' This is an appeal against the judgment and decree delivered on 9-1-1973 and 24-1-1973, respectively by the First Additional District Judge, Karachi in Suit No.235/69, whereby the suit filed by the respondent No.1 for the recovery of Rs.13,599.43 was decreed with interest and costs against the present appellant and respondent No.2.
2. The facts giving rise to the above appeal, briefly stated are that the respondent No.1 filed a suit under Order XXXVII, C.P.C. against the appellant and respondent No.2, stating therein that the respondent No.2 was an account-holder of respondent No.1 at its Eidgah Maidan Branch, Bunder Road, Karachi. On 15-11-1966 the respondent No.1 at the request of the appellant and respondent No.2 granted an overdraft limit of Rs.10,000 to respondent No.2. On the same day the appellant and respondent No.2 delivered a Promissory Note to the respondent No.1 alongwith a letter accompanying the said Promissory Note, executed by respondent No.2 in favour of the appellant and endorsed by the appellant in favour of the respondent No.1, as a security for repayment -of the said loan/overdraft. As the respondent No.2 failed to pay the amount due against her, respondent No.1 filed a suit against the respondent No.2 and the appellant for recovery of the amount of Rs.13,599.43, then found due against respondent No.2.
3. The respondent No.2 did not contest the suit, hence the suit was decreed against him on 23-9- 1971. However, the suit was contested by the appellant and was decreed against him after hearing.
4. The contention of Mr. Akhtar Mahmood, learned counsel for the appellant is two-fold: Firstly, the appellant having not received the amount of Rs.10,000 as consideration from the respondent No.1 Bank, his endorsing the Promissory Note in favour of respondent No.1 bank does not bind him to pay the said amount of Rs.10,000 on the basis of the said Promissory Note; and secondly, he cannot be made liable to pay the said amount as guarantor in the absence of any deed of guarantee executed by him in favour of respondent No.l.
5. In support of his first contention as aforesaid, he referred to me a number of sections of the Negotiable Instruments Act, 1881 namely, sections 8, 9, 13 and 43. His main argument is based on section 43 of the Negotiable Instruments Act, 1881 which reads as follows:- "43. A negotiable instrument made, drawn, accepted, endorsed or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without indorsement to a holder for considera tion, such holder and every subsequent holder deriving title from him, may recover the amount due on such instrument from the transferor for consideration or any prior party thereto."
6. Learned counsel for the appellant contended that the respondent No.1 bank failed to prove that the amount of Rs.10,000 was paid by the respondent No.1 to him. Respondent No.1 examined one of his clerks who produced Account Sheets but they were in respect of respondent No.2 only, as the appellant did not maintain any Account with the respondent No.l. He further contended that the respondent No.1 could very well produce the officer concerned to prove the amount of consideration of Rs.10,000 having been paid to him by the respondent No.l. Continuing with his contentions, he submitted that although the burden of proof of non-receipt of consideration was on the appellant but in the circumstances of the case when the evidence has been led by both the parties, the burden of proof having not been discharged by him will be immaterial. With the result that the question of the passing of consideration will ultimately depend on appreciation of evidence bearing on that question. To support his contentions, he relied on; Anumolu Narayana Rao and another v. Ghattaraju Venkatapayya and others AIR 1937 Mad.
182. Bishnu Dayal Junjhunawalla v. Atal Behari Acharya and another AIR 1960 Orissa 172 and Chandan Lal Joura v. M/s Amin Chan Mohan Lal AIR 1960 Punjab 500.
7. It may be noted that there are special rules of evidence with regard to the proof of certain matters under the Negotiable Instruments Act, 1881. Subsection (a) of section 118 of the Negotiable Instruments Act, 1881 is relevant to the facts of the present case which reads as follows : - "118. Until the contrary is proved, the following presumptions shall be made:--
(a) that every negotiable instrument was made or drawn for considera tion, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferrd for consideration"
8. Admittedly the burden of proof of the absence of consideration for the endorsement of the Promissory Note in favour of respondent No.1 by the appellant rests on him. The presumption of receiving consideration which is provided in section 118(a) of the Negotiable Instruments Act, 1881 is, however, rebuttable. That being so, if the evidence produced by the parties prove that no consideration passed under the Promissory Note endorsed by the appellant in favour of respondent No.1, the respondent No.1 will be non-suited on that score.
9. It is correct that the clerk by by respondent No.1 does not say that any amount was paid by respondent No.1 to the appellant under the Promissory Note endorsed by him in favour of the respondent No.1 bank. But the consideration, under section 118(a) of the Negotiable Instruments Act, 1881 is not limited to monetary consideration only. By delivering the Promissory Note executed by respondent No.2 in favour of the appellant and endorsed by the appellant in favour of respondent No.1 and the same having been delivered jointly by the appellant and the respondent No.2 to respondent No.1 bank alongwith a letter (Exhs. 23 and 24) on 15-11-1966, the date on which the overdraft limit of Rs.10,000 was sanctioned by respondent No.1 in favour of the respondent No.2, clearly go to prove beyond any doubt that it was a part of the same transaction of giving overdraft facility to the respondent No.2 upto the amount of Rs.10,000. The respondent No.2 and the appellant had endorsed the Promissory Note in favour of respondent No.1 as a part of -that transaction which is clearly borne out of the letter Exh.24, accompanying the Promissory Note Exh.23. The letter reads as follows:- "Manager, National Bank of Pakistan, Iddgah Branch, Karachi. Code No.085.
' Dear Sir, ' Please take delivery of the accompanying DEMAND PROMISSORY NOTE, dated 15.11.1966, for Rs.10,000 made by S. Peshwa Begum d/o S.Qur-Be-Mohammad in favour of Salim Chowhdry.
' We further request you to note that we dispense with a notice of dishonour in terms of section 98(a) of the Negotiable Instruments Act, 1881/(Act XXVI of 1881) and that in event of payment not being made on demand the Bank is at liberty to give time for payment to any one/either of us without discharging the other/others from liability.
Yours faithfully, (Sd.) Syeda Peshwa Begum. (Sd.) Illegible.
' Note.-- Deletion must be initiated by all the persons signing the form."
10. The fact that the endorsing of the Promissory Note by the appellant in favour of respondent No.1 bank was in continuation of the same transaction accommodating respondent No.2 by granting overdraft limit upto Rs.10,000, is very much evident by the contents of the letter quoted above. Para. 2 of the letter contains a request by respondent No.2 and the appellant to dispense with notice of dishonour in terms of section 98(a) of the Negotiable Instruments Act, 1881. It also stipulates that in the event of payment not being made on demand the bank will be at liberty to give time for payment to any one either of them (i.e. the respondent No.2 or the appellant) without discharging the other from liability under the said Promissory Note.
11. I, therefore, hold that there was a consideration of accommodating the respondent No.2 for availing overdraft facility which validly passed to the appellant on his endorsing the Promissory Note in favour of the respondent No.l.
12. In support of the second contention, learned counsel for the appellant has relied on a case Tharumal Dhanrajmal Wadhva v: Kishindas Daryadionmal Mulchandani AIR 1940 Sind 146. This case is also relied on by the learned counsel for the respondent No.1. On reading the judgment, I find that, on the contrary, it supports the case of respondent No.1. The facts of the case, cited above, are somewhat similar to the facts of the present case. In the case cited by both the counsel for the parties, the facts were that a Promissory Note was executed by defendant No.1 in favour of defendant. No.2. The said Promissory Note was endorsed by defendant No.2 in favour of the plaintiff and it appears that the money, the raising of which was the purpose of the transaction, was paid, at least as to its major part, directly by the plaintiff to the defendant No.1.. In the written statement filed by the defendant No.2 he pleaded that he had obtained no considera tion by his endorsement on the Promissory Note. In appeal, the learned District Judge, Sukkur held that there was consideration for defendant No.2's endorsement on the Hundi in that he wanted to accommodate defendant No.1 and that such accommodation was sufficient consideration for the endorsement.
He, therefore, decreed the suit against defendant No.2. The second appeal before the erstwhile Sind Chief Court was dismissed with the following observations:- "Under section 37, Negotiable Instruments Act, he was in the position of a surety, and as a surety it is not essential that he should receive monetary consideration for himself. As the learned District Judge put it, he received consideration because defendant 1 was accommodated. The facts of this case are very different from those of cases of formal endorsers of a negotiable instrument. There can be no doubt that the making of the promissory note, the endorsement by defendant 2 to the plaintiff, and the payment by the plaintiff were, in the words of Leach C.J. in (1939) 1 MLJ 897, a part and parcel of the same transaction; and that the money consideration admittedly paid by the plaintiff passed, if not into the hands of defendant 2, at least to his knowledge into the pocket of defendant 1, whom he wished should be accommodated. The first point taken, therefore, seems to us without substance."
13. Learned counsel for respondent No.1 relying on section 37 of the Negotiable Instruments Act, 1881, submitted that the appellant, even otherwise, was liable on the Promissory Note as surety for respondent. No.2, the maker of the Promissory Note. Section 37 of the Negotiable Instruments Act, 1881 reads as under:- "37. The maker of a promissory note or cheque, the drawer of a 'bill of exchange until acceptance, and the acceptor are, in the absence of a contract to the contrary, respectively liable thereon as principal debtors, and other parties thereto are liable thereon as sureties for the maker, drawer or acceptor, as the case may be."
14. As provided in section 37 of. Negotiable Instruments Act, 1881, a party liable on a negotiable instrument bears to the holder either the relationship of a principal debtor or that of a surety. The provisions of the Contract Act, 1872 which generally govern the rights and liabilities of the principal debtor and surety are, however, subject to the provisions of the Negotiable Instruments Act, 1881, when the suit is based on a bill of exchange, promissory note or cheque. Therefore,not with standing the absence of any formal agreement of guarantee, between the appellant and respondent No.1, under the Contract Act, 1872, their relationship will be governed by section 37 of the Negotiable Instruments Act, 1881C whereunder the appellant stands as surety to respondent No.1 for respondent No.2. The contention of the learned counsel for the appellant that there being no agreement of guarantee the appellant cannot be held liable as guarantor, is misconceived.
Strictly speaking, the position of the surety as provided under section 37 of the Negotiable Instruments D. Act, 1881 may not be exactly the same but is sufficiently analogous to that of surety as provided under the Contract Act, 1872.
15. Therefore, the position of the appellant under the provisions of section 37 of the Negotiable Instruments Act, 1881 as referred to above, is that of surety for respondent No.2.
16. The upshot of the above discussion is that the appellant cannot, in the circumstances of the case, be said to have endorsed the Promissory Note in favour of repondent No.1 bank without consideration and that he is otherwise liable as surety for the respondent No.2. The appeal is, therefore, dismissed with costs.