T.V. Ramakrishnan, J.
1. A.S. Nos. 188 and 284 of 1984 are appeals filed respectively by defendants 1 and 2 in O.S. No. 247 of 1982 on the file of the Sub Judge, Kottayam. The plaintiff is the 1st respondent in both the appeals. Plaintiff has also filed a cross appeal in A.S. No. 188 of 1984.
2. Plaintiff filed the suit on the basis of Ext. A1 pronote and Ext.A2 agreement styled as Sammathapathram. Ext.A1 is dated 16-11-1974 and was executed by the first defendant in the name of plaintiff. Ext. A2 is dated 12-7-1979 and was executed jointly by the plaintiff and 2nd defendant. Admittedly the promissory note was executed for and on behalf of the 2nd defendant. It was towards money due to the 2nd defendant from first defendant that the promissory note was executed by plaintiff has alleged that the promissory note was in his possession from the very beginning with the consent and knowledge of the 2nd defendant. It is his further case that as per Ext. A2 agreement executed jointly by the plaintiff and 2nd defendant, plaintiff was given the right to realise the money due under the promissory note and as such he is entitled to enforce the promissory note in his own right. On and after execution of Ext. A2 agreement 2nd defendant has no right to claim the amount covered by the pro note. Plaintiff relied upon certain endorsements contained in Ext. A1 promissory note and contended that the suit is not barred by limitation. On the basis of Exts. A1 and A2 plaintiff prayed that he may be granted a decree for the amount due under the promissory note with 18% interest against both the defendants.
3. Defendants filed separate written statements contesting the claim. First defendant contended that the plaintiff is not entitled to maintain the suit as the promissory note on which it is based is admittedly one executed for an on behalf of the second defendant. He has fully discharged his liability under the pro note by payment to the second defendant. A detailed statement of accounts showing the payments made by the 1st defendant to the 2nd defendant was annexed to the written statement. The claim for 18% interest was disputed. It was contended that even though in the promissory note the rate of interest shown is 18% there was a contemporaneous agreement between the first defendant and second defendant to pay only 12% interest. First defendant contended that he was not aware of Ext. A2 agreement and that no notice was given to him of the terms and conditions of the agreement. As such Ext.A2 is not binding on him. First defendant, however, admitted the execution of the promissory note and his liability to the second defendant to pay the amount covered by Ext.A1.
4. Second defendant in his written statement admitted that the suit pro note was executed in the name of the plaintiff for and on his behalf and that at the time of execution of Ext.A1 pro note amounts were due to him from the first defendant and it was towards such amounts that the promissory note was executed. Detailing the circumstances under which the promissory note happened to be executed in the name of plaintiff, second defendant stated that plaintiff being the husband of his wife's sister was looking after the conduct of a number of cases on his behalf for sometime and in that context certain valuable title deeds and securities came into plaintiff's possession and taking advantage of that circumstance, plaintiff demanded from him an exhorbitant amount as compensation for services rendered and since there was no other go to get back the valuable securities and out of undue influence and coercion he had to execute Ext. A2 agreement jointly with the plaintiff. On the basis of the above allegations it was contended that Ext. A2 agreement is vitiated by undue influence and coercion and the same is unenforceable in law. Plaintiff cannot claim any right on the basis of Ext. A2. As Ext. A2 is unenforceable Ext.A1 pro note cannot also be enforced by the plaintiff. It was also contended that plaintiff has violated the terms of Ext.A2 in as much as he has failed to conduct cases on behalf of the second defendant as agreed in Ext.A2. In fact the plaintiff has acted against the interest of second defendant in O.S. No. 517 of 1978 and has given evidence on the side of the defendant in that case. With regard to the plea of discharge raised by the first defendant, the second defendant disputed the claim and contended that only an amount of Rs. 9,940/- was received on various dates as stated in the written statement. It was further claimed that an amount of Rs. 27,360/- is actually due from the first defendant to him. On the basis of the above averment it was contended that the suit is liable to be dismissed with costs.
5. Plaintiff was examined as P.W. 1 on the side of the defendants, defendants 1 and 2 were examined as D. Ws. 1 and 3. D.W. 2 was examined to prove the payment of Rs. 9,900/-to second defendant. D.W. 4 is the mediator in whose presence Ext.A2 was admittedly executed by the second defendant;
6. On a consideration of the evidence adduced in the case the learned Judge found that Ext. A2 is a legally valid agreement and that it is not vitiated by undue inflence or coercion as alleged by the 2nd defendant. On the basis of the above finding it was further found that plaintiff is entitled to enforce Ext.A1 pro note and to realise the amount due under it in his own right. The plea of discharge raised by the first defendant was accepted except to the extent of Rs. 9,900/-. Learned Judge held that the oral agreement regarding payment of interest at the rate of 12% per annum is not proved. Accordingly a decree for the amount mentioned in the pro note with 18% interest was passed in favour of the plaintiff allowing adjustment of the amounts paid by the first defendant as shown in the statement of accounts annexed to the written statement except to the extent of Rs. 9,900/-. Plaintiff and defendants have challenged the decision of the learned Judge in these appeals and cross appeal.
7. On the basis of the contentions raised by the learned counsel for the appellants in the two appeals and the cross-objection, the following points arise for consideration :
(i) Whether the plaintiff is entitled to maintain the suit.
(ii) Whether Ext. A2 is vitiated by undue influence and coercion as contended by the second defendant.
(iii) Whether the discharge pleaded is true and valid and if so to what extent.
8. Before going into the question of maintainability of the suit, I may consider the point regarding the validity of Ext.A2 agreement raised on behalf of the 2nd defendant. The execution of Ext.A2 as such by the plaintiff and 2nd defendant in the presence of DW. 4, a mediator, is admitted. The oral evidence in the case clearly estabishes that there was a dispute regarding a claim made by the plaintiff against the 2nd defendant for an amount of Rs. 50,000/- as compensation for the services rendered by him to the 2nd defendant and that DW.4 mediated the said dispute and it is as a result of the said mediation that Ext. A2 was executed in the presence of DW.4. DW.4 has stated that plaintiff's claim for Rs. 50,000/- as compensation was not acceptable to the 2nd defendant and he after a discussion with both parties, advised the 2nd defendant to agree for payment of Rupees 30,000/- and it was accordingly Ext. A2 was executed by the parties. Of course, he has also stated that at the time when the plaintiff made the claim the plaintiff was having in his custody large number of valuable securities belonging to the second defendant and the plaintiff threatened that he will not hand over them unless the 2nd defendant accepts his demand for compensation. The contention raised by the 2nd defendant that Ext. A2 is vitiated by undue influence and coercion cannot in the circumstances be easily accepted. Second defendant is a Professor of Botany working in St. Berkman's College, Changanacherry. Plaintiff and second defendant are close relations. In fact they have married sisters. Admittedly plaintiff was conducting several cases for and on behalf of second defendant. Even though originally there was no agreement to pay any remuneration for the services rendered by the plaintiff, evidently, he has claimed remuneration for such services, later. The said claim according to second defendant was an exhorbitant one and he was not willing to pay the same. It is true that at the time when the plaintiff made his claim he was having certain valuable documents belonging to the 2nd defendant in his custody and was refusing to hand over the same to the second defendant unless his demand for payment of compensation is accepted by the 2nd defendant. He was exerting pressure to persuade the 2nd defendant to agree for the payment of compensation demanded by him. It was this dispute which was discussed and settled in the presence of DW.4. If really Ext.A2 was executed as a result of undue influence and coercion 2nd defendant had sufficient time and opportunity to dispute the validity of the same. Till the suit was filed no action to question the validity of Ext. A2 was taken by the second defendant. This would certainly probabilise the case of the plaintiff that there was a settlement of the claim for compensation and it was as a result of such settlement Ext. A2 was executed. The plaintiffs action in getting the unstamped agreement properly stamped by the concerned authority under the Stamp Act would also probabilise the case of the plaintiff that it is as part of a settlement of a disputed claim that Ext. A2 was executed. In the light of the evidence discussed above, it is difficult to hold that Ext.A2 is vitiated by undue influence and coercion. The learned Judge in the circumstances was justified, in my view, in arriving at a conclusion that Ext.A2 is not vitiated by undue influence or coercion. Accordingly, I confirm the said finding.
9. Ext.A1 is a pro-note admittedly executed by the first defendant in the name of the plaintiff. The contract appearing on the face of the instrument without anything more entitles the plaintiff to receive and recover the amount covered by Ext. A1 in his own name. There is no case that possession of the instrument was obtained by the plaintiff unauthorisedly or illegally. Thus according to the apparent tenor of the instrument plaintiff satisfies all the requirements of the word 'holder' as defined in Section 8 of the Negotiable Instruments Act (for short "the act"). Section 8 of the Act is in the following terms:
"'Holder'.-- The 'holder' of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto.
Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction."
In this view the plaintiff is fully entitled to maintain the suit. However, it was argued that plaintiff himself has admitted in the plaint that Ext. A1 is a pro-note executed for and on behalf of the second defendant in consideration of the amounts due from the first defendant to second defendant and as such plaintiff cannot be considered as a "holder". It is said that he is not a person entitled to recover for himself the amount covered by the instrument. It is true that this admission of the plaintiff may constitute the 2nd defendant to be the beneficial owner of the instrument or the property covered by it and the plaintiff the legal title holder. But that may not be sufficient to constitute the second defendant a "holder" of Ext.A1. The plaintiff alone can still be considered as the holder of the note. By being the beneficial owner the second defendant may not be entitled to sue upon the pro-note. This is because Ext.A1 being a negotiable instrument, the law would insist that the contract appearing on the face of the instrument should be taken as the real contract. It is now fairly well settled that no person can sue on a negotiable instrument unless he is named therein as the payee or unless he becomes entitled to it as endorsee or becomes the bearer of an instrument payable to bearer. In the Full Bench case reported in Subba Narayana Vathiyar v. Ramaswami Aiyar, (1907) ILR 30 Madras 88, it has been held that in a suit on a negotiable instrument by the payee or endorsee, it is not open to the defendant to plead that the plaintiff is a mere benamidar not entitled to payment with a view to show that the note has been discharged by payment to real owner. Again in the Full Bench decision of the Patna High Court in Bacha Prasad v. Janaki, AIR 1957 Pat 380 it has been held that a person who is not a holder of a negotiable instrument cannot maintain a suit for recovery of money due under it even though holder is admittedly the benamidar and is impleaded in the suit. In the said decision it has also been held that "a beneficiary cannot be called a holder of the instrument and payment to him cannot discharge the maker thereof unless the case falls under Section 82(c) of the Act". So also, it has been held in the decision reported in Subharaya v. Abirami, AIR 1965 Madras 157 that a beneficiary does not become a holder of the instrument even upon getting a declaration that he is the beneficial owner and the payee is only a benamidar. In this connection it has to be noted that A1lahabad and Rajasthan High Courts have taken a slightly different view and held that in certain cases a beneficiary may maintain a suit on a negotiable instrument "if holder is also made a party to the suit" (see Sewa Ram v. Hoto Lal, AIR 1931 Allahabad 108 and Bhagirath v. Gulabkanwar, AIR 1956 Rajasthan 174). In the Rajasthan case there is a detailed discussion as to the circumstances under which a suit by a benamidar can be allowed to be maintained. Section 78 of the Act makes it clear that subject to the provision of Section 82(c) of the Act payment of the amount due on a pronote must in order to discharge the maker or acceptor be made to the holder of the instrument. Construing Section 78 of the Act it has been uniformly held that only by payment to a "holder" the maker can get a valid discharge. In the light of the legal principles noted above, it has to be held that the plaintiff is entitled to sue for the recovery of the amount due under Ext. A1 pronote and the payments admitted to have been made by the first defendant to the second defendant cannot be treated as valid payments in discharge of the liability of the first defendant to plaintiff as a maker of the pronote.
10. Since Ext.A2 has been held to be a valid agreement, the plaintiff has become the legal as well as beneficial owner of Ext. A1 and was fully entitled to recover the amount due under it in his own name and to appropriate it as compensation amount agreed to be paid to him by the second defendant under Ext.A2. The second defendant was not entitled to receive any payment under Ext.A1 on and after the execution of Ext.A2. In the circumstances, though the first defendant had admittedly made payments to second defendant after 12-7-1979, such payments cannot be allowed to be adjusted against the amount due to the plaintiff under Ext.A1. Thus the amount of Rs. 9,940/- admittedly paid by the first defendant to second defendant cannot go in discharge of his liability due to plaintiff under Ext. A1 on the date of execution of Ext. A2 agreement.
11. Regarding the plea of discharge raised by the first defendant, the learned Judge has accepted the same except to the extent of Rs. 9,900/-. First defendant has in his appeal contended that his plea of discharge should have been accepted in toto. Plaintiff on the other hand has in the cross-objection disputed the adjustment allowed by the learned Sub Judge. While examined as DW. 3, second defendant has admitted all payments shown in the statement of accounts annexed to the written statement of the first defendant except the payment of Rs. 9,900/ -. It is accepting the admission of the second defendant that the learned Judge has found that the first defendant has discharged the liability under Ext. A1 as contended by him except to the extent of Rs. 9,900/-. It is the admitted case of the plaintiff that originally the pronote was executed for and on behalf of the second defendant. It is the case of the first defendant that he was not given due intimation about the execution of Ext. A2 and the right or authority given thereunder to the plaintiff to realise and appropriate for himself the amount due thereunder. On the other hand, the plaintiff has contended that he has issued a notice through his advocate demanding payment of the amount due under Ex.A1 to him on the basis of Ext.A2. To prove that a notice was issued to first defendant, he has produced Ext.A3 postal receipt. Ext. A4 has been produced to prove the receipt of the notice so issued by the first defendant. Plaintiff has not produced the copy of the notice alleged to have been issued or called upon the first defendant to produce it. The first defendant has contended that since he was not given due intimation about the execution of Ext. A2 and its terms he is not bound by the terms of the agreement and as such he was fully justified in making payments under Ext. A1 to the second defendant treating him as the person really entitled to the money due thereunder. There is dispute between parties as to whether due intimation of Ext. A2 and its terms was given to the first defendant as per the notice which the plaintiff has issued as per postal receipt Ext. A3. However, it is not necessary for me to decide the said dispute in as much as I have already found that the first defendant could have legally effected payments only to plaintiff as the holder of the note and only such payments would discharge the liability of the first defendant as the maker of the pronote. In this view the question whether due intimation of Ext. A2 was given to first defendant or not is not material at all. Thus it has to be held that payments made by first defendant directly to the second defendant cannot be treated as valid payment in discharge of the liability of the second defendant to the plaintiff under Ext. A1.
12. In the result I hold that plaintiff is entitled to maintain the suit as the legal and beneficial owner of Ext. A1 pronote and that the discharge pleaded by the first defendant is not valid and binding on the plaintiff. The plaintiff is entitled to a decree against the first defendant as prayed for. The dismissal of the suit as against the 2nd defendant would stand. Ext. A2 is not vitiated by undue influence or coercion as contended by the 2nd defendant. It is a valid agreement binding on both the plaintiff and 2nd defendant.
13. In the light of the above discussion and the findings entered by me the plaintiff is entitled to a decree for Rs. 20,000/- with 18% interest from 16-11-1974 till the date of suit after adjusting the several payments made on 3-11-1976, 21-1-1978, 11-8-1979, 11-10-1979 and 28-1-1980 totalling to Rs. 11,800/- and thereafter at 6% interest per annum on the remaining principal amount till realisation against the first defendant in the place of the decree passed by the trial court. The dismissal of the suit against second defendant is confirmed. Both the appeals are without any merit and are dismissed. The cross objection is allowed.
14. The appeals and cross objection are disposed of as indicated above. The parties shall bear their respective costs.