasampalayam,
Thiruchengode, Namakkal District.
1/30
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A.S.Nos.824 and 825 of 2008
3.M/s. Sivasakthi Textiles, rep. by its
Partner P.Natesan
134/B, Salem Road,
T.Kailasampalayam,
Thiruchengode, Namakkal District. ...
Defendants/Respondents
A.S.No.825 of 2008:
M/s. Sri Muruhavel Finance,
A Registered Firm,
Rep. by its Partner K. Venkatesh
20, Thiruvenkatasamy Street,
Erode ...Plaintiff/ Appellant
Vs.
1.M.Shanthi Proprietrix,
Gowri Sankar Textiles,
13/4B, Salem Road
T.Kailasampalayam, Tiruchengode
2.M/s Sri Lakshmi Saraswathi Textiles
Rep. by its Partner S.Murugesan
134/B, Salem Road,
T.Kailasampalayam,
Thiruchengode, Namakkal District. ... Defendants/Respondents
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A.S.Nos.824 and 825 of 2008
Prayer in A.S.No.824 of 2008: Appeal suit filed under Section 96 of
the Code of Civil Procedure against the Judgment and Decree in
O.S.No. 48 of 2007 on the file of the learned I Additional District
Judge, Erode dated 31.01.2008.
Prayer in A.S.No.825 of 2008: Appeal suit filed under Section 96 of
the Code of Civil Procedure against the Judgment and Decree in
O.S.No. 50 of 2007 on the file of the learned I Additional District
Judge, Erode dated 31.01.2008.
For Appellant : Mr.Vadivel Murugan
for Mr.R.G.Narendhiran
in both appeals
For Respondents : Mr.N.Manoharan
for R1 in both appeals
R2 -Not Ready in notice
in A.S.No.824 of 2008
R2 and R3 - Not Ready in
notice in A.S.No.824 of 2008
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A.S.Nos.824 and 825 of 2008
COMMON JUDGEMENT
A common Judgment is being pronounced in the above First
Appeal, since the facts in both the suits namely O.S. No.48 of 2007 and
O.S.No.50 of 2007 are identical, in so far as the plaintiff is concerned
and the cause of action for filing the suit. However, I shall be dealing
with the pleadings in both the suits separately. The parties are referred
to in the same rank as before the Trial Court.
Plaintiff's case in O.S.No.48 of 2007:
2. The plaintiff claims to be a registered firm doing finance
business at Erode. The firm is a registered firm. The first defendant
which was a proprietary concern doing business in Textiles under the
name and style of "Lakshmi Textiles" had issued cheques favouring the
2nd and 3rd defendants, which were also firms and close business
associates of the 1st defendant. The defendants 2 and 3 would discount
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A.S.Nos.824 and 825 of 2008
these cheques on commission payment with the plaintiff on the
assurance that the same would be honoured by the 1st defendant on
presentation.
3. The 1st defendant had issued the following cheques which were
discounted by the defendants 2 and 3 are detailed below:
M/s. Sri Lakshmi Saraswathi Textile (2nd Defendant):
S.No. Cheque Date of Drawn on Sent for Amount
No. cheque Collection
1. 133123 23-12-03 Andhra 19-05-04 1,60,000
Bank
2. 133124 26-12-03 Andhra 20-05-04 1,62,000
Bank
3. 133134 09-01-04 Andhra 20-05-04 1,50,000
Bank
4. 133135 22-01-04 Andhra 20-05-04 1,47,000
Bank
6,19,000
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A.S.Nos.824 and 825 of 2008
M/s. Sivasakthi Textiles (3rd defendant):
S.No. Cheque No. Date of cheque Drawn on Sent for Amount
Collection
5. 133120 04-02-03 Andhra Bank 22-01-04 1,60,000
6. 133121 10-12-03 Andhra Bank 22-01-04 1,58,000
3,18,000
When the cheques were presented by the plaintiff for collection, the
same was returned with the endorsement "exceeds arrangements". The
plaintiff therefore has instituted criminal proceedings under Section
138 of the Negotiable Instruments Act before the Judicial Magistrate
No. II, Erode, in C.C.No. 584 of 2004, in respect of one of the cheques,
namely cheque No. 133123 dated 23.12.2003.
4. The plaintiff therefore made demands for the payment on the
defendants, however there was no response from them. Thereafter, the
plaintiff had issued legal notices dated 04.06.2004 for each of the
cheques drawn in the name of the 2nd and 3rd defendants, respectively.
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The notices were served on the 1st defendant who, however did not
respond to the same either by sending a reply or by making the
payment. Therefore, the plaintiff is constrained to file the above suit.
Written Statement of the 1st Defendant in O.S.No.48 of 2007:
5. The 1st defendant had denied the allegation contained in the
Plaint. They had taken out a preliminary objection that the plaintiff is
not a registered firm and further that Mr. K. Venkatesan who has been
described as a partner representing the plaintiff firm was not a partner
of that firm. The defendant had denied the fact that he would discount
his own cheques with the 2nd and 3rd defendants. The 1st defendant also
contended that they had nothing to do with the defendants 2 and 3. It is
also the case of 1st defendant that there was no direct transaction
between the plaintiff and the 1st defendant and he would further
contend that the plaintiff had to prove the passing of consideration to
the defendants 2 and 3. In order to prove that the plaintiff had not
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A.S.Nos.824 and 825 of 2008
become a holder in due course, the defendant had also extracted the
contents of the complaint filed before the Judicial Magistrate No. II,
wherein the plaintiff was represented by one Mr. Anbalagan and the
said Anbalagan had stated that M/s.Lakshmi Saraswathi Textiles i.e.,
the 2nd defendant had not directly borrowed any money from the
plaintiff. They would submit that in the light of the above statement it
is crystal clear that the contention of the plaintiff that there was
discounting of Bills was totally false.
6. The defendant would further submit that the plaintiff has
introduced new cheques into the plaint which does not find mention in
Section 138 proceedings before the Judicial Magistrate. Further, the
suit is barred by time and there is no cause of action for filing the suit.
Plaintiff's case in O.S.No.50 of 2007:
7. The plaintiff had raised the very same contentions as in the suit
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A.S.Nos.824 and 825 of 2008
O.S.No.48 of 2007, except for the fact that in this suit the subject
matter were the following cheques:
S.No. Cheque Date of Drawn on Sent for Amount
No. cheque Collection
1. 0106572 26-11-03 Andhra 08-05-04 1,63,000
Bank
2. 0106574 16-12-03 Andhra 18-15-14 1,56,000
Bank
3. 0106575 19-12-03 Andhra 20-09-03 1,55,000
Bank
4,74,000
In all other respects the plaint was more or less identical to the plaint in
the suit O.S.No.48 of 2007.
Written Statement of the 1st defendant in O.S.No.50 of 2007:
8. The 1st defedant had taken identical defence in this suit as well.
9. The I Additional District Judge, Erode (Trial Court) before
whom the two suits were pending, on considering the pleadings in the
two suits had framed issues.
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A.S.Nos.824 and 825 of 2008
i. Issues framed in O.S.No. 48 of 2007:
1) Whether the plaintiff's firm is a registered one and
K.Venkatesh its partner?
2) Whether plaintiff is the holder in due course
of the suit cheques and entitled to collect the suit
amount on the cheques?
3) Whether proceedings before the Honourable
Judicial Magistrate No.II, Erode in C.C.No. 584 of
2004 have a bearing on the present suit?
4) Whether the plaintiff is maintaining true and
correct account in the normal course of business?
5) Whether the suit cheques are not truly drawn
but forged?
6) Whether the suit is barred by limitation?
7) To what relief is the plaintiff entitled to in the
suit?
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A.S.Nos.824 and 825 of 2008
ii. Issues framed in O.S.No. 50 of 2007:
1) Whether the plaintiff's firm is a registered
one and K.Venkatesh its partner?
2) Whether plaintiff is the holder in due course
of the suit cheques and entitled to collect the suit
amount on the cheques?
3) Whether proceedings before the Honourable
Judicial Magistrate No.II, Erode in C.C.No. 585 of
2004 have a bearing on the present suit?
4) Whether the plaintiff is maintaining true and
correct account in the normal course of business?
5) Whether the suit cheques are not truly
drawn but forged?
6) Whether the suit is barred by limitation?
7) To what relief is the plaintiff entitled to in
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A.S.Nos.824 and 825 of 2008
the suit?
10. The plaintiff and the defendants had adduced common
evidence for both the suits. On the side of the plaintiff, the alleged
partner K. Venkatesh examined himself as P.W.1 and one Meena and
V.Ragunathan were examined as P.W.2 and P.W.3 respectively. They
had marked Exs. A-1 to A-34. On the side of the defendants, one
Muthuswamy, the proprietor of Lakshmi Textiles had adduced
evidence and marked Exs. B-1 to B-4. The sole proprietor of the 1st
defendant in O.S.No.50 of 2007 had not entered the box and it is only
her husband Muthuswamy who is a proprietor of the 1st defendant in
O.S.No.48 of 2007, who had adduced evidence.
11. The Trial Court on considering the evidence held that the said
Venkatesh has not proved that he is the partner of the 1st defendant firm
and further the registration of the 1st defendant firm had also lapsed and
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A.S.Nos.824 and 825 of 2008
there was nothing to indicate that the same had been extended. The
learned Judge also observed that there was no endorsement as
contemplated under the Negotiable Instruments Act and further, the
plaintiff has not been able to prove the passing of consideration.
12. The learned Judge had also taken note of the fact that the
plaintiff was not able to prove that the 2nd and 3rd defendants had
actually discounted the cheques and that he had business dealings with
them. The Court took note of the fact that the summons which were
issued to the 2nd and 3rd defendants at the address mentioned by the
plaintiff had been returned with the endorsement "no such addressee".
The learned Judge held that this only further strengthens the case of the
1st defendant that the plaintiff had no direct knowledge about the
defendants 2 and 3. Ultimately, the learned Judge had dismissed the
two suits. It is challenging the said Judgment and Decree in O.S.No. 48
of 2007 that the plaintiff has filed A.S.No. 824 of 2008 and A.S.No.
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A.S.Nos.824 and 825 of 2008
825 of 2008 has been filed, challenging the Decree and Judgment in
O.S.No. 50 of 2007.
Submissions:
13. Mr.Vadivel Murugan, learned counsel appearing on behalf of
the plaintiff / appellant in both the appeals would submit that the the
Trial Court has placed too much of reliance on the fact that one
Anbalagan has represented the plaintiff company in the Criminal Case
and that he has not filed the suit. Being a partnership firm, it is well
open to any of the partners to represent the firm and therefore, the said
Venkatesh has represented the plaintiff in the suit. He would further
contend that under the provisions of Order XXX Rule 2 of the Code of
Civil Procedure, if a defendant had any doubt about whether the person
sueing in his capacity as a partner was actually a partner of the firm, he
could demand in writing to the plaintiffs to disclose the details of the
partners. He would contend that in the instant case, this procedure has
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A.S.Nos.824 and 825 of 2008
not been followed by the 1st defendant and further, there is no proof on
the side of the defendants to show that Venkatesh is not a partner of the
plaintiff firm. He would further argue that the plaintiff has filed Ex.A-
1, which is the Registration Certificate of the firm which would clearly
show that the plaintiff firm is the registered firm and therefore
competent to file the suit, as it does not suffer the bar under Section 69
of the Partnership Act. He would submit that the 1st defendant has
admitted his signature in the cheques and has been contesting the
Criminal Proceedings. He would also argue that the findings of the
Criminal Court would have no relevance to the Civil Proceedings and
therefore, the finding of the Trial Court that the cheques have not been
discounted based on the evidence in C.C. No. 584 of 2004 is without
basis. He would submit that the Judgment and Decree of the Court
below in both the suits deserves to be set aside and the suit has to be
decreed.
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A.S.Nos.824 and 825 of 2008
14. Per contra, Mr. N. Manoharan, learned counel appearing on
behalf of the 1st respondents in both the appeals (respective 1st
defendant's in the suit) would submit that a duty is cast upon the
plaintiff to prove that the person who represents the plaintiff firm is a
partner and the 1st defendant cannot be called upon to prove the
negative. He would further submit that the cheques which are the
subject matter of the two suits have not been endorsed in the manner as
contemplated under Sections 16 and 50 of the Negotiable Instruments
Act. He would also submit that the Criminal Court's order would also
have a bearing on the Civil suit when the subject matter (cause of
action) is more or less identical. He would also point out the admission
of P.W.2, who would submit that Venkatesh is not a partner in the
plaintiff firm and that it was only Anbalagan who was the partner. He
would point out the discussion of the Trial Court in this regard. The
learned Judge had observed as follows:
" A staff in the Plaintiff's institution has deposed as
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A.S.Nos.824 and 825 of 2008
P.W.2 and in her cross examination, she has stated that
the plaintiff Venkatesh and one Kumar were partners in
Murugavel textiles. It is very very important to note that
the present plaintiff Murugavel finance and Murugavel
Textiles are distinct establishments and according to
P.W.2 a staff in the plaintiff's institution Venkatesh and
Kumar were partners only in Murugavel Textiles."
15. The learned counsel would further submit that the said
Venkatesh was totally in the dark about the facts of the case which is
clearly evident from his cross-examination. All these put together
would only go to show that Venkatesh had nothing to do with the
plaintiff firm and this coupled with the facts that the plaintiff has not
produced any evidence to prove that Venkatesh is a partner will only
aid the 1st defendant. He would further submit that the learned Trial
Judge has discussed the fact that the cheques had not been endorsed in
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A.S.Nos.824 and 825 of 2008
the manner contemplated under the Act. In support of this argument
regarding the valid endorsement, the learned Counsel has relied upon
the following Judgements:
(1) 2010 CRI.L.J. 3323 - M/s Jayaram Finance, Kancheepuram
and Anr. Vs. Jayaprakash.
(2) 2011 (1) LW CRL 542 - Palaniappa Mills rep. by its partner,
P. Natarajan Vs. A.Vaithiyalingam
(3) 2012 (2) MLJ CR 621 - G.B.Finance, rep, by Power
ofAttorney Agent, Thiru. Kotteeswaran
16. The learned Counsel has also produced the Judgment in
Criminal Appeal Nos. 176 & 177 of 2006, which were the appeals filed
by the plaintiff firm, challenging the acquittal of the proprietors of the
1st defendant firm in both the suits by orders dated 03.10.2005 in C.C.
Nos. 584 and 585 of 2004 respectively. This Court has dismissed the
appeals and upheld the Judgment of the learned Judicial Magistrate II,
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A.S.Nos.824 and 825 of 2008
Erode.
17. The points for consideration arising in the above First
Appeals are:
"a) Whether the person sueing on behalf of the
plaintiff's firm has proved that he is the partner of the
said firm?
b) Whether the cheques have been endorsed in
favour of the plaintiff as per the provisions of the
Negotiable Instruments Act?
c) Whether the Judgment and Decree of the
Trial Court calls for any interference? "
Point No.1 :
18. The plaintiff firm is represented by one Mr. K. Venkatesh
who has been described as its partner. The 1st defendant had even at the
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A.S.Nos.824 and 825 of 2008
very outset contended that K. Venkatesh is not a partner of the plaintiff
firm, since the plaintiff firm in the Criminal Proceedings before the
Judicial Magistrate No. II, Erode, in C.C. No.584 of 2004, is
represented by one Mr. Anbalagan who is described as the partner of
the plaintiff firm. Though the defendants has taken out a categoric
defence that the said Venkatesh is not a partner the plaintiff has not
chosen to prove the same by producing a copy of the list of partners as
registered with the Registrar of Firms. The non-production of the said
document compels this Court to draw an adverse inference against the
plaintiff. The finding of the Trial Court in this regard does not require
any interference.
Point No.2 :
19. Section 9 of the Negotiable Instruments Act defines a holder
in due course as follows:
“Holder in due course”.—“Holder in due course”
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A.S.Nos.824 and 825 of 2008
means any person who for consideration became the
possessor of a promissory note, bill of exchange or
cheque if payable to bearer, or the payee or indorsee
thereof, if 1[payable to order], before the amount
mentioned in it became payable, and without having
sufficient cause to believe that any defect existed in the
title of the person from whom he derived his title."
20. Section 15 defines endorsement as follows:
"15. Indorsement.—When the maker or holder of a
negotiable instrument signs the same, otherwise than as
such maker, for the purpose of negotiation, on the back or
face thereof or on a slip of paper annexed thereto, or so
signs for the same purpose a stamped paper intended to be
completed as a negotiable instrument, he is said to indorse
the same, and is called the “indorser”.
21. Section 16 of the Negotiable Instruments Act talks about the
Indorsement "in blank" and "in full" and about the indorsee which is
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extracted herein below:
"If the indorser signs his name only, the
indorsement is said to be “in blank”, and if he adds a
direction to pay the amount mentioned in the instrument
to, or to the order of, a specified person, the indorsement
is said to be “in full”, and the person so specified is
called the “indorsee” of the instrument.
[(2) The provisions of this Act relating to a payee shall
apply with the necessary modifications to an indorsee.]"
22. Section 50 talks about the effect of the endorsement and
provides certain illustrations. The illustrations given therein are as
follows:
"Illustrations B signs the following indorsements on
different negotiable instruments payable to bearer:—
(a) “Pay the contents to C only.”
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(b) “Pay C for my use.”
(c) “Pay C or order for the account of B.”
(d) “The within must be credited to C.” These
indorsements exclude the right of further negotiation by
C.
(e) “Pay C.”
(f) “Pay C value in account with the Oriental Bank.”
(g) “Pay the contents to C, being part of the consideration
in a certain deed of assignment executed by C to the
indorser and others.” These indorsements do not exclude
the right of further negotiation by C."
23. As per section 50, the endorsement of a Negotiable
Instrument followed by its delivery gives a right to the endorsee for
further negotiation. The effect of an endorsement of a Negotiable
Instrument with the endorsements as illustrated above has the effect of
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transferring to the endorsee the property therein with the right to
further negotiate. However, the endorsement may expressly restrict or
exclude such a right or merely constitute an endorsee right of further
negotiation.
24. A perusal of Exs. A-1 to A-7 would clearly indicate that it
does not contain an endorsement as contemplated under the Act. The
cheque merely contains a seal and a signature with no express words
acknowledging the endorsement. This Court in its Judgment reported
in 2005 M.L.J (CRL.) 186 - Ashok Kumar, S/o. Srilakkushiwani,
Erode, Vs. K.Gunasekaran, S/o. A.KaliappaMudaliar, Prop. Vijay
Fabrics, ThiruchengodeTaluk, had discussed Section 50 of the
Negotiable Instruments Act, particularly, the illustrations contained
therein and has held as follows:
"11.A reading of Secs. 138 and 142 of N.I.Act
would show that the complaint under Sec. 138 of
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N.I.Act can be lodged only by a “Payee” or “Holder in
due course”. Holder in due course is defined in Sec.9 of
N.I.Act. Sec.9 of N.I.Act makes it clear that “Holder in
due course” means any person who for consideration
became the possessor of a promissory note, bill of
exchange or cheque if payable to bearer,or the payee or
endorsee thereof. No doubt, complaint under Sec.138 of
N.I.Act by such holder in due course is maintainable.
But, in this case, the facts and circumstances under
which Dilip Shivani has endorsed the cheques Exs.P.2
to P.4 to Maya Shivani are not forthcoming.
Consideration for passing of the cheque is not
satisfactorily proved. It is relevant to note that the
transaction between the parties relates not merely to
one cheque; but relate to as many as six chques.
Substantial evidence ought to have been adduced to
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prove the endorsement. In the absence of endorsement
in compliance of Sec. 50 of N.I.Act, the presumption
that the holder of cheque is of a holder in due course
cannot be drawn in favour of the complainant."
25. This Judgment has been followed in the later Judgments
reported in 2010 CRI.L.J. 3323 - M/s Jayaram Finance,
Kancheepuram and Anr. Vs. Jayaprakash, 2010 (1) LW CRL 542 -
Palaniappa Mills rep. by its partner, P. Natarajan Vs.
A.Vaithiyalingam and 2012 (2) MLJ CR 621 – G.B.Finance, rep, by
Power of Attorney Agent, Thiru. Kotteeswaran. The last of the
judgments was a similar case where except for the signature there was
no endorsement to indicate the passing of consideration. The learned
Judge observed as follows:
"Except the signatures, there is no endorsement to
indicate passing of any consideration under the same
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and any date relating to date of transaction and date of
endorsement. In the absence of those particulars, mere
signature on the back side of the cheque cannot be
treated as proper endorsement amounting to valid
assignment of any right under the cheque in favour of
the complainant to treat him as holder in due course so
as to accept his locus standi to maintain the present
complaint."
26. The learned Judge ultimately found that there was no
endorsement as contemplated under the Negotiable Instruments Act
and therefore upheld the findings of the Trial Court that the accused
was not guilty. In the light of the above Judgments and the provisions
of the Act, it is evident that the cheques which are the subject matter of
this suit has not been endorsed as per the provisions of the Act. That
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apart, the Criminal Proceedings initiated by the plaintiff on the two
cheques in question has ended in an acquittal which was upheld by this
Court on the ground that the plaintiff had not been able to prove the
passing of consideration. The detailed finding of the I Additional
District Judge, Erode based on the evidence does not require any
interference and accordingly I hold that the plaintiff has not proved the
endorsement in the manner known to law and the Judgment of the Trial
Court which has elaborately considered this issue does not require any
interference.
Point No.3:
27. The plaintiff has not made out any case to find fault with the
findings of the Trial Court and its consequent Judgment.
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28. In fine, these appeals are dismissed and the Judgment and
Decree of the learned I Additional District Judge, Erode, in O.S.Nos.
48 of 2007 and 50 of 2007 is confirmed. There shall be no order as to
costs.
09.09.2021
Index : Yes/No
Internet : Yes/No
shr
To
The I Additional District Judge,
Erode.
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A.S.Nos.824 and 825 of 2008
P.T. ASHA, J.
shr
A.S.Nos.824 and 825 of 2008
09.09.2021
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