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Ram Nath Vs. Bhagwati Prasad and anr. - Court Judgment

LegalCrystal Citation
Subject Civil
CourtAllahabad
Decided On
Reported inAIR1946All150
AppellantRam Nath
RespondentBhagwati Prasad and anr.
Excerpt:
.....not entitled to institute the suit; 2. the court of first instance found that the promissory note in suit was duly endorsed by mt. in view of these findings, the appeal as well as the cross-objections were dismissed and the decree of the court of first instance was affirmed. but so far as this last point is concerned it may be stated at once that it has absolutely no substance in it inasmuch as the proviso to rule 18 (=rule 16 old) read with section 37 makes it perfectly clear that the benefit of rule 18 is available only in respect of instruments executed between 1st april 1934 and 1st april 1935. obviously it was a concession granted to persons who executed instruments and affixed postage stamps instead of revenue stamps in ignorance of the new rule regarding revenue stamps and..........in para. 5 of their written statement.2. the court of first instance found that the promissory note in suit was duly endorsed by mt. bitti in favour of the plaintiff, for consideration so the latter had a right to sue on its basis. it, however, came to the conclusion that the promissory note was not admissible in evidence under section 35, stamp act, and consequently the suit to recover the loan on the basis of the promissory note could not be decreed. the court of first instance, in taking this view, acted in accordance with the full bench decision of this court in nazir khan v. ram mohan : air1931all183 . in view of these findings, the court of first instance dismissed the suit, but, in the circumstances of the case, directed the parties to bear their own costs.3. on appeal, the.....
Judgment:

Wali Ullah, J.

1. This is a plaintiff's second appeal against the decree of the learned Civil Judge of Mirzapur confirming the decree of the Court of first instance dismissing the suit with costs. The suit out of which this appeal arises was filed by the plaintiff for the recovery of Rs. 1000 principal and RS. 51 interest total Rs. 1051 from the defendants on the allegation that the latter borrowed Rs. 1000 from one Mt. Bitti on the basis of a promissory note dated 5th July 1937 and agreed to pay the loan with, interest at 12 annas per cent, per mensem on demand. The plaintiff's case was that Mt. Bitti (who is dead) assigned the debt due under the promissory note in favour of the plaintiff by making an endorsement on the back of it, on 8th December 1939. The defendants contested the suit on the grounds: (1) that the promissory note being improperly stamped was not admissible in evidence and the suit on its basis, therefore, could not be decreed; (2) that Mt. Bitti had not endorsed the promissory note in plaintiff's favour and the plaintiff was consequently not entitled to institute the suit; and (3) that no consideration passed so far as the alleged assignment in plaintiff's favour was concerned. It may be noted here that the defendants while contesting the claim admitted the execution of the promissory note in para. 5 of their written statement.

2. The Court of first instance found that the promissory note in suit was duly endorsed by Mt. Bitti in favour of the plaintiff, for consideration so the latter had a right to sue on its basis. It, however, came to the conclusion that the promissory note was not admissible in evidence under Section 35, Stamp Act, and consequently the suit to recover the loan on the basis of the promissory note could not be decreed. The Court of first instance, in taking this view, acted in accordance with the Full Bench decision of this Court in Nazir Khan v. Ram Mohan : AIR1931All183 . In view of these findings, the Court of first instance dismissed the suit, but, in the circumstances of the case, directed the parties to bear their own costs.

3. On appeal, the learned Civil Judge affirmed the findings of the Court of first in stance. He held in effect that in view of the allegations in para. 1 of the plaint and also I of the statement of plaintiff's witness Deota Prasad to the effect that it was on the promissory note that Mt. Bitti had advanced Rs. 1000 to the defendants, no oral evidence was admissible to prove the transaction apart from the promissory note itself. The promissory note being inadmissible in evidence the suit as instituted could not be decreed. On the other point in the case, namely the validity of the assignment of the promissory note in favour of the plaintiff the lower appellate Court agreed with the Court of first instance in holding that the promissory note was duly assigned for consideration in favour of the plaintiff. In view of these findings, the appeal as well as the cross-objections were dismissed and the decree of the Court of first instance was affirmed.

4. This appeal in the first instance came before a learned Single Judge of this Court who referred it to a Bench of two Judges for decision. Learned Counsel for the plaintiff-appellant has strongly contended that the view of the law taken by the Courts below was entirely erroneous and particularly so in view of the recent Full Bench decision of this Court in Shiv Nath Prasad v. Sarjoo Nonia : AIR1943All220 . It has further been contended that in view of the findings arrived at by the Courts below as to the execution of the promissory note and the receipt the plaintiff was entitled to succeed on the basis of the 'independent consideration,' i.e., the loan apart from the promissory note in suit. There were some other grounds taken with regard to Rule 18, Government of India Stamp Rules, which were also referred to in the order of the learned Single Judge of this Court referring the case to a Bench of two Judges. But so far as this last point is concerned it may be stated at once that it has absolutely no substance in it inasmuch as the proviso to Rule 18 (=Rule 16 old) read with Section 37 makes it perfectly clear that the benefit of Rule 18 is available only in respect of instruments executed between 1st April 1934 and 1st April 1935. Obviously it was a concession granted to persons who executed instruments and affixed postage stamps instead of revenue stamps in ignorance of the new rule regarding revenue stamps and this concession was confined to the period of one year from 1st April 1934 to 1st April 1935. The promissory note in question, as stated above, was executed on 5th July 1937 and so the concession provided for by Rule 18 read with Section 37, Stamp Act, was clearly not available in the case of this instrument.

5. Before proceeding further with the case it is necessary to consider the authorities. In the Full Bench case Nazir Khan v. Ram Mohan : AIR1931All183 the principles of law enunciated may be summarized thus: Where there is a completed cause of action for recovery of money on foot of a distinct and separate transaction, and a promissory note is given only as a collateral security, the promise will be entitled to sue on the basis of the original consideration even if, for some flaw in the promissory note, the promissory note itself may not be sued upon, being inadmissible in evidence under the law. On the other hand, where the promissory note and the handing over of the money are part and parcel of the same transaction and the terms of the loan are the very terms of the promissory note there is no room for the argument that there was a completed loan and by way of collateral security only a promissory note was given. In such a case, it is clear, the creditor would not have lent the money without the promissory note; therefore the making and handing over of the note and the payment of the money are concurrent conditions (i.e. part and parcel of the same transaction) and if the promissory note turns out to be inadmissible in evidence for any reason (such as the absence of a proper stamp) it is not open to a creditor to recover his money by proving orally the terms of the contract. The oral evidence was held to be excluded by Section 91, Evidence Act.

6. It must be stated here that the judgment in the above mentioned case at p. 118 makes it perfectly clear that the learned Judges of the Full Bench proceeded on the footing that the promissory note in the case before them contained the entire terms of the transaction between the parties. Indeed the question referred to the Full Bench was formulated in language which clearly showed that the promissory note was assumed to contain all the terms of the loan. This Full Bench ruling was followed in this Court as well as in the Court subordinate, in every case in which the promissory note was found to be inadmissible without considering the question whether the promissory note contained all the terms of the contract or not. This was undoubtedly a mistaken view of the law laid down by the Full Bench. Next we have to consider the recent Full Bench case in Shiv Nath Prasad v. Sarjoo Nonia : AIR1943All220 . This is a five Judge case in which one of the learned Judges dissented from the view of the majority. In this case the plaintiff-appellant, alleging that he had lent a certain sum of money to B, the predecessor in interest of the defendants, in proof of which B had executed a promissory note and a receipt of the same date in his favour and the said loan not having been paid, raised an action for the recovery of principal and interest due on the said loan. It was contended that the promissory note being insufficiently stamped was inadmissible in evidence and apart from the promissory note the alleged loan could not be proved by any other evidence. It was held that inasmuch as all the substantial terms of the contract were not embodied in the promissory note it was open to the plaintiff-appellant at the trial of the suit to prove the alleged loan by such evidence including the receipt, as may have been available to him. The principle enunciated by this Full Bench may be stated thus: Where, as in the suit in appeal and as usually, all the substantial terms of the contract have not been embodied in the promissory note and where, as in the suit in appeal, the promissory note is inadmissible in evidence by reason of Section 85, Stamp Act, it is open to the plaintiff to prove the terms of the contract. Under such circumstances the bar of Section 91, Evidence Act, does not apply.

7. In laying down the law in the terms indicated above the learned Judges of the Pull Bench have relied upon the decision of the Privy Council in Mohammad Akbar Khan v. Attar Singh ('36) A.I.R. 1936 P.C. 171; reading the two Full Bench decisions referred to above it seems to me abundantly clear that there is no real conflict between the views expressed in the two cases. To my mind it only comes to this that what was implicit in the decision of the earlier Full Bench has been made very clear and explicit in the later Full Bench and henceforth there can be no excuse for mistaking the view of law laid down in the earlier Full Bench as happened so frequently in the interval between the decision of the first Full Bench and the later Full Bench in 1943. To make my point clear I may refer to p. 190 where Collister J. stated the law thus:

Where as here and as usually, the terms of the contract - by which I mean all its substantial terms -have not been embodied in the promissory note and where, as here, the promissory note is inadmissible in evidence by reason of Section 35, Stamp Act, it is open to the plaintiff to prove the terms of the contract. The defendant will of course be entitled to rebut the evidence so adduced and establish-that there was in fact no loan; but if he fails to do so, the plaintiff will ordinarily succeed on the proved contract of loan. In the case before us, I am satisfied that all the terms of the contract were not incorporated in the promissory note.

Dar, J. stated the law thus at p. 193:

It follows that if money is lent under a simple contract and the terms of this contract can be regarded in fact or in law as reduced to the form of a promissory note and the promissory note cannot be admitted in evidence, the loan cannot be recovered apart from the promissory note. But it is-also settled law that when the terms of a contract not required by law to be in writing are not wholly but only partially reduced to the form of a document, Section 91, Evidence Act, is no bar to the proof of the contract. And the main controversy centres round the question that when money is lent under a simple contract and in relation to it a promissory note is also given by the borrower to the lender, does the promissory note express wholly or in part or not at all the contract by which the money was lent.

Again at p. 198 he states:

In my opinion the law on the subject may thus be stated. When a promissory note was given in consideration of a sum of money it is a question of fact in each case whether the sum of money was given as a loan or not as a loan; in the absence of all evidence the presumption is that it was given by way of a loan; and there is a further presumption that the promissory note was given in conditional' payment of the loan. If by reason of the defect of stamp the promissory note is held inadmissible-in evidence, it is open to the plaintiff to prove the loan and all its terms and to recover the loan irrespective and independently of the promissory-note by giving other evidence including that furnished by a contemporaneous receipt, if there be any. It is for the defendant to prove that the promissory note was given for a sum of money which was not given as a loan or it was given in absolute1 satisfaction of the loan, or the plaintiff has made it, his own by his agreement or by his conduct. If the defendant succeeds in proving any of these facts the plaintiff shall be restricted to the promissory note and he shall not be allowed to recover independently of the promissory note.

Mathur, J. expressed himself thus at p. 201:

I find that there is ample authority for the proposition that if all the terms of the contrast are-not contained in the pronote oral evidence could always be given to prove those terms. I may in this connection refer to the Privy Council case in Mohammad Akbar Khan v. Attar Singh ('36) 23 A.I.R. 1936 P.C. 171.

Again at p. 206 Mathur J. observed:

Applying the law, as I understand it, to the facts of this case, it seems to me that on looking at the pronote in suit and at the pleadings as contained in the plaint it would be possible to say that the pronote did not contain all the terms of the contract. To make my point clear I should say that while the pronote only lays down an undertaking to pay the sum of Rs. 495 to the plaintiff or his order at a certain interest on demand it does not mention what was the consideration of that payment, It is only by looking at the receipt that one comes to the conclusion that the money was advanced to Bhaggu Nonia, an ancestor of the defendant. It is thus the two documents pronote and receipt and not the pronote itself that contains all the terms of the contract. In these circumstances, according to my view, oral evidence will be admissible to prove the plaintiff's claim.

The other learned Judges, Collister and Bajpai JJ., expressed their general concurrence with the views expressed by Dar and Mathur JJ. In view of the above discussion of the law, it is clear that the first question which has to be decided in the present case is whether the promissory note in suit contains substantially all the terms of the contract of loan between the parties. If it does, then the position would be that the plaintiff on failure of his cause of action based upon the promissory note cannot fall back upon an independent cause of action for the simple reason that there is no cause of action independent of, and apart from, the promissory note If, however, the promissory note in question, as is usually the case, does not contain substantially all the terms of the contract between the parties, it would be open to the plaintiff to substantiate his claim by oral evidence. On an examination of the promissory note in suit, it is quite clear to my mind that it contains substantially all the terms of the agreement between the parties. It recites that Bhagwati Prasad and Budhu Lal having borrowed Rs. 1000, half of which is Rs. 500, from Mt. Bitti undertake to pay the sum borrowed together with interest at twelve annas per cent, per-month on demand and accordingly they are executing 'Buqqa Induttalab' (the document in question) so that it may be useful in time of need. In the view that I take of this matter, namely, that the promissory note in suit contained all the terms of the contract between the parties, it seems to me obvious, in the light of the earlier as well as the later Pull Bench decisions referred to above, that it was not open to the plaintiff, in the present case, to fall back upon any so-called independent cause of action and to prove the alleged loan by any evidence other than the promissory note itself, for the simple reason that there was no separate cause of action. In my judgment, therefore, the view of the law taken by tho Courts below was entirely correct. There is, therefore, no force in this appeal and I would dismiss it.

Sinha, J.

8. I concur.

9. The appeal fails and is dismissed. No order as to costs.


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