[1938] EACA 210

## ORIGINAL CIVIL

## BEFORE THACKER, J.

## NIKA SINGH TRADING AS NIKA SINGH & SONS, Plaintiffs $v$ .

## DEWA SINGH & LAL SINGH TRADING AS GANESHILAL LAL SINGH & Co., Defendants

Civ. Case No. 152 of 1937

Negotiable instrument—Promissory note payable to order—Delivery to plaintiffs without endorsement—Holder—Bearer—Parties— Rights of person in possession—Bills of Exchange Ordinance. 1927, secs. 2, 8 and 38—Merger—Account stated and settled— Action for sale and delivery of goods.

Plaintiffs claimed Sh. 1815/30 on foot of a promisory note dated 15-6-33 drawn by defendants in favour of plaintiffs or order or, alternatively on foot of an account stated and settled between the parties on $15-6-33$ or in the further alternative on foot of goods sold and delivered and money lent by the plaintiffs to the defendants.

The plaintiffs had endorsed the note in favour of one B. who in turn endorsed it to a bank. The bank subsequently endorsed the note back making it payable to the order of **B**, without recourse. There was no further endorsement on the note which at the time the suit was instituted was in the plaintiffs' possession.

Held $(20-5-38)$ —(1) That the rights of action in respect of the goods sold and delivered and cash lent and the right of action on foot of the account stated and settled became merged in the right of action in respect of the promissory note.

(2) That where a promissory note is endorsed payable to order mere possession resulting from delivery by the endorsee is not sufficient to enable the person to whom it was delivered to sue upon it in his own name.

Ross for the plaintiffs.

Schwartze for the defendants.

JUDGMENT.—The plaintiff is in possession of a promissory note, which has been put in by consent, and which promissory note has three endorsements, the last of which is that made by Barclays Bank making the promissory note payable to the order of one Maganlal Bhutt. Maganlal Bhutt, I am informed by Counsel, has transferred by delivery this note to the plaintiff but the note has not been endorsed by him to the plaintiff. Plaintiff seeks to sue the defendants as liable as drawers of the promissory note, as liable on an account stated, or as liable for goods supplied and money lent.

The first question, I have to decide, therefore, is whether the plaintiff can in these circumstances sue the defendants on the promissory note. I am referred by Mr. Schwartze for the defendants to a case of Rehemat Khan Kherdin v. Shirkhan Punukhan (No. 297 of 1933), and to the judgment of Mr. Justice Horne therein; secondly to a case of *Harrop v. Fisher* (142 E. R. 428), and thirdly to Halsbury's Laws of England (Halisham Edition) Vol. II, p. 654, where it is stated as follows: -

"Where the holder of a Bill payable to order transferred it for value without endorsing it the transferor gives the transferee such title as the transferor had in the bill and the transferee in

addition acquires the right to have the endorsement of the transferor ... In such a case the holder of such a bill cannot sue on the instrument except in the name of the transferor."

Mr. Ross for the plaintiff has referred me to section 38 of the Bills of Exchange Ordinance, 1927, and to section 2 of the same Ordinance where the word "holder" is defined and has argued that because his client is the holder of the promissory note he may, by section 38 sub-section (1) sue on the note in his own name. For this purpose it is necessary to examine section 38 and section 2. It is true that by section 38 (1) amongst the rights and powers of a holder of a bill are included the right to sue on the bill in his own name, but it is necessary to look at the definition of the word<br>"holder". The word "holder" means the payee or endorsee of a bill or note who is in possession of it or the bearer thereof. Mr. Ross has argued that his client is the payee of the note and is in possession of it, but no doubt while he was the original payee he has since negotiated the note and no longer has the status and rights and powers of the payee. The status and rights and powers of the payee as such of this note were terminated when the note was negotiated by the payee; merely because the note happens to be again in the hands of the party who was the original payee does not and cannot recreate or restore the status powers and rights of the payee. The plaintiff cannot after negotiating the note consider himself as the payee with the payee's same rights as he once held. So much is I think inherent in Mr. Justice Horne's decision on the cheque which had been endorsed by the plaintiff to the bank. If he has given value for the note, the plaintiff's status is that of one in possession with the right to have the endorsement of the transferor. Again he is not the endorsee of the note because the note has not been endorsed to him; but Mr. Ross argues again that he can sue as bearer of the note, but the definition of the word "bearer" is a person in possession of a bill or note which is payable to bearer. By section 8 sub-section $(3)$ a bill is payable to bearer when it is expressed to be so payable. Now the note, the subject of this action, is not payable to bearer but is a note payable to order and therefore it follows that the plaintiff is not the "holder" of this particular note within the meaning of section 2 of the Bills of Exchange Ordinance No. 7 of 1927 and if he is not he cannot sue under section 38.

It seems to me clear from the authorities which have been cited that it is not merely sufficient to be in possession of the promissory note payable to order to be entitled to sue upon it. The mere act of delivery is not enough. If the note is one payable to order there must be endorsement over to the person suing on it, and as there is not, in this case, endorsement on the note, the plaintiff cannot sue on it.

As to the claim for goods supplied and money lent, or on the account stated, Mr. Schwartze raised the objection that the plaintiff cannot sue on these grounds for the reason that these causes of action are merged in the cause of action arising out of the promissory note. The promissory note was given in settlement of the plaintiff's account and has been negotiated by them and is still in circulation. It seems to me therefore that this is a valid objection and that the plaintiff cannot sue for goods supplied and money lent or on the account stated.

For these reasons this action must be dismissed with costs.