Judgment :- 1. Second defendant in O.S. No. 311 of 1978, on the file of District Munsifs Court, Chengalpattu; is the appellant. After filing the appeal, he died, and his legal representatives have been impleaded as additional appellants 2 to 7. 2. Plaintiff, first respondent herein, also died, and his legal representatives have been impleaded as respondents 3 and 4. Second respondent in this appeal is the first defendant in the suit. 3. Suit filed by (deceased) plaintiff is one for a declaration that the suit promissory note and the amount due thereunder belongs to the plaintiff exclusively and that he alone is entitled to recover the money due thereunder and that the first defendant has no sort of interest in it. Plaintiff also sought for a relief, directing second defendant to pay the plaintiff a sum of Rs. 4,724-28. p. with subsequent interest and costs. 4. It is averred in the plaint that on 7.1.1973. second defendant received Rs. 3,700/- from plaintiff and executed the suit promissory note, promising to repay the principal on demand with interest at 6% per annum. According to plaintiff, he took the promissory note benami in the name of first defendant for the plaintiffs benefit and with the plaintiffs funds. The first defendant was only a name-lender and he has no beneficial interest in the money due under the promissory note. On 31.5.1976, plaintiff issued a registered notice to defendants pointing out the benami nature of the promissory note. Second defendant, on 15.6.1976, sent a reply falsely alleging that he had discharged the promissory note by payment to first defendant. First defendant sent a reply dated 17.3.1976 admitting the benami nature of the transaction and conceding that he has no beneficial interest in the promissory note. In spite of various demands made by plaintiff, since the second defendant (appellant) did not pay the amount, the suit was filed for recovery of the amount due under the promissory note. 5. In the written statement filed by the second defendant, he contended that the suit is not maintainable in law. He said that he borrowed a sum of Rs. 3,700/- from the first defendant and he executed a promissory note in his favour Long before the plaintiff issued the notice, first defendant had issued a notice calling upon the appellant to pay the amount due under the promissory note. He said that he borrowed a sum of Rs. 3,700/- from the first defendant and he executed a promissory note in his favour Long before the plaintiff issued the notice, first defendant had issued a notice calling upon the appellant to pay the amount due under the promissory note. It is further said that the first defendant represented that the promissory note is in the hands of the plaintiff and promised to return the same. He said that he has not borrowed any amount from the plaintiff. The further allegation that the prmissory note is benami for the plaintiff was also disputed. The funds also belong to the first defendant only and plaintiff has no beneficial interest therein. He further said that since he has discharged the entire amount by paying the same to the first defendant, his liability under the promissory note also stands discharged. He, therefore, prayed for dismissal of the suit. 6. The trial court, as per judgment, dated 23.11.1981, dismissed the suit holding that the suit is not maintainable. Since the plaintiffs name does not appear on the promissory note and since it was found that he is not a holder as defined under the Negotiable Instruments Act, it was held that the suit as framed cannot be sustained. It was further found that since the first defendant, the holder has already received the entire amount and has admitted the repayment, his liability under the notice also stands discharged. Section 78 of the Negotiable Instruments Act was relied on for the said purpose. 7. Aggrieved by the judgment, plaintiff preferred A.S. No. 27 of 1982, on the file of Subordinate Judges Court at Chengalpattu. The lower Appellate Court held that the case of benami pleaded by plaintiff is true. Being a beneficial owner, he is entitled to file the suit to recover the amount. It also relied on a decision of the Patna High Court reported in A.I.R. 1930 Patna 313 ( Sarjug Singh v. Deosaran Singh ) to come to the conclusion that the beneficial owner can file a suit to recover the amount on the basis of the promissory note making the alleged benamidhar and the debtor as parties to the suit and on the basis of the declaration granted, he gets assignment or he can be treated as a holder. The suit, according to the lower Appellant Court, is maintainable, and, therefore, a decree as prayed for was granted. It is against the said judgment of the lower Appellate Court, this Second Appeal has been preferred by the second defendant. 8. At the time of admission of the Second Appeal, the following substantial questions of law were raised for consideration:— “1) Whether the lower appellate court has properly appreciated and applied the principles governing benami transactions to the facts of the present case? 2) Whether the lower appellate court has properly appreciated and applied the principles under Sections 78 and 118 of the Negotiable Instruments Act to the facts of the present case? 3) Whether the lower appellate court has properly construed or omitted to construe the material evidence on record, when it chose to reverse the judgment and decree of the first Court? and 4) Whether the suit is barred by limitation?” 9. The only point that was argued by learned counsel for the appellant was that the suit as framed by plaintiff was not maintainable, since he is not a holder, or holder in due course, or assignee of the promissory note. The suit which is based only on the promissory note cannot be entertained, and the plaintiff is not entitled to a decree. Learned counsel submitted that if the legal position is found against him, the other findings which are based on evidence, do not call for any interference. So, the only question that requires consideration is, whether the plaintiff who claims to be the beneficial owner, and who alleges the first defendant as the benamidhar, is entitled to institute the suit and recover the amount from the second defendant, who is the promisor. 10. The promissory note is produced by plaintiff and the same is marked as Ex. A-1 in the case. 11. For deciding the question as to maintainability of such a suit, the Court will have to take into consideration the definition of ‘holder’ under Section 8 of the Negotiable Instruments Act. ‘Holder’ is defined as “The holder” of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto . (The remaining portion of that Section is not relevant for our purpose). ‘Holder’ is defined as “The holder” of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto . (The remaining portion of that Section is not relevant for our purpose). Sec. 9 of the said Act defines ‘Holder in due course’ as ‘any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer or the payee or indorsee thereof, if payable to order, 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 his title’. One more Section that requires consideration by this Court is Section 78. It reads thus:— “Subject to the provisions of Section 82, clause (C), payment of the amount due on a promissory note, bill of exchange or cheque must in order to discharge the maker or acceptor, be made to the holder of the instrument.” 12. In A.I.R. 1935 Madras 880 ( Pakiathammal v. Vaiyapuri Udayan ), a learned Judge of this Court held thus:— “The Negotiable Instruments Act was enacted for the benefit of trade and commerce and the principle underlying it is that promissory notes, bills of exchange, and cheques should be negotiable as apparent on their face without reference to secret title to them. Where the maker of a promissory note pays the “real” holder, he will yet be liable to the person whose name appears in the note and who is the holder within the meaning of the Act and the maker in such a case would find himself in peril. Therefore the “real” holder cannot sue on a note whereon the name of another person appears as payee.” 13. In A.I.R. 1965 Madras 157= (1964) 77 L.W. 524 (K.M.K. Subbaraya v. Abirami), Veerasawami, J. as he then was, held in paragraph 2 of the judgment, thus:— “No stranger to a contract can sue upon it. That is a basic principle of law. This principle is applied lo Negotiable Instruments Act, which is but a part of the law of Contract. That is a basic principle of law. This principle is applied lo Negotiable Instruments Act, which is but a part of the law of Contract. Apart from that, S. 8 of the Negotiable Instruments Act clearly defines a holder as a person entitled, be it noted, in his own name to the possession of the promissory note and to receive or recover the amount due thereon from the parties thereto. The rights of an endorsee to sue on the promissory note are rested on special statutory provisions .. ..” Further down, the learned Judge relied on a Full Bench Judgment of this Court reported in AIR 1935 Madras 181=41 L.W. 15=68 M.L.J. 81 (Venkatarama Reddiar v. Valli Akkal) wherein it was held thus:— “It may be that even upon getting a declaration to this effect (that he is the beneficial owner), the beneficiary will not directly be able to sue upon the promissory note; but that does not mean that a declaration of this kind will be futile. Under other provisions of the Trusts Act, the beneficiary can sue for the execution of the trust by compelling the trustee to take the necessary steps and have a Receiver appointed in the course of such proceedings so that the receiver may sue for the debt, or the befeficiary may also insist upon the trustee conveying the legal title to himself and after such transfer there will be no difficulty in his suing upon the promissory note in his own name.” And finally, in paragraph 6 of the judgment, it was held thus:— “In a declaration, as is rightly contended by Mr. M.S. Venkatarama Aiyar, there is no transfer of the property in the note. Beneficial ownership does not carry with it a legal title to the property concerned. A declaration that a person is the beneficial owner, does not take the matter further and leaves unaffected the legal title in the person in whom it inheres and it rests there only until it is tranferred to the beneficial owner It was perhaps on that basis Varadachariar, J. in 68 M.L.J. 81: [ AIR 1935 Mad. A declaration that a person is the beneficial owner, does not take the matter further and leaves unaffected the legal title in the person in whom it inheres and it rests there only until it is tranferred to the beneficial owner It was perhaps on that basis Varadachariar, J. in 68 M.L.J. 81: [ AIR 1935 Mad. 181 =41 L.W. 15 (FB)] considered that a beneficial owner would not be competent, merely on the basis of a declaration to that effect to sue on a promissory note and that in order to render him competent to do so, there must be a transfer in his favour. I am therefore unable to accept the contention of Mr. M.R. Narayanaswami that on the basis of a declaration granted to the first respondent she would be competent to recover on the promissory note.” 14 In A.I.R. 1971 Madras 496 (C. Thevar v. M. Kudumban) also, a learned Judge of this Court has taken a similar view. In that case, the defendant contended that he has already discharged the debt by paying the amount to the plaintiffs brother. But in the promissory note, the payee was the plaintiff. The question was, whether payment to plaintiffs brother, who was alleged to be the beneficial owner, will relieve the defendant of his liability under the promissory note. In paragraph 3 of the judgment, the Court held thus:— “The promissory note stands in the name of the plaintiff, and the discharge by payment made to a person who is not the holder of the promissory note, cannot prevent the holder of the promissory note from suing on the note for recovery of the amount due. Under Section 78 of the Negotiable Instruments Act, the promisee alne can maintain a suit and no payment made to a person who is not the holder can be recognised. On this question there is a direct decision in Subba Narayana Vathiyar v. Ramaswami Iyer , (1907) ILR 30 Mad. 88 to the following effect: “In our opinion Sections 78 and 8 are clearly applicable Section 78 provides that subject to the provisions of Section 82 (c) which do not apply here ‘payment of the amount due on a promissory note must in order to discharge the maker, be made to the holder. 88 to the following effect: “In our opinion Sections 78 and 8 are clearly applicable Section 78 provides that subject to the provisions of Section 82 (c) which do not apply here ‘payment of the amount due on a promissory note must in order to discharge the maker, be made to the holder. These provisions are imperative and in our opinion preclude the maker when sued on the instrument from pleading discharge by payment to any one but ‘the holder’”. 15. In a Full Bench decision of the Patna High Court reported in AIR 1957 Patna 380 (Bacha Prasad v. Janaki Rai), it was held thus:— “The Negotiable Instruments Act is moulded upon the English Act with slight modifications. The English law is founded upon the law Merchant of England. According to the law Merchant no person could sue unless he was a named payee-promisee or was entitled as indorsee or bearer. Similarly a person cannot also be sued unless be appeared as a party on the instrument by name or designation. That principle equally applies to a case coming under the provisions of the Negotiable Instruments Act. Where admittedly a case does not fall under Clause (c) of S. 82 a discharge could be given under S. 78 to the maker of the promissory note only when a payment is made to the holder thereof. The use of the words “any person entitled in his own name” in S. 8 which defines the term “holder” is very significant. They were inserted by the legislature with a view to prevent any one from claiming the rights of a holder under the Act on the ground that the ostensible holder is his benamidar. Thus, a beneficiary cannot be called a holder of the instrument and a payment to him cannot discharge the maker thereof. The law relating to negotiable instruments is the law of commerce in general and contains mercantile usages which require that the contract appearing on the face of the instrument should be taken as the real contract and the application of the doctrine of benami will introduce an element of uncertainty greatly hampering the free circulation of negotiable instruments. It is, therefore, that the legislature used the words “in his own name” purposely to avoid benami transactions in this respect. It is, therefore, that the legislature used the words “in his own name” purposely to avoid benami transactions in this respect. Thus the beneficiary not being in a position to give a valid discharge, cannot be entitled to recover the debt and sue for its recovery. To say that the object of S. 78 is only to secure an effective discharge and not to deal with the right of suit and there being no provision at all in the Act which prohibits the true owner of the instrument bringing a suit thereon the beneficiary can file a suit if he can secure a valid discharge for the debtor is to hold in favour of a proposition sacrificing both the spirit and form of the law on negotiable instruments. The provision of S. 78 even as a matter of construction prohibits any one but a h older to sue on the instrument. .. .. ” It may be noted that the decision relied on by the lower Appellate Court, viz. , AIR 1930 Patna 313 (supra) was held to be no longer good law in that case, and the same was overruled. 16. In view of the above said legal position, the finding of the lower Appellate Court that the plaintiff can maintain a suit as a beneficial owner on the promissory note cannot be sustained. 17. The finding of the lower Appellate Court that if a declaration is given, that will amount to an equitable transfer, and on that basis, the amount could be recovered, cannot stand a moments scrutiny by this Court. I hold so in view of the decision reported in A.I.R. 1965 Madras 157 = (1964) 77 L.W. 524 (supra) where similar argument was put forward. In AIR 1961 Madras 518 (Muthuveeran Chetty v. Govindan Chetty), In a partition in the family, debt due on a promissory note was allottted to a brother. He filed a suit. Learned Judge held in that case that allotment of a promissory note debt in a family partition is a valid transfer in law in favour of such a member, so that he will be competent to maintain s suit on the basis of that note. He filed a suit. Learned Judge held in that case that allotment of a promissory note debt in a family partition is a valid transfer in law in favour of such a member, so that he will be competent to maintain s suit on the basis of that note. In AIR 1965 Madras 157 (supra), the learned Judge distinguished that decision and held that if the promissory note is an asset of the joint family, by allotment of the same to a member, he becomes a holder under the Negotiable Instruments Act for he is already a member of the joint family. The promissory note, when owned by the Hindu family, it is really owned by all the members therein, and, if, in a partition, it is allotted to one of the members of the joint family, he becomes the owner-holder thereof. The argument that a declaration will amount to a transfer was not accepted by the learned Judge. That is clear from paragraph 6 of the judgment, which I have already extracted. 18. I have already held that the plaintiffs claim is based only on the promissory note. His name does not appear in the note. He also does not claim as a holder or holder in due course. It is only as a beneficial owner, the suit is filed. If that be so, the suit instituted plaintiff cannot be entertained. The lower Appellate Court has relied on a decision which was overruled even as early as in the year 1957. Without taking note of the correct law, the decree granted by the lower Appellate Court per se is illegal. 19. In the result, I allow the Second Appeal by restoring the judgment and decree of the trial Court. The suit O.S. No. 311 of 1978, on the file of District Munsifs Court, Chengalpattu, will stand dismissed. 20. Considering the importance of the question of law raised in this case, I direct the parties to suffer their respective costs.