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“The assignment of a promissory note by the payee is a part of the “cause of action” within the meaning of S.20 (c), C.P.C. and the assignee can sue on it in the Court having jurisdiction where the assignment took place:





Smt.Veluchuri Lakshmi and others

Counsel for the Appellant : Sri K.G.Krishna Murthy

Counsel for the Respondent: Sri Ravi Cheemalapati

<Gist :

>Head Note:

? Cases referred:
1.AIR 2005 A.P. 37
2.AIR 1958 A.P. 451
3.1969 An.W.R. 222
4.AIR 1966 A.P. 334
5. 2010 (5) ALT 96 (D.B)
6.AIR 1917 MADRAS 221


The unsuccessful defendant in O.S.No.119 of 1994 on the file of the Court
of Senior Civil Judge, Vizianagaram is the appellant herein.

02. The suit was one filed for recovery of a sum of Rs.70,800/- alleging that
the defendant has borrowed a sum of Rs.50,000/- on 06-09-1992 and executed a
promissory note in favour of one Laxmi Narsu who in turn transferred the
promissory note on 06-11-1993 for consideration in favour of the first
plaintiff at Srungavarapu Kota.

03. The defendant claimed that he did not borrow any amount from the original
holder Laxmi Narsu who is an employee of I.O.B at Chittoor. The defendant
obtained some loan from IOB, Chittoor and at that time the original holder
obtained signatures on blank papers and the suit promissory note might have been
fabricated. The suit is, therefore, not maintainable. He also pleaded that the
court at Vizianagaram has no jurisdiction to try the case.

04. After considering the evidence on record, the trial court has decreed the
suit and in an appeal the District Judge, Vizianagaram in A.S.No.95 of 2004 has
dismissed the appeal. Aggrieved by the concurrent judgments of the Courts
below, the present Second Appeal is sought to be filed.
05. The Second Appeal has been admitted on the following substantial questions
of law.
1. Whether the suit was properly instituted in the Court of the Senior Civil
Judge at Vizianagaram and whether the plaintiff is a holder in due course?
2. Whether the judgments of the Courts below are not proper as the Courts have
no jurisdiction to entertain the suits?

06. So far as the execution of the promissory note is concerned, there is a
dispute and the defendant has come up with a theory of contributing signatures
on blank papers. But, however, the evidence of PWs.1 and 2 clearly goes to show
that the transaction of lending money is true and PW.2 supports the above
version. His acquaintance with the original holder of the promissory note is
not in dispute. PW.2 is the scribe of the promissory note and is also the scribe
of the indorsement of transfer. This evidence has been accepted by the Court
below and, therefore, in view of the above circumstances, the question of non-
execution of the promissory note by the defendant cannot be accepted and it is a
question of fact appreciated by the Courts below, which does not call for any

07. However, the thrust of the argument of the counsel for the appellant is
that the transfer indorsement for consideration does not create jurisdiction to
the Court at Srungavarapu Kota as no transaction has taken place except the
alleged transfer and as the defendant resides at Chittoor and following the
decision reported in S.S.V.Prasad v. Y. Suresh Kumar1 the suit should have been
dismissed. No doubt, in the above decision, it was held that a transfer
endorsement does not create jurisdiction to the Court. The learned Judge has
taken into consideration the provisions of Section 20 C.P.C and took into
consideration the provisions of the Negotiable Instruments Act, 1881. Evidently,
according to the learned Judge, the provisions of Sections 68 to 70 of N.I Act
prescribes the place of presentation and if no place is agreed between the
parties, it should be the place where the defendant resides or carries on
business. Evidently, Sections 68 to 70 of N.I.Act deals with presentation of the
negotiable instrument claiming the amount. None of those sections refer to the
jurisdiction of a Court where the suit has to be filed. Presentation of a
negotiable instrument for honouring or dishonouring is quite different from the
institution of a suit for recovery of the amount due under the negotiable
instrument. Therefore, the purport under Sections 68 to 70 of the N.I Act
cannot be imported to consider the cause of action under Section 20 of C.P.C
which mandates the procedure for filing of the suits. Having considered the
scope of Section 20(C) of C.P.C, ultimately, the learned Judge found that cause
of action in the larger context has two components, viz., (a) existence of a
duty in the defendant towards the plaintiff and its breach; and (b) the damage
or loss arising out of that breach. Therefore, the scope of cause of action
evidently is from a bundle of facts. It does not start with the right of the
defendant and it starts with the right of the plaintiff in instituting a suit.
In this connection, it is useful to refer to a Division Bench decision of this
Court reported in N.Narayana Murthy v. G.Ganga Raju2 wherein it was held as
“Cause of action is a bundle of essential facts which the plaintiff has to prove
in order to sustain his action. This connotes that both the right to sue and
cause of action are the same and the cause of action is synonymous with the
right to sue.”

08. The above judgment clearly lays down that a cause of action starts with
the right to sue and it is evidently vested with the plaintiff. In the decision
relied on by the counsel for the appellant in S.S.V.Prasad (1st supra) the
learned Judge has referred to the judgment of this Court reported in
P.S.Kothandarama Gupta v. Sidamsetty Vasant Kumar3, but, differed with the
learned Judge in holding that Section 70 of the N.I Act does not lay the place
of suing. In this connection, the judgment reported in Radhakrishnamurthy v.
Chandrasekhara Rao4 also deals with the situation of this nature and it was
held that a transfer of assignment on promissory note creates cause of action
within whose jurisdiction the transferor endorsement has taken place.
Therefore, the opinion of the two earlier single Judges of this Court is in
favour of holding that the cause of action is created by virtue of the transfer
of the promissory note at a place where it was transferred and particularly for


09. It is to be noted that exception to Section 64 of the N.I.Act is as
“Exception:– Where a promissory note is payable on demand and is not
payable at a specified place, no presentment is necessary in order to charge the
maker thereof.”
Therefore, the above provision makes it clear that a presentation of the
promissory note is not necessary and when presentation is not necessary, the
provisions of Sections 68 to 70 of N.I.Act can have no application.
Consequently, the jurisdiction has to be decided only under Section.20 C.P.C.

10. It is to be noted that this Court is a Court established by merger of
Andhra High Court and Hyderabad High Court. Andhra High Court being one carved
out of Madras High Court, which is a Court of record, all its decisions prior to
establishment of Andhra High Court are binding on High Court of Andhra Pradesh,
subject of course to other rules of doctrine of precedent. [vide decision
reported in Lakshminagar Housing Welfare Association Vs. Syed Sami @ Syed

11. In this connection, it is useful to refer to the decision of a Division
Bench of Madras High Court reported in Manepalli Magamma and others v. Manepalli
Sathi Raju6 which was referred by the learned single Judge in Radhakrishnamurthy
(4th supra) with whom the learned Judge differed in the decision 1st
supra. Exactly, the similar question arose before the Division Bench of Madras
High Court and the question was whether assignee of a promissory note can sue in
the Court having jurisdiction where his assignment was made. Ultimately, it was
found that assignment is part of cause of action under Section 20 (c ) and
further it was held as under:-
“The expression within ’cause of action’, in Section 20 C.P.C must be read with
reference to the suit instituted by the plaintiff; it means plaintiff’s cause of
action, and not the cause of action on the documents, sued on irrespective of
the rights of the plaintiff under it, in other words, the cause of action as it
existed when the right to sue on the note arose for the first time.”
“The assignment of a promissory note by the payee is a part of the “cause of
action” within the meaning of S.20 (c), C.P.C. and the assignee can sue on it in
the Court having jurisdiction where the assignment took place: Read Vs.Brown [
(1989) 22 Q B D 128.”

12. It is to be noted under Section 48 of the N.I.Act a promissory note is
negotiable by the holder by endorsement and delivery thereof. There is not of
much difference with reference to an “assignment” or a “transfer of a promissory
note”. They only create the right of the person in whom the endorsement or
assignment was made to recover the money against the executant.

13. In-fact, it was also held in the above decision that the above
interpretation may cause inconvenience to the defendant in particular cases,
but, it cannot be a factor. In-fact, the learned Judge in the decision relied
on by the appellant in S.S.V. Prasad (1st supra) referred to the inconvenience
of the defendants in para 33 opining that if the interpretation of right to sue
is given, it will result in disastrous consequences and the defendant will be
subjected to face litigation with a person who is a stranger to him and at a
place where he is neither resident nor undertaken any activity, if the suit is
filed on the strength of a promissory note said to have been endorsed by the
holder. In view of the judgment of the Division Bench which is binding and
which has been relied on by the other two single Judges, it is to be held that
jurisdiction of the Court to entertain the suit at Srungavarapu Kota on the
basis of the transfer for consideration cannot be doubted. Therefore, the
appeal is liable to be dismissed.
Accordingly, the Second Appeal is dismissed. No costs. Miscellaneous
petitions pending, if any, in this Second Appeal shall stand closed.

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