P L D 1961 (W (PLP)

(1) Was the draft in question drawn by the Punjab National Bank, Moga Branch? (2) What is the effect of the defendant bank having accepted the draft and made payment to the Muslim Commercial Bank through clearing? (3) Is the plaintiff a holder in due course of the draft in question. If so what is its effect ?

2. On issue No. 1 the finding of the learned Senior Civil Judge was that the draft in question was not issued by the Moga branch of the defendant bank, not having been signed by the manager or the accountant who were posted to the Moga branch at the time of its preparation, i.e., on the 23rd of July 1949. On the same point the learned Judge came to the further finding that Bishan Das appeared to have stolen the draft from the draft book of the defendant bank at Moga and filled it up fictitiously and that it was possible that the plaintiff and the witnesses that had been produced by him were privy to this forgery.

3. On issue No. 2 the learned trial Judge held that the mere acceptance of the draft by the Lahore Branch of the defen dant bank and payment of the money to the Muslim Commercial Bank in lieu of it did not estop the bank from pleading that the draft was a forged document. He considered that the draft may have been encashed on account of the negligence of the manager concerned or on account of his collusion with the persons who cheated the bank.

4. On issue No. 3 the learned trial Judge held that the plaintiff was not a holder in due course, as the‑document was proved to be a forged one. In the result he dismissed the plaintiff's suit with costs and directed that the respondent was entitled to the sum in dispute.

5. In appeal the learned counsel for the appellant has chal lenged before us the judgment of the lower Court mainly on two grounds. He argued, firstly, by reference to section 120 of the Negotiable Instruments Act, that the respondent as drawer of the draft was precluded from denying its validity in a suit brought by the appellant who was s holder in due course. The second point urged by him is that being a bona fide holder in due course for con sideration the appellant should be protected against the respondent whose officials were guilty of negligence, resulting in the fictitious preparation of the draft in question.

6. Section 120 of the Negotiable Instruments Act, referred to above, reads as follows :‑ "No maker of a promissory note, and no drawer of a bill of exchange or cheque, and no acceptor of a bill of exchange for the honour of the drawer shall, in a suit thereon by a holder in due course, be permitted to deny the validity of the instru ment as originally made or drawn."

7. In our view, the section clearly postulates that before a plea of estoppel can be successfully raised against the maker of a promissory note or the drawer of a bill of .exchange or the acceptor of a bill of exchange for the honour of the drawer, he must be found to be such maker, or drawer or acceptor for the honour of the drawer, as the case may be. Where an instrument of that nature is admitted to have been made or drawn by a person, its validity, as originally made or drawn, cannot be ques tioned by its drawer or maker. The section, however, does not bar any defence which may be independent of the plea that the instrument, as made or drawn, was invalid. The validity of a document is independent of its existence and where the defence is that the bill of exchange in respect of which plea of estoppel is being raised does not in fact exist from the point of view of the ostensible drawer, in the sense that he never drew it, the plea of estoppel will have no application. It is clear that unless a maker or a drawer places his signatures on a bill of exchange it does not legally come into existence, and where it is alleged by the drawer that a bill of exchange is a forgery it will not create any title until it is proved to be a genuine document. A forged instrument is in the eyes of law a nullity, having no existence and creating no title, and a title which never comes into existence cannot furnish the basis for any action. Even if in the course of circulation such an instrument passed into the hands of a holder in due course it is not cured of its defect because there being no title from the very start, it is not a case of a defect of title which could be cured by the bona fides of the holder in due course. It is true that a defence based on the invalidity of an instrument, for example, that the instrument is obtained by means of fraud or some other offence, or lacks lawful consideration, is not available against a holder in due course, but this pre‑supposes the liability on the negotiable instrument itself and does not do away with the basic requirement that the negotiable instrument must have been, in the first instance, made or drawn by the person who is to be made liable for it.

8. Reference may be made to a cognate provision in the field of estoppels raised in the case of bills of exchange, as contained in section 117 of the Evidence Act. Of particular relevancy is explanation (1) to section 117, which reads as follows:‑ "The acceptor of a bill of exchange may deny that the bill was really drawn by the person by whom it purports to have been drawn." If a defence is open to the acceptor to challenge the genuineness of the authorship of a bill of exchange, a fortiori, it must be open to the alleged maker or the drawer himself to do so: In the B present case, there is overwhelming evidence to confirm the finding of the learned trial Judge that the draft in question was wholly fictitious and as such it did not raise any legal or equitable estoppel against the respondent who had not drawn or made the draft in question.

9. The same argument, although in a different form, applied to the second point argued by the learned counsel .for the appellant that the appellant being a holder in due course is protected on account of the negligence of the respondent. There is no reason why the principle, which is of a universal application, that forgery creates no title, should not be extended to the law of commercial customs and practices unless there be a legal prohibition to do so. As often stated by eminent authors on the subject, "no amount of negligence will vitiate the title of a bona fide holder of a negotiable instrument, but not the most innocent mistake will enable him to make title through a forged instrument." This is plainly a common‑sense view, for to hold otherwise would be to enable any person to draw a bill as if drawn by another and put it into circulation. An innocent transferee is protected and need not complain in such cases, because when he takes the instrument, he relies on the under taking of his transferor that the prior endorsements are genuine and the instrument is good as it purports to be; and further, he can have his remedy against the transferor for breach of the warranty implied in the endorsement. In the last analysis, it would be the guilty forgerer who would be made to suffer. But neither in law nor in equity is a person, even if he were a holder in due course of a negotiable instrument, entitled to enforce the payment of a bill against the ostensible drawer or maker of a negotiable instrument, when in fact he is found not to be a drawer or maker. The learned counsel for the appellant relied on section 58 of the Negotiable Instruments Act for his contention mentioned above and it is necessary to refer to its provisions. It reads as follows:‑ "

58. When a negotiable instrument has been lost or has been obtained from any maker, acceptor or holder thereof by means of an offence or fraud, or for an unlawful considera tion, no possessor or indorsee who ‑claims through the person who found or so obtained the instrument is entitled to receive the amount due thereon from such maker, acceptor or holder, or from any party, prior to such holder, unless such possessor or indorsee is, or some person through whom he claims was a holder thereof in due course."

10. The section does not mention the offence of forgery explicitly, as does the corresponding section 24 of the English Act, and this has led to the view in some judicial decisions that as section 58 makes no distinction between the effect of forgery and that of any other offence, the matter must be taken to have been dealt with completely by this section which gives the holder in due course a good title, no matter what offence, including forgery, has been committed in the course of the negotiation. This view clearly applies to the course of negotiation, but what we are concerned with here is the fact that section 58 speaks of the negotiable instruments obtained from any maker etc. In other words, the section contemplates that their instrument has been properly made or drawn, and thereafter it is either lost or obtained from its lawful possessor by fraud or other offence. In this view of the matter, this section is not attracted to instruments which are forged ones at the very baser Further, we do not think that the appellant is a holder in due course within the definition of that term under section 9 of the Negotiable Instruments Act. Under this section, `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, * * *". We are not satisfied in this case that the appellant paid any consideration in lieu of getting the draft endorsed in his favour. According to his own statement, he purchased the draft from Abdul Wahid (P. W. 2) for Rs. 9,400 paid by him in cash and not by a cheque, while his witnesses Abdul Wahid (P.. W. 2) and Muhammad Rashid (P. W. 3) say that he had made the payment by a cheque. The appellant did not produce any account books to substantiate his plea that he did pay the money on account of this draft, although he is a business‑man and had admitted that he maintained regular accounts in the course of his business. His halting explanation that he made this payment out of money lying in his house from his private account is unacceptable in view o1 his own admission that he had purchased the draft in question in connexion with his business transaction, for which, he did maintain regular accounts.

11. We hold that the, appellant is not entitled to any relic and we dismiss his appeal with costs. Appeal dismissed.