J. CHALAMESWAR, J. ( 1 ) THE appellant is the first defendant in the suit. The appellant sold tobacco to the second respondent/second defendant and towards the value of the said tobacco, the appellant was given a cheque dated 2-11-1987 (Ex. A. 1) for an amount of Rs. 9,000. 00 by the second respondent. The cheque was drawn on the first respondent-plaintiff-Bank s branch at Guntur. On receipt of the cheque, the appellant presented the same to the first respondent-Bank s branch at Kovvur with whom the appellant had an account. The first respondent-Bank discounted the cheque and paid an amount of Rs. 5,000. 00 to the appellant and the balance amount of Rs. 3,975. 00 was credited to the Saving Bank account of the appellant maintained with the plaintiff-Bank. ( 2 ) THE cheque (Ex. A-1) was an account payee cheque. When the first respondent sent the cheque to the drawee bank i. e. , Andhra Bank branch at Guntur, the same was returned with an objection memo stating that the drawer exceeded the arrangement with the bank and hence the suit. ( 3 ) THE suit was decreed against both the defendants i. e. , the appellant and the second respondent herein to pay an amount of Rs. 15,415-50 ps. with future interest at 6% per annum, from the date of the institution of the suit till the date of the realisation and costs. ( 4 ) AGGRIEVED by the said judgment and decree dated 16-4-1985, the present appeal is preferred by the first defendant. ( 5 ) THE principal submission of the learned counsel for the appellant is that as the cheque in question was discounted by the first respondent-Bank, there is no creditor and debtor relationship between the first respondent and the appellant. The cheque in question was in fact not endorsed but transferred only by delivery by the appellant in favour of the first respondent and hence negotiated. The first respondent on such negotiation having discounted the bill become a holder in due course and, therefore, the relationship of creditor and debtor exists only between the respondents herein and the appellant has no legal liability to suffer the decree. ( 6 ) THE fact that the cheque in question was discounted by the first respondent is not disputed. ( 7 ) BILLS of exchange have been a common means of financing trade nationally and internationally. ( 6 ) THE fact that the cheque in question was discounted by the first respondent is not disputed. ( 7 ) BILLS of exchange have been a common means of financing trade nationally and internationally. A brief history of the origin and development of the bills of exchange and their purpose in the language of the celebrated authors - Bhashyam and Adiga :". . . . . In primitive societies, the system of bills of exchange could not, of course, have existed; for firstly, money which it represents was not invented till long after, and secondly, the art of writing was a thing unknown to them. When the system of bartering, by which crude and uncivilized societies carried on their commerce, was found inconvenient, a common medium of exchange and a representative of property of an easily convertible character was found necessary and money came into use. It might have had its humble origin in cowrie shells, brass or copper rings; but when once the utility of money was found, it never was lost sight of. With the progress of civilization, nobler metals displaced the baser ones, and the use of gold and silver as instruments of exchange is now to be found generally current in all civilized countries. With facility of communication between countries, and security of peace between nations, commerce of the world grew apace and one nation after another struggled for supremacy. The Phoenicians, Grecians and Carthaginians were more or less the chief commercial nations of the ancient world. The routes along which the vast commerce was carried on were insecure, and merchants carrying specie or coins were robbed of their wealth by roving pirates on sea and marauding robbers on land. Money by itself did not obviate all these difficulties arising from the multiplicity of commercial transactions, and in the course of centuries, there came into existence the idea of exchange. . . . . . . . whereby letters of credit, generally called bills of exchange, from a merchant in one country, to his debtor, a merchant in another, were issued requiring debt to be paid to a third person who carried the letter to the place where the debtor resided. . . . . . . . whereby letters of credit, generally called bills of exchange, from a merchant in one country, to his debtor, a merchant in another, were issued requiring debt to be paid to a third person who carried the letter to the place where the debtor resided. A bill of exchange was thus originally an order to pay a trade-debt, and the system of such bills afforded a convenient and facile way for the payment of debts in one country due to a person in another, without the danger or the incumbrance of carrying money in specie. For example, if A in Madras buys goods from B a merchant in London, and if A has a merchant C in London who owes him money, B of London by getting an order from A on C for the payment of that money to himself, can collect that price of his goods at London. The loss of interest during the time occupied by the journey, the trouble which A is relieved of in collecting his debt in a foreign place and even the absence of ready money in the hands of A at the time of the transaction are some of the causes which would promote the wide use of such instruments. It was found that the person in whose favour such order was made might, with advantage, transfer it to another and such transfers came to be recongized. In its origin, then, a bill of exchange effected the transfer of trade-debts of persons residing in distant countries and when once the advantages of such a course were realized, the system was extended to apply to inland trade debts, and gradually to private debts also. By the scrupulous fulfillment of the obligations arising under such instruments in the early stages of their growth, confidence was begotten, and from that confidence arose the peculiar use to which such instruments are now put. The instruments are now merely instruments of credit readily convertible into money and easily passable from one hand to another. With expanding commerce, the growing demands for money could not be met by mere supply of coins, and these instruments of credit took the function of money, which they represented, and thus became, by degrees, articles of traffic. Thus, the negotiable instrument came to be largely employed by merchants as an effective substitute for money. With expanding commerce, the growing demands for money could not be met by mere supply of coins, and these instruments of credit took the function of money, which they represented, and thus became, by degrees, articles of traffic. Thus, the negotiable instrument came to be largely employed by merchants as an effective substitute for money. "the most striking characteristic of money as distinguished from other species of property is the facility and freedom with which it circulates. Its possession with bearer is conclusive title to those who deal with him in good faith; and one taking it, therefore, in the course of business need look no further than the face of the coin and the possession of the person from whom he receives it. These are qualities which every representative of money must possess in order to answer its purpose effectively; and a negotiable paper does possess them in an eminent degree". In Gibson v. Minet, (1791) 1 H. Bla 569, Eyre, C. B. , said : "the wit of man cannot devise a thing better calculated for circulation. The value of the writing, the assignable quality of it, and the particular mode of assigning it, are created and determined in the original frame and constitution of the instrument itself; and the party to whom such a bill of exchange is intended, has only to read it, need look no further and has nothing to do with any private history that may belong to it. "xxxx xxxx xxxxxxxx xxxx xxxx. . . . and the present, perhaps complicated, but certainly convenient practice and rules relating to exchange and the instruments effecting such exchange from a necessary part of the knowledge to be acquired by any practical lawyer or a modern businessman. " ( 8 ) EVERY civilization developed its own negotiable instruments, though the law governing negotiable instruments in this country is mostly modelled after the law on the subject in England. In England, the body of law dealing with these instruments had its origins in the law merchant which is nothing but the settled usage and custom of merchants, the traders recognized and applied by the English Courts of law, in view of general interests of trade and convenience of public. The present Negotiable Instruments Act is a codification of the law on the subject. ( 9 ) SECTION 13 of the Act defines the expression "negotiable instrument". The present Negotiable Instruments Act is a codification of the law on the subject. ( 9 ) SECTION 13 of the Act defines the expression "negotiable instrument". By virtue of the said definition, promissory notes bills of exchange or cheques payable either to order or bearer are Negotiable Instruments. The expressions promissory note , bills of exchange and cheque themselves are once again defined under various provisions of the Act. Since the dispute in this case is about a cheque, I shall examine the relevant provisions of the Act dealing with cheques . ( 10 ) SECTION 6 of the Act defines "cheque":"a cheque is a bill of exchange drawn on specified banker and not expressed to be payable other wise than on demand. " ( 11 ) TO understand the definition, an examination of the definition of the expression "bill of exchange" also is required. The definition of the bill of exchange insofar as it is relevant for the purpose of the present case is as follows :section 5:"a bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a sum of money only to, or to the order of, a certain person or to the bearer of the instrument. "from a combined reading of Sections 5 and 6 of the Act, a cheque , which is a bill of exchange must be (1) an instrument in writing, (2) it must contain an unconditional order signed by the maker, (3) it must direct a specific banker to pay a sum of money, eihter - (a) To a certain person or (b) To the order of a certain person, or (c) To the bearer of the cheque, and (4) it must not be expressed to be payable otherwise then on demand. ( 12 ) IT is already noticed from the history of Negotiable Instruments that bills of exchange have always been negotiable. Section 14 of the Negotiable Instruments Act, defines the expression negotiation and in the context of a cheque it reads thus:"when a cheque is transferred to any person so as to constitute that person the holder thereof", the cheque is said to be negotiated. Section 14 of the Negotiable Instruments Act, defines the expression negotiation and in the context of a cheque it reads thus:"when a cheque is transferred to any person so as to constitute that person the holder thereof", the cheque is said to be negotiated. Under Section 8 of the Negotiable Instruments Act, the holder of a cheque is defined to be "any person entitled in his own name to the possession there of and to receive or recover the amount due thereon from the parties thereto. " ( 13 ) TO understand the concept of negotiation, the expression transfer in the context of property and the concept as to who is entitled to the possession of the property require examination. There are various modes of transfer of property known to law. They are sale, exchange, gift, mortgage, lease etc. Some of these modes are peculiar only to immovable property. As far as movable property is concerned, sale, exchange and gift are also known modes of transfer. Whether the other modes of transfer available in the context of immovable property are also available to transfer of movable property is not required to be gone into in this case having regard to the facts of the case. When the property is transferred either by sale or exchange, there is a consideration, which could be computed in terms of money where as when the property is transferred by way of gift, such a consideration is absent. ( 14 ) AS a proposition of law it is well settled that a cheque is movable property. Therefore, normally it is capable of being transferred by way of either sale or exchange or gift . In all the abovementioned categories of transfer, the transferee becomes the absolute owner of the cheque. Possession is one of the necessary incidents of ownership. ( 15 ) BUT possession and ownership of property need not always go together. Anglo Saxon Jurisprudence recognizes that the owner of the property always need not be in possession of the property. The owner can permit some other person to be in possession. At times the possession of property can lie with persons who have no title or claim to ownership of the property even without the permission of the owner. Anglo Saxon Jurisprudence recognizes that the owner of the property always need not be in possession of the property. The owner can permit some other person to be in possession. At times the possession of property can lie with persons who have no title or claim to ownership of the property even without the permission of the owner. It is also settled principle of law that whoever is in possession of the property is entitled to, the enjoyment of the said property and if any person interferes with such enjoyment of the property or deprives the possessor of his possession of the property, the possessor is entitled to bring an action in law to recover his possession. ( 16 ) THE cheque being movable property, any person who is in possession of a cheque would also normally be entitled to seek protection of law for enjoying the property. Normally a person who is in possession of a cheque, should be able to receive the amount due thereon from the persons who are liable to make payment if they pay voluntarily or recover the same by initiating appropriate legal proceedings if it is not voluntarily paid. ( 17 ) BUT the legislature imposed limitation on such a right by stipulating that the holder of cheque would only be a person who is entitled in his own name to the possession thereof . Though in realm of immovable property, a person who is in adverse possession of the immovable property can resist even real owner from interfering with the property, subject to the law of limitation, the legislature obviously having regard to the nature of the property in a cheque chose to define the expression holder as meaning only a person entitled to in his own name thereby implying by some means legally recognized - to the possession of the cheque. ( 18 ) WHEN a cheque is transferred without consideration by the previous holder, the transferee becomes holder. On the other hand if a cheque is transferred for consideration, the transferee becomes holder in due course. As can be seen from the definitions of holder and holder in due course that every holder in due course is also a holder, but every holder is not necessarily a holder in due course. On the other hand if a cheque is transferred for consideration, the transferee becomes holder in due course. As can be seen from the definitions of holder and holder in due course that every holder in due course is also a holder, but every holder is not necessarily a holder in due course. ( 19 ) ONCE a person is a holder, he should be entitled to receive the amount due on the cheque if paid voluntarily by the persons liable to make the payment and recover the same by appropriate action in law if the amount is not paid voluntarily by such persons. ( 20 ) THE next question is that from whom such amount can be recovered. Section 8 of the Act says that the amount can be recovered from the parties to the cheque. The expression parties to the cheque or bill of exchange is not defined under the Act. But Chapter III of the Act deals with the same. Under the various Sections of Chapter III, legislature defined the liability of the various persons dealing with the bills of exchange, cheques etc. , Section 26 of the Act declares that every person who makes, draws, accepts, endorses, delivers, or negotiates may bind himself and be bound. Section 28 of the Act deals with agent signing Negotiable Instrument on behalf of any person making, drawing, accepting, endorsing, delivering, or negotiating the negotiable instruments. Similarly Section 29 of the Act deals with the liability of the legal representative of any of the persons mentioned above when he signs negotiable instrument. Section 30 deals with the liability of the drawer. The liability of every one of the person who would have an occasion to deal with a cheque/bill of exchange, in various capacities is clearly spelt out by the legislature in the succeeding sections. The legislature also spelt out the various circumstances under which such liability accrues to such person. Therefore, from any one of the persons, who deals with a negotiable instrument, contemplated under Chapter III of the Act, who are the parties to the negotiable instrument, the amount can be recovered subject to the limitations imposed under the relevant provision. ( 21 ) IN the context of a cheque, there is always drawer, drawee and payee. Apart from them, any one of the abovementioned persons can negotiate the cheque thereby creating rights and obligations in third parties. ( 21 ) IN the context of a cheque, there is always drawer, drawee and payee. Apart from them, any one of the abovementioned persons can negotiate the cheque thereby creating rights and obligations in third parties. As already noticed from the definition of the expression cheque and bill of exchange a cheque can be drawn and payable to a specified person or ordered to be payable to the specified persons or to the bearer. Depending on the fact that as to whom the cheque is payable, the mode of negotiation varies. ( 22 ) SECTION 47 of the Act, stipulates that a cheque payable to the bearer is negotiable by delivery there of. Section 48 of the Act stipulates that a cheque (payable to order) is negotiable by the holder by endorsement and delivery thereof. The expression indorsement is defined under Section 15 of the Act and according to the said definition, whenever the maker or the holder of the negotiable instrument signs the same for the purpose of negotiation, then the instrument is said to be endorsed. Section 35 of the Act stipulates that any person who endorses and delivers a negotiable instrument is bound himself thereby to the subsequent holder to compensate such holder for any loss or damage caused to him, in case, the instrument eventually is dishonoured by that person who is legally liable to make the payment. Ofcourse, Section itself provides that the indorsee may at the time of indorsement expressly exclude or make his liability conditional. ( 23 ) THE legal position in common law, with respect to delivery of a negotiable instrument without indorsement, fell for consideration before the English Courts in a judgment, reported in Fenn and Harrison, (1790) 100 ER 842. In the following factual background :"where the holder of a bill of exchange desired A to get it discounted, but positively refused to indorse it, and A delivered it to B for the same purpose, informing him to whom it belonged, and B, finding that he could not dispose of it without indorsing it, was prevailed upon to do so by A s telling him that he would indemnify him; but the indorsee took it upon the credit of the names on the bill without any knowledge of the real owner. ( 24 ) IN an action against the holder, the Court by majority held that such holder is not liable. Buller, J. held :". . . . . . I consider this action as a new attempt; and it is difficult to say to what extent it may be carried, if it be encouraged. In the case of a bill of exchange, we know precisely what remedy the holder has, if the bill be not paid; his security appears wholly on the face of the bill itself; the acceptor, the drawer and the indorsers, are all liable in their turns, but they are only liable because they have written their names on the bill. But this is an attempt to make some other persons liable, whose names do not appear on the bill, and that under circumstances very alarming to mercantile houses through whose hands bills of exchange pass,. . . . . " ( 25 ) SECTION 35 of the Act embodies the principle of law merchant to the extent that any person indorsing a negotiable instrument is liable thereon. However, either Section 35 or the other provisions of the Negotiable Instruments Act are silent about the liability of a party to the negotiable instrument which he chose not to indorse. Therefore, the principle of law merchant enunciated in the above referred case still holds good. ( 26 ) A Division Bench of Madras High Court, in the case of Valjee Kanjee and Co. v. Horsookdas, AIR 1932 Mad 323, while interpreting with Section 35 of the Act, held :"further, the defendants were not endorsers of the bills. They were transferors by delivery; and a transferor by delivery is not liable on the instrument; vide Section 58 (2), Bills of Exchange Act. It is true that there is no provision in the Negotiable Instruments Act corresponding to Section 58 (2 ). But this Section simply embodies the law merchant which was explained by Abbott, in Van Wart v. Woolley, (1824) 3 B and C 439 at page 445 as follows :"if a person delivers a bill to another without endorsing his own name upon it, he does not subject himself to the obligations of the law merchant, he cannot be sued on the bill either by the person to whom he delivers it or by any other. . . . . . . . . . . . . . . " ( 27 ) COMING to the facts of the case, as already noticed, the appellant who is the payee of the cheque in dispute did not indorse the same, but, only delivered it to the first respondent-bank. The cheque being a bearer cheque could be negotiated by delivery in view of Section 47 of the Act. The first respondent admittedly discounted the cheque. The expression discounting is defined by the celebrated author on banking; Paget, in the following terms. "to discount a bill is to buy it to become the transferee of it by having it endorsed or transferred by delivery by the holder giving him a price settled either by agreement or by current rate in the money market and based on the time the bill has to render. " ( 28 ) THE said definition is quoted with approval by the Division Bench of Madhya Pradesh High Court in the case of Dena Bank v. M. P. N. T. Corporation Limited, AIR 1982 Madh Pra 85, their Lordships held that discounting is nothing but purchasing. Their Lordships further held as under (Paras 16 and 17) :". . . . . . It is clear that if the bills and the relevant documents presented by its drawer are accepted by a banker with endorsement in its favour and the same are immediately discounted by the banker without waiting for its collection, by giving full credit for the entire amount of the document, so presented, the banker itself becomes a purchaser and the holder thereof for full value. . . . . . . . xxxx xxxx xxxxxxxx xxxx xxxx. . . . . . that the defendant Bank was not only a collecting agent of the documents presented to it by the plaintiff company but the documents on presentation were discounted by the Bank and the value was credited to the account of the plaintiff immediately without waiting for its collection from the drawee. These facts and circumstances clearly make out a case that the Bank was purchaser of title documents and it was holder thereof for full value. . . . . "on the facts of the case before their Lordships, it appears that the bill of exchange in question was in fact indorsed by the holder. These facts and circumstances clearly make out a case that the Bank was purchaser of title documents and it was holder thereof for full value. . . . . "on the facts of the case before their Lordships, it appears that the bill of exchange in question was in fact indorsed by the holder. In such a case, having regard to the language of Section 35 of the Negotiable Instruments Act, their Lordships should have reached a conclusion that the indorsee was liable and the result of the appeal should have been otherwise. Apparently, Section 35 of the Act was not brought to the notice of their Lordships, I am in entire agreement with the view of the opinion of their Lordships insofar as the effect of discounting is concerned. With respect to the conclusions reached by their Lordships, for the reasons mentioned above, I mostly humbly disagree. ( 29 ) IF that is the legal effect of discounting, the first respondent-bank has become a holder in due course and, therefore, is entitled to recover the amount from the parties to the cheque. It is doubtful whether the appellant can be called a party to the cheque in view of the fact that he is the payee, but definitely a party to the cheque in view of the fact that he delivered the same to the first respondent bank, that he could not be mulcted with the liability in view of the above discussion as he did not endorse the cheque in question, nor he bind himself to be liable by a contract (as no such contract was either pleaded or proved by the respondent;) nor there is anything in the Negotiable Instrument Act which fastens the liability on the appellant. For all the above reasons, the appeal deserves to be allowed. ( 30 ) THE appeal is accordingly allowed. However, there shall be no order as to costs. Appeal allowed.