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K. Anantharajaiah Vs. Shivaramaiah - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKarnataka High Court
Decided On
Case NumberSecond Appeal No. 276 of 1964
Judge
Reported inAIR1968Kant148; AIR1968Mys148; (1967)2MysLJ369
ActsEvidence Act - Sections 35 and 91
AppellantK. Anantharajaiah
RespondentShivaramaiah
Excerpt:
.....clearly indicates that the payment of the amount referred to in it is made with reference to the promissory note executed by the defendant on that very day and thus there is clear indication that the loan referred to by the plaintiff is not separable from the promissory note, being in any manner antecedent to the document or otherwise a separate transaction. --when a cause of action for money is once complete in itself, whether for goods sold or for money lent or for any other claim, and the debtor then gives a bill r note to the creditor for payment of the money at a future time the creditor, if the bill or note is not paid at maturity, may always, as a rule sue for the original consideration provided that he has not endorsed or lost or parted with the bill or note, under such..........is. on the facts of this case, the document that was executed by the defendant was a promissory note. a promissory note cannot contain anything more than what is permissible under section 4. therefore in this case, it cannot be doubted that the promissory note contained all the terms of the contract between the parties. if the holder of the promissory note is permitted to adduce any evidence in respect of the loan under the promissory note, it would be transgressing the provision of section 91 of the evidence act. it is difficult to accept the observation of the bombay high court expressed in the following terms while referring to the second proposition by garth c. j. set out n (1881)ilr 7 cal 256.'.... the case of a loan of money falls under the first proposition. it is said that the.....
Judgment:

(1) The Plaintiff in Original Suit No. 853 of 1961 is the appellant in this Second Appeal. The plaint allegations are that the defendant borrowed a sum of Rs. 1000 agreeing to pay the same back with interest there of at the rate of 1 per cent per mensem. It is undisputed that on that very day the defendant not merely executed a consideration receipt as mentioned in paragraph 1 of the plaint but also executed a promissory note. There is no reference to the promissory note in the plaint and it has been made clear by the plaintiff that the suit is based on the original cause of action and not on the basis of the promissory note executed on that day. The learned Munsiff held that the plaintiff had advanced a sum of Rs. 1,000 as a loan to the defendant but the loan and the execution of the promissory note were part of the same transaction. The learned Munsiff also states in his judgment that even the plantiff has not deposed in his evidence that the amount borrowed is independent of the execution of the promissory note in his favour In view of this. The learned Munsiff held that the plaintiff cannot fall back on the original cause of action. Therefore he dismissed the suit. On appeal the learned Civil Judge Mandya, in Regular Appeal No. 85 of 1963 came to the same conclusion. Referring to the evidence of P. W. 2, the learned Judge holds that the loan referred to by the plaintiff is contemporaneous with the execution of the promissory note and the consideration receipt and they form one transaction. Exhibit P--1 is the consideration receipt produced by the plaintiff. It recites that the defendant had received a sum of Rs. 1,000 being the amount due in respect of the promissory note executed on that day. This document clearly indicates that the payment of the amount referred to in it is made with reference to the promissory note executed by the defendant on that very day and thus there is clear indication that the loan referred to by the plaintiff is not separable from the promissory note, being in any manner antecedent to the document or otherwise a separate transaction. The learned Judge, therefore concurred with the finding of the trial Court that the advance of money and the execution of promissory note constituted one transaction and inseparable. This promissory note is insufficiently stamped and has not been put in evidence and the plaintiff has tried to by-pass the promissory note by basing the suit on the original cause of action. Admittedly the transaction is evidenced by writing which is inadmissible in evidence. The plaintiff's suit is dismissed as not maintainable by both the Courts. It is against this judgment and decree that the plaintiff has preferred this second appeal.

(2) Sri Balagopal, the learned counsel for the appellant, contends that though the findings of the courts below are that the advance of money by the plaintiff and the execution of the promissory note form one and the same transaction, it is yet possible to treat the advance of money as loan and the execution of the promissory note as a mere piece of evidence to indicate that the loan was advanced. The question as to whether the holder of the promissory note which is inadmissible in evidence on account of its being insufficiently stamped or otherwise inadmissible, can file a suit on the original cause of action, has been the subject matter of consideration in several decision. The basic decision in this connection is the one reported in (1881) ILR 7 Cal 256, Sheikh Akbar v. Sheikh Khan. This decision is relied upon by the Chief Court of Mysore in (1928) 6 Mys LJ 157 and it is observed as follows:

'But where the original cause of action is the bill or note itself and does not exist independently of it and if for want of stamp or some other reason the note is not admissible in evidence the creditor must lose his money. When therefore money is lent on terms contained in a note given at the time of the loan the lender suing for the money must prove the terms of the note and if for want of stamp or any other reason the note is inadmissible the creditor is not entitled to set up a case independent of the note. This principle is in accordance with Section 91 of the Evidence Act.'

This is what has been laid down in a decision in : AIR1946All150 , Ram nath v. Bhagawathi Prasad. it is observed therein as follows:

'Where as is usually the case the pronote in suit does not contain substantially all the terms of the contract of loan between the parties and the pronote is found inadmissible in evidence for want of proper stamp under Section 35 it is open to the plaintiff to prove the loan by such evidence oral or documentary as may be available to him. Under such circumstances the bar of Section 91, Evidence Act, does not apply. But if the pronote in suit contains substantially all the terms of the contract of loan between the parties and the pronote is found admissible in evidence under Section 35 the plaintiff cannot fall back upon an independent cause of action to recover the loan and prove the same by independent evidence for the simple reason that there is no cause of action independent of and apart from the promissory note'

(3) In this case, as found by the courts below the transaction referred to in the plaint is contained in the promissory note. It is executed on the date when the loan is advanced and that document is inadmissible in evidence as it is insufficiently stamped. The other decision to which a reference may be made is : AIR1957Mad715 . Rangaswami Reddy v. Doraiswami Reddy. It was held therein that all the terms of the contract between the plaintiff and defendant in respect of the loan were reduced to writing and embodied in the promissory note as in this case. The learned Judges held that the payment of the amount as loan being simultaneous with the execution of the promissory note Section 91 of the Evidence Act would be an obvious bar to the admission of any evidence aliunde to prove the passing of consideration under the promissory note. This indicates that once a transaction is evidenced by an instrument in writing, Section 91 would be a bar to prove the terms of the contract otherwise. Section 91 of the Evidence Act reads as follows:

'91 When the terms of a contract, or of a grant, or of any other disposition of property, have been reduced to the form of a document and in all cases in which any matter is required by law to be reduced to the form of a document, no evidence shall be given in proof of the terms of such contract, grant or other disposition of property, or of such matter, except the document itself, or secondary evidence of its contents in cases in which secondary evidence is admissible under the provisions hereinbefore contained.

ILLUSTRATIONS

xx xx xx (b) If a contract is contained in a bill of exchange the bill of exchange must be proved.'

In this case the findings of the Courts below are that the contract between the parties is contained in the promissory note and therefore under Section 91 the document must be proved. No other evidence is admissible unless it is by secondary evidence under the provisions of the Evidence Act.

(4) The appellant's counsel drew my attention to the decision of the Bombay High Court in AIR 1938 Bom 286, Sombhai v. Kalyanbhai. In this case, the Bombay High Court held that the case on the original consideration is maintainable for the reason that the transaction of loan created a cause of action independently of the pronote and therefore the suit is based otherwise than on the promissory note, i.e., the loan being the term of the contract contained in the promissory note. With great respect if must be pointed out that the terms of the contract are fully embodied in the promissory note itself. The definition of the promissory note is given under S 4 of the Negotiable Instruments Act. It is defined as follows:

'4. A 'promissory note' is an instrument in writing (not being a bank-note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of a certain person, or to the bearer of the instrument.'

Several illustrations are also given to show what a promissory note is. On the facts of this case, the document that was executed by the defendant was a promissory note. A promissory note cannot contain anything more than what is permissible under Section 4. Therefore in this case, it cannot be doubted that the promissory note contained all the terms of the contract between the parties. If the holder of the promissory note is permitted to adduce any evidence in respect of the loan under the promissory note, it would be transgressing the provision of Section 91 of the Evidence Act. It is difficult to accept the observation of the Bombay High Court expressed in the following terms while referring to the second proposition by Garth C. J. set out n (1881)ILR 7 Cal 256.

'.... The case of a loan of money falls under the first proposition. It is said that the independent cause of action must be antecedent in time to the note and this principle has been laid down because the word 'then' in the first proposition in 7 Cal 256. In my opinion however the principle is unsustainable. If there is a loan it does not matter whether the promissory note is taken at the time or at some later time. it is the loan which constitutes the cause of action and gives rise to it and it is separate from the note itself and the fact of a loan can never be a term of the contract contained in the promissory note and therefore it is open to a person to prove that there was a loan independently of S 91 of the Evidence Act.'

This proposition cannot be accepted. No exception however can be taken to the further observation that if the cause of action is antecedent to the making of promissory note, then there is nothing to prevent the creditor from maintaining a suit on the original cause of action. The difficulty really arises as the transaction of loan and the execution of the promissory note are contemporaneous and form part of the same transaction. In this connection, the two propositions laid down in ILR 7 Cal 256 may also be referred to the said case being the leading case on the question. The first proposition is as under:--

'When a cause of action for money is once complete in itself, whether for goods sold or for money lent or for any other claim, and the debtor then gives a bill r note to the creditor for payment of the money at a future time the creditor, if the bill or note is not paid at maturity, may always, as a rule sue for the original consideration provided that he has not endorsed or lost or parted with the bill or note, under such circumstances as to make the debtor liable upon it to some third person. In such cases, the bill or note is said to be taken by the creditor on account of the debt, and if it is not paid at maturity the creditor may disregard the bill or note and sue for the original consideration.'

The second proposition is:

'But when the original cause of action is the bill or note itself and does not exist independently of it, as for instance, when, in consideration of A depositing money with B, B contracts by a promissory note to repay it with interest at six month's date here there is no cause of action for money lent, or otherwise than upon the note itself, because the deposit is made upon the terms contained in the note and no other. In such a case the note is the only contract between the parties and if for want of a proper stamp or some other reason the note is not admissible in evidence the creditor must lose his money'

(5) I have no hesitation with great respect, to accept the second proposition as being in accordance with the provisions of Section 91 of the Evidence Act. In the view I take that this case falls within the 2nd proposition the judgment and decree of the lower Courts are confirmed and the appeal is dismissed. In the circumstances of the case I direct the parties to bear their own costs.

(6) Appeal dismissed


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