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Jagivandas Bhikhabhai Vs. Gumanbhai Narottamdas - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtGujarat High Court
Decided On
Judge
Reported in(1965)6GLR778
AppellantJagivandas Bhikhabhai
RespondentGumanbhai Narottamdas
Cases ReferredVadilal v. Ugarchand
Excerpt:
.....a whole that the instrument specifies the payee with certainty the instrument must be held to be a promissory note if the other ingredients of the definition are satisfied. it will be seen that the body of the khata did not mention the name of the payee and yet since the name of the payee appeared clearly on the face of the instrument taken as a whole inclusive of the heading the division bench of the bombay high court held that the instrument amounted to a promissory note. on the other hand illustration (b) to section 4 of the negotiable instruments act clearly shows that the reference to the payee need not be found in the words of promise. if that is done it is apparent that in the present case the plaintiff was clearly specified as the payee in the heading of the khata which was as..........necessarily a negotiable instrument. it is a wider term which may include two kinds of promissory notes; promissory notes which are not negotiable instruments and promissory notes which are not and merely because a promissory note is not a negotiable instrument it does not mean that it ceases to be a promissory note. in order to determine whether an instrument is a promissory note or not regard must be had only to the definition of promissory note contained in section 4 and if the instrument satisfies the requirements 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. if the promissory note is not a negotiable instrument it may not be negotiable and the person to whom it is delivered or.....
Judgment:

P.N. Bhagwati, J.

1. This Letters Patent Appeal is directed against a judgment given by Raju J. in Second Appeal confirming a decree passed in appeal by the District Judge Broach dismissing a suit filed by the plaintiff to recover a sum of Rs. 5 100 alleged to have been lent and advanced by the plaintiff to the defendant on 21st June 1949. The defendant had also according to the plaintiff executed in favour of the plaintiff an instrument in writing dated 21st June 1949 in respect of this loan but since in the view of the plaintiff the instrument appeared to be a promissory note and on that view the instrument being unstamped would be inadmissible in evidence the plaintiff sued on the original cause of action. The defendant admitted execution of the instrument but his defence was that no moneys were lent and advanced to him against the instrument on 21 June 1949. According to the defendant the instrument though dated 21 June 1949 was actually executed on 14th June 1949 and the circumstances under which it came to be executed were as follows. On 16th January 1948 the defendant had executed a Khata for Rs. 3 0 in favour of the plaintiff and the amount due under that Khata with interest was outstanding on 14th June 1949. The defendant was an agriculturist and the last date for making an application for adjustment of the debts of the defendant under the Bombay Agricultural Debtors Relief Act 1948 was expiring on 15th June 1949. The plaintiff therefore approached the defendant on 14th June 1949 and asked him to square up the existing Khata and to pass a new Khata in favour of the plaintiff bearing date 21 June 1949. The date 21st June 1949 was suggested by the plaintiff because that being a date subsequent to 15th June 1949 the plaintiff expected that if the new Khata was dated 21st June 1949 that would enable him to avoid the consequences of the Bombay Agricultural Debtors Relief Act 1948 Now the amount due under the existing Khata was Rs. 3 0 by way of principal and Rs. 265 lby way of interest upto 21 June 1949. The defendant was also in arrears of rent in respect of the lands held by him as a tenant of the plaintiff and those arrears amounted to Rs. 169-9-0. The aggregate amount of indebtedness of the defendant as on 21st June 1949 was therefore Rs. 3 434 The plaintiff lent and advanced a further sum of Rs. 1 665 to the defendant on 14th June 1949 in order to enable the defendant to purchase an engine for better cultivation of the lands and the total amount due and payable by the defendant to the plaintiff thus came to Rs. 5 100 In respect of this indefendant the defendant executed the instrument in question in favour of the plaintiff on 14th June 1949 but the instrument was dated 21st June 1949 at the instance of the plaintiff with a view to getting out of the provisions of the Bombay Agricultural Debtors Relief Act 1948 The defendant on these allegations contended that the transaction having taken place on 14th June 1949 the suit filed on 20th June 1952 was barred by the law of limitation and the plaintiff was not entitled to recover any amount from the defendant. The learned trial Judge accepted the story put forward on behalf of the plaintiff and decreed the suit against the defendant. On appeal by the defendant however the learned District Judge held that the plaintiff had failed to establish that he bad lent and advanced a sum of Rs. 5 100 to the defendant on 21st June 1949 and that the story narrated by the defendant appeared to be more probable namely that the transaction had taken place on 14th June 1949 and that the amount of Rs. 5 100 was made up of the amount due under the previous Khata the arrears of rent and the further amount of Rs. 1 665 lent and advanced by the plaintiff to the defendant on that day as alleged by the defendant. The learned District Judge took the view that though the plaintiffs case was not established a decree could have been passed in favour of the plaintiff on the case of the defendant but the suit having been filed on 20th June 1952 more than three years after the date of the accrual of the cause of action was clearly time-barred. The learned District Judge in the result allowed the appeal and dismissed the suit. The plaintiff thereupon preferred a Second Appeal in this Court but the Second Appeal was dismissed by Raju J. Hence the present appeal with leave of the learned Judge obtained under Clause 15 of the Letters Patent.

2. This being a Letters Patent appeal against a decision given in Second Appeal the facts as found by the learned District Judge must be accepted as final and binding and the Letters Patent Appeal must be decided on the basis of those facts. As we have pointed out above according to the learned District Judge the plaintiff failed to establish that he lent and advanced a sum of Rs. 5 100 to the defendant on 21st June 1949 which was the case with which he came to the Court. Ordinarily therefore the plaintiff would not be entitled to obtain a decree against the defendant and the decision dismissing the suit of the plaintiff would be unassailable. But contended Mr. N.C. Shah learned advocate appearing on behalf of the plaintiff the plaintiff was still entitled to succeed on the case of the defendant which was held established by the learned District Judge. The learned District Judge held that on 14th June 1949 a sum of Rs. 5 100 was due and payable by the defendant to the plaintiff and that amount was made up of a sum of Rs. 3 265/ being the amount due under the Khata dated 16th January 1948 a sum of Rs. 169-9-0 being the arrears of rent and a sum of Rs. 1 665 being the amount lent and advanced by the plaintiff to the defendant on that day and according to the contention of Mr. N.C. Shah the plaintiff was entitled to recover this amount from the defendant. This contention would have certainly had great force for it is now well-settled that even if a plaintiff fails to establish his case he can yet get a decree on the case of the defendant but the effective answer given to this contention on behalf of the defendant was that the plaintiffs claim on this basis was barred by the law of limitation. Now it is indisputable that the plaintiffs claim based on this cause of action would be barred by the law of limitation since the suit was filed as late as 20th June 1952. But Mr. N.C. Shah on behalf of the plaintiff rejoined by saying that the plaintiffs claim was saved from the bar of limitation by reason of the acknowledgment of liability contained in the instrument executed by the defendant in favour of the plaintiff and since the instrument was dated 21st June 1949 the suit was within time. Now unfortunately for the plaintiff the instrument was not tendered in evidence at the trial of the suit and no reliance could therefore be placed on it on behalf of the plaintiff. However we may point out that if the instrument were otherwise admissible we should have even in this Letters Patent Appeal admitted the instrument in evidence since we find that the execution of the instrument has throughout been admitted by the defendant. But we are of the view that the instrument is not admissible in evidence and our reasons for taking that view are as follows.

3. The instrument is in our opinion a promissory note within the meaning of Section 2(22) of the Indian Stamp Act and being unstamped it is inadmissible in evidence. Section 2(22) of the Indian Stamp Act defines a promissory note to mean a promissory note as defined by the Negotiable Instruments Act 1881 and also includes a note promising the payment of any sum of money out of any particular fund which may or may not be available or upon any condition or contingency which may or may not be performed or happen. Since the first part of the definition of promissory note given in Section 2(22) of the Indian Stamp Act defines a promissory note by reference to its definition in the Negotiable instruments Act 1881 we must go to the Negotiable Instruments Act 1881 to see how it is defined in that Act. Section 4 of the Negotiable Instruments Act. 1881. defines a promissory note in the following terms:

4. A 'promissory note is an instrument in writing (not being a bank 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.

The question which, therefore, arises for consideration is whether the instrument before us is a promissory note within the meaning of this definition. In order to be able to arrive at a proper determination of this question it is necessary at this stage to set out the terms of the instrument which require to be considered. The instrument is in the Gujarati language and is in a form which is in common use in this part of the country and it was not disputed that that is the form in which people in this part of the country express themselves when they want to execute a promissory note. But that is not of consequence for the belief of the parties that what they have executed is a promissory note does not mike the instrument a promissory note unless it fulfils the requirements of the definition. What we must therefore consider is whether an instrument in this form satisfies the requirements of the definition. The instrument when translated in English was in the following terms:

Jagjivandas Bhikhabhai of Mouje Jhagadia this Khata is passed Shahjog.

Khata of Modi Gumanbhai Narottamdas resident of village Kansia Taluka Ankleshwar Samvat 2005.

Cr.... Dr....

5100/- On the day of Samvat 2005 Jeth vad 10 and week day of Monday dated 21-6-49 Rs. 5 100 in words Rs. five thousand and one hundred are taken in full. I promise to pay the same Shahjog whenever you make a demand signed by self.

Sd. Modi Gumanbhai Narottamdas signed by self.

Now it is clear that the instrument was an instrument in writing and it contained an unconditional undertaking signed by the defendant to pay a certain sum of money namely Rs. 5 100 This much could not be disputed and indeed was not disputed on behalf of the defendant. But the contest raised on behalf of the defendant was that the instrument could not be said to contain unconditional undertaking to pay to or to the order of a certain person or in other words the payee of the instrument was not certain. The argument was that the name of the payee was not set out in the instrument and that all that the instrument said was *** (that is we promise to pay whenever demanded by you.) the word *** that is you not indicating a certain or definite person as the payee. This contention is in our opinion wholly without force. It is undoubtedly true that the payee under a promissory note must be a certain person. As observed by Jervis C.J. in Cowie v. Stirling 6 E. and B. 327 to make a promissory note there must be a payee ascertained by name or designation. The instrument must point out with certainty the party who is to receive the money. It may be that a payee is misnamed or designated by description only in which event extrinsic evidence may be admitted to show who is the person mentioned as the payee is the instrument but the instrument must indicate the payee with certainty so that the payee can be ascertained from the instrument. If the payee cannot be identified with certainty from the instrument itself the instrument would not fulfil the requirements of a promissory note. Such was the case in Lala Jethaji v. Bhagu Gopal 3 Bom. L.R. 699. In that case the instrument was written in the plaintiffs account book and was in the form of a Khata and it contained an unconditional undertaking to pay a certain sum of money but the name of the payee was not apparent on the face of the instrument and the instrument was therefore not regarded as a promissory note. The same was also the case in Chandraprasad v. Varajlal 8 Bom. L.R. 644. There also there was a Khata and it contained an unconditional promise signed by the defendant to pay a certain sum of money but it was expressed to be payable to you and who was meant by you did not appear on the instrument and the Division Bench of the Bombay High Court therefore held that the Khata was not a promissory note within the meaning of Section 4 of the Negotiable Instruments Act 1881 In the present case however we find that the position is different. It is no doubt true that in the body of the Khata the name of the payee does not appear and all that the Khata says iswe promise to pay whenever you demand but if we look at the whole of the instrument it is clear that the name of the payee is specified with certainty and the plaintiff is the payee under the instrument. The instrument is in the form of a Khata and the heading of the Khata shows that the Khata is addressed to the plaintiff and it is in the context of that heading than the Khata says we promise to pay whenever you demand the word you having clearly reference to the plaintiff mentioned he the heading. There is therefore no doubt that if the heading of the Khata is taken into account the plaintiff is specified as the payee to whom the unconditional undertaking to pay the sum of Rs. 5 100 is given by the defendant by signing the instrument. Section 4 does not say that the name of the payee must appear in the words of the promise nor does it say that the payee must be specified in any particular part of the instrument. The name of the payee may be set out in any part of the instrument and so long as it appears clearly on a reading of the instrument taken as a whole that the instrument specifies the payee with certainty the instrument must be held to be a promissory note if the other ingredients of the definition are satisfied. This view which we are taking appears to be the only possible view on a plain reading of the section but we are fortified in this view by two decisions one a decision of the Bombay High Court and the other a decision of the Madras High Court. The decision of the Bombay High Court to which we refer is that reported in Mathurbhai v. Dalpat 3 Bom. L.R. 839. The facts of that case were almost identical with the facts of the present case. In that case too the instrument was in the form of a Khata and the heading of the Khata specified the name of the plaintiff in whose favour the Khata was passed by the defendant and the body of the Khata then stated: We shall pay the same with interest at the rate of 3/4 Dokada per Rupee per mensem whenever the owner (of this khata) demands it. It will be seen that the body of the Khata did not mention the name of the payee and yet since the name of the payee appeared clearly on the face of the instrument taken as a whole inclusive of the heading the Division Bench of the Bombay High Court held that the instrument amounted to a promissory note. This decision being a decision of a Division Bench of the Bombay High Court is binding upon us and is in our view decisive of the question before us. The same view we find has also been taken by a Division Bench of the Madras High Court in Chockalingam Chettiar v. Palaniappa Chettiar 58 Madras 261. Varadachariar J. delivering the judgment of the Division Bench in this case after referring to the previous decision of the Madras High Court in Kadir Moithin Pulavar v. Panduranga Naidu (1933) 38 L.W. 846 observed:

No exception can be taken to the principle laid down in that case that in considering whether a docuMent is a promissory note or not it is material to see whether the payee is named there. But neither that case nor any other decision lays down in which part of the document the payee is to be named or by what kind of language. On the other hand illustration (b) to Section 4 of the Negotiable Instruments Act clearly shows that the reference to the payee need not be found in the words of promise.

It is, therefore, clear that the instrument must be regarded as a whole and every part of it must be scanned in order to see whether a certain payee is specified in the instrument. If that is done it is apparent that in the present case the plaintiff was clearly specified as the payee in the heading of the Khata which was as much a part of the instrument as the body of the Khata and the instrument did not suffer from the vice of the payee being uncertain.

4. It was then contended by. Mr. N.C. Shah on behalf of the plaintiff that in any event the instrument could not be regarded as a promissory note since the words of the instrument showed that the instrument was not transferable and the instrument was therefore not a negotiable instrument. This contention was based upon a decision of Raju J. in Vadilal v. Ugarchand : (1963)4GLR305 . The instrument which came up for consideration before the learned Judge in that case was almost in the same terms as the instrument in the present case. It contained a promise by the executant to pay a stated amount to the promisee and then followed the following additional words: *** *** that is I promise to return to you the moneys with interest at the rate of 6 per cent per annum whenever you demand the same. It was argued before the learned Judge that the instrument was not a promissory note since the aforesaid words which occurred in the instrument rendered the instrument not transferable and the instrument was therefore not a negotiable instrument and consequently could not be regarded as a promissory note within the meaning of the Negotiable Instruments Act 1881 This argument found favour with the learned Judge and he held that the instrument before him could not be regarded as a promissory note. This decision was strongly relied on on behalf of the plaintiff and there is no doubt that if this decision is correct the instrument in the present case also cannot be regarded as a promissory note and the difficulty in the way of the plaintiff would disappear. But we are of the view that this decision does not lay down the correct law and must be overruled.

5. We have already set out the definition of promissory note contained in Section 4 of the Negotiable Instruments Act 1881 All that this definition requires is that there must be an instrument in writing which contains 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. Now having regard to the law relating to currency notes no one save the Government can execute an instrument containing an unconditional undertaking to pay a sum of money to the bearer of the instrument. The instrument to be a promissory note within the meaning of the definition must therefore be an instrument containing an unconditional undertaking signed by the maker to pay a certain sum of money to or to the order of a certain person. We have already seen that the instrument in the present case satisfies all requirements of the definition and there is therefore no reason why the instrument should not be regard as a promissory note. The only reason suggested in the judgment of Raju J. as to why the instrument cannot be regarded as a promissory note is that it contains words indicative of an intention that the instrument shall not be transferable and that the instrument is therefore not an instrument payable to order so as to be negotiable and being not negotiable the instrument cannot be regarded as a promissory note. This reasoning with the greatest respect to the learned Judge suffers from a double fallacy. In the first place the Negotiable Instruments Act 1881 does not lay down any rule that an instrument in order to be a promissory note must be negotiable. The only requirement laid down by the Act is that it must satisfy the ingredients of the definition contained in Section 4. Of course negotiability is an advantage of great value for when a promissory note is negotiated in the manner prescribed by Section 46 the person to whom it is negotiated becomes the holder of the promissory note (Section 14) and he is entitled in his own name to the possession of the promissory note and to receive or recover the amount due thereon from the parties thereto (Section 8). But every promissory note is not necessarily negotiable. It is only where a promissory note is payable either to-order or to bearer that it comes within the definition of negotiable instrument given in Section 13(1) of the Act. If a promissory note is not payable either to order or to bearer it would not be a negotiable instrument though est would be a promissory note none the less. Now turning to examine when a promissory note can be said to order as the definition of promissory note shows a promissory note may contain an unconditional undertaking to pay a sum of money to or to the order of a certain person. If the promissory note contains an unconditional undertaking to pay a sum of money to the order of a certain person it would be clearly a promissory note payable to order and therefore a negotiable instrument within the meaning of Section 13(1). But a promissory note may contain an unconditional undertaking to pay a sum of money to a certain person without saying in terms that the amount shall be payable also to the order of that person. In such a case prior to the introduction of Explanation I in Section 13(1) by the Amendment Act VIII of 1919 the law was that the instrument was not negotiable. The Legislature therefore introduced in Section 13(1) Explanation (i) which read as follows:

Explanation (i): A promissory note bill of exchange or cheque is payable to order which is expressed to be so payable or which is expressed to be payable to particular person and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable.

The result, therefore, is that now after the amendment even if there is a promissory note which is not expressed to be payable to order but merely contains an unconditional undertaking to pay to a Particular person it would still be a promissory note payable to order and therefore negotiable provided it does not contain words prohibiting transfer or indicating an intention that it shall not be transferable. The privilege of negotiability would attach to such a promissory note as being a promissory note payable to order. The legal position thus appears to be as follows. Every instrument in writing which satisfies the requirements of the definition in Section 4 would be a promissory note. Such an instrument may contain an unconditional undertaking to pay a sum of money to the bearer of the instrument or to the order of a certain person. In either case the instrument being payable to bearer or to order would be a negotiable instrument within the meaning of Section 13(1). The instrument may also in some cases contain an unconditional undertaking to pay a sum of money to a certain person without stating that it shall be payable also to the order of that person. In such an event if there are no words prohibiting transfer or indicating an intention that it shall not be transferable the instrument would still be an instrument payable to order and would therefore be a negotiable instrument within the meaning of Section 13(1). But if the instrument contains words prohibiting transfer or indicating an intention that it shall not be transferable the instrument would not be payable to order in which event though the instrument would be a promissory note it would not be a negotiable instrument. It would therefore be seen that every promissory note is not necessarily a negotiable instrument. It is a wider term which may include two kinds of promissory notes; promissory notes which are not negotiable instruments and promissory notes which are not and merely because a promissory note is not a negotiable instrument it does not mean that it ceases to be a promissory note. In order to determine whether an instrument is a promissory note or not regard must be had only to the definition of promissory note contained in Section 4 and if the instrument satisfies the requirements 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. 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 indorsed 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 thereto but that cannot deprive the instrument of its character of a promissory note and the payee can certainly sue on the promissory note. The error into which with the greatest respect Raju J. fell was in equating a promissory note with a negotiable instrument in all cases. That view is clearly erroneous and we must hold that the decision of Raju J. that an instrument of the type before him would not be a promissory note must be regarded as incorrect.

6. The second fallacy in which in our humble opinion Raju J. fell was in taking the view that the words used in the instrument before him indicated that the instrument was not transferable. We have already set out the words which were in the instrument before Raju J. According to Raju J. these words restricted the right to demand and recover payment under the instrument to the person in whose favour the instrument was made. We do not think that that is the right construction to be put on these words. These and similar words are in common use in this part of the country and they are used as the Gujarati equivalent of I promise to pay you on demand. No doubt the words used were *** which literally translated would mean whenever you demand but they mean nothing more than what is conveyed by the English expression on demand. These words do not make the obligation of the executant of the instrument conditional upon an actual demand being made by the person in whose favour the instrument is executed. The obligation arises eo instanti as soon as the instrument is executed and these words are inserted merely in recognition of this obligation with a view to emphasizing that the amount shall be payable immediately or forthwith. The net effect of these words is the same as that of their English equivalent namely. I promise to pay to you on demand and if the latter words do not have the effect of restricting negotiability we do not see how the former can have that effect. We are therefore of the view that Raju J. was not right in taking the view that the words in the instrument before him which are almost identical with the words in the instrument before us prohibited transfer or indicated an intention that the instrument shall not be transferable and made the instrument non-negotiable.

7. This being the position it is clear that the instrument in the present case was a promissory note within the meaning of Section 4 of the Negotiable Instruments Act 1881 and therefore within the meaning of Section 2(22) of the Indian Stamp Act and being admittedly unstamped it could not be received in evidence. We cannot therefore admit the instrument in evidence or look at it even as an acknowledgment of liability with a view to saving the plaintiffs claim from the bar of limitation. The plaintiffs claim must therefore be rejected.

The result is that the appeal fails and is dismissed. There will be no order as to costs.


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