1. The plaintiffs, who are the executors of one Gouri Prosad Kundu deceased, seek by this suit to recover against the defendant, the Secretary of State for India in Council, the value of certain Government Promissory Notes of the face value of Rs. 48,000 under the circumstances hereafter stated.
2. The deceased Gouri Prosad Kundu, whose native village was Gopalbari in the District of Faridpur, had for some years prior to his decease carried on a rice business in the Suburbs of Calcutta.
3. The evidence is, and it is not disputed, that he was possessed of Government Promissory Notes of the face value of Rs. 56,000. These Government Notes were from time to time pledged with the firm, of Roy of 55 Sova Bazar Street, Calcutta, for the purpose of raising money, when required, for the rice-business.
4. For the last eight years of his life-time the deceased Gouri Prosad Kundu had owing to declining health ceased to take any active part in the rice business and had retired to his native village of Gopalbari.
5. There, on the 10th of May 1904, Gouri Prosad Kundu executed a registered Will.
6. The evidence is, and there can be little doubt that it is true, that the deceased had his Government Promissory Notes with him at Gopalbari at the date he executed his registered Will. In such. Will the deceased specifically refers to the Government Promissory Notes for Rs. 56,000, and it is in evidence that the Government Promissory Notes were taken out of the box, in which they were kept, for the purpose of taking the particulars thereof for insertion in the registered Will.
7. Sometime between 8th and 11th May 1904, the deceased left Gopalbari and came to Calcutta for the purpose of undergoing medical treatment. He was accompanied to Calcutta by a niece, named Kankana, who has been called as a witness for the plaintiffs. The deceased, according to the evidence which I accept, brought with him to Calcutta the Government Promissory Notes for Rs. 56,000 and the registered Will. A house in Calcutta had been hired for the deceased and there ho remained until his death on the 22nd of August 1904. The deceased’s health, when he came to Calcutta, was bad and he gradually grew worse and for sometime before his death his condition was such that he could not transact any business. It is common ground between the parties that on the 15th of June 1904, the deceased through his servants drew at the Public Debt Office the interest due on the Government Promissory Notes. This being so, it follows that any blank endorsements, which were on the Notes for Rs. 56,000 at the date of the deceased’s death, must have been placed thereon after the 15th June 1904, because the Public Debt Office will not pay interest on Government Promissory Notes, when they are endorsed in blank. The amount realised for interest on the Notes for Rs. 56,000 was, at or about the time the interest was drawn, invested by the deceased in the purchase of Government Promissory Notes of the face value of Rs. 5,000.
8. It is admitted by the plaintiffs that after the date on which the interest was drawn the deceased pledged Government Promissory Notes of the face value of Rs. 2,000 with the said firm of Roy to secure the advance of two sums of Rs. 900 each required for the purpose of the deceased’s rice-business. These Notes were redeemed by the deceased on the 16th July 1904. It appears from the evidence that, whenever the deceased used to require money for the purpose of his business, he used to borrow it from the said firm of Roy on the pledge of his Government Promissory Notes. This is shown by the evidence of the cashier of the firm, who produces the books showing many transactions between his firm and the deceased. The only transaction between this firm and the deceased after the 15th June 1904 was the borrowing by the deceased of the two sums of Rs. 900 mentioned above. One of the witnesses for the defendant, who was formerly employed in the deceased’s rice-business, stated in his evidence that the deceased used to borrow money on pledge of the Government Promissory Notes from firms other than the said firm Roy. This witness was, however, unable to state the names of any such other firm or the nature or amount of such transaction, and it would appear also that he was not on good terms with the plaintiffs.
9. The deceased, as I have already stated, died on the 22nd August 1904.
10. Accordingly I hold on the evidence that at the date of the deceased’s death all the Government Promissory Notes for Rs. 56,000 and Rs. 5,000 were in his possession.
11. The deceased left him surviving his widow Hemanta Kumari and his said niece Kankana, who was trusted by the deceased in his affairs and was accustomed to keep the deceased’s keys. The plaintiffs, who married two nieces of the deceased, are the executors named in his registered Will. Shortly after the deceased’s death the widow, Kankana and the plaintiffs returned to Gopalbari. They took with them the registered Will and the Government Promissory Notes. At that time the widow and the plaintiffs appeared to have been on good terms. After their arrival at Gopalbari the servant of a creditor of the deceased’s business named Khettermoni arrived and pressed for security for the debt that was owing to his mistress. According to the plaintiffs’ evidence, which I accept, the box containing the Government Promissory Notes was produced and notes of the face value of Rs. 7,000 were made over as security for Khettermoni’s debt. Now some of the notes that were made over as security for Khettermoni’s debt bear no endorsement by the deceased. It is a not insignificant fact that, if all the remaining notes had been endorsed by the deceased in blank, that the parties should go out of their way to hand over notes as security to Khettermoni, which were not capable of being negotiated.
12. The relations between the widow and the plaintiffs then ceased to be friendly. The widow seems to have disapproved of the terms of the registered Will.
13. A few days after the Pujahs in October 1904 there was a meeting of the agnates of the deceased’s family and as part of the arrangement come to, it was decided that the Government Promissory Notes should be kept under two locks, the key of one should remain in the possession of Kankana and that of the other should be kept by the widow. On the 21st November 1904, the plaintiffs applied to the Court of the District Delegate of Faridpur for grant of probate of the registered Will. This application was opposed by the widow.
14. The correspondence between the legal advisers of the plaintiffs and the Bank of Bengal, who manage the Public Debt Office on behalf of the Government of India, then commences. It will, however, be convenient before proceeding further to set out the rules framed by the Bank of Bengal with reference to the stoppage of Government Promissory Notes–such rules are as follows: The stoppage of notes is effected by a written application addressed to the Public Debt Office containing a correct description of the loans, numbers and amounts of the notes to be stopped. The address of the applicant should also be given in full. On presentation at the Public Debt Office of any of the notes so stopped, notice of presentation is promptly given requiring the production of an order of a competent Court within ten days from the date of notice for the further detention of the notes by the Public Debt Office, failing which the stoppage is removed against the notes presented, which are then dealt with as though no stoppage had been entered against them.
In the case of notes stopped by residents in the mofussil or at any great distance from Calcutta, the period allowed for the requisite order of Court is extended to 15 or 20 days according to the circumstances. Steps should be taken to identify the presenter of a stopped note and his address should be registered in case of need.
15. These rules approximate to the practice of the Bank of England and other public Companies in England with reference to distringas notices, and it cannot be doubted, if the Public Debt Office had acted in accordance with these rules, this case would never have arisen.
16. On the 25th November, a few days after the application for probate in the Court at Faridpur, the plaintiffs’ attorneys in Calcutta wrote to the Bank of Bengal a letter in the following terms:
Estate Gouri Prosad Kundu deceased.
The above named deceased died on the 22nd August last possessed of the following Government Promissory Notes and leaving a Will, whereby he appointed our clients Babus Banku Behari Sikdar and Parmessur Sikdar executors. Our clients have applied for probate of the Will and expect to obtain the same shortly. The deceased has not endorsed or transferred the notes during his life-time. We are instructed to request you not to pay the interest on the notes to any one except our clients, who are the only persons rightfully entitled to receive the same.
17. The schedule to the letter sets out full particulars of the notes.
18. This letter appears to me to come clearly within the rules relating to stoppage of the notes. The Bank are informed first, of the death of the deceased and that the plaintiffs are the executors and then there is a request for the stoppage of payment of interest.
19. The Bank reply to that letter on the 26th November 1904 that they could not recognise the plaintiffs, until they produced probate of the Will.
20. Again, on the 7th December 1904, the plaintiffs’ attorneys wrote a farther letter to the Bank, in which they state “the probate will be produced to you after it is obtained from Court. No one besides our clients have the right to deal with the Government Promissory Notes in question.” On the same date, the 7th December 1904, the District Judge at Faridpur appointed Asutosh Maitra, who has been called as a witness in this case, to be administrator pendente like of the estate of the deceased.
21. On the 9th December 1904, Asutosh Maitra went to Gopalbari to take possession of the estate of the deceased. On arriving there he was informed that the notes were in the custody of the widow and Kankana and was requested not to take possession of them as the parties hoped to come to a settlement.
22. The administrator pendente lite, returned to Faridpur and reported the matter to the District Judge.
23. On the 14th or 15th December, the administrator pendente lite proceeded to Gopalbari for the second time.
24. The administrator pendente lite was there informed that the Government Promissory Notes had been removed by the widow. On the morning after his arrival he had an interview with the widow, who stated that an elderly female relative, one Chandamoni, had got possession of the notes. The administrator pendente life sought out Chandamoni, who denied having possession of the notes. The plaintiffs’ evidence as to the widow getting possession of the notes is as follows: The day before the second visit of the administrator pendente lite the widow and Kankana had a quarrel over the custody of the notes, and in the course of this quarrel Kankana threw down her key of the box, in which the notes were kept, and, subsequently, the widow removed the notes to the quarters of Upendra Nath Kundu, who was one of the cosharers in the house at Gopalbari. Having regard to the subsequent history of the notes I think this story is correct.
25. Early in January 1905, the widow propounded in this Court a document, which she stated to be the last Will of the deceased. The widow was examined on commission in those proceedings and in the course of her evidence she stated that the Government Promissory Notes were in her possession. On the 29th April 1905, an application was made in the High Court for the appointment of a Receiver. The widow filed an affidavit in opposition to that application, wherein she stated that she had pledged certain of the notes for necessaries and costs of the suit. On the 4th May 1905, the Official Receiver was appointed to be Receiver of the estate of the deceased.
26. The petition for probate in the High Court was subsequently dismissed, the Court holding the alleged Will propounded by the widow to be a forgery.
27. It will now be convenient to trace the subsequent history (so far as it appears from the evidence) of the notes from the date they were removed by the widow in the middle of December 1904.
28. On the 13th March 1905, Upendra Nath Kundu (being the person to whose quarters the widow had removed the notes) pledged with the Bank of Bengal certain of the notes of the face value of Rs. 25,000 as security for an advance of Rs. 24,000.
29. On the 18th April 1905, Upendra Nath Kundu pledged a further parcel of the notes having a face value of Rs. 10,000 with the Bank of Bengal as security for an advance of Rs. 9,500.
30. On the 1st May 1905, Kedarnath, whom the evidence shows was connected with the widow, sold to the Bank of Bengal a further parcel of the notes having a face value of Rs. 11,000.
31. On the 29th May 1905, Upendra sold to the Bank of the Bengal a further parcel of the notes of the face value of Rs. 2,000.
32. On the 21st June 1905, Upendra wrote to the Bank of Bengal requesting them to sell the pledged notes of the face value of Rs. 35,000. The Bank accordingly did so and paid the balance to Upendra.
33. Thus the Bank of Bengal acquired notes of the face value of Rs. 48,000 out of the notes for Rs. 61,000, which belonged to the deceased at his death. All these notes purport to be endorsed by the deceased. The Bank of Bengal presented the notes for Rs. 48,000 to the Public Debt Office and received in exchange in their own favour renewed notes for a similar amount.
34. The plaintiffs allege that these endorsements purporting to be made by the deceased are forgeries. The defendant denies this, and further says that, even if the endorsements purporting to be made by the deceased on the back of the notes are forgeries, yet the Bank of Bengal became holders in due course of the notes within the meaning of the Negotiable Instruments Act. Now Government Promissory Notes are payable to the order of the payee and therefore pass by endorsement and delivery only. (Section 46 of the Negotiable Instruments Act.)
35. A “holder in due course” is defined in Section 9 of the Act as any person who for consideration becomes the possessor of a promissory note, bill of exchange or cheque if payable to bearer or the payee or endorsee thereof, if payable to or to the order of a payee, 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 title.
36. But then the defendant says that under Section 58 of the Negotiable Instruments Act, the Bank of Bengal, even if the signature of the deceased are forgeries, were “holders in due course,” as they took the notes from some persons other than the deceased in good faith and for value.
37. In support of this proposition the defendant relies on the dictum of Stephen J. in Chandra Kali Dabee v. E.P. Chapman 32 C.799,815. With the greatest respect to the learned Judge I am unable to agree with his opinion that a person, can claim title to a negotiable instrument through a forged endorsement. A forged endorsement is a nullity, and it must be taken as if no such endorsement was on the instrument. The judgment of Russell, J. in the case of Hunsraj Purmanand v. Ruttonji Walji 24 B. 65 commends itself to me. There does not appear to me to be any difference between the law in England and in India in this respect.
38. The defendant has also this further difficulty in his way with regard to a largo number of the notes, namely, at the time the Bank of Bengal acquired the notes several of them had matured, and with respect to these the Bank could not be holders in due course and could, therefore, only acquire the rights of their transferor (section 59 of the Negotiable Instruments Act). The real question is therefore whether or not the endorsements or the notes purporting to be those of the deceased are or are not genuine. Now on whom is the onus as to this issue.
39. In my opinion the onus is on the defendant with respect to the bills that had not matured. When once the plaintiffs have established, as I have held they have, that the widow obtained possession of these notes from the lawful owners by means of an offence or fraud, the onus of proving that the Bank became holders in due course lies on the defendant.
40. With respect to the notes that had matured the onus seems to me to be obviously on the defendant.
41. If that be so, it is obvious that the evidence in this case falls far short of discharging that onus. But even if the onus were on the plaintiffs, I should hold that the plaintiffs have discharged that onus. There is first the fact that the notes were free from any endorsement on the day on which interest was drawn in June 1904. Secondly, I think the evidence establishes that after that date the notes, except the notes for Rs. 2,000, were not pledged with any one. The evidence on behalf of the plaintiffs further proves that the notes, except on the occasions when the notes for Rs. 2,000 were taken out of the box to raise the two sums of Rs. 900 each, and when the box was taken out to restore these two notes on their redemption on the 16th July 1904, remained in the box until the deceased’s death. There is also the important fact that some of the notes given to Khettermoni bore no endorsement, whereas one would have expected that, if some of the notes were blank endorsed notes without an endorsement by the deceased and, therefore, incapable of being negotiated, they would not have been given to Khettermoni.
42. In these circumstances I hold that the endorsements on the notes through which the Bank of Bengal claimed the notes are forgeries.
43. I must, therefore, enter judgment for the plaintiffs for a sum which at the present market price represents the value of Government Promissory Notes for Rs. 48,000.
44. With respect to the interest, which ought to have been received by the plaintiffs, unless the parties can agree upon the amount I must direct a reference to ascertain this amount.
45. The defendant must pay to the plaintiffs their costs of this suit.