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Kanhailan Chandak Vs. R. Mohan - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Reported in(1980)2MLJ234
AppellantKanhailan Chandak
RespondentR. Mohan
Cases ReferredLakshmi Ammal v. Rakkayi Ammal
Excerpt:
- .....collateral purpose.16. in ashling v. boon l.r. (1891) 1 ch.d. 568, it is stated that a promissory note insufficiently stamped cannot be admitted in evidence to prove the receipt of the money for which the note was given therefore, in the present case, i am of the , view that the purpose for which the promissory note is sought to be admitted in evidence viz., to prove the loan is not a collateral purpose and that consequently the insufficiently stamped promissory note cannot be admitted in evidence to prove the receipt of money.17. the learned counsel for the petitioner strongly relied upon the decision in meenammal v. s.n.c. reddiar : air1960mad237 . in that case, a promissory note was executed for a sum of rs. 320. since the promissory note was insufficiently stamped the plaintiff.....
Judgment:

S. Padmanabhan, J.

1. The plaintiff in O.S. No. 6958 of 1973 on the file of the Court of the XI Asst. Judge, City Civil Court, Madras is the revision petitioner. The respondent-defendant is said to have borrowed from the plaintiff a sum of Rs. 2,000 on 5th June, 1970, and later on the same day he is said to have executed a promissory note in favour of the plaintiff in respect of the amount borrowed earlier. The defendant is said to have borrowed a further sum of Rs. 1,000 as a hand-loan on 10th September, 1970. The suit has been filed on the debt for the recovery of the amount.

2. In the plaint itself it is stated that the promissory note executed by the defendant in favour of the plaintiff is insufficiently stamped.

3. The defendant inter alia denied the borrowing and also contended that the suit was not maintainable as the promissory note was insufficiently stamped.

4. The trial Court raised as many as four issues, the main issue being issue No. 1 which relates to the question whether the defendant borrowed the money from the plaintiff. During the trial the plaintiff was examined as P.W. 1. He stated that the defendant had passed a receipt for receiving the sum of Rs. 2,000 on 5th June, 1970 and sought to mark the document in evidence. An objection was taken on behalf of the defendant that the document sought to be marked was a promissory note which was insufficiently stamped and consequently it should not be admitted in evidence. The learned Assistant Judge, City Civil Court, Madras upheld the objection advanced on behalf of the defendant by his order, dated 10th November, 1978.

5. The aggrieved plaintiff has consequently filed this revision petition against the order, dated 10th November, 1978.

6. It is not disputed before me that the document that was sought to be admitted in evidence is a promissory note. According to Mr. Ramabhadran, learned Counsel for the plaintiff the suit itself is based on the debt and not on the promissory note and that the promissory note is sought to be marked in evidence only for the purpose of proving the factum of the loan of Rs. 2,000 advanced on 5th June, 1970 which according to the learned Counsel is a collateral purpose. Mr. Ramabhadran, contended that what is prohibited under Section 35 of the Stamp Act is that the insufficiently stamped promissory note cannot be admitted in evidence so as to form the very foundation of the suit, but there is no prohibition for any insufficiently stamped promissory note being received in evidence for a collateral purpose. The purpose for which the insufficiently stamped promissory note is sought to be put in the present case is only to prove the collateral purpose of showing that Rs. 2,000 was lent by the plaintiff on 5th Tune, 1970 and there could be no objection to the reception of the insufficiently stamped promissory note in evidence.

7. I am unable to accept the contention of the learned Counsel. Section 35 of the Stamp Act leads as follows-

No instrument chargeable with duty shall be admitted in evidence for any purpose I by any person having by law or consent of ' parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped:

Provided that--

(a) any such instrument not being an instrument chargeable with a duty of one anna (or half an anna only), or a bill of exchange or promissory note, shall, subject to all just exceptions, be admitted in evidence, on payment of the duty with which the same is chargeable, or in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion. * * *

The above section prohibits a Court from admitting in evidence any document which is insufficiently stamped. Even if no objection is raised by one or the other parties to the suit, it is the duty of the Court to see that the instrument which has to be stamped in accordance with the provisions of the Stamp Act is sufficiently stamped. If any such instrument is insufficiently stamped then the Court is not expected to receive the instrument in evidence. The proviso provides that excepting certain documents mentioned therein, such as a bill of exchange or a promissory note, other documents shall be admitted in evidence provided the duty thereon and the prescribed penalty thereof are paid. Under Section 35 read with the proviso a promissory note which is insufficiently stamped is not admissible in evidence and it cannot be validated on payment of duty with which it is chargeable together with the penalty thereon. Consequently, it shall not be admitted in evidence for any purpose by the Court.

8. The contention of Mr. Ramabhadran is that the prohibition contained in Section 35 of the Stamp Act against receiving in evidence insufficiently stamped promissory note will arise only when the suit is filed for the recovery of the money on the foot of the promissory note and the promissory note is sought to be marked in evidence is the very foundation of the plaint claim. But the said prohibition will not apply where is insufficiently stamped promissory note is only sought to be used in evidence for the collateral purpose of proving the loan, in a case where the suit is not on the promissory note but on the original cause of action. Similarly, it could be admitted in evidence for other collateral purposes such as proving the acknowledgment of liability under the promissory note. I am not impressed with this argument of Mr. Ramabhadran. Section 35 of the Stamp Act has no relevance at all to the Stamp Act has no relevance at all to the nature of the plaint claim. It deals only with the reception in evidence of an instrument in-sufficiently stamped. The prohibition under Section 35 of the Stamp Act will come into play irrespective of the fact whether the instrument that is sought to be admitted in evidence is the very foundation of the plaint claim or it is only sought to be used as a piece of evidence for a collateral purpose. If the contention of Mr! Ramabhadran, that Section 35 will be attracted only when a plaintiff files a suit on an insufficiently stamped promissory note and not in other cases is accepted, then the section will not apply to cases where the defendant to an action is put to the necessity of marking in evidence an insufficiently stamped promissory note. Though no doubt cases where the defendant seeks to mark an insufficiently stamped promissory note in evidence may be rare, it cannot be postulated that no such instance will arise. In those cases, it cannot be said that the promissory note will constitute the foundation of the action and if the argument of Mr. Ramabhadran is accepted the Court will not be entitled to take any objection to the reception of the said insufficiently stamped promissory note in evidence. I do not think that that would have been the intention of the Legislature in enacting Section 35 of the Stamp Act. When an insufficiently stamped promissory note is admitted in evidence for any collateral purpose, it would only mean that the promissory note is being admitted for 'some purpose' and such admission for that 'purpose' will defeat the very object of Section 35 of the Stamp Act. Therefore, on the terms of Section 35 of the Stamp Act, it is clear that an insufficiently stamped promissory note cannot be admitted in evidence for any purpose whatsoever.

9. If any doubt existed on the question of the admissibility of an insufficiently stamped promissory note for a collateral purposes, the same has been cleared by the decision of the Privy Council in Ram Rattan v. Parma Nand , Prior to the Privy Council decision in Vancheswara v. Narayam : AIR1933Mad251 , Pandalai, J. following the decision in Rakkappan v. Suppiak : AIR1930Mad485 , had taken the view that where a promissory note contained in addition to the promise, a statement that the amount for which it was given was due in settlement of a previous account, the instrument although inadmissible as a promissory note for want of sufficient stamp, was admissible to prove an acknowledgment under Section 19 of the Limitation Act. The learned Judge was of the view that Section 35 of the Stamp Act merely shuts out the portion of the document which constitutes the promissory note and does not affect other statements in the document. However, a Division Bench consisting of Beasley, C. J. and King, J.. in K. M. Subbayyar and sons v. P. M. Lakshmana Iyer S.A. No. 124 of 1930, held that an insufficiently stamped promissory note could not be used for the purpose of proving an acknowledgment by the maker of it of his indebtedness. This view was reiterated by Beasley, C.J. sitting singly in Ramanatha v. Narayanaswami : (1937)1MLJ163 . The learned Chief Justice, observed as follows:

The learned Subordinate Judge has quite rightly taken this to be a document which comes within Section 35, Stamp Act. It is true that it is a promise to pay at a future date instead of on demand, but it is nevertheless a promise to pay and is in my opinion clearly provided for by Section 35 Stamp Act. Therefore, the learned Subordinate Judge should have held that the suit was barred by limitation as insufficiently stamped note could not be used in evidence for any purpose and it is not necessary for me to deal with the other questions raised before him.

10. In Nageswara Rao v. Narayanamurthi : AIR1938Mad75 , the insufficiently stamped promissory note that was sought to be given in evidence contained a recital with regard to the execution of an anterior promissory note. It was contended that even though the promissory note as such was inadmissible in evidence by reason of its being not properly stamped, that portion of the document which recited the previous promissory note would be admissible in evidence and could be used for the purpose of saving limitation in respect of the earlier instrument. Leach, C.J., spoke thus : 'The section itself (35 of Stamp Act) in my opinion, provides a complete answer to the petitioner's case. An unstamped document cannot be admitted under any circumstances in a civil suit. If the Legislature in placing this provisions of law on the 'statute book had intended to allow unstamped instruments to be admitted for collateral purposes, it would surely have said so. It did not say so, but on the other hand it provided that a negotiable instrument which is insufficiently stamped at the time of execution cannot be properly stamped afterwards, even On payment of a penalty which is allowed in the case of other instruments'.

11. In Ram Rattan v. Parma Nand , the Judicial Committee was concerned with the admissibility in evidence of an instrument of partition which was not registered. Unlike a promissory note or a bill of excharge an unstamped instrument of partition could be validated by payment of necessary stamp duty and the penalty due thereon. However, the respondent before the Privy Council who had filed the instrument of partition before the trial Court, declined to pay the necessary stamp duty and penalty. Therefore, the learned trial Judge held that the instrument of partition was not admissible in evidence and excluded the same. However, on appeal a learned single Judge held that the oral evidence in that case proved that there was a partition between the parties and the instrument of partition even if it required to be registered could be used for corroborating the oral evidence for the purpose of deter-mining the factum of partition as distinguished from its terms. The question was again canvassed before the Judicial Committee. Sir John Beaumont speaking for the Judicial Committee observed thus : 'With this latter opinion their Lordships are not in agreement. As already noted, Section 35, Indian Stamp Act, enacts that no instrument chargeable with duty shall be admitted in evidence for any purpose. Mr, Rewcastle as part of his argument for the respondent adopted the note on the words 'for any purpose' in Section 35 contained in Edn. 4 of Sir Dinshah Mulla's book on the Indian Stamp Act, 1899. He pointed out that the words 'for any purpose' first appeared in India in the Stamp Act of 1879, and in England in the Stamp Act of 1891, and that under the earlier Acts there were decisions in both countries that an unstamped document might be admitted in evidence for a collateral purpose, that is, to prove some matter other than the transaction recorded in the instrument, and he submitted that these cases applied even under the later Acts. Their Lordships do not take this view. A document admitted in proof of some collateral matter is admitted in evidence for that purpose, and the statute enacts that it shall not be admitted in evidence for any purpose. Their Lordships see no reason why the words 'for any purpose' in the Indian Stamp Act of 1879, should not be given their natural meaning and effect. Such words may well have been inserted by the Legislature in order to get rid of the difficulties surrounding the question of what amounted to a collateral purpose'.

12. Ismail, J., (as he then was) had to consider this question in Lakshmi Ammal v. Rakkayi Ammal : (1976)2MLJ234 . There the plaintiff had filed a suit on a promissory note dated 15th May, 1959 for Rs. 1,500. The promissory note was insufficiently stamped. The plaintiff claimed that this promissory note was issued in respect of a promissory note dated 1st August, 1956, for Rs. 500, a promissory note dated 1st December, 1956 for Rs. 500 and another promissory note dated 31st May, 1957 marked as Exhibits A-1, A-2 and A-3 respectively. Since the promissory note was insufficiently stamped, the suit was filed on the original cause of action and the endorsements were relied upon to prove the acknowledgment. It was contended that for the purpose of proving the acknowledgment the promissory note could be received in evidence. The learned Judge stated the law thus : 'Even assuming that Exhibit A-4 can be said to constitute an acknowledgment of liability, still Exhibit A-4 not being admissible in evidence, there is no acknowledgment of liability in law. It is admitted that Exhibit A-4 was insufficiently stamped as a promissory note. Therefore, by virtue of Section 35 of the Indian Stamp Act, if must be held that Exhibit A-4 cannot be admitted in evidence for the purpose of showing that it constituted as acknowledgment of a pre-existing liability Section 35 of the Stamp Act states that no instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped....Exhibit A-4 cannot be admitted in evidence even for the purpose of saving limitation, under the original cause of action, namely loans advanced under Exhibits A-1, A-2 and A-3 already referred to'.

13. The result of the above analysis is that an insufficiently stamped promissory note is not admissible in evidence for any purpose whatever. It cannot be received in evidence even for a collateral purpose. The admission of a document for a collateral purpose relied upon by the plaintiff would amount to admission of an insufficiently stamped promissory note for some purpose and that is what is exactly prohibited by Section 35 of the Stamp Act.

14. That the above principle is the true and correct interpretation of the principle contained in Section 35 of the Stamp Act is further strengthened by the ratio laid down by the Supreme Court in Javer Chand v. Pukhraj Surana : [1962]2SCR333 . The plaintiff therein filed a suit against the defendant for the realisation of 39,615 on two mudatti hundies executed by the defendant in favour of the plaintiff. The main plea raised by the defendant was that the hundies were inadmissible in evidence in view of the fact that they were insufficiently stamped. One of the issues raised Was whether the two hundies, the basis of the suit being unstamped were inadmissible in evidence. The hundies were marked as Exhibits P-1 and P-2. The defendant as D.W. 5 stated that he had drawn the two hundies. The other witnesses were also examined and cross-examined with reference to the hundies. The learned trial Judge came to the conclusion that the instruments having been introduced, in evidence, the defendant was barred under the provisions of Section 35 of the Stamp Act, from raising the question of admissibility of the document in evidence and in that view, he decreed the suit. On appeal by the defendant, the High Court took the view that the plaintiff could not take advantage of the provisions of Section 35 of Stamp Act in view of the fact that the admission of the hundies was a pure mistake. Before the Supreme Court the legal effect of the receipt of the insufficiently stamped promissory note in evidence arose for consideration. Sinha, C.J., after extracting the Section 36 of the Stamp Act stated : 'Section 36 does not admit of other exceptions. Where a question as to the admissibility of a document is raised on the ground that it has not been stamped, or has not been properly stamped, it has to be decided then and there when the document is tendered in evidence. Once the Court, rightly or wrongly, decides to admit the document in evidence, so far as the parties are concerned, the matter is closed. Section 35 is in the nature of a penal provision and has far-reaching effects. Parties to a litigation, where such a controversy is raised, have, to be circumspect and the party challenging the admissibility of the document has to be alert to see that the document is not admitted in evidence by the Court. The Court has to judicially determine the matter as soon as the document is tendered in evidence and before it is marked as in exhibit in the case ....Once a document has been marked as an exhibit in the case and the trial has proceeded all along on the footing that the document was an exhibit in the case and has been used by the parties in examination and cross-examinations of their witnesses, Section 36 of the Stamp Act, comes into operation. Once a document has been admitted in evidence, as aforesaid, it is not open either to the trial Court itself or to a Court of Appeal or revision to go behind that order. Such an order is not one of these judicial orders which are liable to be reviewed or revised by the same Court or a Court of superior jurisdiction. The ratio of this decision has been re-affirmed by the Supreme Court in Ram Rattan v. Bajrang Lal : [1978]3SCR963 . The result that follows from the above decisions of the Supreme Court is that once an insufficiently stamped negotiable instrument is admitted in evidence, then its admissibility on the ground that it is insufficiently stamped cannot be subsequently raised in view of Section 36 of the Stamp Act. Therefore, once an insufficiently stamped negotiable instrument like promissory note is admitted in evidence even for a collateral purpose, the promissory note as a whole becomes admissible and the ground of objection to its admissibility as a promissory note by reason of its being insufficiently stamped cannot be subsequently raised on account of the operation of Section 36 of the Stamp Act. In such circumstances, the plaintiff will become entitled to use the very instrument itself as the foundation of his action. This will be defeating the provisions of Section 35 of the Stamp Act. This is another reason why an insufficiently stamped promissory note cannot be admitted in evidence even for collateral purposes .

15. Apart from the above, it cannot be stated in this case that the purpose for which the plaintiff wants to use the insufficiently stamped promissory note is a collateral purpose. The plaintiff wants the instrument to be admitted in evidence for the purpose of proving the very borrowing itself. Such purpose cannot by any stretch of imagination be termed as a collateral purpose. Therefore Mr. Ramabhadran, learned Counsel for the petitioner is not right in saying that the purpose for which the promissory note is being sought to be used in the present case vis., to prove the loan is a collateral purpose.

16. In Ashling v. Boon L.R. (1891) 1 Ch.D. 568, it is stated that a promissory note insufficiently stamped cannot be admitted in evidence to prove the receipt of the money for which the note was given Therefore, in the present case, I am of the , view that the purpose for which the promissory note is sought to be admitted in evidence viz., to prove the loan is not a collateral purpose and that consequently the insufficiently stamped promissory note cannot be admitted in evidence to prove the receipt of money.

17. The learned Counsel for the petitioner strongly relied upon the decision in Meenammal v. S.N.C. Reddiar : AIR1960Mad237 . In that case, a promissory note was executed for a sum of Rs. 320. Since the promissory note was insufficiently stamped the plaintiff filed the suit on the original cause of action. The promissory note which is marked as Exhibit A-1 contained endorsements of payments and those endorsements were relied upon by the plaintiff to save limitation. Ismail, J., in Lakshmi Ammal v. Rakkayi Ammal : (1976)2MLJ234 , has referred to this decision and distinguished the same. I am unable to see how the decision of Rajagopalan, J., can help the plaintiff in this case.

18. Mr. Ramabhadran then advanced another contention viz., in the present case the promissory not has been executed as a collateral security and therefore the same would be admissible in evidence. I have already referred to the ambit of Section 35 of the Stamp] Act. The said section is not concerned with the purpose for which the promissory note is executed. The section does not make any distinction between a promissory note which evidences the very borrowing itself and a promissory note which is executed as a collateral security. When once it is seen that a promissory note which has to be stamped in accordance, with the provisions of the Stamp Act is not so stamped then the Section 35 will be attracted and an insufficiently stamped promissory note will be inadmissible in evidence for any purpose and such a defect cannot be cured by a subsequent payment of the duty and the penalty thereon. Therefore, the contention that Section 35 of the Stamp Act is not attracted to cases where the promissory note is executed as a collateral security for the loan has only to be rejected.

19. In the result, I find that the instrument in question which is admitted to be an insufficiently stamped promissory note is inadmissible in evidence. The order of the lower Court is therefore correct. The revision petition accordingly fails and is dismissed. There will be no order as to costs.


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