1. This revision petition Is, directed against the judgment and decree of the City Small Causes Court, Hyderabad, dated 22-2-61.
2. The facts relevant for the purpose of appreciating the contentions raised in this revision petition are that the plaintiff instituted a suit for Rs. 214-35 nP. alleging inter alia that the defendant borrowed Rs. 300/- as loan without Interest from the plaintiff on 26-12-56. The defendant executed the promissory note as collateral security and also executed a receipt for Rs. 300/-. The defendant had paid Rs. 100/-; the suit therefore was laid for the balance. The defendant denied the execution of the promissory note. He raised a plea that as the suit promissory note was not sufficiently stamped, it is not admissible In evidence, He also stated that as the suit is based on the promissory note it is liable to be dismissed.
3. The learned Judge without recording the evidence, but after hearing the parties dismissed the suit folding that the suit promissory note is insufficiently stamped and therefore Inadmissible in evidence and although the promissory note was used In evidence at the ex parte trial when the ex-parte decree is set aside, it is open to the defendant to object to the admissiblllty of the promissory note. The learned judge also came to the conclusion that as the suit Is based on the promissory note which Is Inadmissible, it Is liable to be dismissed, it is this view of the learned Judge of the City Small Causes Court which Is assailed before mo to this revision petition.
4. It is contended by Mr. Upendralal Waghray, learned Advocate for the petitioner, that the suit promissory note although insufficiently stamped and inadmissible in evidence on that account was used in evidence in the ex-parte trial and that the question of admissibllity therefore does not arise at a later stage in the same suit.
5. In order to appreciate the above contention it it necessary to look into the language of Section 36 of the Indian Stamp Act That Section is in the following terms;
"Where an instrument has been admitted in evidence, such admission shall not, except as provided in Section 61 be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped."
It is plain from a reading of the section that in order that the provisions of that section may apply to any case the instrument must have been admitted in evidence. The expression "admitted in evidence" means that the document must have been let in as part of the evidence. The contention of Mr. Waghray is that the promissory note was admitted in evidence as it was let in as part of the evidence in the ex-parte trial. I do not know how that argument can be effective in the face of a clear decision of the Madras High Court which was followed recently by this Court.
In Solamalai Mudaliar v. Vadamali Muthiran, 23 Mad LJ 273 Sundara Aiyar J., observed as follows:-
"Section 36 of the Stamp Act lays down rule pro-venting only the exclusion of what already Is evidence in the proceedings. But if certain proceedings terminated and other proceedings where the documents would not be regarded as being in evidence already, re-commence e.g., where the prior exparte proceedings were set aside and new proceedings begin, Section 36 would have no application. After the ex-parte proceedings are once set aside subsequent proceedings are in substance different, though the suit is technically the same."
This decision was considered by jagamohan Reddy, 1. in Munipalli Raje Swara Rao v. Sela Veerayya, in S. A. No. 871 of 1958, DA 1-2-1962 (AndhPra), and was approved. In view of these clear decisions on the point It becomes clear that although generally once the Instrument is admitted in evidence no objection to its admis-siblity can be raised at any stage of the same suit or proceeding. Where, however, a promissory note is admitted in evidence in an ex parte trial, its admissibility can be questioned in a de-novo trial commenced after the setting aside of the ex-parte decree. Section 36 has no application to such a case as the proceeding is not the same. I do not therefore think that the submission made by the learned Advocate for the petitioner that once the document was admitted In evidence at the ex-parte trial the defendant cannot at a subsequent stage of the same suit object to ttie admlssibility of the document is tenable. The lower court consequently has not committed a mistake in over-ruling that contention and coming to the conclusion that the promissory note being insufficiently stamped is inadmissible in evidence and although used in evidence at the ex-parte trial cannot be so used in evidence after the ex-parte decree is set aside.
6. It was next urged by Mr. Waghray that the lower court has erred in stating that the suit is based excluslvely on the promissory note. I find sufficient force in this contention. In paragraph 3 of the plaint it has been specifically stated by the plaintiff that the promissory note was executed as a collateral security. It is clear from the plaint that the suit is not based on the promissory note but on the loan and the promissory note is alleged to be taken as a collateral security. Though the loan and the execution of the promissory note may be contemporaneous the document still can be given as a collateral security or as a conditional payment of the loan. In such a case it cannot be said that the promissory note itself is the contract of loan. If the allegation made by the plaintiff is true then he can certainly sue on the debt apart from the promissory note as the two causes of action are distinct and separate. This conclusion finds sufficient support from a Full Bench decision of the Madras High Court in Perumal Chettiar v. Kamakshi Ammal, AIR 1938 Mad 785 at p. 788 in which Leach C. J., observed at page 788 as follows :-
"In my opinion the law may be stated shortly in this way. If the promissory note embodies all the terms of 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."
The learned Judge of the Small Causes Court therefore was in error when he stated that as the suit is based on a promissoiy note it is not maintainable. The suit is clearly based on the debt and the promissory note is said to be given as collateral security. The circumstances under which the promissory note came into existence or the debt was given will have to be enquired into. Without recording any evidence in that respect no conlusion can be drawn. The lower Court was therefore in error in deciding the case without recording the evidence of the parties.
7. That apart the defendant cannot be allowed to walk away with the money simply because the promissory note is not sufficiently stamped and that it is inadmissible in evidence. He is in my opinion liable to refund the amount which he took from the plaintiff an the theory of money had and received. In Sadasuk Janki Das v. Sir Kishen Pershad, AIR 1918 PC 146 it would appear that the consideration passed at the same time as the execution of the hundis on which the suit was based. Their Lordships held that the suit was not maintainable against the defendant as the name of the party to the instrument was not disclosed on the face of the instrument. But at the same time their Lordships observed as follows:
"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 used both on the hundis and, alternatively, upon the consideration."
The abovesaid observation of their Lordships of the Privy Council suggests very strongly that 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 engagement evidenced by the instrument. It is true that there is still conflict over this point. But if the observation of the Privy Council is kept in view, the correct position seems to me, to be, that the plaintiff can have his money back though the document is inadmissible in evidence on the ground that it is insufficiently stamped. Under Section 91 of the Evidence Act it is only the terms of a contract with reference to the money that would be precluded from being proved. But in my judgment, Section 91 of the Evidence Act is no bar to the plaintiff succeeding on a non-contractual basis that is, in an action for money had and received.
8. It is true that in AIR 1938 Mad 785 (FB), Varadachariar J., has expressed an opinion that the theory of money had and received cannot be invoked in such cases as such theory is based on an implied contract which, in the class of cases under discussion cannot be regarded as distinct from the expressed contract contained in the promissory note. From a reading of the decision, however, it appears that two decisions decided in 1918 by the Privy Council were not brought to his Lord-ships' notice. It is perhaps useful to refer to those two cases.
The first case is John v. Dodwell and Co. Ltd., AIR 1918 PC 241 at p. 245. Although that case related to Ceylon but in my opinion the same considerations are applicable to India. The other case which deals with this question is Juscurn Bold v. Pirthichandlal, AIR 1918 PC 151. It is clear from these cases that in India also an action analogous to that for money had and received can be maintained without resort to any theory of implied contract. Plaintiff would therefore be justified in asking his money back from the defendant although the suit promissory note is inadmissible in evidence on the theory of money had and received. It is open to the plaintiff, if so advised, to get his plaint amended basing his cause of action on that ground also. The result of the abovesaid discussion is that as the suit is not based on the promissory note but on the debt and as the promissory note is alleged to have been given as collateral security, the suit canrot be dismissed without enquiring into the allegations. That apart, on the basis of the theory of money had and received also the plaintiff may be entitled to claim his money back. The lower court was therefore in error in dismissing the suit without making enquiries into the questions which arise out of the pleadings and are disputed.
9. I would therefore allow this revision petition, set aside the judgment and decree of the court below and remit the case to the court of Small Causes for disposal in accordance with law keeping in view the abovesaid observations. Costs of this revision petition will depend upon the result of the suit.