ShahabuddIn Sahib Vs. Tota Venkatachalam Chettiar - Court Judgment

Abdur Rahman, J.

1. The facts which had led up to this revision may be briefly stated. One Anthonimuthu owed some money to Gnanaprakasam Pillai for which the latter had secured two decrees against the former. The defendant was an agent to the aforesaid Gnanaprakasam Pillai for the purpose of collecting his outstandings. When he went to realise the debts due to Gnanaprakasam Pillai he discovered that Anthonimuthu could give useful evidence in a case which he intended to institute against some third person, with whom I am not concerned here. An arrangement was thus arrived at between the defendant on the one hand and Anthonimuthu on the other, under which the latter promised to depose in the defendant's favour and the former agreed to discharge the debts due to Gnanaprakasam Pillai by the latter. It appears that the defendant was not in a position to pay the debts due to Gnanaprakasam Pillai at the moment. He consequently paid a sum of Rs. 100 only in cash and after deducting Rs. 50 which would have been due to him for his commission on realisation of the debts due from Anthonimuthu, he executed a promissory note on 29th August, 1935 (Ex. A) in favour of Gnanaprakasam for Rs. 580. Gnanaprakasam agreed to this and released Anthonimuthu from his decrees and certified payment to the Court. Gnanaprakasam then served the defendant with a notice on 7th September, 1935 (Ex.1) under which he was asked to discharge his liability by the 15th of September, failing which, it was so mentioned in the notice, the promissory note would be assigned. It appears, however, that the promissory note was assigned in favour of the plaintiff a day before the time given in the notice for payment, i.e., on 14th September, 1935 and the assignee filed this suit on its basis, which was decreed by the lower Court. The defendant has now come up to this Court and has urged the dismissal of the suit on the grounds that the plaintiff was not a holder in due course and inasmuch as the promissory note was executed for an illegal consideration, it could not be enforced in a Court of Law.

2. Three reasons were given by Mr. Pocker to show that the plaintiff was not a holder in due course; (1) that as the promissory note was payable on demand, it should be deemed to have matured on the date on which it was executed and an assignment on a subsequent date would not place the plaintiff in a position better than that of his assignor; (2) as a demand was made by Gnanaprakasam Pillai on 7th September, 1935, an assignment subsequent to that date could be of no avail to the plaintiff, who would be subject to such equities as existed at the time of transfer; and (3) as a notice of dishonour was given by the defendant to Gnanaprakasam Pillai on 13th September, the holder took the instrument subject to the vice with which the bill was tainted at the time of the transfer.

3. The learned Counsel for the petitioner has placed his reliance on Section 9 of the Negotiable Instruments Act in support of his first objection. It is true that the language of the section lends some support to the argument advanced by him; but I do not think it would be seriously contended that the promissory notes, which are payable on demand could not be negotiated in such a manner as to make their holders to be holders in due course under any circumstances. It would come as a rude shock to the commercial community in India, if they discovered that the legal position in regard to such promissory notes happens to be what has been contended for before me. The contention raised by Mr. Pocker is based on the supposition that promissory notes of this kind must be taken to have matured on the date on which they are executed. The date on which limitation would start in regard to these notes could not be a safe guide to come to a conclusion that even for this purpose they should be presumed to have matured on the date on which they were executed. There is nothing in the Negotiable Instruments Act which would warrant such a conclusion. On the contrary, the ordinary presumption under Section 118(d) of the Negotiable Instruments Act is that every transfer of a Negotiable Instrument was made before its maturity and there is no reason why this presumption should not be extended to promissory notes which are payable on demand. I am therefore of the opinion, that for this purpose a promissory note which is payable on demand cannot be regarded as having matured on the date on which it came into existence. The dale of its maturity would, I feel, depend upon the circumstances of each case. In tlie case of such a promissory note, as has been mentioned above; one of the safe guides would be to ascertain if a demand had been made and refused. The length of the time for which the prbrhissory note has not been paid would also be a relevant factor in order to ascertain if the promissory note was a stale one. If it has been in the hands of the holder for an unreasonable length of time, the transferee may be considered to be put1 on; enquiry, but if there is nothing which may give any legitimate cause for suspicion, the ordinary presumption referred to above would have to be raised in his favour. The date of the execution of the promissory note in suit and the date of its transfer to the plaintiff are therefore material and it is highly improbable that the plaintiff could suspect that during an interval of sixteen days, which had passed between the date of the execution of the promissory note and its transfer to the plaintiff, a demand was made by his assignee and refused by the defendant. I would therefore hold that the promissory note in suit could not be considered to have matured on, the date on which it was transferred to the plaintiff.

4. As for the second reason which has been urged by the learned Counsel on behalf of the petitioner, it appears that the demand was made by Gnanaprakasam Pillai under which the-defendant was asked to pay his dues on or before the 15th September, 1935 (Ex. I). The promissory note was, as stated above, assigned on 14th September and the mere fact of the demand would not be sufficient to enable me to hold that it had matured before the expiry of the time given for payment,. Moreover there is no evidence, on the record from which S could infer that the plaintiff had any knowledge of the demand made by Gnanaprakasam Pillai on 7th September, 1935.

5. As for the third reason^ the notice of dishonour bythe defendant to Gnanaprakasam Pillai had not been produced ori the record and no secondary evidence of the safne has been-given. But from Gnanaprakasam Pillai's reply to that letter which is on the record (Ex. II-a) it appears that it was delivered to him on 16th September, 1935. The notice of dishonour must therefore be deemed to have been conveyed to Gnanaprakasam Pillai on that' day and hot earlier; but as pointed' out above the promissory note had already been transferred on 14th September, 1935. This contention must also be repelled.

6. The result is that the plaintiff would not be affected in the circumstances by Section 59 of the Negotiable Instruments Act. He has been found by the lower Court to be an indorsee for consideration and there is nothing on the record to show that he had any cause to believe the existence of any defect in the title of the assignor. He must therefore be presumed to be a holder in due course as defined in Section 9 of that Act.

7. The next ground which has been urged on behalf of the petitioner is that the promissory note was for an unlawful consideration. The petitioner's learned Counsel has relied on Seshanna Chetty v. Ramaswami Chetty (1886) 4 M.H.C.R. 7 and Adiraja Chetty v. Vittil Bhatta (1914) M.W.N. 322 in support of his contention. There is no doubt that a promissory note executed in consideration of giving evidence is unenforceable - whether the statement which a person may have promised to give be either true or false. There would be no consideration if the evidence which he had undertaken to give be true, as it would then be a promise to perform a public duty which he is bound by law to discharge; but if the evidence be false the consideration would be positively vicious and illegal. In the first case there would be no consideration at all and in the latter case the consideration would be unlawful. It has therefore been urged that the consideration for the promissory note in suit being either non-existent in the eye of law or being illegal, the transfer of the same would be void and would confer no title in the plaintiff to recover. Mr. Pocker has cited two English cases, Pearce v. Brooks (1866) 1 Exch. 213 and Cannan v. Bryce (1819) 3 B. & Ald. 179 : 106 E.R. 628, and a Madras case Pannichand v. Nanoo Sanker Tawker : (1908)18MLJ456 to substantiate his contention. They are authorities for the proposition that any one who contributes to the performance of an illegal act with a knowledge that the subject-matter of his contract is intended to be illegally applied cannot recover on the contract. This proposition may be correct and even incontrovertible so far as it goes. But the question is, if it has any application to the facts of the case.

8. It has been found by the lower Court that the money was due to Gnanaprakasam Pillai for which decrees had already been passed in his favour and which were certified by him, as a decree-holder to, have been duly satisfied on the receipt of the promissory note executed by the defendant. Anthonimuthu's release from the decretal debts would undoubtedly furnish a good consideration for the promissory note in suit. The question then is if, as found by the lower Court, Gnanaprakasam's knowledge of the defendant's motive for executing the promissory note would vitiate the transaction. It is clear that Gnanaprakasam was not to benefit by the contract entered into between Anthonimuthu and the defendant. I have already held that the consideration which had emanated for Gnanaprakasam, namely, the release of Anthonimuthu from his decretal debts.^was a valuable one. The object of the contract in substituting the defendant for Anthonimuthu cannot be said to be illegal. If the object and consideration are legal, the contract cannot be avoided under Section 23 of the Indian Contract Act. Gnanaprakasam's knowledge of the defendant's motive in executing the promissory note cannot be held to make it unenforceable at his instance. Motive should not be confused with the object and consideration of a contract. They are essentially different. If the object and consideration are found to be legal and valuable, the transaction cannot be avoided simply because the promisee happens to know the reason for which the defendant promisor had executed the promissory note in his favour. As pointed out by Mukerjee, J., in Dehra Dun Electric Tramway Company v. Official Liquidators I.L.R.(1929) All. 406:

A contract cannot be vitiated, as a collateral contract happens to be unenforceable at law.

9. It would therefore follow that even if Anthonimuthu had agreed to give false evidence in favour of the defendant, the illegality of the consideration of the contract between Anthonimuthu and the defendant would not affect the validity of the transaction between the defendant on the one hand and Gnanaprakasam Pillai on the other. There is nothing on the record to show that Gnanaprakasam Pillai was a party to this arrangement between Anthonimuthu and the defendant. Nor ihas it been proved or found that Gnanaprakasam knew that the evidence to be given by Anthonimuthu was false. A priori the same result would follow if the evidence which Anthonimuthu had agreed to give were true, as in that case there would be no consideration for the contract but this would not affect the legality of the contract between the defendant and the promisee.

10. Let me consider the case from a different point of view. It has been held in Wild v. Simpson (1919) 2 K.B. 544 that the consideration would be considered to be contaminated with illegality if the plaintiff requires any aid from the illegal transaction to establish his case. Let me see if the plaintiff or his assignor Gnanaprakasam Pillai would be required to establish the nature of the contract between Anthonimuthu and the defendant in order to succeed on the promissory note executed by the defendant in Gnanaprakasam's favour. It is obvious that he would not be required so to do. Judging from this test also, the promissory note in suit cannot be held to be contaminated with an illegality.

11. Moreover, under Section 120 of the Negotiable Instruments Act, the defendant who is the maker of the promissory note in suit cannot be permitted to deny its validity as against the plaintiff who has been held to be a holder in due course.

12. In addition to this, since the plaintiff has been found to be a holder of the promissory note for consideration, he would be entitled to recover the amount either from his transferor or any prior party, which would in this case include the defendant.

13. For the foregoing reasons, the revision fails and is dismissed with costs.