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Nazir Khan and anr. Vs. Ram Mohan Lal and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Reported inAIR1931All183
AppellantNazir Khan and anr.
RespondentRam Mohan Lal and anr.
Cases ReferredCalcutta High Court. In Dula Meah v. Abdul Rahman
Excerpt:
.....question that bad been referred there to the high court by a learned munsif was whether a certain promissory note which purported to be in favour of the bearer was void and inadmissible in evidence and could not be the basis of a claim in any court of law. see the same page :37. it will be noticed in connexion with this case that there is no provision in the paper currency act, which forbids the admissibility into evidence of a promissory note which has been drawn up in a form condemned by section 25 of the act. in madras it appears that the view has been consistently taken that where there is no independent and separate cause of action, the suit based on a promissory note which is not admissible in evidence should fail. on this point we cannot do better than quote the following remarks..........that section 91, evidence act, would prevent the admission of any oral evidence to prove the loan, the promissory note being inadmissible in evidence6. some of the cases, whether decided in this court or in other courts, do not, in our opinion, with all respect, take sufficient note of the provisions of section 91, evidence act, and follow the english authorities : see farr v. price 1 east 55. our law being codified, in our opinion, it is not open to the courts in india to ignore the enacted law and follow the english law, simply because in certain cases the enforcement of the, law might appear to create a hard case.7. being in disagreement with the cases decided in this court, we are of opinion that the case should be referred to a larger bench. we do not propose to discuss the.....
Judgment:
ORDER

1. This revision arises out of a suit for recovery of money on foot of a promissory note instituted in the Court of the Judge, Small Cause Court at Allahabad. The promissory note is alleged to have been executed by the defendants for a sum of Rs. 500 and Provides for the repayment of the loan, on demand, with interest at 4 per cent per mensem. The defence was that the execution of the promissory note was admitted by the defendant not subject to additional pleas. The further pleas were to the effect that defendant 2 never borrowed any money, nor did she execute any promissory note, that the promissory note was inadmissible in evidence, for want of proper stamp duty, that defendant 1 borrowed Rs. 50 only and that that was the only consideration that passed.

2. The learned Judge, Small Cause Court, tried only one issue, namely the one as to the admissibility of the document in. suit in evidence and holding that it was inadmissible, dismissed the suit.

3. It appears that the suit was once heard and decreed ex parte. At the defendants' instance, the ex parte decree was sat aside and the suit was restored to its original number in the register and was tried de novo. When the suit was heard ex parte, the then learned Judge, overlooking the fact that the promissory note in suit required a stamp duty of two annas admitted the document into evidence. It bore a stamp duty of one anna only. It was contended on behalf of the plaintiff that as the document had once been admitted into evidence, it was not open to either party to question the sufficiency of the stamp duty at subsequent stages of the suit, in view of the provisions of Section 36, Stamp Act. On this point, the learned Judge, Small Cause Court held and in our opinion rightly, that with the setting aside of the ex parte decree, the order admitting the document into evidence, on the basis of the ex parte evidence, also fell and the Court had to adjudicate on the case, including the question of the admissibility or otherwise of the document, as if it had never been admitted into evidence at all. The view of the learned Judge is in agreement with the case of Webster v. Bosanquet [1912] A.C. 394.

4. The main question however in the case is whether the promissory note being inadmissible in evidence, the plaintiff could rely on the factum of the loan and prove the loan, independently of the document in suit.

5. On this point there is a number of conflicting cases decided by different High Courts. It appears that while all the Courts are agreed that where a plaintiff has a cause of action, independently of a promissory note, which is found inadmissible in evidence, he can sue on the cause of action which he had before the promissory note was given and recover. Opinion is divided as to what should be the case where there was no loan, independently of the promissory note, that is to say, where the entire contract between the parties is embodied in the promissory note. As at present advised, we are of opinion, that Section 91, Evidence Act, would prevent the admission of any oral evidence to prove the loan, the promissory note being inadmissible in evidence

6. Some of the cases, whether decided in this Court or in other Courts, do not, in our opinion, with all respect, take sufficient note of the provisions of Section 91, Evidence Act, and follow the English authorities : see Farr v. Price 1 East 55. Our law being codified, in our opinion, it is not open to the Courts in India to ignore the enacted law and follow the English law, simply because in certain cases the enforcement of the, law might appear to create a hard case.

7. Being in disagreement with the cases decided in this Court, we are of opinion that the case should be referred to a larger Bench. We do not propose to discuss the case law in our order. It will be sufficient to say that the case of Miyan Bux v. Mt. Bodhiya : AIR1928All371 has no bearing on the case. The latest case of this Court is that of Ram Sarup v. Jasodha Kunwar [1912] 34 All. 158. The earlier ease of Parsotam Narain v. Taley Singh [1903] 26 All. 178 seems to us as laying down the right law. In Madras, the case of Muthu Sastrigal v. Vishvanatha [1914] 38 Mad. 630 and in 'Lahore, the case of Chandra Singh v. Amritsar Banking Co. A.I.R. 1922 Lah. 307 appear to support our view. We would especially draw the attention of the learned Judges before whom this case may go to the opinion of the Madras Judges to be found reported at p. 663 of the case in Muthu Sastrigal v. Vishvanatha [1914] 38 Mad. 630.

8. In order to settle the law for this Court we direct that the record of this case be submitted to the Hon'ble the Chief Justice, for the constitution of a larger Bench for the decision of the question indicated above, namely:

Whether it is open to the party, who has lent money on terms recorded in a promissory note, which turns out to be inadmissible in evidence for want of proper stamp duty, to recover his money, by proving orally the terms of the contract, in the teeth of the provisions of Section 91, Evidence Act.

Mukerji, J.

9. The following point of law has been referred to a Full Bench, namely:

Whether it is open to the party who has lent money on terms recorded in a promissory note, which turns out to be inadmissible in evidence for want of proper stamp duty, to recover his money by proving orally the terms of the contract in the teeth of the provisions of Section 91, Evidence Act.

10. The facts which have led to the reference are these. The applicants, Nazir Khan and Ismail Shah Khan, brought a suit for recovery of money in the Court of Small Causes at Allahabad, alleging that on foot of a promissory note filed with the plaint, they lent to the two defendants to the suit, who were husband and wife, namely Ram Mohan Lal and Mt. Girindra Kuari a sum of Rs. 500 which was to be repaid with interest at 4 per cent per mensem, on demand. The promissory note bears a stamp duty of one anna only, while under the law for the time being in force, it ought to have borne a stamp duty of two annas.

11. The defence of defendant 1, who alone appeared was that his wife never executed the promissory note, that he borrowed a sum of Rs. 50 only and that being under pressure for money he executed the promissory note relying on the assurance of the plaintiffs that they would not claim more than Rs. 50 and interest thereon. He further pleaded that he had repaid the money which he had borrowed, with interest.

12. When it was discovered that the promissory note bore insufficient stamp duty the plaintiff sought to prove by oral evidence that he had lent a sum of Rs. 500.

13. The learned Judge of the Small Cause Court held that to establish the loan alleged by the plaintiffs, the promissory note was the only evidence that could be adduced to prove the transaction, having regard to the provisions of Section 91, Evidence Act. In the result, the learned Judge dismissed the suit in its entirety.

14. The plaintiffs filed an application in revision under Section 25, Provincial Small Cause Courts Act and the contention of learned Counsel for the applicants was that the applicants were entitled to prove the factum of the loan. This point was not specifically taken among the grounds of revision, but as the point was supported by cases decided in this Court, the point was allowed to be argued and considered.

15. The Bench before which the revision application came were not satisfied that some of the cases decided in this Court were good law and as none of these cases were decisions of a Full Bench, they referred the matter to a larger Bench.

16. Before we proceed to consider authorities, it would be desirable to consider the state of the statutory law. As already stated the plaintiffs lent money in consideration of the promissory note and the note alone. Gul Mohammad Khan who appeared as a witness for the plaintiffs and is their relation said:

I lent Rs. 500 to the defendant and not Rs. 50...I would not have lent money without the pro-note.

17. It is clear therefore that this is not a case in which there was already a completed cause of action for recovery of money on foot of a distinct and separate transaction and a promissory note was given as a collateral security. To illustrate what we mean, we would give an example: Suppose a trader sells a motor bicycle to a purchaser on credit. Later to secure the payment, the purchaser gives a promissory note. The trader and the purchaser have a completed transaction, namely the sale of a motor bicycle, as soon as the delivery is made with the stipulation that the price would be paid later on, by the purchaser. On this' transaction, the trader is entitled to sue for the price of the article sold by him. The promissory note here is only a collateral security. In these circumstances, it is agreed on all hands, that the trader will be entitled to sue for the price of the motor bicycle, 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. In the case before us there is no such completed transaction as we have described above. On the other hand, 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 a promissory note was given. To quote again the words of the witness Gul Mohammad, the plaintiffs would not have lent the money without the promissory note. The making and handing over of the note and the payment of the money are 'concurrent conditions.'

18. The question then is:

Whether the promissory note contains the entire terms of the transaction between the parties; and if so can any oral evidence be adduced where the document itself is not admissible into evidence.

19. Our clear answer is that oral evidence is not admissible, Section 91, Evidence Act, being a bar to such a procedure. Section 91 reads as follows:

When the terms of a contract...have been reduced to the form of a document .... no evidence shall be given in proof of the terms of such contract....except the document itself or secondary evidence of its contents in oases in which secondary evidence is admissible....

20. The question which we have to decide is whether it is or is trot the case that the terms of the contract between the parties have been reduced to the form of a document. If they have been reduced to the form of a document then, by the express language of the law, the document itself is the only proof admissible into evidence, it being common ground that there is no case made out for admission of secondary evidence. Oral evidence is in the nature of secondary evidence, where the terms of a contract have been reduced to the form of a document On the statute therefore there seems to be no reason to doubt that oral evidence was not admissible into evidence.

21. Now we propose to consider some of the important cases decided in this and other Courts. In Parasotam Narain v. Taley Singh [1903] 26 All. 178, the facts were very similar to the facts of this case. The headnote runs as follows:

When money is lent on terms contained in a promissory note given at the time of the loan, the lender suing to recover money so lent must prove those terms of the promissory note. If for any reason, such as the absence of a proper stamp, the promissory note is not admissible in. evidence, the plaintiff is not entitled to set up a case independent of the note.

22. The case was heard by a learned single Judge of this Court, Aikman, J., and he following certain cases decided in the Calcutta High Court disallowed the plaintiff's contention to prove his case independently of the promissory note. The learned Judge quoted Section 91, Evidence Act and said:

It appears to me that the decision which have held otherwise ignore the provisions of Sections 91, 65 and 22 Evidence Act; and I do not think that it can be denied that those decisions condone and encourage evasions of the Stamp Act.

23. We are of the same opinion as the learned Judge.

24. This case of Pursotam Narain [1903] 26 All. 178 was not considered in the case of Banarsi Prasad v. Fazl Ahmad [1906] 28 All. 293 and a contrary decision was given by a Bench of two Judges. It is rather significant that the learned Judges professed to follow the very case of Sheikh Akbar v. Sheikh Khan [1882] 7 Cal. 256, on which Aikman, J. had founded his decision in Pursotam Narain's case [1903] 26 All. 178. In the Calcutta case Garth, C. J., said at p. 259 of the report, as follows:

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 or 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.

25. The learned Judges of this Court in Banarsi Prasad v. Fazl Ahmad [1906] 28 All. 293 quoted the language quoted above and said:

Now here the plaintiff did state the consideration for the note, namely money borrowed from him by the defendant.

26. The facts of the case show that the loan and the promissory note were part and parcel of the same transaction The learned Subordinate Judge, who heard the appeal from the Court of the Munsif said:

The defendant took a loan of Rs. 572 and executed a promissory note.

27. This finding was binding in second appeal to the High Court, but the learned Judges of this Court said after quoting from the judgment of the Subordinate Judge the sentence quoted above:

It seems to us therefore that the Court of first instance ought not to have summarily dismissed the plaint, but ought to have given the plaintiff an opportunity of proving the consideration of the note if there was such consideration. The law on the subject is clearly stated by Girth, C. J. in the case of Sheikh Akbar v. Sheikh Khan 9).

28. In our opinion the learned Judges of this Court overlooked the use of the word ' then' by Garth, C. J., which we have underlined (Italicized) above. The whole point of Garth, C. J., was that evidence aliunde could be given only if the transaction of the promissory note could be separated from a previously completed transaction.

29. We are of opinion therefore that this case of Banarsi Prasad [1906] 28 All. 293 which is based on the authority of the Calcutta cases was decided on a misreading of that case.

30. Referring to the opinion of Garth C.J. quoted from the case of Sheikh Akbar v. Sheikh Khan [1882] 7 Cal. 256, Mr. Iqbal Ahmad argued' that it would always be difficult to determine in the case of a loan whether the loan was a previous' transaction or whether it was a transaction which occurred simultaneously with the execution of the promissory note. He said:

If the loan was advanced five minutes before the execution of the promissory note will the plaintiff be entitled to prove the loan if the promissory note is ruled out of evidence.

31. This argument is entirely based on a misapprehension. It would always be a question of fact whether there was or was not a completed transaction between the parties whether in the shape of a sale or other transaction or whether it be in the shape of a loan. As an illustration, we can cite the case of an 'antecedent debt' of the father under the Hindu law. Under that law a father is entitled to transfer joint family, property belonging to himself and his sons to pay his 'antecedent debt.' In the case of a mortgage executed by the father it was urged before the Privy Council that the money advanced might be taken as an 'antecedent debt' and the mortgage might be treated as one given in consideration of the 'antecedent debt.' Their Lordships of the Privy Council, in the case of Brij Narain v. Mangal Prasad A.I.R. 1924 P.C. 50 at p. 103(of 46 All.) remarked as follows:.the incurring of the debt was the creation of the mortgage itself and there was no antecedency either in time or in fact.

32. Again, in laying down the several propositions of Hindu law, where their Lordships dealt with the question of antecedent debts, they said (at p. 101 of 46 All.):

Antecedent debt means antecedent in fact as well as in time, that is to say, the debt must be' truly independent and no part of the transaction impeached.

33. In the language of their Lordships of the Privy Council, we may say:

The transaction of sale of goods or loan must be a matter antecedent in fact as well as in time, that is to say, the transaction. must be truly independent and not a part of the transaction of the promissory note.

34. The next case in this Court is Srinath Das v. Angul Singh [1910] 6 I.C. 126. It was a Letters Patent appeal against the judgment of a, learned single Judge of this Court who had dismissed the suit of the plaintiff. The learned Judges who heard the appeal professed to follow the dictum of Garth, C. J., in Sheikh Akbar v. Sheikh Khan [1882] 7 Cal. 256 and the case in this Court in Banarsi Prasad v. Fazl Ahmad [1906] 28 All. 293, which itself professed to be based on Sheikh Akbar v. Sheikh Khan [1882] 7 Cal. 256. We have shown that the actual decision of Sheikh Akbar v. Sheikh Khan [1882] 7 Cal. 256, was just the other way. But this was again overlooked and on the basis of a previously decided case, the judgment of the learned single Judge was set aside and the plaintiff's suit was decreed. In this judgment there is no discussion whatsoever of Section 91, Evidence Act.

35. The next case in this Court is Ram Sarup v. Jasoda Kunwar [1912] 34 All. 158. In this case, their Lordships definitely pronounced their opinion against the case of Sheikh Akbar v. Sheikh Khan [1882] 7 Cal. 256, decided by Garth, C. J., and basing their judgment on the dictum of Lord Kenyon in the well known case of Farr v. Price 1 East 55 held in effect that even where the debt is inseparable from the promissory note, the debt could be proved although the promissory note was not admissible in evidence. It is interesting to note that Garth, C. J., himself had referred to the case of Farr v. Price 1 East 55 and had distinguished the dictum of Lord Kenyon (at p. 260). In the last mentioned Allahabad ease Ram Sarup v. Jasoda Kunwar [1912] 34 All. 158, which corresponds to Ram Sarup v. Jasodha Kunwar [1912] 34 All. 158 there is no consideration of Section 91, Evidence Act.

36. Mr. Iqbal Ahmad places his reliance on the case of Mia Bakhsh v. Mt. Bodhia : AIR1928All371 . That case has no relevance whatsoever to the case before us. The question that bad been referred there to the High Court by a learned Munsif was whether a certain promissory note which purported to be in favour of the bearer was void and inadmissible in evidence and could not be the basis of a claim in any Court of law. Two of the learned Judges (Boys and Kendall, JJ.,) held that the promissory note was in a form forbidden by law, that the promissory note could not form the basis of a suit. They however further went on to state that the plaintiff could sue on the basis of any obligation whether antecedent to or arising simultaneously with the execution of the promissory note, independently of the execution of the promissory note. Sen, J., refused to express any opinion and said (at p. 745 of 26 A.L.J.):

It is outside the scope of the present reference to determine whether the plaintiff can maintain a claim against the debtor founded upon an obligation independent of a promissory note. He further held that although the promissory note was in a form forbidden by law, it was admissible in evidence under Section 91, Evidence Act: see the same page :

37. It will be noticed in connexion with this case that there is no provision in the Paper Currency Act, which forbids the admissibility into evidence of a promissory note which has been drawn up in a form condemned by Section 25 of the Act. In the circumstances, the very document itself could prove the obligation created by it.

38. The answer of the two learned Judges Boys and Kendall, namely the plaintiff could sue on the basis of an obligation whether antecedent to or arising simultaneously with the execution of the 'promissory note etc., was not called for. The case was decided without any counsel appearing on either side. These circumstances entirely differentiate the case in Mia Bakhsh v. Bodhia : AIR1928All371 from the present case.

39. This exhausts the cases decided in the Allahabad High Court. We need not examine at length the cases decided in other High Courts. We may however make one remark, that in Calcutta there is a conflict of opinion. The case in Sheikh Akbar v. Sheikh Khan [1882] 7 Cal. 256 was followed by Radha Kant Shaha v. Abhay Charan Mitter [1882] 8 Cal. 721. But the case in Sheikh Akbar v. Sheikh Khan [1882] 7 Cal. 256 was sought to be explained away in a later case in the same Court in Promotho Nath v. Dwarka Nath [1896] 23 Cal. 851. In this case of Pro-motho Nath v. Dwarka Nath [1896] 23 Cal. 851, there is no consideration of Section 91, Evidence Act. In Madras it appears that the view has been consistently taken that where there is no independent and separate cause of action, the suit based on a promissory note which is not admissible in evidence should fail. This was held following the case in Sheikh Akbar v. Sheikh Khan [1882] 7 Cal. 256. In Yarlagadda v. Gorantala [1906] 29 Mad. 111 and in Muthu v. Vishwanatha [1914] 38 Mad. 630, Section 91, Evidence Act was relied upon and it was held that in circumstances similar to this case before us, oral evidence could not be given in proof of the loan. At p. 663 in Muthu v. Vishwanatha [1914] 38 Mad. 630, the learned Judge Sadasiva Iyer observes as follows:

To import the doctrines laid down in English cases about vague obligations to repay arising out of equity and not out of contract or about obligations which can be enforced if the plaintiff skilfully draws up his plaint as one on account for money had and received concealing the real contract of loan which had been reduced to the form of a document is, it seems to me, merely trying to nullify Section 91. Evidence Act.

40. The learned Judges who heard this ease differed from certain Bombay cases and followed the cases decided in their own Court. .

41. In Lahore the same view has been taken as we are disposed to take in the case before us. In Chandra Singh v. Amritisar Banking Co. A.I.R. 1922 Lah. 307, Section 91, Evidence Act was applied, as we are disposed to apply it.

42. We asked the learned Counsel for the applicant to cite a case decided by any High Court that may have been decided in his favour in spite of a consideration of Section 91, Evidence Act. He cited the case of Dhaneshar Sahu v. Ram Rupgir A.I.R. 1928 Pat. 426. In that case one of the learned Judges did consider the applicability or otherwise of Section 91, Evidence Act, but his learned colleague expressed his doubts.

43. Lastly it was argued by Iqbal Ahmad, the learned Counsel for the applicant, that the plaintiffs were not precluded from proving an oral agreement to pay. On this point we cannot do better than quote the following remarks made by Rankin, C. J., of the Calcutta High Court. In Dula Meah v. Abdul Rahman : AIR1924Cal452 at p. 72 (of 28 C.W.N.) his Lordship observed as follows:

Verbal negotiations leading up to an express contract in writing cannot be set up as an independent contract and are not admissible in evidence (Evidence Act, Section 91). Moreover where there is an express promise an implied promise will not be inferred.

44. We entirely agree with these observations.

45. In the result our answer to the question referred to us by the Division Bench is in the negative, namely in the circumstances set forth in the question referred to us, the plaintiff cannot recover. We direct that the record with our answer and a copy of this judgment be sent to the Bench making the reference.


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