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Chhabiladas Mangaldas Vs. Luhar Kohan Arja - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtGujarat High Court
Decided On
Case NumberSecond Appeal No. 261 of 1960
Judge
Reported inAIR1967Guj7; (1965)GLR893
ActsCode of Civil Procedure (CPC), 1908 - Sections 100 and 102; Stamp Act, 1899 - Sections 2(22) and 35 - Schedule - Article 49; Negotiable Instrument Act, 1881 - Sections 13
AppellantChhabiladas Mangaldas
RespondentLuhar Kohan Arja
Appellant Advocate R.C. Mankadd, Adv. for; K.C. Patel, Adv.
Respondent Advocate P.V. Hathi, Adv. for; V.G. Hathi, Adv.
Excerpt:
.....suit filed by appellant dismissed by trial court on ground of inadmissibility of promissory note - appeal against such order - whether document is or is not admissible in evidence depends upon document being a promissory note under section 2 (22) - document is a promissory note if its terms satisfies terms of definition of negotiable instrument given under section 13 - document not drawn up in customary manner in which promissory notes drawn does not mean that document deprived of its character of negotiability - impugned document is promissory note. - - their lordships further pointed out that if the promissory note is not a negotiable instrument it may not be negotiable and the person to whom it is delivered or purported to be endorsed and delivered may not be entitled, in..........whether there was or was not an intention on the part of the parties to the document to make the document negotiable. to my mind, that is essentially a question of fact. it is true that, in order to decide that question, not only the document requires to be construed and the terms of the document have to be ascertained, but all the surrounding circumstances have got to be taken into account and it would be legitimate to apply all proper tests for the purpose of finding out as to what the intention of the parties was. however, once these tests have been applied and a conclusion reached by a judge on the application of the tests, in my judgment, the question so decided would be a question of fact and it is not amenable to be revised in second appeal. mr. mankad, however, contends that.....
Judgment:

(1) The only question which is raised in this Second Appeal is about the correctness of the decision recorded by the two Courts that the instruments, dated 30th December 1951, was a promissory note within the meaning of the Indian Stamp Act, 1899 (XI of 1899). (Hereinafter called 'the Act') and as such, inadmissible in evidence plaintiff Appellant brought the suit from which the Second Appeal arises, for recovering a sum of Rs.769-4-0 from defendant - respondent. The claim was based on the aforesaid document dated 30th December, 1951. When the document was sought to be got admitted in the trail Court, defendant raised an objection that as the document was a promissory note within the meaning of Section 2 sub-section (22) of the Act and as it was not stamped a required by Art.49 of the act, the same was not admissible in evidence under S.35 of the Act. This contention was upheld by the trail court and, on that finding, the suit of plaintiff was dismissed plaintiff preferred an appeal to the District Court Gohilwad at Bhavnagar.

The learned District Judge upheld the finding of the trial court and dismissed the appeal. Mr. Hathi on behalf of respondent raises a Preliminary objection, based on Section 102, Civil Procedure Code, 1908. He contents that, a the claim involved in the suit does not exceed Rs.1,000 no Second Appeal lies. The limit of s.1,000 was introduced in Section 102 for the first time by the Amending Act LXVI of 1965, which Act came into operation on 1st January 1957. The suit from which the Second Appeal arises was instituted in the year 1954, before the aforesaid amending act came into force. Before the amendment the limit was Rs.500. Mr. Mankad contends that the question as to whether a Second Appeal lies or not depends upon the value of the subject matter at the date when the suit was instituted and not the value of the subject-matter at the date when the question is raised for the fist time, in the second appeal. Mr. Mankad contends that a right of appeal is a vested right which comes into existence at very inception of the suit and unless the amendment introduced by Act LXVI of 1956 in Section 102 of the Civil Procedure Code 1908, was retrospective, the right to present in Second Appeal, which became vested when the suit was first file, would not be affected in my judgment, the contention of Mr. Mankad is valid and must be upheld. Mr. Hathi was unable to show to me that the amendment introduced by the aforesaid amending Act was retrospective in operation. In the absence of such retrospective operation, it is quite clear that the right of presenting a Second Appeal which became vested at the date of the institution of the suit, would not be affected by the limit being raised from Rs.500 to Rs.1,000.

(2) The document the admissibility of which is challenged, has been translated by the learned appellate Judge and the translation which is reproduced by him in paragraph 6 of his judgment is as follows:-

'The account of Samvat 2008 of Luvar Mohan Arjan.

Cr.......................................Dr..........................................................Rs.2000 dated 30th December 1955Rs.2,000 is cash have been taken to-day from Chhabildas Mangaldas Desai for investing that amount in the partnership business of a grinding mill. The interest at the rate of 3/4 per cent per month was agreed. This amount is to be paid on demand by you with interest. I agree to pay this amount accordingly on demand by you. The maker of the document has then put his thumb-mark. On the credit side there are entries regarding 'vasuls''.

There are seven entries on the credit side. The first entry is dated 30th December 1951, crediting a sum of Rs.1,000. The other credit entries are for small amounts and represent payments either in cash or in kind, in various dates, regarding from 3rd January 1954 to 30th March 1954. Now, the question as to whether the document is or is not admissible in evidence depends upon the document being a promissory note as defined by section 2, Subsection (22) of the Act.

(3) Article 49 of the Act, at the relevant time, required such a document to be stamped with a stamp of two annas. This is not in dispute. It is also not disputed that the document does not bear any stamp whatsoever. Section 35 of the Act enacts that no instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or by consent of parities authority to receive evidence or shall be acted upon, unless such instrument is duly stamped. Therefore, if the document is a promissory note within the meaning of the Act, it is not disputed that the document would not be admissible in evidence. But the contention of plaintiff all throughout has been that the document is not a promissory note within the meaning of Section 2 sub-section (220 of the Act, that the document is an ordinary agreement, and, that being so, it is admissible in evidence on a penalty being paid. Therefore, the whole controversy in the present appeal turns on the question as to what is the true character of the document in question. Now the expression 'promissory note' means a promissory note as defined by the Negotiable instrument Act, XXVI of 1881. Then follows an inclusive definition. It is not necessary for me to reproduce that inclusive definition in the present appeal because t is common ground that that inclusive definition is not applicable to the fats of the present case. Therefore, in order to decide the question as to whether the document in suit is or is not a promissory note , one has to turn to the definition of the expression 'promissory note ' as given in the Negotiable instrument Act, 1881. That Act defines 'promissory note' in Section 4. The definition is as follows:-

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

Both the lower Courts have held that the document in question fulfills the requirements of this particular section. In my Court, Mr. Mankad did not challenge the validity of this decision. It is not disputed that the document is not a bank note or a currency note. There cannot be any dispute also that the document is an instrument in writing and that it is signed by the maker thereof. There is also no dispute that the document contains an unconditional undertaking to pay a certain sum of money and that the payee is the plaintiff and, therefore, a certain person. But Mr. Mankad's contention is that, in order that a document may be a promissory note it is not enough that it must only fulfill the requirements of Section 4 aforesaid. He submits that, in order that the document may be a promissory note , the document must fulfill a further condition and that condition is the condition or negotiability. He contends that, in order that the document may come within the mischief of Section 35 read with rt.49 of the Act, it is necessary that the promissory note must be a negotiable instrument. He further submits that the question as to whether a document is a negotiable promissory note or not depends upon the intention of the parties to the instrument in question and that having regard to the terms of the document and the surrounding circumstances. It can never have been the intention of the parties to make the aforesaid document a negotiable instrument . Prima facie, the argument does not appear to be sound. The very same argument came up for consideration before a Division Bench of this Court in the case of Jagjivandas Bhikhabhai v Gumanbhai Narottamdas, LPA No. : AIR1967Guj1 and was negatived by the judgment delivered on 25th March 1965 by Bhagawati J., speaking for the Division Bench consisting of himself and Mr. Justice Shah. In that case, it was held that, in order to determine whether the instrument is a promissory note or not, regard must be had only to the definition of 'promissory note' contained in Section 4 of the Negotiable Instrument Act, 1881, and if the instrument satisfies the requirement of that definition, the instrument must be held to be a promissory note quite irrespective of the fact whether it is a negotiable instrument or not. Their Lordships further pointed out that

'If the promissory note is not a negotiable instrument it may not be negotiable and the person to whom it is delivered or purported to be endorsed and delivered may not be entitled, in his own name, to the possession of the promissory note and to receive or recover the amount due thereon from the parties there to but that cannot deprive the instrument of its character of a promissory note..........'.

This follows from the fact that 'negotiable instrument' has been defined in Section 13 of the Negotiable instrument Act, XXVI of 1881, as meaning 'a promissory note , bill of exchange or cheque payable either to order or to bearer'. From this definition, it is quite clear that all promissory note are not negotiable instrument . In order that a promissory note may be a negotiable instrument, besides satisfying the ingredients of the definition of a 'promissory note' as given in Section 4, it must be 'payable either to order or to bearer'. It is true that under Explanation i to Section 13 of the negotiable instrument Act, 1881, if a promissory note is expressed to be payable to a particular person, then it would be payable to the order of that person, provided the instrument does not contain words prohibiting transfer or indicating an intention that it shall not be transferable. It is not necessary for me to elaborate this point any further because, apart form the fact that, with great respect, I entirely agree with the reasoning adopted by the Division Bench in the aforesaid case, I am bound by that particular decision. But Mr. Mankad contends that the aforesaid Division bench decision is contrary to two decisions recorded by Their lordships of the privy Council none of which unfortunately was brought to the notice of their Lordships and none of which is referred to or considered in that judgment. The first Privy Council case is that of Mohammad Akbar Khan v Attar Singh, AIR 1936 PC 171. In that case, also exactly the same point as arise in this appeal and as arose for decision in the aforesaid Division Bench case, arose for consideration of their Lordships of the Privy Council. After referring to the definitions of the expression 'promissory note' in the aforesaid two enactments and to Section 13 of the Negotiable Instrument Act, 1881. Their Lordships at page 174 proceeded to dispose of the point by the following observations:-

'Their Lordships prefer to decide this point on the broad ground that such a document as this is not and could not be intended to be brought within a definition relating to documents which are to be negotiable instruments. Such documents must come into existence for the purpose only of recording an agreement to pay money and nothing more, though of course they may state the consideration'.

This decision was confirmed y Their Lordships of the Privy Council in Lala Karam Chand v Firm Mian Mir Ahmad Aziz Ahmad . In that case, after referring to the fact that there was a strong current of authority in India to the effect that the promissory note of the type which Their Lordships had to consider in that case came within the ban of Section 35 of the Stamp Act and further to the fact that it was because of the strong current of authority that the promissory note in that case had been held by the learned Judicial Commissioners to be the promissory note. Their Lordships made the following observations:-

'But since the judgment of the Judicial Commissioner's Court, a decision of this Board AIR 1936 PC 171, has made it clear that the shadow resting upon these exhibits throughout the case was unreal, that documents of this nature which were clearly never intended to be negotiable instrument at all are not promissory note and are not therefore, for want of a stamp, inadmissible in evidence'.

(4) In view of these two Privy Council cases, Mr. Mankad contends that the test of negotiability which he propounds is still a good test and must be answered before holding a promissory note to be inadmissible in evidence. I do not propose to undertake the task of deciding whether the aforesaid two Privy Council cases are distinguishable from the aforesaid decision recorded by the Division Bench of this High Court, without undertaking that task. I propose to consider the applicability of that test to the facts of the present case. The case has been considered by both the lower Courts from that aspect. The learned District Judge in reaching his conclusion has taken into account a number of authorities, including the aforesaid two Privy Council cases, which were cited before him and recorded his conclusion on the subject of negotiability in two passages which are as follows:-

' In the present case, the document is not written in the account book of the plaintiff . It has been written on a separate loose paper. It is not an acknowledgment of settled accounts. It is a case of a fresh loan advanced on the very day. There is express promise to pay. It is an unconditional promise to pay. The payee has been specified. There is nothing in the document itself to indicate that the negotiability of the instrument was prohibited. Money is promised to be paid on demand by a specified person and the maker has signed the document. All the tests which are to be satisfied for the document to be a promissory note are satisfied in the present case'.

The second passage s as follows:-

'In the present case also, there is an express promise to pay. Merely because there is an agreement to pay interest at a stipulated rate and there is a statement about the purpose for which the loan was taken by the debtor, the character of the document, being a promissory note is not changed. In the present case the payee is specified. A definite sum is promised to be paid to him on demand, with interest. The maker has signed it. It is not a case where there is an acknowledgment on settlement of accounts for the sum found due. All the requirements for the promissory note are satisfied. There is nothing in the document itself to show that the negotiability was prohibited or that the parties did not intend this document to be a negotiable instrument. The learned Civil Judge was therefore, quite justified in holding that this document was a promissory note . The circumstance that this document was not taken on a separate loose paper, is also indicative of the fact that the parties did not intend to prohibit the negotiability of the instrument.'

(5) Now, if the test which is laid down by their Lordships of the Privy Council is to be applied to the facts of the present case, then, it is quite clear that the task which is to be performed is to discover as to whether there was or was not an intention on the part of the parties to the document to make the document negotiable. To my mind, that is essentially a question of fact. It is true that, in order to decide that question, not only the document requires to be construed and the terms of the document have to be ascertained, but all the surrounding circumstances have got to be taken into account and it would be legitimate to apply all proper tests for the purpose of finding out as to what the intention of the parties was. However, once these tests have been applied and a conclusion reached by a Judge on the application of the tests, in my judgment, the question so decided would be a question of fact and it is not amenable to be revised in Second appeal. Mr. Mankad, however, contends that the document in question is the foundation of the claim in suit and when such is the case, the question of the construction of the document is one of law and as such, this Court has jurisdiction to consider whether the document is or is not a negotiable instrument. Even applying this particular test, in my judgment, the present appeal deserves to be dismissed. Having once reached the conclusion that the aforesaid document satisfies all the requirements of the definition of a promissory note as given in S. 4 of the Negotiable Instruments Act. It is quite clear that under Explanation 1 to S. 13 the document would be a negotiable instrument inasmuch as the document would be deemed to be payable to the order of plaintiff inasmuch as it expressed to be made payable to plaintiff and there are no words in the instrument which prohibit the transfer of document. Therefore, when the document is read in the light of the aforesaid explanation, there cannot be any doubt that the document would be a negotiable instrument within the meaning of S. 13 of the Negotiable Instruments Act. Even if, in spite of this construction, the law permits introduction of evidence for the purpose of finding out as to whether the intention of the parties was to make the instrument negotiable, then, in my judgment, the burden would be on plaintiff to show that such was the intention and one of the ways in which such an intention could be proved would be to show that, though the document does not say in express terms that the transfer thereof was prohibited, in fact, the parties intended to prohibit such transfer. In my judgment, all the arguments which Mr. Mankad urges for the purpose of showing a contrary intention are of no consequence. Mr. Mankad says that the true nature of the document is a mere agreement and that, therefore, it cannot be termed a promissory note. He also draws my attention to the fact that the words of promise are preceded by certain recitals relating to the purpose for which the advance was made. In my judgment, the mere fact that a promissory note recites as to how the consideration was fixed by the parties and that a part of that particular document is couched in the form of an agreement does not deprive that document of its character as a promissory note if there are words which, in law, can be construed as meaning a promise to pay. Then Mr. Mankad urges that the document is in the form of an account and not in the form of a mere paper which would pass from hand to hand. In my judgment, this again is not an indication of the intention of the parties to prohibit transfer of the document. On the contrary, in the Division Bench case aforesaid, their Lordships observed that, in this part of the country, promissory notes are usually expressed in the form in which the present document has been expressed. Then, Mr. Mankad contends that, on the credit side of the document, entries have been posted showing payments under the document. I fail to understand as to how this can take away the character of negotiability if the document possessed one when actually the document was signed. The fact that the payments have been noted on the credit side is not at all any indication on the part of the payee that the document was not a negotiable instrument. Then Mr. Mankad makes a reference to the manner in which the whole document has been written and the tenor thereof and contends that, as stated by their Lordships of the Privy Council in Mohammad Akbar Khan's case AIR 1936 PC 171, such a document 'would be a somewhat unusual visitor in the accustomed circle of negotiable paper'. However, in my judgment, these observations were not made by their Lordships to take away a document from the category of promissory note if it is found to be one after applying proper tests simply on the ground that the document would be a stranger in the accustomed circle of promissory notes. In my judgment, for the purpose of deciding as to whether a document is or is not negotiable, the primary test is to find out whether, in fact, the terms thereof satisfy the definition of a negotiable instrument as given in S. 13 of the Negotiable Instruments Act, 1881. If, having regard to the Explanation attached to that section, the document is found to be a promissory note which is made payable to a certain person, then the document would be an instrument which is payable to the order of that person and, unless there are other surrounding circumstances in the case which indicate that negotiability was not intended by parties, the mere fact that the document is one which, in the opinion of the Court, is not drawn up in the customary manner in which promissory notes are drawn up by bankers and merchants, it does not follow that the document must be deprived of its character of negotiability simply because it is a strange visitor in the accustomed circle of negotiable papers.

(6) For the aforesaid reasons, I have come to the conclusion that this appeal must fail and must be dismissed with costs.

(7) Appeal dismissed with costs.

(8) Appeal dismissed.


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