Lallubhai Shah, Kt., Ag. C.J.
1. This is an appeal from the judgment of Mr. Justice Marten in a suit filed by the plaintiffs on a promissory note dated May 20, 1920, whereby the defendant promised to pay them on demand Rs. 2000 and interest thereon at the rate of one and a half per cent, per mensem. The consideration stated in the note is Rs. 2000 borrowed in cash. The defendant admitted the note but denied receipt of any consideration from the plaintiffs for the promissory note. He further pleaded that the promissory note was passed in the following circumstances:
This defendant mortgaged his land known as 'Bagicha' at Koli Kalyan to the plaintiffs by an indenture of mortgage dated May 17, 1920. The said land was formerly mortgaged by this defendant to Hakma Mota & Co. and subsequently redeemed by this defendant on payment of the mortgage moneys but through oversight the reconveyance was not taken from the then mortgagees In order to indemnify the plaintiffs against the claims of the said Hakma Mota & Co., this defendant executed the said promissory note dated May 20, 1922, at the plaintiffs request, pending the execution of the re-conveyance by the said Hakma Mota & Co., but no consideration was paid actually to this defendant by the plaintiffs. Id was further arranged between the plaintiffs and the defendant when the promissory note was executed that the said promissory note should be returned to the defendant duly cancelled after the execution of the reconveyance by the said Hakma Mota & Co., in favour of the defendant. As the reconveyance has not yet been obtained the said promissory note could not be cancelled.
2. He also pleaded that the Court had no jurisdiction as the promissory note was passed at Kurla.
3. On these pleadings the following issues were raised:
(1) Whether the promissory note was executed in Bombay as alleged in plaint and whether the Court has jurisdiction ?
(2) Whether there was any consideration ?
(3) Whether the promissory note was given by way of indemnity for a contingent liability which has now determined ?
(4) Whether the promissory note was passed under the circumstances mentioned in para 2 of the written statement, and, if so, whether any cause of action has arisen on it ?
4. The learned trial Judge came to the conclusion that the Court had jurisdiction even if the bond had been executed at Kurla. AS regards the second issue, he found in the affirmative, and as regards issues (3) and (4) he held that oral evidence in respect of it was not admissible under Section 92 of the Indian Evidence Act. As the execution of the note was otherwise admitted and as according to the case as made by the defendant there would be some consideration for the bond, he passed a decree in favour of the plaintiffs as prayed.
5. In the appeal before us, no question has been raised as to the jurisdiction of the Court, and the finding on issue No. (1) must be accepted.
6. It is urged, however, with reference to issues Nos. (3) and (4) that the learned Judge was not right in excluding the evidence of the defendant in support of the pleas contained in those issues.
7. This point has been fully argued before us and several cases have been cited. It seems to me, however, necessary to bear in mind the plea put forward by the defendant and to see whether that is covered by any proviso to Section 92 of the Indian Evidence Act. If the plea of the defendant was merely that there was no cash consideration as stated in the bond, it seems to ma that he would be clearly entitled to prove that under the first proviso to Section 92, because the plea of want of consideration is expressly mentioned in that proviso. In that case it would be open to the plaintiffs to show that there was cash consideration or that there was some other consideration. But the matter does not rest there. The plea put forward by the defendant in substance is that there was already a mortgage in favour of Hakma Mota & Co.; that that mortgage was satisfied but no formal reconveyance had been obtained from the mortgagee ; that, on May 17, 1920, the defendant mortgaged the land in question to the present plaintiffs; that, on May 20, 1920, that is, three days after this mortgage, the promissory note in question was executed not for cash consideration as stated in the note but merely to indemnify the plaintiffs in case any claim was put forward by Hakma Mota & Co in respect of this property ; and that the promissory note was to be returned to the defendant duly cancelled after the reconveyance from Hakma Mota & Co. in favour of the defendant was obtained by the defendant. As I understand this plea, it means in substance that there was no liability to arise under this promissory note unless and until any claim was made by Hakma Mota & Co. in respect of this property. In fact he pleads the existence of a separate oral agreement constituting a condition precedent to the attaching of any obligation under the promissory note. If that is the true meaning of the defence made by him, it would clearly fall under proviso (3) to Section 92. Whether he will be able to establish this plea or not is quite a different matter; and even if he is able to establish that plea, whether it could be said that there was no consideration for the bond, is a matter upon which it is not possible to express any opinion at this stage. But after considering the arguments on either side, I have come to the conclusion that that really is the true meaning of the plea raised by the defendant.
8. Considerable stress was laid in the course of the argument on behalf of the respondents on the decision in Vishnu Ramchandra v. Ganesh Krishna I.L.R. (1921) 45 Bom. 1155 : 23 Bom. L.R. 488. The learned trial Judge has relied upon this decision in support of the view which he has taken. The distinction sought to be made before us between that case and the present was also pressed upon the attention of the learned Judge, but he did not think that such a distinction could be made I think, however, that that distinction is a real one. In that case at page 1159 the learned Chief Justice, after referring to the observations of Mr. Justice Sale, observes as follows :
Those remarks apply equally well to the case before us It is not suggested that this promissory note was to have no force or effect at all until the plaintiff paid off the incumbrance. It merely provided that the promise to pay on demand was not to be enforced by suit until those incumbrances were paid off.
9. In the present case it is suggested that the promissory note was to have no force or effect at all unless and until Hakma Mota & Co. made a claim against the plaintiffs. In the case cited above if it had been alleged that the promissory note was to have no force or effect at all until a particular condition was satisfied, it seems to me that it would have been difficult to take the case out of the scope of proviso (3) to Section 92. I admit that it is not always easy to determine whether a particular plea falls within the scope of a particular proviso to Section 92. In the present case also I do not say that the question is entirely free from difficulty ; but after giving my best consideration to the point, I have come to the conclusion that the defendant is entitled to establish this plea under proviso (3). It seems to me that if he is able to make good his plea, it would mean that no liability arises under the promissory note until the condition precedent, viz., the making of a claim by Hakraa Mota & Co., comes into existence. This view necessarily involves that the present finding recorded on Issue No. (2) as to consideration cannot be accepted. That question must be considered in the light of the merits of the plea raised by the defendant in issues Nos. 3 and 4.
10. For these reasons I would allow the appeal, reverse the decree appealed from, and remand the case to the trial Court for disposal on the merits
11. Costs throughout in the trial Court and in appeal to be costs in the cause.
12. Kemp, J. Shortly put, the defence is that the promissory note in the suit was passed to secure plaintiff-mortgagees against any claim that might be made by the prior mortgagees, Hakma Mota & Co., who had been paid off and from whom the defendant had failed to obtain a reconveyance.
13. I am of opinion that this alleged agreement amounts to a suspension of the obligation attaching under the note until the necessity for enforcing the indemnity arises. I do not think it is an agreement to postpone payment of an existing liability but one by which the note is to have no legal effect until the eventuality to guard against which it was passed arises. Under the circumstances I think this alleged agreement may be proved under proviso (3) to Section 92 of the Indian Evidence Act. I am not at all sure that the agreement may not also be proved under proviso (2) of the same section. I admit the construction of the alleged agreement is not free from doubt.
14. But if the whole arrangement of the mortgage and the promissory note may, notwithstanding that the latter was passed some days after the former, be regarded as one agreement, part of which was in writing, e. g., the mortgage and the promissory note, then its terms may be proved without the application of Section 92 which only applies to an agreement in writing.
15. I do not think any difficulty on the question of stamp duty and its evasion necessarily arises because if the whole agreement is not in writing there is no necessity for affixing a stamp to such documents as form part of it.
16. I think if such an agreement as the defendant alleges really exists, it would be very inequitable not to allow it to be proved.
17. The statement in the promissory note that the defendant has received in cash Rs. 2,000 is a mere recital which under the decision in Sah Lal Ghand v. Indarjit may be allowed to be contradicted by showing the real facts.
18. I agree with the order proposed.
19. Costs throughout in the trial Court and this appeal to be costs in the cause.