HON’BLE SRI JUSTICE D.S.R. VARMA AND HON’BLE SRI JUSTICE B.N. RAO NALLA L.P.A.No.78 of 2001 ORAL JUDGMENT : (per Hon’ble Sri Justice D.S.R.Varma) Heard Sri V. Raghu, learned counsel appearing for the appellant-Andhra Bank and Sri T.S. Anand, learned counsel appearing for respondent No.1. 2. This appeal is directed against the judgment and decree, dated 7.2.2000, in A.S.No.199 of 1986, passed by a learned single Judge of this Court, allowing the appeal filed by the 1st respondent. 3. Appellant is the plaintiff and respondents are defendants in the suit O.S.No.72 of 1972 filed for recovery of a sum of Rs.15,415-50 ps. 4. For the sake of convenience, in this judgment, the parties are referred to as per their array in the suit before the Court below. 5. The 1st defendant was a customer of the plaintiff Bank at Kovvur and was having an account with that Branch. He presented an account payee cheque, bearing No.CA/3 802367, dated 2.11.1979, which is in his favour, to the plaintiff-Bank. The said cheque was issued by the 2nd defendant, who was having account with Guntur Branch of the plaintiff Bank. The plaintiff discounted the said bill and paid Rs.9,000/- on 10.11.1978 relying upon the bonafides of both drawer and drawee, hoping that it was capable of realization. The plaintiff sent the said cheque and another cheque for Rs.5,000/- by the same drawer on 10.11.1978 to the account paying Branch at Guntur. The said cheque was returned with the memo, dated 30.11.1978, with an endorsement “the drawer exceeded the arrangement with the Bank”. The plaintiff-Manager addressed a letter to the 1st defendant on 29.11.1978, on receiving the above information on phone. But, the same was not replied. The Manager again addressed another letter on 12.12.1978 to the 1st defendant to adjust the amount immediately. The plaintiff again represented the cheque to the paying banker and the same was returned with objection slip, dated 12.5.1979. The 2nd defendant addressed a letter on 15.5.1979 to the plaintiff requesting time till the end of the month regretting for what had happened to the cheque. Subsequently also the efforts made by the plaintiff Bank officers to the 1st defendant to pay back the amount taken by him turned futile. Thus, the 2nd defendant issued a cheque as if he had capacity to make good the amount and the 1st defendant presented the same and received money as the plaintiff never doubted the bonafides of the defendant. The cheque became uncollectable and stale by 2.5.1979. Therefore, the plaintiff filed suit O.S.No.72 of 1972 for recovery of a sum of Rs.15,415-50 ps. 6. The said suit was contested by the defendants by filing written statements. 7. The trial Court, after considering the material and the evidence on record, both oral and documentary, decreed the suit against both the defendants, by judgment and decree, dated 16.4.1985. Aggrieved by the said judgment and decree, dated 16.4.1985, the 1st defendant filed appeal in A.S.No.199 of 1986 before this Court. A learned single Judge of this Court, allowed the same, by judgment and decree, dated 7.2.2000, holding that the 1st defendant had no obligation to pay the amount, inasmuch as he was no longer a debtor. Aggrieved by the said judgment and decree, dated 7.2.2000, the plaintiff filed the present appeal. 8. The learned single Judge had pointed out that since the cheque in dispute was not endorsed by defendant No.1, in whose favour defendant No.2 had originally drawn it, and inasmuch as the plaintiff Bank, without obtaining any such endorsement from defendant No.1, paid the amount after discounting and as a result thereof, the defendant No.1 would become a holder of the bill and whereas the plaintiff Bank would become a holder in due course. 9. The learned single Judge placed reliance on a judgment rendered by a Division Bench of Madras High Court in VALJEE KANJEE & CO. v. HORSOOKDOSS[1] wherein it was held that a person who delivers a bill to another without any endorsement, he will not have any obligation as per law and, as such, he cannot be sued either by the person to whom he delivers it or by anybody. Similar view had been taken by a Division Bench of Madhya Pradesh High Court in DENA BANK v. M.P.N.T. CORPORATION LIMITED[2]. 10. We have gone through the elaborate judgment rendered by the learned single Judge, whereby the entire history and genesis of the Bills of Exchange, including the effect of discounting, endorsement etc., have been elaborated. 11. The eventual conclusions of the learned single Judge are to the effect that, firstly; defendant No.1 would remain as holder of the bill only, secondly; the plaintiff would have to be treated as holder in due course, since without obtaining the endorsement of defendant No.1 on the bill presented before it, the plaintiff paid the consideration thereof and tried to collect the amount from defendant No.2 account, and thirdly; since the appeal filed by defendant No.1 was allowed, the obligation of defendant No.1 to pay the amount would get erased. 12. From the reasoning assigned therein, we are of the considered view that the judgment rendered by the learned single Judge is well founded, both on facts and law, and we feel it inexpedient to re-appraise the entire evidence on record and the law as well. 13. We only add that the plaintiff had acted apparently being not conscious about the legal principles and the ramifications of discounting a bill without any endorsement of the person, who presented it, and as a result the plaintiff-Bank had stepped into the shoes of defendant No.1. In other words, the privity of contract would be between the plaintiff and defendant No.2 as creditor and debtor, respectively, in which case, the obligation of defendant No.1 had totally got extinguished and he cannot be fastened with the liability of debtor. 14. Now, the question is when defendant No.1 is exonerated from his liability, what should follow? 15. The answer is simple, that since the original decree in the suit was passed against both defendant Nos.1 and 2 and, on appeal, since the defendant No.1 was exonerated from the liability of debtor, defendant No.2, being a party to the suit, will be liable to pay the amount under the decree passed by the trial Court. 16. Therefore, the impugned judgment and decree, dated 7.2.2000, rendered by the learned single Judge in A.S.No.199 of 1986 stands affirmed so far as defendant No.1 is concerned and the liability fastened by the trial Court against defendant No.2, since was not challenged by it, is valid and shall remain in force. In other words, the liability against defendant No.1 stands extinguished and the liability against defendant No.2 shall remain in force. 17. With the above clarification, the appeal is dismissed. However, no order as to costs. _______________________ JUSTICE D.S.R.VARMA __________________________ JUSTICE B.N.RAO NALLA 13.07.2010 Msr HON’BLE SRI JUSTICE D.S.R. VARMA AND HON’BLE SRI JUSTICE B.N. RAO NALLA L.P.A.No.78 of 2001 13.07.2010 (Msr) [1] AIR 1932 MADRAS 323 [2] AIR 1982 MADHYA PRADESH 95