N. Kumarayya, C.J.
1. This appeal arises out of a suit brought against the appellant herein for recovery of amounts together with interest thereon alleged to have been advanced to him by way of accommodation on two occasions for which separate receipts were obtained. The suit was registered on 13-9-1963. On 5-10-1963 which was the date fixed for the appearance of the defendant, the 3rd Additional Judge, City Civil Court at Secunderabad set the proceedings against him ex parte as he did not enter appearance in spite of service of summons and fixed the date for plaintiff's evidence as 9-10-1963. The plaintiff was the lone witness and the suit was decreed on that very day. Later the defendant applied for setting aside the ex parte decree by filing I. A. 489 of 1963 which was allowed. He filed his written statement on 14-2-1964 wherein he denied that any amount was advanced to him either on 29-10-1960 or 30-11-1960 by way of loan or any interest was agreed to be paid thereon.
He did not, however, deny the receipts, which showed that the amounts were received 'on account'. He stated that the plaintiff had suppressed the true facts and circumstances under which the said receipts came into being and had instituted a false suit. The true state of facts, according to him, the defendant, is as follows: The state Talkies at Aurangabad was owned by Shah Nawaz Khan, the brother-in- law of the defendant, along with others. The defendant's wife also had interest therein. The defendant looked after the affairs of the Talkies along with his brother-in-law. The plaintiff was interested in taking on lease the said talkies. He therefore approached the defendant at Aurangabad in October, 1960. But the Talkies was already given on lease to one Babubhai Patel. The defendant explained to him that it was not possible to give the said talkies on lease to him as it was already leased out to others. The plaintiff told him that he would arrange with the lessee.
Thereafter, one day he called the defendant to Hyderabad on 29-10-1960 it was agreed that the plaintiff would get the theatre vacated within 6 months whereupon the theatre would be leased out to him. The plaintiff offered to pay Rs. 3,000/- by way of advance to enable the owners of the talkies to meet the incidental expenses in getting the lease terminated. It was one of the terms of the agreement that in case his attempt in getting the theatre vacated by the tenant failed, the said amount should stand forfeited and the plaintiff would have no right to claim back the same. The amount of Rs.3,000/- was paid on 29-10-1960 and it was utilised for the purpose for which it was paid. Later, on 30-11-1960 the plaintiff again approached the defendant and told him that he incurred an expenditure of Rs. 4.000/- in attempting to get the lease terminated and also for purchase of equipment for the talkies in anticipation of getting the lease. He said that the whole amount would be adjusted later and requested the defendant to pass receipts for both the amounts.
The defendant took the plaintiff at his word that they were needed for adjustment of accounts and executed the receipts. The efforts of the plaintiff to prevail upon the lessee to terminate the lease failed as a result of which the amount which was paid to the owners under the terms of the agreement became a forfeit. Some time thereafter, the plaintiff revived his efforts. He sent a letter of a common friend in August 1962 by registered post which was acknowledged by the defendant. A doubt was expressed therein that the defendant had a secret hand in the failure of the lease deed. In reply to the said registered letter, the defendant sent the telegram relied on by the plaintiff dated 14-9-1962, saying that he required two months' time to come and explain. Accordingly the defendant went to Hyderabad in November along with some common friends and businessmen and explained to the plaintiff that he had nothing to do with the failure of the lease deed.
The plaintiff, thereupon, told him that he had already lost Rs.7,000/- and that he was very much interested in the said theatre. He then put forth a fresh proposal of equal partnership. The terms and conditions of equal partnership were settled but they were to be implemented only if the tenant vacates the premises and settles accounts for which it was agreed that both parties should make efforts. It is the case of the defendant that after the defendant left the place after this settlement typed agreement along with a carbon copy was sent by the plaintiff to the defendant for his signature and the defendant retained the carbon copy and sent back the original to the plaintiff after affixing his signature on behalf of the State Talkies, Aurangabad. The defendant tried his best but the lease could not be terminated. The plaintiff sent various letters to the defendant asking about his efforts in getting the tenant vacated by consent.
As the efforts for terminating the lease could not fructify, the lease in favour of the existing tenant had to be renewed. As a result it is said that this false suit has been brought. The defendant raised an objection with regard to the admissibility of the receipts and pleaded further that on the avertments of the plaintiff, the suit transaction falls within the purview of the A. P. (Telangana Area) money Lenders Act (Act V of 1349 F.) and as the plaintiff had no money lending licence during the period the loan is alleged to have been advanced and has not maintained accounts in accordance with the provisions of the act. the suit is liable to be dismissed.
2. Thus, the defence raised against the suit, in short, is that the transaction in question by its nature is not one of loan nor were the receipts which in terms show 'on account' executed on that basis. the telegram relied on also did not contain any promise to pay; nor the question of interest did ever arise. The transaction was altogether different from the one as described in the plaint. The defendant is no way liable for refund of Rs. 3,000/- under the terms of the contract and he has not at all received Rs. 4,000/-. the receipts are inadmissible in evidence and the suit is liable to be dismissed under the clear provisions of the A. P. (Telangana area) Money Lenders Act.
3. On the basis of these pleadings, the following issuses were settled:---
1. Whether the plaintiff is entitled for the amount claimed If so, for what amount and from whom?
2. Whether the receipts on which the plaintiff relies upon are executed in the circumstances mentioned in the written statement ?
3. To what relief is plaintiff entitled The first issue is not precise and clear. The issues, as framed, do not comprehend the whole case. No issue under the A. P. (Telangana Area) Money Lenders Act has been framed even though it is obligatory on the Court to frame such an issue under the mandatory provisions of the Act.
4. After the issues were framed and time was given for filing documents, an interlocutory application was filed by the defendant calling upon the other party to produce certain documents. Eventually another interlocutory application was filed under Order XI, Rule 21 C. P. C. Thereafter further time was given for filing additional written statement. The defendant and his pleader were absent on 17-8-1964 and 20-8-1964. No additional written statement was filed. The case was posted to 8-9-64 for trial and on that day the following order was made :--
'Plaintiff and his pleader present. They are ready. Defendant absent. His pleader is absent. No representation for defendant. Defendant set ex parte. The ex parte evidence is already on record. Suit claim is proved. The suit is decreed as prayed for with costs.'
5. It may, thus, be seen that though the case was posted for trial, no witness was examined and the case was decided on the material or evidence which was brought on record on 9-10-1963 in the absence of the defendant and on the basis whereof an ex parte decree was passed which has been subsequently on 10-12-1963 itself set aside. The defendant's contention has been that the evidence recorded in his absence which formed the basis of the previous ex parte decree cannot be legal evidence once the said ex parte decree is set aside so that it may be used against him at any subsequent stage of the suit. This contention he has raised in appeal. Of course, he could file a review petition before the trial court itself. Further he could take steps for setting aside the ex parte decree in question showing sufficient cause for his non-appearance. But he has not chosen to adopt either of these remedies open to him. He adopted the remedy of appeal instead.
The question then for consideration is whether the passing of decree, ex parte though it may be, was justified by the material on record. When the appeal came up before the single Judge the main question that arose for consideration was whether the evidence recorded in the absence of the defendant on the basis whereof an ex parte decree was passed, can, after the said ex parte decree is set aside, still validly form the basis of a judgment and decree at a fresh trial. As the learned Judge was of the view that there was some conflict of views in this behalf between the two decisions of the Madras High Court in Selvarayan Samson v. Amalorpavanadham. AIR 1956 Mad 969 (2) and Doraiswami v. Palaniandi. AIR 1956 Mad 633 he referred the matter to a Division Bench. The Division Bench in turn referred the following to the Full Bench :
'Whether the evidence recorded by a trial Court in the absence of a defendant prior to setting aside an ex parte decree on an application made by the defendant under Order IX, R-13 is not legal evidence which could be looked into and made the basis of a judgment and decree at a fresh trial.'
The learned Judges did not refer the above question alone for opinion : but referred the whole case for disposal.
6. In this premises it becomes necessary for us not to confine our attention to the limited question posed ; but deal with the entire appeal. For that reason we have taken care to set out the facts in some detail.
7. We are not at all satisfied with the manner in which the case has been dealt with by the trial court. One of the important functions of the trial court is to settle all necessary issues, whether of fact or of law, arising out of the pleadings. If a question is raised that the suit is not maintainable under certain provisions of law, the court cannot afford to lose sight of this material proposition which goes to the root of the matter.
It has to necessarily frame an issue in that benefit. It is surprising that the trial Court failed to notice that the plaint itself elicits that question and the written Statement pointedly raises that issue and the Statute referred to enjoins that the court shall frame and decide the issue.
The suit, having regard to the averments contained in the plaint, was for recovery of loans advanced on interest at Secunderabad where the A. P. (Telangana Area) Money Lenders Act was in force. Of Course, in para. 9 it has been averred that the Money Lenders Act is not applicable. But the Court is not absolved from the duty to frame an issue under the mandate of the Statute. Indeed, the defendant in para 11 has averred that the Money Lenders Act does apply and the suit is liable to be dismissed. Section 9 of the A. P. (Telangana Area) Money Lenders Act (V of 1349 F.) contains the following mandatory provisions :--
'9. Notwithstanding anything contained in any law for the time being in force in every suit relating to a loan :
(1) the Court shall frame and decide the issues whether the money-lender is a money-lender as defined in sub-section (7) of Section 2, and whether he has complied with the provisions of Section 3 and of clauses (a) and (b) of Sub-section (1) of Section 5 and sub-section (1) and (2) of Section 6 :
(2) If it is proved that the plaintiff is a money-lender as defined in sub-section (7) of Section 2, but does not hold a licence granted under Section 3, the Court shall dismiss his suit ;
(2-A) if it is proved that the money-lender has not complied with provisions of clause (a) of sub-section (1) of Section 5, or of sub-section (1) of Section 6 or of Section 8 and the plaintiff's claim is established in whole or in part. the Court may, in the circumstances of the case, disallow the whole or any portion of the interest due and may disallow the cost wholly or in part ;
(3) if it is proved that the money-lender has not furnished the debtor with a statement of account in accordance with the provisions of clause (b) of sub-section (1) of Section 5 or of sub-section (2) of Section 6, the Court shall , in computing the amount of interest, exclude the interest in respect of every period for which the money-lender has not furnished the debtor with the statement of account.
Provided that if the money-lender has, after the prescribed time, furnished the statement of account and the Court is satisfied that there was sufficient cause for not furnishing the statement earlier, the court may, in spite of such default, include such period or periods for computing the interest.
Explanation ........ ............. ......... .......' It is clear from the above provision that framing of an issue and decision of the same was obligatory on the part of the Court. No such issue was settled nor was this aspect of the case considered. Indeed, if the plaintiff was a money-lender and did not possess a licence at the time when he advanced the amounts, the Court has no other choice but to dismiss the suit. Merits of the case do not then come up for consideration at all. Even if the claim is otherwise proved, the suit has to be necessarily dismissed for want of licence. This position in law is not open to doubt or dispute. As observed in Kaloji Talusappa v. Khyanagouda, : AIR1970SC1420 if the plaintiff at the date of the transaction was carrying on business as money-lender. Notwithstanding such a provision under the Money Lenders Act the trial Court had failed to comply with this mandatory provision. The ex parte decree as passed without consideration of this basic material question must, therefore, be set aside. The appeal has to be allowed and the case remanded on this very basis.
8. The irregularities committed by the trial court do not stop at that. The judgment that it has given does not conform to the provisions of Rule 4 (2) of Order XX, C. P. C. at all. Whereas a judgment shall contain a concise statement of the case, the points for determination, and the decision thereon, we search in vain for any of these essentials in the impugned judgment. It is no judgment at all. The provisions of Rule 4 (2) have a set purpose. The form is designed to ensure that while pronouncing the orders or judgments. They should apply their minds to the facts of the case and the points at issue and give a reasoned judgment thereon so that not only their own conscience may be satisfied but also the litigants should have satisfaction that all their evidence has been evaluated and their contentions and arguments duly considered. This is of vital importance inasmuch as the whole edifice of confidence of the litigants in Courts is built upon the quality of judgments. The Courts , therefore, have to necessarily take care that their judgments conform to the provisions of law and are products of sound reasoning. In the instant case the judgment of the trial Court which we have extracted above is no judgment at all. The appeal must be allowed on that basis also.
9. Then again the so-called judgment of the Court suffers from a further defect. It is based upon material which is inadmissible in evidence. In fact that is the main grievance of the defendants and the case has before this Full Bench for a pronouncement thereon as well . It is no doubt true that the proceedings against the defendant were set ex parte under Order IX, Rule 6, C. P. C. after issues were framed in the case. But that does not mean that the defendant should suffer decree by mere reason of his absence. The fact that Rule 6 of Order IX. C. P. C. permits the proceedings to be set ex parte does not dispense with the proof of the case. The meaning of 'ex parte' being 'in the absence of' , all that follows from the order setting proceedings ex parte is that the proceedings which had to continue otherwise in the presence of the party may now be continued in his absence.
The absence of the defendants thus does not dispense with the responsibility of the plaintiff to prove his case to the satisfaction of the Court. He has to discharge his onus in the same way as he should have done in the presence of the defendant. He has to prove his case with the help of the material which is legal evidence. His burdan is in no way lightened by the absence of the defendant. In fact the responsibility of the Court also has increased as it has to reach its conclusions without the assistance of the defendant who, if present , would have raised all questions with regard to admissibility of evidence and cross-examined the witnesses and advanced arguments in his favour. The Court cannot pass a judgment in favour of the plaintiff unless the suit is maintainable, the claim as set up is established by the material on record and the reliefs claimed can be lawfully granted.
It is not open to the Court to form its opinion on material which is not legal end reliable evidence. Indeed, not evidence that may be given in my suit or proceeding as per the provisions of Sec. 5 of the Evidence Act is of the existence of non-existence of facts in issue or of relevant facts in issue or of relevant facts as declared to be relevant under the provisions of the Evidence Act and of no others. It is thus clear that the provisions of the Indian Evidence Act would determine the question of the admissibility of any material in evidence. In the instant case, it may be seen that the Court has based its judgment on the testimony of the plaintiff which was recorded in the absence of the defendant before the ex parte decree was set aside. The question is whether this testimony could be read as evidence even after the ex parte decree is set aside merely on the basis that subsequently the defendant absented himself and the proceedings are set ex parte against him once again. If that testimony is admissible evidence and can be lawfully used against the defendant his presence or absence. Of course, would make little difference.
The question therefore is : can the previous statement on oath of the plainitff recorded in the absence of the defendant before the ex parte decree was passed be used per se as legal evidence against the defendant at a later stage after the ex parte decree is set aside. Of course, no such question would have arisen had the plaintiff been called once again the his statement recorded even though it may be in the absence of the defendant as the proceedings were set ex parte. As already noticed, after the proceedings were set ex parte for a second time, the Court has not recorded any evidence in the case ; but relied only on the material including the testimony of the plaintiff which formed the basis of the earlier ex parte decree which was set aside. The legal effect of setting aside the ex parte decree is that all the was done from the date of the defendant's non-appearance in Court becomes non est as against him. Therefore it can no longer bind him.
The result would be that, that testiomony cannot be used as evidence by its own force against the defendant unless it be so permitted under any of the provisions of the Evidence Act. Of course, the testimony of the plaintiff recorded when the proceedings were ex parte constituted evidence in the case. Indeed it was the statement of a witness in a judicial proceeding. But the natural result of the ex parte decree being set aside was that the parties were relegated back to the same position as they occupied before the non-appearance of the defendant. That testimony no longer remained as evidence in the case thereafter. Nevertheless it may be used as evidence if the Indian Evidence Act is the relevant provision which deals with this aspect. It reads thus :--
'33. Evidence given by a witness in a judicial proceeding, or before any person authorised by law to take it, is relevant for the purpose of proving, in a subsequent judicial proceeding or in a later stage of the same judicial proceeding, the truth of facts which it states, when the witness is dead or cannot be found, or in incapable of giving evidence, or is kept out of the way by the other party, or if his presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable '
that the proceeding was between the same parties or their representatives in interest :
that the adverse party in the first proceedings had the right and opportunity to cross-examine:
that the questions in issue were substantially the same in the first as in the second proceeding.................'
This provision embodies in itself the rule of best evidence as well for it prohibits secondary evidence of the testimony of a witness given at an earlier stage to be admitted in the later stage of the same proceeding unless the requisite conditions warranted by the section are satisfied. According to the said provision the evidence of a witness in a judicial proceeding may be used in a subsequent judicial proceeding or at a later stage of the same judicial proceeding in cases where the witness is dead or cannot be found or is incapable of giving evidence or is kept out of the way by the other party or his presence cannot be obtained without an amount of delay or expense which may be unreasonable in the circumstances of the case. The proviso lays down further conditions viz., that the proceedings in which it is to be used should be between the same parties or their representatives in interest, the adverse party must have had the right and opportunity to cross-examine in the first proceeding and the questions in issue are substantially the same in both the proceedings .
10. None of the conditions of substantive Section 33 is satisfied in this case. The said material therefore cannot be said to be relevant or admissible piece of evidence and having regard to the mandate of Section 5 of the evidence Act read with Section 33, it cannot be read as evidence in the proceedings of the same case at a later stage after the ex parte proceedings in which the testimony was recorded were set aside.
11. In Phani Bhushan Mukherjee v. Phani Bhusan Mukherjee, : AIR1957Cal170 one of the questions which came up for consideration by the learned Judge was whether the material which was before the Court at the time of the passing of an ex parte decree on 29-5-1952 could be utilised for purposes of passing another ex parte decree on 2nd December. 1954. The learned Judge observed that when the ex parte decree was set aside by an order dated 3rd March, 1953, the effect thereof would be that all proceedings subsequent to the stage of defendant's non-appearance on 29th May, 1952 would no longer be binding. 'In other words, as the defendant's non-appearance was condoned by the setting aside of the ex parte decree, the evidence recorded in his absence will not also be admissible against him.'
12. This view was followed by the Allahabad High Court in Mst. Lakshmi Devi v. Rungta & Co., : AIR1962All381 . There the question was whether the statement of the plaintiff's witness recorded on 25th August 1949 in the absence of the defendant resulting in the absence of the defendant resulting in the absence of the defendant resulting in an ex parte decree can be admissible in evidence at a later stage after the ex parte decree has been set aside and can form the basis of a decree. Srivastava J, speaking for the Court observed thus :--
'A decree can be passed against defendant only on admissible material and any evidence produced in his absence cannot be utilised against him and treated admissible material. The earlier ex parte decree against the appellants having been set aside they became entitled to be relegated back to the stage at which they were absent and could insist that everything which had been done in their absence should be done again in their presence ............
On the basis of the evidence recorded in their absence , the decree in question could not, therefore, be passed against them.'
13. In this connection we may also refer to the observations of the Madras High Court in Solanalai Mudaliar v. Vadamalai Muthiran, (1912) 23 Mad LJ 273 where referring to the question whether an instrument which was in admissible in evidence was admitted in evidence taken ex parte and be made admissible in evidence after the ex parte decree was set aside, Sundra Aiyer, J. said :--
'It was at the ex parte trial, that the note was admitted in evidence ................ When the promissory note was put in at the second trial the document did not remain as evidence. The whole ex parte proceeding has been set aside and the trial of the suit had to commence de novo. I am of opinion that Section 36 (Stamp Act) applies only to a case where what is in evidence is sought to be expunged by a party who objects that the evidence was wrongly admitted. But here the promissory note had to be tendered in evidence again at the second trial as the previous proceedings proved abortive in law when they are set aside .'
14. This again confirm the view that the result of setting aside an ex parte decree is that all the proceedings taken from the stage of non-appearance of the defendant become ineffective.
15. A like question arose before the Madras High Court in AIR 1928 Mad 969 (2) (Supra) , speaking for the Court, Ramesam, J. observed thus :--
'When we set aside the ex parte decree, we really set aside all proceedings from the stage of his non-appearance.'
16. These observations, with great respect, contain the correct exposition of law. It follows that where an ex parte decree is set aside, all the proceedings which took place subsequent to the stage of the non-appearance of the defendant leading to the decree are set aside and they are not binding on the defendant .
17. It is however, pointed out that the Madras High Court struck a different note in AIR 1956 Mad 633 (Supra). It may be noticed there Rajamannar, C. J. speaking for the Court cited with approval the observations in both the earlier cases of that Court. In fact referring to the observations of Ramesam, J. viz., 'When we set aside the ex parte decree, we really set aside all proceedings from the stage of his non-appearance.' the learned Chief Justice observed thus :--
'Strictly speaking, this is true in the sense that the absentee defendant is not bound by proceedings, which had taken place in his absence. Such proceedings have not become final as against him.'
Having accepted the legal proposition , the learned Judge further observed : --
'these decisions however, do not prevent the plaintiff choosing to treat the evidence given by him at he ex parte trial as evidence after the ex parte decree had been set aside and a fresh trial had commenced.
Of course, the defendant would have the right to cross-examine the witnesses. who had been examined on behalf of the plaintiff, but it will be an idle farce, if it is necessary that the plaintiff should re-examine the witnesses already examined to repeat what they had said already. The plaintiff can very well inform the Court that the prior evidence may be taken to be the evidence tendered after the fresh trial had deemed to have happened in this case. Instead of the plaintiff calling the two witnesses, he tendered their evidence already taken as evidence at the fresh trial and, without any objection, the Court accepted that evidence.'
18. The learned Chief Justice further observed :
'It is obvious that the only consideration is that no prejudice should be caused to the defendant. In the case before us, the defendant cannot obviously complain of any prejudice, because he never chose to participate in the trial. The decree appealed against is perfectly valid.'
19. It is obvious that so far as the main proposition is concerned even the latter Bench of the Madras High Court is in full agreement with the earlier decisions of the same court and also with the view expressed by the Calcutta and Allahabad High Courts. Nevertheless it is of the view that the evidence recorded at the earlier stage need not be recorded once again and may be straightway read as evidence. The reason given is that recording of evidence once again will be an idle formality. With respect, we beg to differ from this view for, unless the material to be relied on is relevant under the provisions of law it cannot be admissible in evidence at the subsequent stage of the same proceedings unless it satisfies the conditions of Section 33 of the Evidence Act.
When once we held that all the proceedings that have taken place in the absence of the defendant, be reason of setting aside the ex parte decree became non est or not binding, in reason and justice the same material cannot be legitimately used against the defendant unless it is permissible under any provisions of law. It is necessary that the material that should form the basis of the decree must be material which may be treated as legal and admissible evidence. The testimony of the witnesses did not satisfy the conditions of Section 33 of the Evidence Act and it could not be deemed to be legal evidence. In this view of the matter we are of the view that the testimony of the plaintiff which was recorded prior to the setting aside of the ex parte decree in the absence of the defendant cannot be treated as evidence in disregard of the provisions of Section 33 of the Evidence Act.
20. The result of the above discussion is that having regard to the facts and circumstances of the present case, the trial Court was not justified in passing a decree in favour of the plaintiff. Firstly when the ground under the Money Lenders Act was raised, unless it be proved that the said Act had no application or if applicable the plaintiff had complied with the requisite provision, the Court could not go into the merits to pass a decree in favour of the plaintiff. Secondly, even otherwise when the plaintiff had not brought on record material which is legal and admissible evidence, no decree could be passed in his favour. Certainly the testimony of the plaintiff recorded at an earlier stage when the proceedings were ex parte was not legal evidence after the ex parte proceedings or decree was set aside. Lastly, the judgment , given by the Court was no judgment in the eye of law. For all these reasons the appeal must be allowed, the ex parte decree should be set aside and the Court should be directed to proceed with the case from the stage the proceedings were set ex parte against the defendant and dispose of the suit in accordance with law. The appeal is accordingly allowed. The costs of this appeal shall abide the result of the suit.
21. Appeal allowed.