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Ganga Ram Vs. Keshava Deo and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial;Civil
CourtRajasthan High Court
Decided On
Case NumberCivil Misc. Second Appeal No. 14 of 1952
Judge
Reported inAIR1960Raj10
ActsStamp Act, 1899 - Sections 35; Evidence Act, 1872 - Sections 91; Code of Civil Procedure (CPC) , 1908 - Order 6, Rule 17
AppellantGanga Ram
RespondentKeshava Deo and anr.
Appellant Advocate P.N. Datt, Adv.
Respondent Advocate G.N. Sharma, Adv. for Respondent No. 1
DispositionAppeal dismissed
Cases ReferredIn Payana Reena Saminathan v. Pana Lana Palaniappa
Excerpt:
.....was given in lieu of a liability which was created contemporaneously by an award and the action on the promissory note failed on the ground of material alteration in the promissory note. 18. a review of the authorities lends support to the well established principle that every loan carries with it a contract to repay, and if a hand-note or promissory note, which forms the evidence of the transaction, cannot be accepted in evidence for some reason or other, there is nothing in law to prevent the plaintiff from giving other evidence as regards the loan, and if he can satisfy the court as regards the truth of his version, there is no reason why he should not be able to obtain a decree in his favour......that in the second proposition garth c. j. was not referring to a promissory note in relation to a loan of money but in relation to a deposit or other consideration which is not a loan. he observed at page 853 : 'these words, taken alone, may seem to indicate that then a bill or note is taken for a debt the action must be brought upon the bill or note; and that if for any reason the document is excluded, the action must fall, but a reference to the earlier portion of the judgment shows that such was not the meaning of the chief justice, and that when he spoke of a deposit he did not mean a loan as he says where money is lent and a bill or note given for the loan which is not paid at maturity, the creditor may disregard the note and sue oil the original consideration,'9. in nazir khan v......
Judgment:

Bapna, Ag.C.J.

1. This is a second appeal by the defendant in a suit for recovery of money.

2. The respondent, Kesliava Deo, instituted a suit in the Court of Civil Judge, Jaipur City, against Bhanwar Lal and Ganga Ram for the recovery or Rs. 2001/- as principal and Rs. 40/- as interest, on the allegation that defendant No. 1 Bhanwar Lal had borrowed Rs. 2001/- from the plaintiff on 16-2-1949, and had executed a pro-note for the same, but he failed to pay the amount when called upon to do so. The suit was instituted on 18-4-1949. Defendant No. 2 was impleaded as being also liable on the pro-note, as defendant No. 1 was alleged to have borrowed the amount on behalf of himself and defendant No. 2.

3. Bhanwarlal did not participate in the trial, but defendant No. 2 Ganga Ram denied all the allegations in the plaint, and raised an objection that the pro-note was not admissible in evidence owing to insufficiency of stamp.

4. On 6-1-1951, the plaintiff filed an application for permission to amend his plaint so as to convert his suit as on the original cause of action of the loan. The Civil Judge dismissed the application and dismissed the suit on the ground that the pro-note being inadmissible, the plaintiff could not be permitted to prove the loan.

5. The plaintiff filed an appeal, and the learned Additional District Judge Jaipur, by order of 4-4-1952, allowed the appeal, set aside the judgment and decree of the lower court, and remanded the case after permitting amendment of the plaint so as to convert it into a claim on the original consideration of the advance of loan. The defendant has come in appeal.

6. The question whether, when a pro-note is inadmissible in evidence, the plaintiff can be permitted to base his claim on the original cause of action, has been the subject of controversy among the various High Courts. The cases can be broadly divided into two classes:

1. Where the pro-note is executed in respect of an anterior claim; and

2. Where the loan is contemporaneous with the execution of the pro-note.

In respect of the first class of cases the law is now settled that if a pro-note is not admissible in evidence, the plaintiff can be permitted to fall back on the original cause of action, provided it is within limitation. In respect of if the second class of cases, the consensus of opinion is that if the advance of loan is followed by the execution of a pro-note, the latter is only a security for the due payment of the loan, and only purports So postpone the remedy till the maturity of the pro-note, and while the terms of the pro-note, which is inadmissible in evidence, may not be proved, the fact of the loan can be relied upon to support the claim. We now proceed to examine some of the leading cases in this behalf.

7. The earliest case, which has been frequently referred to in later decisions, is Sheikh Akbar v. Sheikh Khan, ILR 7 Cal 256. Garth, C. J., enunciated two propositions:

(1) '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. In such cases the bill or note is said to be taken by the creditor on account of the debt and if it is not paid at maturity, the creditor may disregard the bill or note and sue for the original consideration.'

(2) 'But when the original cause of action is the bill or the note itself and does not exist independently of it, as for instance, when, in consideration of A depositing money with B, B contracts by a promissory note to repay it with interest at six months' date, here there is no cause of action for money lent, or otherwise than upon the note itself, because the deposit is made upon the terms contained in the note, and no other. In such a case the note is the only contract between the parties, and, if for want of a proper stamp or some other reason the note is not admissible in evidence, the creditor must lose his money.'

8. This case was explained by Pethcram, C.J., in Pramatha Nath Sandal v. Dwarka Nath Dey, ILR 23 Cal 851 that in the second proposition Garth C. J. was not referring to a promissory note in relation to a loan of money but in relation to a deposit or other consideration which is not a loan. He observed at page 853 :

'These words, taken alone, may seem to indicate that then a bill or note is taken for a debt the action must be brought upon the bill or note; and that if for any reason the document is excluded, the action must fall, but a reference to the earlier portion of the judgment shows that such was not the meaning of the Chief Justice, and that when he spoke of a deposit he did not mean a loan as he says where money is lent and a bill or note given for the loan which is not paid at maturity, the creditor may disregard the note and sue oil the original consideration,'

9. In Nazir Khan v. Ram Mohan Lal, AIR 1931 All 183, the Full Bench of the Allahabad High Court held that--

'Where money is lent on terms contained in a promissory note given at the time of loan, both the promissory note and the lending being pant andparcel of the same transaction, the lender suing to recover money so lent must prove these 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 in view of the provisions of Section 91 of the Evidence Act. He cannot recover the money by proving orally the terms of the contract.'

10. In Sheo Nath Prasad v. Sarjoo Nonia, AIR 1943 All 220 a later 5-Judge Full Bench of the Allahabad High Court made a slight departure. It was held by a majority of the Judges that--

'Where all the terms of the contract have not been embodied in the promissory note and the promissory note is inadmissible in evidence by reason of Section 35, Stamp Act, for want of a proper stamp, other evidence to prove the terms of the contract independently of the pro-note, is admissible.'

Dar J., went somewhat further than the other Judges, and said that --

'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.'

11. The Court went a step further in the Full Bench case of Major Mistri v. Mt. Binda Debi, AIR 1946 All 126 and laid down that --

'In the case of a simultaneous loan and pro-note where the plaintiff's cause of action on the pro-note fails by reason of the pro-note being inadmissible for want of due stamp his cause of action based on the debt, in the absence of special circumstances, survives and he can fall back upon it and prove the debt by independent evidence.'

12. A still more recent Division Bench case of the Allahabad High Court, viz., Lakshmi Narain v. Mst. Aparna Devi, AIR 1953 All 535, held by reference to the previous decided cases that --

'When a promissory note is not taken in discharge of an oral contract of loan but is taken only by way of conditional payment or collateral security, as it will be presumed to have been so taken unless there is a compact to the contrary, Section 91 has no application to the case and the terms of the original contract of loan can be proved if the promissory note is not admissible in evidence or for any other reason cannot be proved. The facts that the promissory note was executed simultaneously with the advance of the loan or that the loan was advanced on the basis of the promissory note or that the promissory note contained all the terms of the contract of loan are all immaterial, provided only that the promissory note is not in absolute discharge of the original contract of loan.'

13. The same view has been taken in 1. Salimrnurissa Begum v. Abdul Qayyum Ansari, AIR 1956 Hyd 32, 2. Manik Lal v. Dhirendra Chandra, AIR 1957 Tripura 28, 3. Sarjoo Pd. v. Smt. Rampayari Debi, AIR 1950 Pat 493, 4. Gour Chandra Sahu v. Garib Kar, AIR 1957 Orissa 212, 5. Somabhai v. Kalyanbhai, AIR 1938 Bom 286.

14. The matter was considered in Perumal Chettiar v. Kamakshi Ammal, AIR 1938 Mad 785, by the Full Bench of the Madras High Court, and the majority of the Judges held --

'If the promissory note embodies all the termsof the contract and the instrument is improperly stamped, no suit on the debt will lie. Section 91, Evidence Act, and Section 35, Stamp Act, bar the way. But if it does not embody all the terms of the contract the true nature of the transaction can be proved; and where an instrument has been given as collateral security or by way of conditional payment, a suit on the debt will lie. The fact that the execution of the promissory note is contemporaneous with the borrowing cannot exclude the possibility of the instrument having been given as collateral security or by way of conditional payment. Whether a suit lies on the debt apart from the instrument therefore depends on the circumstances under which the instrument was executed.'

Stodart J., however, was of a different opinion. He observed that --

'When a man gives another promissory note in satisfaction of a debt or for other consideration, he gives at the same time a warranty that the note is a good and enforceable instrument. If the note is bad for want of a proper stamp, it cannot operate as a discharge for the debt. This implied warranty is a term of the contract and such a warranty is not generally embodied in a promissory note or other negotiable instrument. When money or other valuable consideration passes and a negotiable instrument is given in exchange for that consideration, a cause of action arises on the consideration apart from, the engagements evidenced by the instrument.'

15. It may be useful to refer to two Privy Council authorities where the matter has been indirectly dealt with.

16. In Firm Sadasuk Janki Das v. Sir Kishen Pershad, AIR 1918 PC 146 certain Hundis executed by the defendant having been dishonoured, the plaintiffs claimed the amount due on the Hundis. Their Lordships made an observation--

'It would, of course, have been open to the plaintiffs, had they thought fit to have framed their case in an alternative form, and to have sued both on the hundis and alternatively upon the consideration.'

17. In Payana Reena Saminathan v. Pana Lana Palaniappa, 41 Ind App 142, a promissory note was given in lieu of a liability which was created contemporaneously by an award and the action on the promissory note failed on the ground of material alteration in the promissory note. In a second suit brought for the recovery of money due on the award it was held that the award could be proved.

18. A review of the authorities lends support to the well established principle that every loan carries with it a contract to repay, and if a hand-note or promissory note, which forms the evidence of the transaction, cannot be accepted in evidence for some reason or other, there is nothing in law to prevent the plaintiff from giving other evidence as regards the loan, and if he can satisfy the Court as regards the truth of his version, there is no reason why he should not be able to obtain a decree in his favour. A word of caution may be entered here. The plaintiff can no doubt claim the original loan in respect whereof the promissory note was obtained.

But if there are certain other terms, which are only contained in the promissory note, and the promissory note is inadmissible, these terms cannot be proved by oral evidence. As for example, the promissory note may contain a stipulation as to interest or as to date of its maturity. The plaintiff can no doubt prove his loan by oral evidence but any evidence as to the rate of interest or the date when the loan was to be repaid cannot be proved by virtue of Section 91 of the Evidence Act as also Section 35 of the Stamp Act. This, however, would not exclude any other evidence, which the plaintiff may have got in this respect. The terms which were contained in the pro-note may not be proved by oral evidence.

19. As a result, the learned Additional District Judge was right in allowing the plaintiff to amend his plaint, and directing remand of the case for a fresh trial.

20. There is no force in this appeal. It isaccordingly dismissed with costs.


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