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2014 DIGILAW 508 (MAD)

S. R. S. Fabrics v. K. Rajambal

2014-02-26

PUSHPA SATHYANARAYANA

body2014
JUDGMENT The appellants / defendants 2 to 4 in the Original Suit filed by first respondent / Plaintiff, who filed the suit for recovery of a sum of Rs.3,00,000/- with interest, have filed this Second Appeal challenging the judgment and decree dated 31.01.2005 passed by the Principal District Judge, Coimbatore, wherein and by which the judgment and decree dated 22.7.2004 made in O.S. No.156 of 1997 on the file of the I Additional Subordinate Judge, Coimbatore, was reversed allowing the First Appeal at the instance of the plaintiff. 2. From the materials available on record, it is seen that the first defendant claims to be the sole Proprietrix of a concern DABEYTEX dealing in Yarn and Handloom Textiles at Door No. 252, Lingappa Chetty Street, Coimbatore and the second defendant / appellant herein, viz., M/s S.R.S. Fabrics, is a partnership firm dealing with similar textile materials in which the third defendant is stated to be one of the Partners. 3. The case of the plaintiff is that the first defendant is the sole proprietrix of M/s DABEYTEX concern in Coimbatore. The second defendant is a firm in which the third defendant is stated to be a Partner. The first defendant approached the plaintiff for a loan of Rs.3,00,000/- on 20.9.1996 and the plaintiff also agreed to lend her money in consultation with her husband. The first defendant produced three cheques drawn on behalf of the second defendant and signed by the third defendant and made an endorsement on the back of the cheques to facilitate negotiability. The first defendant promised to pay the amount to the plaintiff and take back the said cheques. Therefore, the plaintiff claims to be the bona fide holder in due course. It is also stated by the plaintiff that the first defendant had contacted the second defendant’s place of business over phone. When the three cheques totalling an amount of Rs.3 Lakhs were presented by the plaintiff on 09.01.1997, they were returned dishonoured stating that the drawer of the second defendant had to be referred to and payment was stopped. Notice was issued on 14.01.1997 to the defendants about the dishonor of the cheques. The first defendant borrower of the money evaded the receipt of cheque notice. The third defendant sent a reply accusing the plaintiff for her collusive action with the first defendant. Notice was issued on 14.01.1997 to the defendants about the dishonor of the cheques. The first defendant borrower of the money evaded the receipt of cheque notice. The third defendant sent a reply accusing the plaintiff for her collusive action with the first defendant. Hence, the suit against the defendants 1 to 4 was filed for recovery of a sum of Rs. 3 Lakhs. 4. The defence taken by the defendants 2 to 4 was that five cheques including the disputed three dishonoured cheques were issued to the first defendant, who remained ex parte, as advance amount for supply of 80 wrap bags and since the first defendant did not supply the said wrap bags as promised, to them, they were forced to stop payment instructing their banker through letters dated 24.9.1996 and 01.10.1996 respectively. As such, according to the defendants 2 to 4, they are not liable to pay the suit amount to the plaintiff on the basis of the three disputed cheques in question which were issued to the first defendant as there was no pre-existing debt or liability between them. On these grounds, the defendants 2 to 4 sought for dismissal of the suit. 5. Before the trial Court, the plaintiff had examined herself as P.W.1 and marked Exs. A.1 to A.17. On the side of the defendants, the third defendant examined himself as D.W.1 besides examining three more witnesses, viz., D.Ws. 2 to 4 and marked Exs. B.1 to B.11. 6. The trial Court, on evaluation of the evidence available, held that the first defendant is liable to pay a sum of Rs.3,00,000/- to the plaintiff with interest at the rate of 18% per annum from the date of suit till the date of judgment and thereafter, imposed 6% interest till the date of recovery of the amount and decreed the suit to that extent. Insofar as the defendants 2 to 4 are concerned, the trial Court dismissed the suit. Not satisfied with the finding of the trial Court, the plaintiff preferred appeal in A.S. No. 152 of 2004 and the learned Principal District Judge, Coimbatore, after appreciating the facts, reversed the judgment of the trial Court and allowed the appeal holding that the plaintiff is entitled to recovery the suit amount from the defendants 1 to 4. Feeling aggrieved, the defendants 2 to 4 have come up with this Appeal. 7. Feeling aggrieved, the defendants 2 to 4 have come up with this Appeal. 7. At the time of admission of this Second Appeal, the following substantial questions of law were framed for consideration:- (i) Whether the reversing judgment and decree of First Appellate Court is in accordance with requirements of legal principles and provisions of Sections 2(2), 2(9), 96, 99 and 107 and Order 41 Rule 31 of C.P.C.? (ii) Whether the conclusion arrived at by the First Appellate Court that the plaintiff is a bona fide holder in due course for consideration to Exs.A.1 to A.3 cheques is sustainable in law under Sections 8, 14, 9, etc. of Negotiable Instruments Act, 1881 since requirements and conditions thereunder relating to possession, negotiation, title and consideration paid, are not satisfied by the plaintiff? 8. Heard Mr. K. Srinivasan, learned Senior Counsel appearing for the appellants and Mr. M. Velmurugan, learned counsel for the first respondent as well as Mr. S. Mukunth, representing M/s.Sarvabhauman Associates, for the second respondent and perused the records. 9. Learned counsel for the appellants raised an objection that the appeal filed by the plaintiff before the first Appellate Court is not maintainable on the ground that the plaintiff was not an aggrieved person. From the materials available on record, it is clear that the suit O.S. No. 156 of 1997 on the file of the I Additional Sub-Court, Coimbatore, was decreed only against the first defendant and dismissed against the other defendants. No doubt, it is true that there was an adverse finding against the plaintiff. However, the adverse finding will not affect the right of the plaintiff as the suit was decreed in her favour in toto. Therefore, the appellant in A.S. No. 152 of 2005 on the file of the Principal District Judge, viz., the plaintiff, was not an aggrieved person. As the suit was fully decreed though not against all the defendants but against the first defendant - borrower, the plaintiff cannot maintain an appeal. 10. In this regard, learned counsel also relied on the decision of this Court in KamalaiBai Ammal vs. Punyakodi Mudaliar (died) and others reported in 1998 Supplement MLJ 569 wherein in paragraphs 12 and 13, it has been held as follows:- "12. I will just consider the scope of the Second Appeal No. 1321 of 1984. 10. In this regard, learned counsel also relied on the decision of this Court in KamalaiBai Ammal vs. Punyakodi Mudaliar (died) and others reported in 1998 Supplement MLJ 569 wherein in paragraphs 12 and 13, it has been held as follows:- "12. I will just consider the scope of the Second Appeal No. 1321 of 1984. According to me, the appeal before the lower Appellate Court as well as this Court is not maintainable. The Original Suit No. 3492 of 1975 was dismissed and the plaintiffs therein were not given any relief. It is true that there is an adverse finding against the appellant but, that adverse finding will not affect her right, since the suit was ultimately dismissed and the appellant is not an aggrieved person; against the decree of the trial court and therefore she cannot prefer an appeal. Under Section 96 of the Code of Civil Procedure, an appeal is maintainable only by an aggrieved person. Since the suit was totally dismissed, the appellant who was the second defendant cannot prefer an appeal. 13. In the recent decision of the Supreme Court in Devaram and another v. Ishwar Chand and another (1995 6 S.S.C. 733) their Lordships considered this question in detail. It was held therein thus: “An appeal does not lie against mere ‘findings’ recorded by a Court unless the findings amount to a decree’ or ‘order’. Where a suit is dismissed, the defendant against whom an adverse finding might have come to be recorded on some issue has no right of appeal and he cannot question those findings before the appellate Court.” In the above cited case, their Lordships followed the decision of the Supreme Court in Ganga Bai v. Vijay Kumar (1974 2 S.S.C 393)." 11. In support of his contention, learned counsel also placed reliance on the decision of the Hon’ble Supreme Court in Banarsiand others vs. Ram Phal reported in AIR 2003 SC 1989 and more particularly, relied on paragraphs 8 and 9 which read as follows:- "8. Sections96 and 100 CPC make provision for an appeal being preferred from every original decree or from every decree passed in appeal respectively; none of the provisions enumerates the person who can file an appeal. However, it is settled by a long catena of decisions that to be entitled to file an appeal the person must be one aggrieved by the decree. However, it is settled by a long catena of decisions that to be entitled to file an appeal the person must be one aggrieved by the decree. Unless a person is prejudicially or adversely affected by the decree he is not entitled to file an appeal. (See Phoolchand v. Gopal Lal 1967 (3) SCR 153 ; Smt. Jatan Kumar Golcha v. M/s Golcha Properties (P) Ltd. 1970 (3) SCC 573 ; and Smt.Ganga Bai v. Vijay Kumar and others (1974) 2 SCC 393 . No appeal lies against a mere finding. It is significant to note that both Sections 96 and 100 CPC provide for an appeal against decree and not against judgment. 9. Any respondent though he may not have filed an appeal from any part of the decree may still support the decree to the extent to which it is already in his favour by laying challenge to a finding recorded in the impugned judgment against him. Where a plaintiff seeks a decree against the defendant on grounds (A) and (B), any one of the two grounds being enough to entitle the plaintiff to a decree and the court has passed a decree on ground (A) deciding it for the plaintiff while ground (B) has been decided against the plaintiff, in an appeal preferred by the defendant, in spite of the finding on ground (A) being reversed the plaintiff as a respondent can still seek to support the decree by challenging the finding on ground (B) and persuade the appellate court to form an opinion that in spite of the finding on ground (A) being reversed to the benefit of the defendant-appellant the decree could still be sustained by reversing the finding on ground (B) though the plaintiff-respondent has neither preferred an appeal of his own nor taken any cross-objection. A right to file cross-objection is the exercise of right to appeal though in a different form. It was observed in Sahadu Gangaram Bhagade v. Special Dy. Collector, Ahmednagar and another (1971) 1 SCR 146 , that the right given to a respondent in an appeal to file cross-objection is a right given to the same extent as is a right of appeal to lay challenge to the impugned decree if he can be said to be aggrieved thereby. Collector, Ahmednagar and another (1971) 1 SCR 146 , that the right given to a respondent in an appeal to file cross-objection is a right given to the same extent as is a right of appeal to lay challenge to the impugned decree if he can be said to be aggrieved thereby. Taking any cross-objection is the exercise of right of appeal and takes the place of cross-appeal though the form differs. Thus it is clear that just as an appeal is preferred by a person aggrieved by the decree so also a cross-objection is preferred by one who can be said to be aggrieved by the decree. A party who has fully succeeded in the suit can and needs to neither prefer an appeal nor take any cross-objection though certain finding may be against him. Appeal and cross-objection — both are filed against decree and not against judgment and certainly not against any finding recorded in a judgment. This was the well-settled position of law under the unamended CPC." 12. No doubt, Sections 96 and 100 of the CPC are the appeal provisions for preferring appeals against original or appellate decrees. But the above provisions do not enumerate the persons who can file an appeal. Therefore, it is well settled by a catena of cases that one should be a 'person aggrieved' by a decree to file an appeal. Person aggrieved means one who is adversely or prejudicially affected by a decree. In the present case, the claim of the plaintiff is decreed in full, of course, against the first defendant only. The trial Court had dismissed the suit against the appellants herein. The plaintiff having obtained a decree for his suit claim, cannot be called an aggrieved person. The First Appellate Court, while allowing the appeal, had modified the decree in favour of the plaintiff by passing the decree against the appellants herein. In the absence of challenge by the first defendant against the decree, the interference by the First Appellate Court has reduced the appellants to a situation worse than in what they would have been if they had not appealed. Question No.1 is answered accordingly. 13. The plaintiff has advanced Rs. 3 Lakhs to the first defendant on her request on the strength of the three cheques in question. The plaintiff claims to be the bona fide holder in due course of the said three cheques. Question No.1 is answered accordingly. 13. The plaintiff has advanced Rs. 3 Lakhs to the first defendant on her request on the strength of the three cheques in question. The plaintiff claims to be the bona fide holder in due course of the said three cheques. It is the case of the plaintiff that the cheques are negotiable one and the plaintiff has paid the values to the first defendant. The plaintiff had further contended that she could not be expected to make enquiries about the transaction on the supply of wrap bags between the first defendant and defendants 2 to 4 whereas the contention of the defendants 2 to 4 is that the first defendant is the grand-daughter of the plaintiff and there was collusion between the first defendant and the plaintiff on payment of Rs. 3 Lakhs and the disputed cheques in question. It was the further contention that the first defendant did not supply the goods to defendants 2 to 4 as per the terms and conditions. Therefore, defendants 2 to 4 were constrained to inform the Bank to stop payment as they were not liable to pay the amount to the plaintiff. The dispute is with respect to three cheques marked as Exs. A.1 to A.3 in this appeal. It is admitted by the defendants that the three cheques were issued by them post-dated drawn on the State Bank of India for a sum of Rs. 1 Lakh each for the supply of wrap bags to the first defendant. Therefore, the execution of Exs. A.1 to A.3 are not disputed. 14. The question that has to be decided in this appeal is whether the plaintiff is a bona fide holder in due course for the value of the disputed cheques Exs. A.1 to A.3 and entitled to recover the suit amount from the defendants 1 to 4. 15. The trial Court had decreed the suit only against the first defendant holding that there was no bona fide in the case of the plaintiff as well as the first defendant as they have colluded together to defraud the defendants 2 to 4 and recover the money from them. But the Lower Appellate Court had decreed the suit against all the defendants. As the first defendant remained ex parte, defendants 2 to 4 have come up with this appeal challenging the judgment passed by the Lower Appellate Court. But the Lower Appellate Court had decreed the suit against all the defendants. As the first defendant remained ex parte, defendants 2 to 4 have come up with this appeal challenging the judgment passed by the Lower Appellate Court. 16. The plaintiff had examined herself as P.W.1 and stated that the first defendant approached her for the loan amount of Rs. 3 Lakhs for the purpose of business transaction and she readily agreed to pay the same based on the three cheques and also the fact that she was related to her. It is relevant to advert to the evidence of P.W.1 in her chief-examination wherein she has deposed as under:- “Tamil” 17. Therefore, it is clear that P.W.1 has stated that she inquired the first defendant about the nature of the cheques and that the first defendant spoke to the second defendant over phone on 21.9.1996 in her presence and based on the conversation, she believed the first defendant and gave money. 18. No doubt, Exs. A.1 to A.3 are crossed cheques which are negotiable and there is no dispute that such cheques should be transferred by the bearer to the third parties for payment as there is no bar for the same. At this stage, it would be relevant to advert to the plaint averment in paragraph 6, which reads as follows:- “In fact, the first defendant even promised to pay the amount to the plaintiff and get return of the cheques after some time. In any event, the plaintiff has become a bona fide holder in due course for consideration.” 19. From a reading of the plaintiff’s deposition and the averment made in the plaint, it is clear that the cheques were given by the first defendant to the plaintiff not with an intention to be presented for collection by the plaintiff, but only as a guarantee. However, the plaintiff had presented the cheques and the same were dishonoured at the instance of defendants 2 to 4. Though the money was borrowed by the first defendant on 21.9.1996 and the cheques were dated 24.9.1996, 28.9.1996 and 30.9.1996, the third defendant, who was examined as DW1, had instructed the Bank to stop payment even on 24.9.1996. However, the plaintiff had presented the cheques and the same were dishonoured at the instance of defendants 2 to 4. Though the money was borrowed by the first defendant on 21.9.1996 and the cheques were dated 24.9.1996, 28.9.1996 and 30.9.1996, the third defendant, who was examined as DW1, had instructed the Bank to stop payment even on 24.9.1996. According to D.W.1, even in the written statement, it is admitted that as the first defendant did not supply wrap bags as promised on the respective dates, these defendants were forced to give stop payment instruction to their banker vide their letter dated 24.9.1996 and 01.10.1996. Therefore, it is evident from the act of the defendants 2 to 4 that their instruction to stop payment was not deliberate or intentional but only to safeguard their interest as the first defendant had not supplied the wrap bags within time. The plaintiff claims to be the holder in due course and that she is entitled to the recovery of sum from the defendants 2 to 4 also. 20. Section 9 of the Negotiable Instruments Act defines as to who is a holder in due course. It reads thus:- "Holder in due course". --"Holder in due course" means 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 becomes payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom be derived his title." It is clear from the definition that a 'holder in due course' must be a holder for consideration and the instrument must have been transferred to him before it becomes overdue and he must be a transferee in good faith. The other condition is that the transferee, viz., person, who for consideration became the possessor of the cheque, should not have any reason to believe that there was any defect in the title of transferer. In the case on hand, there is no dispute that the plaintiff advanced money to the first defendant and, therefore, the plaintiff received the cheques endorsed in her name for valid consideration before they became overdue. Therefore, the plaintiff is only a holder and a collection agent as per the endorsement made by the first defendant. 21. In the case on hand, there is no dispute that the plaintiff advanced money to the first defendant and, therefore, the plaintiff received the cheques endorsed in her name for valid consideration before they became overdue. Therefore, the plaintiff is only a holder and a collection agent as per the endorsement made by the first defendant. 21. Section 8 of the Negotiable Instruments Act defines a 'holder' of a negotiable instrument as a person entitled in his own name to the possession of a cheque to receive or recover the amount due thereon from the parties thereto. Section 8 reads as follows:- "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. Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction." 22. In this case, it has to be seen whether the two conditions to satisfy a holder in due course is complied with. As stated earlier, the first condition is that the instrument must have been transferred to the plaintiff before it became overdue and she must be transferee in good faith. Even presuming that the first condition is complied with, insofar as the second condition is concerned, the possessor of the cheque should have not have any reason to believe that there was any defect in the title of the transferer. 23. From a combined reading of the deposition of the plaintiff and the averments made by her in paragraph 6 of the plaint, it can be seen that she became the possessor of the cheques not in the real sense but only to hold in trust and return the same immediately after the money is paid. 23. From a combined reading of the deposition of the plaintiff and the averments made by her in paragraph 6 of the plaint, it can be seen that she became the possessor of the cheques not in the real sense but only to hold in trust and return the same immediately after the money is paid. Insofar as the second condition whether the plaintiff had any reason to believe that there was any defect in the title of the transferer, it can be seen that on the day she lent money to the first defendant, the plaintiff had raised a doubt as to the defect in the title for which the first defendant had called the second defendant telephonically and confirmed to the plaintiff about the passing of the cheques where this can be held in favour of the plaintiff and holding to be the bona fide holder in due course because it is not the case of the plaintiff that she made personal inquiries about the cheques with the defendants 2 to 4. It is only the oral conversation in front of the plaintiff telephonically which is said to have been believed by the plaintiff and the moneys were advanced. Whether this action of the plaintiff without making a thorough enquiry when she had a reason to believe that there must be defect in the title of the transferer by not enquiring it thoroughly, can be called bona fide. 24. The mere statement that the first defendant due to misadventure ran into rough weather in her business dealings due to which she could not keep up her promise, cannot be said to be advantageous to the plaintiff. Therefore, it can be seen that the first defendant would supply the goods and the cheques will be presented after the dispatch of delivery of the goods to the defendants 2 to 4, but she failed to dispatch the goods. The plaintiff, without any enquiries about the title of the payee, should not have lent the money because there was sufficient cause to believe that the title of the bearer was not free from defects. One cannot be merely satisfied with the honesty of the person taking the instrument but it also requires the person who exercises due diligence in scrutinising the causes which can make up the belief in the mind of the transferee. 25. One cannot be merely satisfied with the honesty of the person taking the instrument but it also requires the person who exercises due diligence in scrutinising the causes which can make up the belief in the mind of the transferee. 25. In this regard, learned counsel for the first respondent /plaintiff pressed into service the decision of the Hon’ble Apex Court in U. Ponnappa Moothan Sons, Palghat vs. Catholic Syrian Bank Limited reported in 1991 (1) SCC 113 . Learned counsel, more particularly, relied on paragraph 17 and 18 of the judgment which read as follows:- "17. From the above discussion it emerges that the Indian definition imposes a more stringent condition on the holder in due course than the English definition and as the learned authors have noted the definition is based on Gills case (1824 (107) ER 806). Under the Indian law, a holder, to be a holder in due course, must not only have acquired the bill, note or cheque for valid consideration but should have acquired the cheque without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title. This condition requires that he should act in good faith and with reasonable caution. However, mere failure to prove bona fide or absence of negligence on his part would not negative his claim. But in a given case it is left to the Court to decide whether the negligence on part of the holder is so gross and extraordinary as to presume that he had sufficient cause to believe that such title was defective. However, when the presumption in his favour as provided under S. 118(g) gets rebutted under the circumstances mentioned therein then the burden of proving that he is a holder in due course lies upon him. In a given case, the Court. while examining these requirements including valid consideration must also go into the question whether there was a contract express or implied for crediting the proceeds to the account of the bearer before receiving the same. The enquiry regarding the satisfaction of this requirement invariably depends upon the facts and circumstances in each case. The words "without having sufficient cause to believe" have to be understood in this back-ground. 18. The enquiry regarding the satisfaction of this requirement invariably depends upon the facts and circumstances in each case. The words "without having sufficient cause to believe" have to be understood in this back-ground. 18. In the instant case there is sufficient evidence establishing the fact that the defendants were allowed credit facilities up to a limit of Rs. 35,00,000/- by the Bank and this fact is not in dispute. The pledging of the title deed by 5th defendant of her properties with the Bank with an intention to create an equitable mortgage to secure the repayment of the amounts due from Ist defendant and the fact that a pronote for an amount of Rs. 35,00,000/-executed by defendants Nos. 2 to 4 in favour of the 5th defendant was endorsed in favour of the plaintiff Bank would establish that there was an express contract for providing the credit facilities. It should therefore necessarily be inferred that there is also an implied contract to credit the proceeds of the cheques in favour of defendant No. 1 to his account before actually receiving them. As a question of fact this aspect is established by the evidence on record. In such a situation the plaintiff need not make enquiries about the transactions of supply of goods etc. that were going on between defendants Nos. 1 and 6. Even if defendant No. 1 has not supplied the goods in respect of which the cheque in question were issued by defendant No. 6 there was no cause at any rate sufficient cause for the plaintiff to doubt the title of defendant No. 1 nor can it be said that the plaintiff acted negligently disregarding red flag raising suspicion. Viewed from this background it cannot be said that there was sufficient cause to doubt the title nor there is scope to infer gross negligence on the part of the plaintiff." 26. In the above referred case, there was no material which amounts to rebuttal of presumption. On the other hand, the plaintiff had discharged the necessary burden and proof that he was a holder in due course for valid consideration. But in the case on hand, though the facts are similar to an extent, the condition that the transferee should not have any reason to believe that there was any defect in the title, is not established by the plaintiff. But in the case on hand, though the facts are similar to an extent, the condition that the transferee should not have any reason to believe that there was any defect in the title, is not established by the plaintiff. The plaintiff seems to have not taken any independent effort or action to find out whether the cheques Exs. A.1 to A.3 issued by the defendants 2 to 4 were free from any defect on the date of lending of the money. The mere oral enquiry that too, by the first defendant, who was in the advantageous position, will not automatically lead to presumption that the plaintiff was a bona fide holder in due course. 27. Learned counsel for the first respondent / plaintiff also relied on the decision of this Court in Bajanlal H. Raheja vs. G.Sethuraman Sfero Graf Castings and another reported in 1998 (3) LW 349 and the relevant passage found in paragraph 16 where the learned counsel emphasized, is extracted hereunder:- "................. .................... .................... ...................... ............ .................. .................... .................... ..................... ............. Ordinarily a person taking a negotiable instrument in good faith and for value is not, under the English law, bound to make enquiries, to qualify as a holder in due course, unless the circumstances are such as to excite his suspicion. In Lloyds Bank Ltd. v. Swissbankverein, Farwell, L.J. said: The equitable doctrines of constructive doctrines of constructive notice are common enough in dealing with land and estates, but there have been repeated protests against the introduction into commercial transactions of anything like an extension of those doctrines, and the protest is founded on perfect good sense. In dealing with estates in land, title is everything and it can be lie surely investigated. In commercial transactions possession is everything and there is no time to investigate title; and if we are to extend the doctrine of constructive notice to commercial transactions we should be doing infinite mischief and paralysing the trade of the country. Notice of a defect in the transferors title should not have been there only at the time the instrument was taken. Subsequent notice does not alter the position of a holder in due course. The Indian definition imposes a more stringent condition on the holder in due course than does the English definition. Notice of a defect in the transferors title should not have been there only at the time the instrument was taken. Subsequent notice does not alter the position of a holder in due course. The Indian definition imposes a more stringent condition on the holder in due course than does the English definition. Under the English law, he should not have notice of a defect in the transferors title and he should have taken the instrument in good faith. Under the Indian law, there should be no cause to believe that any such defect existed. Hence it is not sufficient if the holder acts in good faith. He should also exercise due care and in taking the instrument. Perhaps, the Indian definition is based on the principles laid down in Gill v. Cubbit, where Abbot, C.J. said: It appears to me to be for the interest of commerce, that no person should take a security of this kind from another without using reasonable caution. If he takes such security from a person whom he knows, and whom he can find out, no complaint can be made of him. In that case he had done all any person could do. ................ .................... .................... ...................... ............. .................. .................... .................... ..................... ............." 28. From the foregoing, it can be seen that the first respondent / plaintiff, who has no privity of contract with the defendant 2 to 4 and claiming only to be the bona fide holder in due course, has not enquired about the defect in the instrument of title transferred. Having not exercised his right diligently by enquiring the validity of the instrument as on the date of passing of the same, the first respondent / plaintiffis not entitled to take relief against the executors of the instrument based on the endorsement. At best, the plaintiff can recover the same only from the first defendant, who had admittedly borrowed the money. It also leads to suspicion that the conduct of the first defendant who remained ex parte to disprove the case of the plaintiff. 29. In view of the above discussion, the plaintiff, having not established that she was the bona fide holder in due course, is not entitled for decree against defendants 2 to 4. It also leads to suspicion that the conduct of the first defendant who remained ex parte to disprove the case of the plaintiff. 29. In view of the above discussion, the plaintiff, having not established that she was the bona fide holder in due course, is not entitled for decree against defendants 2 to 4. However, having established a case against the first defendant that she had borrowed the amount, as rightly held by the trial Court, the plaintiff is entitled for a decree against the first defendant. Question No. 2 is answered accordingly. In the result, the Second Appeal is allowed restoring the judgment of the trial Court dated 22.7.2004 passed in O.S. No. 156 of 1997 and the judgment of the Lower Appellate Court dated 31.01.2005 passed in A.S. No. 152 of 2005 is set aside . However, there shall be no order as to costs. Consequently, connected Miscellaneous Petition is closed.