1. The first question is, what was the transaction that took place between the defendant and Thompson as the agent of the plaintiff in connection with the piece of Government paper in suit.
2. There can, I think, be no doubt upon the evidence that it was a lending by the defendant and a borrowing in the name of, and ostensibly for, the plaintiff’, of Rs. 19,000 upon the security of the paper. When the loan was effected a promissory note for the amount was executed in favour of the defendant by Thompson in the name of the plaintiff, and the Government paper was delivered, to the defendant by Thompson. The paper was not endorsed to the defendant, but at the time of its delivery to the defendant bore an endorsement in blank, which had some time previously and for some other purpose been made by Thompson in the name of the plaintiff.
3. There is no dispute as to the identity of the paper. It is a promissory note of the Government of India of the four-and-half per cent. Loan of 1879 for Rs. 20,000. It bears the No. 016388 over 000678, and was issued by the treasury in the name of the plaintiff and payable to his order. It was a renewal of a previous note of the same Government loan, for the same amount, numbered 000678, which had been also issued in the name of the plaintiff and payable to his order. The latter piece of paper had, together with other pieces, been deposited by the plaintiff in October 1878 with Nicholls & Co., who styled themselves “financial agents,” and gave the plaintiff a receipt for the same, dated the 22nd of that month. Two days before the date of the receipt, the plaintiff had executed in favour of William Nicholls and G.A. Thompson, two of the members of the firm, a power-of-attorney, applicable, amongst other things, to the Government paper so deposited.
4. Benimadhub, who manages the defendant’s business in Calcutta as headman, deposes that the broker who negotiated the transaction came to him on behalf of the plaintiff, and said that the plaintiff wanted to borrow Rs. 19,000 upon a Government security for Rs. 20,000, which he represented as being in pledge with the firm of Ameer Singh for money lent by the latter to the plaintiff. The defendant requiring to see the Government security before making the advance, the Government paper in suit was brought to him, and he, after satisfying himself by enquiry of the broker that Thompson had authority to draw the interest and sell the paper, sent the Rs. 19,000 by his clerk Koylash Chunder to Nicholls & Co.’s place of business. Koylash Chunder deposes that he took the money to that place, and having got what he considered to be satisfactory answers from Thompson as to his authority to borrow money on. the Government paper in the name of the plaintiff, and also having received from Thompson the promissory note and Government paper in suit, handed to him the Rs. 19,000. This took place on the 15th December 1880. At the foot of the promissory note is a memorandum of the deposit of the Government paper. An account also was opened in the plaintiff’s name by Benimadhub in his master’s books, in which the transaction is recorded as a loan upon the Government paper.
5. The next question is, was this transaction authorized by the plaintiff? The defendant, in his written statement, asserts, that he believed, and had every reason to believe, that Nicholls & Co. had full power to borrow the said sum of Rs. 19,000 as agents of the plaintiffs”; but he has given no evidence that either Thompson, or his firm, had any such authority. The plaintiff, on the other hand, denies in his evidence that he ever borrowed Rs. 19,000 from Ameer Singh, or any one else, or ever gave authority to Nicholls & Co., or to Thompson, to borrow any money for him. He adds, that he first became aware of the loan made in his name when the members of the firm of Nicholls & Co. became bankrupt and disappeared. No member of that firm has been called to contradict the plaintiff, or to prove why or when Thompson put the blank endorsement in the plaintiff’s name upon the Government paper in suit; nor any one from the firm of Ameer Singh to show the circumstances under which the Government paper was pledged with the latter firm.
6. But the defendant strenuously contends that the transaction was warranted by the power-of-attorney executed by the plaintiff in favour of Thompson and William Nicholls, authorizing the attorneys, amongst other things, to ‘negotiate’ the plaintiff’s Government paper.
7. This word is in the power allied with the words “make sale, dispose of, assign, and transfer.” Each of these words, according to the decision of the Privy Council in The Bank of Bengal v. Fagan 5 Moore’s I.A. 27 is to be read disjunctively, and the powers conveyed by these words to be treated as joint and several.
8. The power-of-attorney relates to many other classes of property besides Government notes and Government paper, the last class of property mentioned being “securities of any description.” Viewing the words conveying absolute authority in connection with the classes of property over which the powers are to operate, it is difficult to see how the word ‘negotiate’ is appropriate to anything which is ordinarily done with or to a Government promissory note or piece of Government paper. As was truly said by one of the learned Counsel for the plaintiff, if a banker who had a Government note belonging to a customer, deposited with him for safe custody, were to receive a written order from the customer to negotiate the Government note, he would not know how to execute the order, and would probably ask his customer for more definite instructions as to how he wished the note to be dealt with. If a similar order was given respecting an ordinary commercial promissory note, the banker would feel no hesitation what to do with the note. He would get it discounted, which means that he would sell the note and put it in circulation, with a right on the part of the purchaser or any subsequent holder to have recourse to the party on whose behalf it was discounted, in case that party’s name was on the note and default made in payment of the note at maturity. If the principal’s name was not on the note when offered for discount, a banker, who held a similar power-of-attorney to the present one, would, beyond doubt, be authorized to endorse the note in his principal’s name for the purpose of discounting the bill.
9. Promissory notes of the Government of India, issued against a loan made by the public to that Government, although in form the same as ordinary commercial promissory notes, differ from them in most other essential particulars. They are not payable at any certain time, or on demand, or at sight. Their payment, with the exception of the half-yearly interest, is deferred indefinitely at the will of the borrowers, who are the makers of the notes; and, as far as I am aware, though I do not think the point has ever been, or is likely to become, the subject of judicial decision, the holders have no right to come upon previous endorsers for payment of the principal or interest in case Government should make default. A consideration of all these circumstances makes the doubt whether the word ‘negotiate’ ought not to be confined in its application to that class of property which is described in the power-of-attorney as “securities of any description,” and to such of them only as are ordinarily said to be negotiated when they are transferred or put in circulation.
10. Taking the term, however, to be applicable to a Government promissory note, and that such a note stands in the same position as an ordinary commercial note, did the word ‘negotiate’ confer upon Thompson authority to do what he did in the present case in the plaintiff’s name?
11. Is it reasonable to suppose, or is it a reasonable interpretation of the word ‘negotiate’ to hold, that the plaintiff, when he executed the power in Thompson’s favour, intended to confer upon Thompson authority to pledge his credit to an indefinite extent, or make him responsible for any money which Thompson might choose to borrow, or empower him to use the Government paper in Nicholls & Co.’s hands as a security for any loan that Thompson might please to contract. I think not. The word ‘negotiate,’ if applicable to such property as Government paper or Government promissory notes, did not, in my opinion, authorize Thompson to do more than put the paper in the market or to put it in circulation in the ordinary way in which such a transaction takes place in the market; and, if necessary for that purpose, to endorse it in the name of the plaintiff. In the transaction which Thompson entered into with the defendant, it was not put in the market or put in circulation; it was deposited as a security for money borrowed. It was an essential part of the transaction between Thompson and the defendant that the latter should keep the paper out of the market, and with himself, ready to be returned to Thompson when the loan was paid off, or when he sought to redeem the paper.
12. The defendant’s contention is, that if the word ‘negotiate’ does not by itself authorize the transaction, it does so when coupled with the words lower clown in the power-of-attorney, which run thus, “and for the purposes aforesaid to sign for me and in my name and on my behalf any and every contract, agreement, acceptance, or other document.” These are general words, and if the contention were sound, Thompson, under these words, might have entered into any transaction he pleased in the name of the plaintiff involving the plaintiff’ in any amount of responsibility, provided only he used the plaintiff’s Government paper for the purpose of raising the money necessary to carry out the transaction,–thus he might have bought goods or opened a shop in the plaintiff’s name. The authorities cited at the bar show that these general words are not to be construed as enlarging the authority of the donee of the power, but are to be confined strictly to the doing of things necessary to be done in performing the acts authorized by the power.
13. The defendant having, in my opinion, failed to show that the pledge of the Government note was authorized by the power-of-attorney, it follows that he acquired no title to the note by its delivery to him, although at the time it bore an endorsement in blank in the plaintiff’s name.
14. Besides this ground, it appears to me that the plaintiff’s right to recover the Government paper may be put upon another ground.
15. It is clear from the evidence that the defendant could not sue the plaintiff to recover the money which was borrowed by Thompson in his name, nor upon the promissory note which was executed by Thompson in his name. The loan, which is the principal transaction, being irrecoverable from the plaintiff because unauthorized, how can the defendant retain the Government paper, which was deposited as a security for that loan? If he sought to do so on the plea that he was a purchaser for valuable consideration without notice, the answer is obvious, that he took no means before lending his money to ascertain whether Thompson had authority to enter into the transaction. Neither Benimadhab nor Koylash Chunder asked to see the power-of-attorney which Thompson held; the former contented himself with seeing that the piece of Government paper was endorsed by Thompson for the plaintiff, and with the answer of the broker that Thompson had authority “to draw interest and sell the paper”; and Koylash Chunder, who was sent to Nicholls & Co., with the money and instructions to “enquire whether the Government paper had Thompson’s signature upon it,” was satisfied with Thompson’s acknowledgment of his signature, and his answer that “he had a power-of-attorney from the plaintiff to manage all his business, and had authority to receive money on that paper.”
16. The case of The Bank of Bengal v. Fagan 5 Moore’s I.A. 27 has been much relied on by the defendant’s counsel on the argument of this case. That decision is an authority for two propositions: first, that the words in a power-of-attorney conferring power are to be read disjunctively; and secondly, that the word ‘endorse’ in a power-of-attorney warranted the endorsement which was made in that case; but beyond this has little or no application or bearing upon the present case.
17. The points there decided arose in an action of detinue instituted on the Common Law Side of the old Supreme Court of Calcutta. The success or failure of the suit depended upon whether the property in the Company’s paper had passed to the defendants, and this again turned solely upon whether, under the power-of-attorney, the plaintiff’s agent had authority to endorse the paper.
18. The present suit is instituted in a Court of both law and equity, and it must be determined by law as modified by equity. It seems to me immaterial whether the delivery of the Government paper, with the plaintiff’s endorsement in blank upon it by the hand of Thompson, passed the property in the paper or not. If it did not, no title was conferred upon the defendant; and if it did, the defendant cannot in equity be allowed to retain the property.
19. The plaint is not well drawn; it does not, as it might have done, ask for any relief in respect of the promissory note executed by Thompson in the plaintiff’s name; but that is not, I think, a reason why the plaintiff should be denied the relief which he does ask in respect of the Government paper. Although the plaint contains the omission referred to, the correspondence between the respective solicitors, which is set out in the plaint, supplies, in a great measure, the deficiency. The plaintiffs attorney’s letter of the 25th February 1881 demands the return of both the promissory note and the Government paper, alleging that the latter was deposited as a security for the payment of the former; and the defendant’s attorney, on the following 21st of March, writes a letter requiring the plaintiff to redeem the Government paper by paying the Rs. 19,000 and interest. These letters show how the parties regarded the transaction.
20. Having decided the case adversely to the defendant on the grounds which I have mentioned, it becomes unnecessary to consider the charge brought against him, that he took the Government paper with knowledge of the fraud which Thompson committed against the plaintiff by pledging it.
21. The plaintiff is entitled to a decree ordering the defendant to deliver to the plaintiff the Government paper in suit and to pay him all interest, if any, that he may have received upon the Government note since its deposit with him on the 15th December 1880; and that, in the meantime, the defendant be restrained from endorsing or parting with the said Government note.
Richard Garth, C.J.
22. I agree in the main with my brother WHITE’S judgment. He has gone very fully into the facts, and it is only necessary for me to express my opinion shortly. I confess, if the case had depended upon the meaning of the word ‘negotiate’ in the power-of-attorney, I should have been disposed to take the same view as the learned Judge in the Court below I see no reason why a Government note should not be ‘negotiated’ like any other promissory note; and if, as was suggested in the argument, the word ‘negotiate’ has any special meaning in Calcutta, which would confine its applicability to any particular class of instruments, or to any particular mode of dealing with those instruments, I think evidence to that effect should have been given at the trial.
23. It was held by the Privy Council in the case of The Bank of Bengal v. Fagan 5 Moore’s I.A. 27 that a power to endorse a Government note of this kind authorized an endorsement of the instrument by way of pledge; and upon the same principle it seems to me that a power to negotiate such a note would authorize its negotiation by way of pledge.
24. These notes are negotiated in much the same way as an ordinary promissory note,–that is to say, by endorsement and delivery in the first instance, and afterwards by delivery only; and endorsement seems to me to be only one mode of negotiation, the word ‘negotiate’ being the more comprehensive term of the two.
25. But this case does not depend, in my opinion, upon the meaning of the word ‘negotiate,’ nor of any other word in the power-of-attorney. It involves a different and much broader question than that in the case of The Bank of Bengal v. Fagan 5 Moore’s I.A. 27. There the transaction in respect of which the pledge was made was perfectly honest and unimpeachable. The borrower of the money effected the loan on his own account, and the only question was, whether he had authority under the power-of-attorney to endorse, by way of pledge, the Government notes belonging to his brother; and the Privy Council held, that the word ‘endorse’ gave him that power without reference to the purpose for which the endorsement was made.
26. But in this case the plaintiff’s real object is to impeach the whole transaction between Messrs. Nicholls and the defendant as a fraud upon himself, for which, from beginning to end, Messrs. Nicholls had no authority, and it is to be regretted that the plaintiff did not put his case upon this broad ground, and ask for relief as regards the promissory note, as well as the Government paper. He did take that course in the letter that was written before the suit was brought, and why he should have omitted to do so in his plaint it is perhaps not easy to explain.
27. I cannot help thinking that the separation of the question of pledge from that of the original loan has had a tendency to divert the argument, as well as the attention of the Court, from that which is the true issue in the cause; and I fear it may have been the means of inducing the learned Judge in the Court below to take what we consider to be an imperfect view of the matter.
28. It seems to me now, looking at the question in its proper light, that the plaintiff had a right to unripe the whole transaction. I cannot doubt that if he had sued to have the promissory note delivered up to be cancelled, on the ground that the loan itself was unauthorized and fraudulent, the defendant would have had no answer to the suit. It is clear that Messrs. Nicholls & Co. had no authority to borrow in the plaintiff’s name; indeed, it is not pretended that they had such authority, and the promissory note, although the plaint asks no relief in that respect, is in fact so much waste paper.
29. Then how can the security stand if the loan is negatived, and the promissory note is invalid? I think that the whole transaction is a fraud, and a nullity from beginning to end. The return of the Government paper is claimed upon that ground, and I think that the omission to ask relief as regards the promissory note will make no substantial difference in the result of the cause.
30. The plaintiff will have a decree in the terms of my brother WHITE’S judgment, and he will also have his costs in both Courts on scale No. 2.