Dismissed

Friends Investment & Co. v. Shahul Hameed

Kerala HC11 Mar 2008SA/118/1995

Case brief

AI extract

What is this about?

The Court held that a promissory note containing a material alteration, specifically a forged signature of a party, is void against all parties to the instrument. Applying Section 87 of the Negotiable Instruments Act and the principle ex turpi causa non oritur actio, the appeal was dismissed.

What did the court decide?

Appeal dismissed; no decree passed against either respondent based on the materially altered promissory note.

Friends Investment & Co. Vs Shahul Hameed — Contract and Commercial Disputes | Kerala HC (2008)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT :

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THE HONOURABLE MR. JUSTICE M.SASIDHARAN NAMBIAR

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TUESDAY, THE 11TH MARCH 2008 / 21ST PHALGUNA 1929

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SA.No. 118 of 1995(E)

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--------------------AS.165/1990 of DISTRICT COURT, THRISSUR OS.293/1987 of PRL.SUB COURT,THRISSUR

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APPELLANT/APPELLANT/PLAINTIFF:

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FRIENDS INVESTMENT COMPANY, PAZHANJI VILLAGE, DESOM, TALAPPILLY TALUK REP. BY MANAGING PARTNER JACOB.P.KALLANNUR, AGEDC 36, S/O.KOLLANUR PAUL

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BY ADV. SRI.E.R.VENKATESWARAN SRI.P.N.MOHANAN

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RESPONDENTS/RESPONDENTS/ DEFENDANTS:

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SHAHUL HAMEED, S/O.HYDROSEKUTTY, THIRUVENKITAM DESOM, IRINGAPRAM AMSOM, CHAVAKKAD TALUK

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ABDUL KARIM, S/O.APPUNNY MUSALIYAR, MANATHALA AMSOM, PUNNA DESOM, CHAVAKKAD TALUK

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BY ADV. SRI.C.P.CHANDRASEKHARAN (CALICUT) SRI.ANIL KUMAR SMT.APARNA C.MENON

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THIS SECOND APPEAL HAVING BEEN FINALLY HEARD

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ON 11/03/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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M.SASIDHARAN NAMBIAR,J.

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S.A.NO. 118 OF 1995

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Dated 10^th March 2008

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J U D G M E N T

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Plaintiff in O.S.293/1987 on the file of

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Sub court, Thrissur is the appellant. Defendants are respondents. Appellant is a registered partnership firm engaged in the business of money lending. Appellant instituted the suit for realisation of Rs.17,000/- with interest due under Ext.A1 promissory note dated 9/4/1984. Case of the appellant is that respondents borrowed Rs.17,000/- on executing Ext.A1 promissory note agreeing to repay the same and in spite of the demand amount was not paid and so appellant is entitled to realise the amount due under Ext.A1. First respondent remained ex-parte. Second respondent filed a written statement contending that he did not borrow any amount and did not execute Ext.A1 promissory note and is not liable to pay any amount.

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Learned Sub Judge on the evidence of Pws.1 and 2, DW1, Exts.A1 to A10 found that Ext.A1

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SA 118/95

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promissory note was not executed by second respondent and as a fraudulent signature of second respondent seen in Ext.A1, under Section 87 of Negotiable Instruments Act there is material alteration and appellant is not entitled to the decree sought for. Suit was dismissed. Appellant challenged the judgment before District court, Thrissur in A.S.165/1990. Learned District Judge on reappreciation of evidence confirmed the findings of the learned Munsiff and dismissed the appeal. It is challenged in second appeal.

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Second appeal was admitted on the following substantial question of law.

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Whether the alleged addition of the signature of the second defendant to the promissory note would make it unenforceable, even against the first defendant on the ground that it is materially altered.

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Learned counsel appearing for appellant was

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heard.

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Argument of the learned counsel relying on the decision of learned Single Judge of this curt in Aravindakshan Nair v. Essen Bankers (2007 (3) KLT

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718) is that courts should not decide the genuineness of

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SA 118/95

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a document based on comparison of the signature and though Section 73 of the Evidence Act enables the court to compare the signature, decision shall not based on comparison of the signature alone. Argument is that both the trial court and first appellate court decided the case based on comparison of the signature of second respondent seen in the written statement and postal acknowledgment and as well as Ext.A10 the earlier promissory note and findings of the courts below is not sustainable. Learned counsel did not dispute the question that if there is material alteration promissory note cannot be used for any purpose.

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Though the appellant challenged the finding of the courts below with regard to execution of Ext.A1 promissory note by second respondent and a substantial question of law on that aspect was sought to be raised, appeal was admitted only on the short question whether due to the material alteration, Ext.A1 promissory note can be enforced as against first respondent who did not dispute the execution.

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Case of the appellant is that Ext.A1 promissory note was executed by both the respondents. Though first respondent did not contest, second respondent

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contended that he did not borrow any amount and did not execute the promissory note. Burden is on the appellant to prove the execution. Burden is not on respondent to send Ext.A1 to an expert to get a report after comparing his admitted signatures with the signature seen in Ext.A1. Appellant did not apply to send Ext.A1 with the admitted signature of the second respondent to an expert to get an opinion on the identity of the signature. As rightly found by the courts below even in the plaint appellant did not plead that second respondent along with first respondent had earlier executed another promissory note and borrowed amount and that was repaid and subsequently Ext.A1 promissory note was not executed. Ext.A10 was pressed into service at the time of evidence to prove that second respondent had earlier executed another promissory note. Second respondent denied execution of that promissory note also. Courts below compared the signature seen in Ext.A1 with the signature seen in Ext.A10 as well as the admitted signatures seen in the written statement vakalath and acknowledgment. Based on such comparison, it was found that second respondent did not execute Ext.A1. That factual finding arrived at by the courts

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below is not based on the comparison of signature alone. It was based on the evidence on record. It cannot be said that appreciation of evidence was perverse. That concurrent funding of courts below. cannot be interfered in exercise of powers of this court under Section 100 of Code of Civil Procedure, especially in the light of the evidence on records. If that be so, it can only be found that signature seen in Ext.A1 is not that of the second respondent. If that be so, finding of courts below that there is material alteration which would make the promissory note unenforceable is perfectly correct.

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Section 87 of Negotiable Instruments Act provides that any material alteration of a negotiable instrument renders the same void as against any one who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties. Eventhough first defendant did not contest the suit and did not deny execution of Ext.A1, evidence of the appellant supported and his witness was that Ext.A1 was executed together by both the respondents. Evidence establish that second respondent did not

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execute Ext.A1. Even if first respondent executed Ext.A1 promissory note when the signature of second respondent is forged in Ext.A1, it will definitely be a material alteration as provided under section 87 of Negotiable Instruments Act. The question then is whether as canvassed by the appellant, a decree could be passed against the first defendant for the reason that he did not contest the case.

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Section 87 makes it absolutely clear that a material alteration of a negotiable instrument, unless with the consent of the parties thereto or made in order to carry out the common intention of the parties, would render the instrument void as against any one of the parties to the instrument. If there is a material alteration, in Ext.A1, that material alteration would make the instrument void not only against second respondent but against all the parties including the first respondent. So long as Ext.A1 is void, appellant is not entitled to realise any amount based on Ext.A1.

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A similar question was considered by a learned single Judge of High Court of Madras in Amirtham Pillai

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v. Nanjah Gouden (AIR 1914 Madras 369). As in this case, promissory note was allegedly executed by two

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persons and it was found that only one of them executed the instrument. It was held that a material portion of the promissory note being a forgery, it comes within the principle of the decision which hold that a material alteration invalidate whole note. As signature of one of the executants was forged it was held that the whole instrument is void and a decree cannot be passed against that person who executed it also. In Madam

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Pillai v. Athinarayana Pillai (AIR 1925 Madras 929) a similar question was considered by a single Judge. In that case also the promissory note was allegedly executed by two persons a father and so. On the evidence it was found that signature of one of the son was forged and the father executed the note. Finding was that after father executed the note, signature of the son was forged would make the whole instrument void only if it is an illegal contract. It was held:-

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“But this case has no application to the present: for here, the contract itself was not an illegal or immoral one. It was an ordinary loan transaction,

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evidenced by a promissory note.

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But to evidence the loan, or as
part of the contract itself the
promissory note was executed;
and in executing it the mark of
a person not a party to the
document was forged. If the
contract in itself is illegal,
the plaintiff would not be
entitled to enforce hisremedy
against any one, who is a party
to the contract. But where the
contract is legal, and as,
evidence of the contract,
something illegal is done, it
cannot be said that the whole
contract is void. In the
absence of any finding, that the
contract evidenced by the
promissory note was, for the
purpose of cheating or depriving
the 2^nd defendant of her
property, the contract cannot be
set to be invalid. If the

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intention and object of the plaintiff and the 1^st defendant were to deprive the 2^nd defendant of her property, the contract evidenced by the promissory note would be illegal. But where the plaintiff lends money to the 1^st defendant's father and asks for additional security and the 1^st defendant's father forges the mark of the 2^nd defendant with the consent and approval of the plaintiff, it cannot be said that the whole transaction is void.

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Granting that S.87 applies to such a transaction. In as much as the alteration was made with the consent of the executant, the document is not void. But I hold that S.87 has no application to a case like this, as it has reference only to an

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alteration after execution and

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not anything done at the time of

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the execution.”

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In Santhu Mohideen Pillai v. Jamal

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Md.Jamaludin (AIR 1928 Madras 1092), Justice Wallace on similar facts held that when plaintiff was a party to the forgery and it is a material alteration within the meaning of Section 87 of Negotiable Instruments Act and plaintiff is not entitled to get a decree against even the defendant who executed it.

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Evidence establish that Ext.A1 promissory note was not executed by the second respondent. A signature purporting to be that of the second respondent is seen in Ext.A1. Even if first respondent executed the promissory note, when the signature of the second respondent was forged in Ext.A1 and when even according to appellant both the executants executed Ext.A1 together it is a material alteration as provided under section 87.As a result the whole instrument is void and not void against the second respondent alone but also against first respondent. Plaintiff who committed an illegality and committed material alteration by forging the signature of the second

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respondent in Ext.A1 is not entitled to get a decree as against second respondent. The principle Ex turpi causa non oritur actio must apply. The Queen's Bench Division in Scott v. Brown, Doering, McNAB & Co. (C.A.1892 724) laid the principle as follows:-

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“Ex turpi causa non oritur
actio. This old and well-known
legal maxim is found in good
sense, and expresses a clear
and well-recognised legal
principle, which is not
confined to indictable
offences. No court ought to
enforce an illegal contract or
allow itself to be made the
instrument of enforcing
obligations alleged to arise
out of a contract or
transaction which is illegal,
if the illegality is duly
brought to the notice of the
Court, and if the person
invoking the aid of the Court

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is himself implicated in the illegality. It matters not whether the defendant has pleaded the illegality or whether he has not. If the evidence adduced by the plaintiff proves the illegality the court ought not to assist him. If authority is wanted for this proposition, it will be found in the well-known judgment of Lord Mansfield in

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Holman v. Johnson.”

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When appellant committed forgery of the signature of second respondent in Ext.A1 that material alteration makes Ext.A1 void against all parties to the instrument including first respondent also. Appellant is not entitled to the decree against first respondent also.

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Appeal is dismissed.

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M.SASIDHARAN NAMBIAR, JUDGE.

uj.

SA 118/95

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