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Pl. Ct. Sp. Subramaniam Chettiar v. Muthiah Chettiar, (Died) And Others
Factual and Procedural Background
The plaintiff-respondent filed a suit for recovery of Rs. 24,655 due under two promissory notes dated 25-6-1969 (Exhibit A-1) and 2-9-1969 (Exhibit A-2). A payment of Rs. 1,000 was made towards the note dated 25-6-1969, with an endorsement on 24-11-1969. On 7-4-1972, the defendant executed a fresh promissory note for Rs. 18,750, covering the total amount due under the two earlier notes with interest. Identical endorsements on the original notes stated that the fresh note discharged the amounts due. The plaintiff assigned the 7-4-1972 note to Muthukaruppan Chettiar, who filed a suit (O.S 34 of 1973) for recovery under the fresh note. The defendant challenged the suit on grounds including that Muthukaruppan was not a bona fide holder, the suit was premature due to a one-year payment period, the note was not negotiable, and it was insufficiently stamped and thus inadmissible. The assignee withdrew the suit with liberty to file a fresh one. Muthukaruppan did not file a fresh suit but returned the invalid note to the plaintiff after receiving payment. The plaintiff then filed the present suit based on the original promissory notes, arguing the endorsements on 7-4-1972 acknowledged liability and the suit was within the limitation period. The lower court accepted this view and held the suit was timely.
Legal Issues Presented
- Whether the suit based on the original promissory notes is maintainable despite the execution of a fresh promissory note dated 7-4-1972 that purportedly discharged the original notes.
- Whether the endorsements on the original promissory notes dated 7-4-1972 amount to an acknowledgment of liability sufficient to save the suit from the bar of limitation.
Arguments of the Parties
Appellant's Arguments
- The original promissory notes (Exhibits A-1 and A-2) were superseded by the fresh promissory note dated 7-4-1972, rendering the present suit on the original notes not maintainable.
- The assignee’s earlier suit filed on the fresh note was withdrawn with liberty to file a fresh suit only on the basis of the 7-4-1972 note, hence the plaintiff cannot now sue on the original notes.
- The endorsements on the original promissory notes dated 7-4-1972 represent a discharge of liability rather than an acknowledgment, and thus do not extend the limitation period for filing the suit.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Vakkalanka Kondamma v. Kasaneedi Venkatarayadu, (1938) 2 Mad LJ 846 : AIR 1939 Mad 34 | Endorsements cancelling and superseding an original promissory note can amount to an acknowledgment of liability, saving the suit from limitation. | The Court relied on this precedent to hold that the endorsements on the original notes dated 7-4-1972 amounted to acknowledgment of a subsisting debt despite substitution of new security. |
| Pandit Salig Ram v. Radhay Shiam, AIR 1931 All 560 | An endorsement stating that a new promissory note has been executed in lieu of an earlier note, rendering the earlier note void, can constitute acknowledgment of liability. | The Court used this precedent to affirm that such endorsements are valid acknowledgments that prevent the suit from being barred by limitation. |
Court's Reasoning and Analysis
The Court analyzed the appellant’s contentions sequentially. First, it rejected the argument that the suit on the original promissory notes was not maintainable due to the execution of the fresh, insufficiently stamped promissory note dated 7-4-1972. The Court noted that the defendant’s plea regarding insufficient stamping was valid, rendering the fresh note inadmissible. It is a well-settled principle that where a promissory note is insufficiently stamped and inadmissible, the promisee may rely on the original cause of action under the original notes if the suit is otherwise timely.
Second, the Court examined the endorsements on the original notes which stated that the fresh promissory note discharged the earlier notes. Drawing on authoritative precedents, the Court held that such endorsements do not constitute a discharge but rather an acknowledgment of a subsisting liability with substitution of new security. The Court cited the Vakkalanka Kondamma and Pandit Salig Ram decisions to confirm that endorsements cancelling an original note in favor of a new note, even if invalid, amount to acknowledgment sufficient to extend limitation.
Thus, the Court concluded that the suit on the original notes was within limitation and properly maintainable, and found no merit in the appellant’s contentions.
Holding and Implications
The Court dismissed the appeal, affirming the judgment and decree of the lower court which held the suit on the original promissory notes to be maintainable and within the limitation period.
The direct effect of this decision is that the plaintiff is entitled to proceed with recovery under the original promissory notes despite the existence of a later insufficiently stamped note. The ruling clarifies that endorsements cancelling original notes in favor of invalid new notes can amount to acknowledgment of liability, thereby preserving limitation rights. No new precedent was set beyond the application of existing authoritative decisions.
1. The defendant is the appellant. The suit was filed by the plaintiff-respondent for the recovery of a sum of Rs. 24655 due under two promissory notes dated 25-6-1969 Ex. A-1 and 2-9-1969 Exhibit A-2. A sum of Rs. 1000 was paid towards the promissory note dated 25-6-1969 and an endorsement was made on 24-11-1969. On 7-4-1972, he executed a fresh promissory note for a sum of Rs. 18,750, which was the total amount due under. Exs. A-1 and A-2, with interest up till that date. On the same day, identical endorsements were made in Exs. A-1 and A-2 to the effect that by execution of the promissory note dated 7-4-1972, the amount due under the promissory note has been discharged. Subsequently, the plaintiff herein assigned the promissory note dated 7-4-1972, in favour of one Muthukaruppan Chettiar. The assignee filed O.S 34 of 1973 for the recovery of the amount due under the note dated 7-4-1972. It appears that the defendant contended in the suit that Muthukaruppan was not a bona fide holder in due course, that the suit was premature since one year thavanai was fixed for payment, that the promissory note was an instrument payable otherwise than on demand and not a negotiable instrument and that it is also inadmissible in evidence as it was insufficiently stamped. On such a plea taken by the defendant the assignee filed I.A 446 of 1974 for permission to withdraw the suit with liberty to file a fresh suit on the same cause of action. The petition was ordered on 30-7-1974, by which the Court permitted the plaintiff to withdraw the suit with liberty to file a fresh suit on the same subject matter. However, it appears that Muthakaruppan did not file a suit, that on the other hand obtained the consideration paid from the plaintiff herein and handed over the invalid promissory note dated 7-4-1972. Thereafter, the plaintiff filed this suit on the original promissory note, Ex. A-1 dated 25-6-1969 and Ex. A-2 dated 2-9-1969 and pleaded that the endorsements made on 7-4-1972, on those promissory notes amounted to a acknowledgment of liability and that the suit filed within three years from 7-4-1972, is not barred by limitation. The learned Sub ordinate Judge, who tried the suit, accepted this contention and held that the endorsement on Exs. A-1 and A-2 dated 7-4-1972 amounted to an acknowledgment of a subsisting liability or outstanding debt on the date and the substitution of a new security for the same and that therefore the suit was in time.
2. The learned counsel for the appellant raised two main contentions: The first contention was that since Exhibits A and A-2 are superseded by the execution of a fresh promissory note date 7-4-1972, the present suit on the basis of the original two promissory notes is not maintainable. In this connection, he also relied on the fact that the assignee of the promissory note dated 7-4-1972, filed O.S 34 of 1973 on the file of the learned Subordinate Judge of Pudukottai, and withdrew the same with permission to file a fresh suit on the same cause of action. According to that learned counsel, in view of the filing of the suit and its withdrawal, with liberty to file fresh suit only a fresh suit on the basis of the promissory note dated 7-4-1972 could be filed. We are unable to agree with this contention. As already stated, the plea in the earlier suit by the defendant was that the promissory note dated 7-4-1972, was in sufficiently stamped and it was also an instrument payable otherwise than on demand and as such it was invalid and inadmissible in evidence. This plea of the defendant was correct and we find that the promissory note dated 7-4-1972, was invalid as it had been insufficiently stamped. It is a well settle proposition that in the case of an insufficiently stamped promissory note, it is open to the promisee to rely on the original cause of action and claim the recovery of the amount. It was therefore not necessary for the plaintiff to rely on the invalid promissory note dated 7-4-1972, and he could file the suit on the original promissory notes. Exs. A-1 and Exs. A-2 it the suit is otherwise in time. The fact that be purposed to assign an invalid promissory note and again got it back from the assignee after paying the money does not in any way affect the right of the plaintiff to recover the money under the original promissory notes. Therefore, there is no substance in this contention of the learned counsel. The second contention of the learned counsel is that the endorsements made on 7-4-1972 on the original promissory notes Exs. A-1 and A-2 do not amount to an acknowledgment of liability and in fact it amounts to an endorsement of discharge and that therefore will not save the suit from the bar of limitation. We have already noted that in the endorsements it was stated that the promissory note is discharged by the execution of fresh promissory note on that date. Similar endorsements came up for consideration in this Court in an earlier decision. Vakkalanka Kondamma v. Kasaneedi Venkatarayadu, (1938) 2 Mad LJ 846 : (AIR 1939 Mad 34). In that case, the plaintiff filed a suit for enforcement of a promissory note dated 9th August 1929, which was executed by the first defendant in renewal of an earlier note dated 11th August, 1926. But, owing to insufficient stamps on the renewed promissory note it became inadmissible in evidence and therefore the plaintiffs applied for an amendment of the plaint seeking permission to base his cause of action on the earlier note which had been cancelled and superseded by the later note. While considering the question whether the endorsement made on the original promissory note cancelling and superseding the original note amounted to an acknowledgment of liability to save the period of limitation, this Court, following the decision of the Allahabad High Court in Pandit Salig Ram v. Radhay Shiam, AIR 1931 All 560 held that the meaning of the endorsement was that there was a subsisting debt though a new security was being substituted and that therefore the endorsement of cancellation on the previous note amounted to a valid acknowledgment of liability. In the decision Pandit Salig Ram v. Radhay Shiam, AIR 1931 All 560 the endorsement on the suit promissory note was to the following effect—
“On the 7th of November 1925 in lieu of the promissory note a second promissory note of the amount of Rs. 1350 has been executed and this promissory note has become void.”
On the question whether this amounted to an acknowledgment of liability the Court held that it did amount to an acknowledgment of liability. The head note of the judgment which brings the ratio of the judgment clearly reads as follows—
“Where defendant borrows money from the plaintiff on the security of promissory notes and later the promissory note is renewed by another promissory note which is found to be inadmissible in evidence being insufficiently stamped, the plaintiff can fall back on the original promissory note and succeed in his claim provided the terms of contract are to be found in the older promissory note and subsequent promote can be used as an acknowledgment.”
These two decisions are clear authority for the proposition that the endorsements on Exs. A-1 and A-2 would amount to an acknowledgment of a subsisting liability and the substitution of a new security for the same and that therefore it would save the suit from the bar of limitation. The judgment and decree of the lower Court are therefore correct and do not call for any interference. The appeal accordingly fails and it is dismissed. There will be no order as to costs.
3. Appeal dismissed.
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