V.Bhargava, J. - (1.) This is a plaintiff's second appeal arising out of a suit brought for the recovery of money on the basis of four promissory notes executed by the defendant-respondent. The facts admitted or found proved by the lower Courts are that the plaintiff Rai Ram Kishore formed a joint Hindu family with his brothers, Rai Amar Nath and Rai Ram Charan. There was a joint family firm under the name and style of "Piru Mal Radha Rawan" through which this joint family used to carry on money lending business. The respondent used to borrow money from this joint family firm. The present suite relates to four promissory notes executed by the respondent in the name of Rai Amar Nath as payee in the years 1935 and 1936. The first, promissory note was executed on 2-2-1935, for a sums of Rs. 541, the second on 25-2-1935 for Rs. 175 and the third and the fourth on 8-2-1936, for Rs. 2920 and Rs. 330 respectively. All these promissory notes were renewals of previous loans which has been taken by the respondent originally during the years 1930 and 1931. Rai Amar Nath was the karta of the joint Hindu family, being the eldest brother, and the money, which was advanced came out of the joint family funds. On 3-11-1932 before the execution of these renewed promissory notes which are the basis of the suit, but after the original loans had been advanced to the respondent, one Rai Krishnaji was appointed as arbitrator without intervention of the Court to partition the joint family property between the three brothers. The arbitrator gave his award on 21-12-1933 and the Court was moved to make this award the rule of the Courts During the proceedings in Court a statement was made by all the parties that they would abide by the order of the Presiding Officer, viz., Sri Ratan Lal, Civil Judge, who was authorised as arbitrator to make the partition. Sri Ratan Lal, Civil Judge, gave his decision on 29-4-1937, and passed a decree in terms of his decision. By this decree the renewed promissory notes in suit which had already come into existence during the partition proceedings fell to the share of Rai Ram Kishore, On 14-5-1937, the counsel for Rai Amar Nath filed these promissory notes in Court with an application that they may be delivered to Rai Ram Kishore in whose share they had fallen and making further request that all other property may be given in possession of the parties to whom it had been allotted by the decree. At the time whom these promissory notes were filed in Court Sri A.N. Sinha, counsel for Rai Amar Nath, put his initials on the back of all these promissory notes. The promissory notes were taken back from the Court by Rai Ram Kishore and he then instituted this suit for recovery of the money due under them. The suit was contested by the respondent on various grounds of which only one need be mentioned here as that is the only ground with which this Bench is concerned. It was pleaded by the respondent that Rai Ram Kishore plaintiff in the suit was not the holder of any of these promissory notes and consequently he had no right to institute a suit which was not maintainable. The other points of contest between the parties were also decided by the trial Court though the suit was dismissed on a decision of this point against the plaintiff. It was held that the suit at the instance of the plain, tiff was not maintainable. In appeal the lower appellate Court considered this question of law only, and since it held that the suit was not maintainable it dismissed the appeal and confirmed the decree of the trial Court. Other points of contest which were decided by the trial Court were not considered by the lower appellate Court as they did not arise when the suit was dismissed on the decision of this question against tbe plaintiff. Both the lower Courts held that Rai Ram Kishore was not the holder of the promissory notes and consequently he had no right to institute a suit for recovery of money on their basis. The only point that falls for determination in this appeal, therefore, is as to whether on the facts mentioned above Rai Ram Kishore had the right to institute the suit. This second appeal came up for hearing before a learned single Judge who referred it to a Division Bench. The Division Bench was of the view that it involved a very substantial question of law and thought it desirable that it should be decided by a Full Bench. The case was, therefore, referred to a Full Bench. Rai Ram Kishore, the original plaintiff of the suit, is dead and the present appellants are his legal representatives. For the sake of convenience, however, we shall refer to Rai Ram Kishore as the plaintiff.
(2.) Before the Division Bench, as appears from the referring order, the contention on behalf of the plaintiff was that, though the promissory notes in suit were executed in the name of Rai Amar Nath as payee, his name was put in as manager of the joint Hindu family from whose assets the loans were advanced. Rai Amar Nath was, therefore, only the ostensible holder whereas under the Hindu law the real holders were he as well as his two brothers, including the plaintiff. In the partition effected by the decree of the Court the promissory notes fell to the share of Rai Ram Kishore and consequently he became entitled to the money due under them. He was, therefore, the owner of that money and the holder of the promissory notes and was entitled to institute the suit for its recovery against tbe respondent. The contention on behalf of the respondent on the other hand was that the provisions of Hindu law could not override the special provisions of the Negotiable Instruments Act and it was only Rai Amar Nath, the ostensible holder, who could institute the suit for recovery of money on the basis of the promissory notes. A large number of authorities were cited before tbe Bench in support of the proposition that only the holder of a promissory note could institute a suit to recover money on its basis and consequently this suit by Rai Ram Kishore plaintiff was not maintainable. On behalf of the appellant also a number of cases were referred to where it had been held that money due under promissory notes could be recovered even by a person whose name did not appear on the promissory notes as a payee or holder in due course. There was also an additional plea that there was an indorsement in blank on all these promissory notes by Rai Amar Nath the payee because they had all been initialled by Sri A.N. Sinha, his counsel, when he filed these promissory notes in Court. This latter contention was repelled by the lower Courts and we think rightly. It appears from the promissory notes that Sri A.N. Sinha had initialled them only for the purpose of indicating that he was filing them in Court on behalf of his client, Rai Amar Nath. For an indorsement to bind the payee or the holder of a promissory note, it must be made either by the payee or the holder himself or by a duly authorised agent acting in his name under Section 27, Negotiable Instruments Act. In the present case Sri A.N. Sinha, counsel for Rai Amar Nath in the partition suit, had no such authority to make an indorsement on behalf of Rai Amar Nath and consequently, even if these initials of Sri A.N. Sinha be treated as having been made for the purpose of indorsement, there would be no valid indorsement binding on Rai Amar Nath. It cannot, therefore, be held that these promissory notes had been indorsed in blank and the right of the plaintiff to institute the suit on their basis has to be decided independently of these initials of Sri A.N. Sinha.
(3.) It was contended in these circumstances on behalf of the plaintiff that, though Rai Ram Kishore may not be the holder in due course of the promissory notes, he was at least the holder, because after the decree in the partition suit the right to the money secured by these promissory notes vested in him. Considerable argument was advanced on behalf of both the parties on the question as to whether Rai Ram Kishore could or could not be held to be the holder of the promissory notes as a result of the decree in the partition suit after the finding that the money advanced under the promissory notes had belonged to the joint Hindu family on partition of which the promissory notes had fallen to the share of Rai Ram Kishore. In our opinion, it is not necessary for the purpose of deciding this second appeal to give any definite finding as to whether Rai Ram Kishore did or did not become the holder of the promissory notes after the partition. There can be no doubt at all that, after the partition had been effected by the decree, Rai Amar Nath, the payee of the promissory notes, no longer had any right in the money due under them. Further the promissory notes were given by the Court in the possession of Rai Ram Kishore plaintiff and thereafter Rai Amar Nath had no right to claim possession thereof. Under Section 8, Negotiable Instruments Act, the holder of a promissory note, bill of exchange or cheque has been defined to mean : "Any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto." Since Rai Amar Nath ceased to possess any right in the promissory notes after the partition decree, he was no longer entitled thereafter to the possession of the promissory notes and consequently he ceased to be the holder thereof. There was also no indorsement of the promissory notes and consequently after the partition there was no person who could be described as 'holder in due course' of these promissory notes. This suit was, therefore, instituted at the time when there was no holder or holder in due course of these promissory notes if it be held that Rai Ram Kishore had not become the holder. The question, therefore, resolves into one relating to the right of Rai Ram Kishore to recover the money on the promissory notes when there was no holder or holder in due course thereof. In these circumstances we are of opinion that Rai Ram Kishore, who is clearly on the facts entitled to the money due under the promissory notes, has the right to institute a suit to recover it. Under Section 78, Negotiable Instruments Act, the maker or acceptor of a promissory note, bill of exchange or cheque is required to pay the amount due to the holder of the instrument in order to obtain a discharge. When there is no holder at all, it is obvious that the right to receive the money must vest in the person who is entitled to the money due under the instrument and in such circumstances Section 78 will not stand in the way of the maker or acceptor obtaining full discharge from such person by making payment to him. The obvious case which arises most frequently is where, after the execution of the promissory note, the sole payee dies and there has been no indorsement. In such a case, the legal representatives of the payee have always been held to be entitled to institute the suit for recovery of money on the instrument even though their names may not appear on the face of the instrument. In this connection notice has to be taken of the fact that the Negotiable Instruments Act nowhere specifically provides as to who is entitled to institute a suit to recover money due on a negotiable instrument. The various provisions of the Act deal with the right of negotiation of the instrument which initially vests in the payee but which can also be exercised by the holder or the holder in due course. For the protection of the maker or acceptor of the instrument provision has been made in Section 78 laying down that a payment made to the holder would grant full discharge to the maker or acceptor, this provision cannot and should not be considered to mean that the right to institute a suit on the basis of a negotiable instrument vests merely in the holder of the instrument and in no other person. Obviously, when there is no holder the right to recover the money on the negotiable instrument must, in case the holder dies, pass to his legal representatives and, in other cases, when the holder loses his status as such for any other reason, pass to the person who becomes entitled to the money due under the instrument. In the present case Rai Amar Nath, who was the payee and as such the holder of these promissory notes when they were executed, lost his status as a holder after the partition decree by which these promissory notes were allotted to the share of Rai Ram Kishore plaintiff. Thereafter the right to recover the money due under them vested in Rai Ram Kishore and the present suit brought by him is, therefore, clearly maintainable. Even if the rights in a negotiable instrument, such as a promissory note, are transferred by a registered instrument without any indorsement in favour of the transferee, the transferor ceases to be a holder and the right to recover the money on the promissory notes under these circumstances would vest in the transferee. Transfers by means other than an indorsement have clearly been recognised by the Negotiable Instruments Act. Section 43 makes a clear mention of any instrument being transferred with or without indorsement. In Ghanshyam Das v. Ragho Sahu, A. I. R. (24) 1937 Pat. 100, James J., with whose judgment all the other four Judges constituting the Bench agreed, remarked : "I do not think that it can be held in view of these authorities that endorsement is the only means by which a negotiable instrument can be transferred. Chapter 4, Negotiable Instruments Act, deals with the manner of the negotiation of these instruments. In the ordinary way, under Section 48 of the Act, a hand note such as we have before us in the present case would be negotiated by endorsement and delivery thereof ; a promissory note endorsed in blank or a promissory note to the holder or bearer is negotiated in simpler fashion. But the Negotiable Instruments Act itself does recognise that negotiable instruments may be transferred and for consideration otherwise than by negotiation, because Section 118 (a) of the Act, provides that unfil the contrary is proved, when a negotiable instrument has been negotiated or transferred, it shall be presumed that it was negotiated or transferred for consideration.";