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Kempegowda Vs. M. Mahalingaiah - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKarnataka High Court
Decided On
Case NumberSecond Appeal No. 36 of 1968
Judge
Reported inAIR1972Kant152; AIR1972Mys152; (1972)1MysLJ57
ActsLimitation Act, 1908 - Sections 19; Stamp Act, 1899 - Sections 35; General Clauses Act, 1897 - Sections 2
AppellantKempegowda
RespondentM. Mahalingaiah
Appellant AdvocateC.R.V. Swamy, Adv.
Respondent AdvocateJ.M. Riazuddin, Adv. for ;A.C. Nanjappa, Adv.
Excerpt:
.....as he was holding the land as a tenant prior to and as on 1.3.1974. - 10,000/- from the said society to discharge the debt due to the plaintiff as well as the other creditors of the defendant. moreover, this witness appears to be an obliging witness, as he is obliged to the plaintiff who is accustomed to lend agricultural implements like ploughs. ' it does not appear from his statement, as the learned judge thought, that the plaintiff was accustomed to lend agricultural implements like ploughs to him. 1000/- and he is a member of a large family consisting of five children, his mother step mother as well as himself. he being a literate man and also well experienced in worldly affairs it is hardly acceptable that he would have made payment of such substantial amount without taking any..........arrangements, the defendant paid a sum of rs. 1,290/- on 4-7-1963 in full satisfaction of the pronote debt and that the plaintiff returned the pro-note and consideration receipt tearing the top and removing the stamp in token of discharge. thereafter the defendant has produced the document before the secretary of the society and made a report that the said debt has been discharged. it was also contended that as the suit is based on loan transaction, it is barred by time.4. the trial court held that the plaintiff's suit is not barred by time. it was of the view that ex. p-4 the statement of the defendant dated 4-4-1962 and the memorandum sanctioning the loan ex. p-5 dated 9-3-1962 were sufficient acknowledgment by the defendant to save the limitation. on consideration of evidence it.....
Judgment:

Ahmed Ali Khan, J.

1. This Second Appeal arises out of a suit filed by the plaintiff in O. S. No. 1519 of 1963 on the file of the Additional Munsiff, Mandy. The plaintiff's suit was for the recovery of a sum of Rs. 1334-00 inclusive of interest on the principal sum of Rs. 1,000/-at the rate of 12 per cent and notice charges a sum of Rs. 10/-.

2. The allegations contained in the plaint were that on 3-2-1960, defendant borrowed a sum of Rs. 1,000/- from the plaintiff agreeing to pay interest at the rate of 12 per cent per annum on the sum and as security for the said amount, executed a pronote which has been marked as Ex. P-1 in the case and a receipt along with it on the same day. It was stated that the defendant thereafter paid a sum of Rs. 120/- towards interest on 5-4-1961 and made an endorsement to that effect on the pro-note Ex. P-1. It was further alleged that the defendant represented to the plaintiff that the pronote Ex. P-1 and the consideration receipt were required for the purpose of producing the same before the Land Mortgage Co-operative Society, Mandya in order to obtain a loan of Rs. 10,000/- from the said Society to discharge the debt due to the plaintiff as well as the other creditors of the defendant. But subsequently, the defendant did not return those documents; nor discharged the debt. From the enquiry which the plaintiff made he learnt that the pronote and consideration receipt have been produced before the Society. The plaintiff therefore issued a notice to defendant demanding the amount lent to him. The defendant repudiated his liability.

3. The defendant in his written statement denied that the pronote Exhibit P-1 and the receipt were executed as security for the amount borrowed. He contended that the payment of consideration and execution of the pronote was contemporaneous. He admitted that he borrowed Rs. 1,000/- on executing the Promissory note and the consideration receipt. He also admitted that on 5-4-1961 he paid a sum of Rs. 120/- towards interest. But it was alleged by him that after taking a loan of Rs. 10,000/-from the land Mortgage Co-operative Society, Mandya, he requested the plaintiff to give him the true copy of the promissory note and consideration receipt and after obtaining the same from the plaintiff he produced them before the Society. As the Secretary of the Society wanted to verify the copies by comparing them with the original, the plaintiff was requested to show the pronote and receipt (though the written statement is not clear in this regard, it was submitted during the course of arguments by the counsel for the petitioner, the plaintiff was requested by the defendant.). Accordingly they were produced by the plaintiff and after due verification, returned to him.

It was contended that after making necessary arrangements, the defendant paid a sum of Rs. 1,290/- on 4-7-1963 in full satisfaction of the pronote debt and that the plaintiff returned the pro-note and consideration receipt tearing the top and removing the stamp in token of discharge. Thereafter the defendant has produced the document before the Secretary of the Society and made a report that the said debt has been discharged. It was also contended that as the suit is based on loan transaction, it is barred by time.

4. The trial court held that the plaintiff's suit is not barred by time. It was of the view that Ex. P-4 the statement of the defendant dated 4-4-1962 and the memorandum sanctioning the loan Ex. P-5 dated 9-3-1962 were sufficient acknowledgment by the defendant to save the limitation. On consideration of evidence it found that the defendant has not discharged the suit debt. It also held that it is not proved by the evidence that the plaintiff has given the pronote to the defendant tearing the top of the pronote and removing the stamps thereof as alleged by the defendant. On the basis of the findings recorded by it the trial court decreed the plaintiff's suit.

5. In the appeal by the defendant, the lower Appellate Judge held that plaintiff's suit was barred by limitation. He further held that it is not true that plaintiff has handed over the pronote and the receipt to the defendant. On the basis of the conclusions reached by him he reversed the judgment and decree of the trial court and dismissed the plaintiff's suit with costs.

6. It is against the decision of the learned Civil Judge, this Second Appeal is preferred by the plaintiff.

7. The first contention that has been advanced on behalf of the appellant was that the lower appellate court was wrong in holding that the plaintiffs suit is barred by limitation.

8. The second contention was that the Lower Appellate Judge has misconstrued the evidence led in the case in coming to the conclusion that the pronote and receipt were handed over by the plaintiff to the defendant and that the debt under the pronote was discharged.

9. Conscious as I am of the restricted power that we exercise in Second Appeal, I hesitated a great deal before deciding whether I should interfere with the finding of the lower court in this case with regard to discharge of debt under the pronote. Having regard, however, to the particular fact and circumstances of the case and as I am of the opinion, that the lower Appellate Judge has misconstrued the evidence in that regard. I think I should interfere.

10. With regard to the limitation, the reasons given by the lower appellate Judge are found in paragraph 8 of his judgment. It is stated therein that 'having regard to the fact that the plaintiff has not based his suit on the pronote the endorsement made thereon regarding payment of Rs. 120/- on 5-4-1961 which relates to the debt under the pronote does not save limitation in respect of the debt sued on the actual borrowing, which is claimed as independent transaction'. It is impossible to agree with the view taken by the lower appellate Judge. The endorsement of payment appearing on the pronote Exhibit P-1 is effective for the purpose of extending the limitation.

11. Before I advert to this point of law. I must mention here that the defendant has expressly admitted the execution of the pronote Ex. P-1 and its consideration. He has also admitted specifically the payment of Rs. 120/- on 5-4-1961 and the endorsement to that effect on the pronote Ex. P-1. This is what he has stated in paragraph 2 of his written statement :

'It is true that the defendant borrowed Rs. 1,000/- on executing a promissory note and consideration receipt and subsequently on 5-4-1961 paid Rs. 120/- towards interest mentioned in the endorsement thereon.'

12. It is not disputed before me that the pronote Ex. P-1 is not sufficiently stamped. In the said circumstances. I think the endorsement of payment on the pronote Ex. P-1 is effective for the purpose of extending the period of limitation. In a much harder case, where the pronote on which endorsement of payment was made was inadmissible in evidence for want of sufficient stamp, it was held by Madras High Court in Kondamma v. Venkatarayudu, AIR 1939 Mad 34. that although the pro-note being insufficiently stamped and inadmissible under Section 35 of the Stamp Act endorsement of payment appearing is effective for purpose of limitation.

The question for consideration in that case was whether the plaintiff could rely on the endorsement on an insufficiently stamped promissory note as a valid endorsement acknowledging the original liability. It was observed at page 36 of the report: --

'It is argued that the promissory note itself being insufficiently stamped and inadmissible in evidence, the instrument cannot be used in evidence for any purpose under Section 35, Stamp Act. But it was held in a decision of this court in 34 Ind Cas 417 = (AIR 1917 Mad 460) that though the promissory note itself is inadmissible the endorsement of payment appearing on it can be availed of as acknowledgment of the liability upon the original debt. If so, in this case, it is clear the suit is not barred by limitation as it was instituted within three years from 6th July 1932.'

Then their Lordships proceed to observe:--

'Section 35 of the Stamp Act says that 'no instrument chargeable with duty shall be admitted in evidence for any purpose ............ unless such instrument is duly stamped'. Under this Section an insufficiently stamped instrument is inadmissible in evidence. 'Instrument' is denned in Stamp Act 2 of 1899 to include every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded.

(See Section 2, Clause 14); and 'document' is defined in the General Clauses Act 10 of 1897 as follows: 'Document' shall Include any matter written, expressed or described upon any substance by moans of letters, figures, or marks, or by more than one of those means, which is intended to be used, or which may be used, for the purpose of recording that matter.' 'From this it follows that the instrument that is inadmissible under Section 35, Stamp Act, is the 'matter written on the substance' by means of letters described as the promissory note. For the purpose of extending the period of limitation what is relied on is not the writing which constitute the promissory note and which is inadmissible but the endorsement on the insufficiently stamped note. So long as it acknowledges the liability under the original note I can see nothing in law to prohibit its admission in evidence.'

With respect, I agree with the above observation. But Mr. J. M. Riazuddin -- learned counsel for the respondent contends that as the pronote Ex. P-1 was torn and thereby materially altered, endorsement on the pronote is ineffective, because, it cannot be said that there was existing jural relationship. In this connection it was argued that acknowledgment means promise to pay. But there is no such promise in the endorsement made on the pronote Ex. P-1. It is not possible to agree with his contention. An acknowledgement under Section 19 of the Limitation Act, must be a conscious admission of existing liability, in respect of property and the right claimed in the suit and must show existing jural relationship between the party at the tune when the admission was made.

13. The first part of the argument advanced on behalf of the respondent falls to the ground, because when the endorsement was made on Ex. P-1 neither the pronote was torn nor was altered in any way.

The second part of his contention is to the effect that acknowledgment means promise to pay and as there is no such promise, in the endorsement appearing on Ex. P-1, it does not amount to an acknowledgement. I do not find any substance in the contention. Section 19 of the Limitation Act is undoubtedly free from the doctrine of English Law which puts the value of acknowledgment upon its being equivalent of a new promise to pay. Under Section 19 of the Limitation Act, there must be no doubt about the identity of the debt and once it is clear that the defendant admits that he owes the money and it is clear what debt he had admitted, it is a valid acknowledgment. It need not contain a promise to pay. It will no doubt amount to subsistence of debt and existence of jural relationship.

Therefore it has to be concluded that plaintiff's suit is (not ?) barred by time, and the endorsement appearing on the pronote Ex. P-1 is effective for the purposes of limitation.

I think there is considerable force in the second contention. It is stated in the written statement.

'............On receipt of the amount, the plaintiff returned the promissory note with consideration receipt tearing the top and removing the stamp as a token of discharge.'

The defendant was examined twice --once before the remand, viz., on 2-2-1965 and the second time after the remand on 18-1-1967. In his deposition before remand, the defendant, in his examination-in-chief, has stated :--

'Then I borrowed from D. W. I under Exhibit D-2 and paid plaintiff's loan and took back the pronote tearing on the top and punching the stamps.'

In his deposition recorded on 18-1-1967 after the remand, he has stated in his ex-amination-in-chief:

'The Stamp on the suit pronote was torn off and returned to me by the plaintiff.'

It is thus seen that the defence evidence on that point is inconsistent. Moreover what he has deposed in his statement recorded on 2-2-1965 is inconsistent with his pleading. The lower appellate Judge in para 9 of its judgment has stated:

'............the defendant has contended that so far as the production of the document before the bank is concerned, it was by the plaintiff for purpose of comparison and verification and that subsequently he paid the amount due to the plaintiff and received the document from him. who got the top of the document torn and the stamps therein punched as token of discharge.'

And then again, further down in the same para, he has stated:

'The defendant has deposed that as the plaintiff demanded to discharge the amount immediately he borrowed from D. W. 1 under Exhibit D-2 and paid the amount to the plaintiff and took back the pronote from him who returned it by tearing off and punching the stamps.'

It is thus seen that the lower appellate Judge has misread the evidence. He has not considered that portion of the evidence of the defendant in his deposition which was recorded after the remand wherein he has stated that the stamps on the suit pronote were torn off and returned to him by the plaintiff nor the learned Judge has adverted to the portion of the written statement of the defendant cited above. This shows that the learned Judge without scanning the evidence on that point and misreading the evidence arrived at an erroneous conclusion and this circumstance weighed much on his mind in arriving at the conclusion with regard to the production of the pronote before the Land Mortgage Bank and the discharge of the debt under the pronote.

It is the case of the plaintiff that the defendant took the pronote and the receipt from him stating that he has to produce the same before the Land Mortgage Bank, Mandy. On the other hand, the case of the defendant is that it was the plaintiff who produced those documents before the said Bank. The plaintiff has examined himself and produced two witnesses P. Ws. 2 and 3. The plaintiff has deposed:

'Defendant requested me to give him Exhibit P-1 as he promised he would produce that in Land Mortgage Bank and discharge my debt. One Kenchaiah (P. W. 3) was present when I handed over Ex. P-1 to defendant. When I gave the pronote it was not torn in its top and the stamps were not punched as they are now.'

P. W. 3 Kenchegowda has also deposed to the same effect. P. W. 2 who is the Secretary of the Bank in his examination in chief at first deposed that it was the defendant who produced Ex. P-1 before the Bank. But later on he resiled from his statement and said that the plaintiff had produced Ex. P--1 before the Bank, The Appellate Judge discarded , le evidence of this witness merely stating that his evidence was inconsistent on that point. The mistake the learned Judge has committed was that he overlooked the fact that it is the duty cast on the court to separate the 'grain from the chaff' as observed by the Supreme Court. It is not as though that the witness P. W. 2 had simply stated that defendant produced Exhibit P-1 before the Bank so that it may be construed that due to a slip of tongue or otherwise due to lack of memory he had made that statement and later on he corrected himself.

This is what he has stated in his examination-in-chief:

'We require the original document under which the party wants to pay out debt before sanctioning the loan in our Bank. In this case also, we had required the defendant to produce the documents of debt with duplicate, i.e. Ex. P-1. Ex. P-1 was produced by defendant and after verification it was returned to him.'

It is thus seen that he has given evidence in detail with regard to the production of Exhibit P-1 by the defendant in the Bank. It cannot be said that due to lack of memory or otherwise, he had made that statement. In his examination-in-chief further down he has stated:

'Ex. P-1 pronote was produced in our Bank by plaintiff Kempegowda. I have returned Ex. P-1 to plaintiff alone after verification. At that time, the pro-note was not torn or the stamps not taken.'

It is abundantly clear that the witness has prevaricated. It is an admitted fact in this case that the defendant was one of the Directors of the Bank at the relevant period of time and P. W. 2 was the Secretary of the said Bank at that time. The learned Judge has skipped off this piece of evidence without applying his mind to it by stating that P. W. 2 being the Secretary of the Bank was a responsible officer. As already observed, it is quite evident that at first he came out with the truth and then he went on resiling from his statement. The reason for the same was quite obvious. Further the learned Judge has described P. W. 3 as an 'obliging witness'. He has observed in para 9 of his judgment:

'Moreover, this witness appears to be an obliging witness, as he is obliged to the plaintiff who is accustomed to lend agricultural implements like ploughs.'

But he overlooked the fact that P. W. 2 was working as Secretary in the Bank and the Defendant was one of the Directors of the Bank. He adopted different standards in evaluating the evidence of plaintiffs witnesses. What P. W. 3 deposed was:

'One and a half years back. I had been to plaintiff's house to borrow a plough.'

It does not appear from his statement, as the learned Judge thought, 'that the plaintiff was accustomed to lend agricultural implements like ploughs to him. That was the only ground on the basis of which the evidence of P. W. 3 had been rejected by the lower appellate Judge. I do not think that the learned Appellate Judge was right in discarding his evidence. Even otherwise, if the earlier piece of evidence of P. W. 2 is accepted. I do not see any reason why it should not be accepted, it has to be concluded that the pronote Exhibit P-1 was produced by the defendant before the Bank. The very fact that the evidence of the defendant with regard to the removal of the stamps or punching the same is not consistent and further his evidence is against his own pleading, viz.. what he has, stated in his written statement, shows that the evidence of the defendant is unworthy of credit. In support of the alleged discharge the defendant has examined himself and three witnesses. D. W. 1 is a relative of the defendant. His evidence disclosed that his annual income is Rs. 1000/- and he is a member of a large family consisting of five children, his mother step mother as well as himself. He has stated that he borrowed Rs. 400/- from one Godigowda and made up the amount advanced to the defendant. The said Godigowda is not examined. D. W. 1 is a relative of the defendant The very nature of the document Exhibit D-2 (pronote) indicates that it can be easily prepared at any time.

D. W. 2 has given evidence that defendant borrowed Rs. 1000/- from him and that the defendant had told him that he had applied for a loan from the Land Mortgage Bank. In that connection, the defendant executed a pronote in his favour. He has also deposed that at the instance of the defendant he took the pronote for comparison by the Secretary of the Land Mortgage Bank. His further evidence is that after comparing the copies with the original, the Secretary returned the pronote to him. He adds that at that time Kapre Gowda alias Channegowda. Gaddigowda and plaintiff had also come to the Land Mortgage Bank and that the Secretary compared the true copies with the originals produced by them and returned the originals. He stated that the Secretary compared the true copies with the originals produced by all of them. D. W. 3 has also given evidence substantially to the same effect. He is the defendant's son-in-law and a close relative. Further he has deposed that they have been paid their loans. It is an admitted fact in this case that the creditors of the defendant have not been paid their amounts by the Bank though the cheques had been prepared. Therefore, no reliance can be placed upon the evidence of these witnesses.

With regard to the discharge the relevant portion of the written statement reads:

'Consequently, the defendant with great difficulty had to arrange for the money to make a payment of Rs. 1,290/-(principal Rs. 1000/- and balance of interest up to 4-7-1963 Rs. 290/-) in full satisfaction of the pronote debt.'

It is seen that that portion relates to obtaining of the loan to discharge the debt under the pronote. Nowhere it is stated in the written statement as to on what date the debt under the pronote had been repaid. But the learned counsel for the respondent submitted that the date mentioned in the written statement 4-7-1963 should be understood to be the date on which the debt under the pro-note had been discharged. Even if it is taken to be so the defendant in his deposition has stated:--

'I do not remember the date on which I repaid the suit debt: I can't say the exact amount I paid to the plaintiff.'

The defendant is a retired court clerk and is an experienced man. The amount was a substantial one. His evidence coupled with his written statement furnished a reasonable basis for an inference that he was not at all telling the truth. He being a literate man and also well experienced in worldly affairs it is hardly acceptable that he would have made payment of such substantial amount without taking any receipt or writing to that effect from the plaintiff. Moreover it is borne by the evidence let in in the case that the defendant had applied for loan in the Land Mortgage Bank to discharge the debt of the plaintiff and his other creditors and the loan had been sanctioned. This was sometime in the year 1962.

After the necessary requirements were complied with the defendant executed a mortgage bond in favour of the Bank on 30-3-1963. On 4-7-1963 the defendant made an application to the Land Mortgage Bank as per Ex: P-8(a) to the effect that the amount may be distributed to the creditors on 5-7-1963 as per details furnished in the application. Now Ex. D-2 pronote which is alleged to have been executed by the defendant in favour of D. W. 1 is also dated 4-7-1963. The evidence of the defendant is that the plaintiff was demanding repayment of his debt since 2 years prior to the date of filing of the application in the Bank. If really there was any pressure from the plaintiff for repayment of the debt, it can hardly be believed as to why the defendant waited all that time.

Moreover it looks highly improbable, as argued on behalf of the appellant, when the cheques were already ready, the defendant would have discharged the debt under the suit pronote on 4-7-1963. more so, when on the very day he had presented an application to the Bank requesting the Bank to make payment to his creditors on 5-7-1963. In these circumstances. I think the learned Advocate for the appellant is right in his contention that no reliance can be placed upon the evidence relating to the discharge of the debt produced on behalf of the defendant. It has to be held that the alleged discharge has not been proved by the evidence produced on behalf of the defendant. As already observed by me the learned lower appellate Judge has not only misread the evidence but approached the same without considering the checks that were available in the record for testing the evidence of the witnesses. In this view of the matter the judgment of the lower appellate court is liable to be set aside and the plaintiff is entitled to a decree.

On the reasons stated above, this appeal is allowed and the judgment and decree of the lower appellate court are set aside, and the judgment and decree passed by the trial Court are restored. The trial court has not awarded present and future interest to the plaintiff. The pronote Ex. P-1 carried with it interest at 12 per cent per annum. In these circumstances I am of the opinion that in the interest of justice the plaintiff should be awarded interest present and future at the rate of (six) per cent, per annum and it is ordered accordingly. The plaintiff appellant will also get his costs throughout.


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