Chandra Sekhar Misra v. Gobinda Chandra Das

1. Plaintiff's suit is for recovery of Rs. 402, both principal and interest inclusive on the allegation that on 23-6-1961 the defendant took a loan of Rs. 300 in cash on executing a promissory note by way of security for realisation of the loan and in evidence thereof and stipulated therein to pay back the loan and to pay interest at the rate of 12 per cent per annum on demand. In para 6 of the plaint the cause of action was mentioned to be borrowing of money on the basis of the promissory note. The defence need not be stated as it is not relevant for the purpose of this revision. On 4-9-1964 plaintiff filed an application for amendment of the plaint under Order 6, R. 17 of the CPC. Certain portions of the plaint were prayed to be deleted and to be substituted by the averments that there was an oral agreement that the principal and interest at 12 per cent per annum would be paid on demand. The object of the amendment was to clearly state that the plaint is based on the original transaction of loan and not on the promissory note. The learned S.C.C Judge rejected the prayer for amendment on that very day. The Civil Revision has teen filed against this order.

2. The recital in the promissory note shows that the principal was Rs. 300. When the amount or value exceeds Rs. 250 but does not exceed Rs. 1000 the proper stamp duty to be affixed is 15 paise (see Article 49 of schedule I of the Indian Stamp Act). A stamp of the denomination of ten (10) naye paise has been affixed to the promissory note. Thus the promissory note was insufficiently-stamped. Under Section 35 of the Indian Stamp Act, 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. Their Lordships of the Judicial Committee in Ram Rattan v. Parmanand, AIR 1946 PC 51, settled the conflict of authorities by holding that the words “for any purpose” in the section, should be given their natural meaning and effect and would include a collateral purpose. Where an unstamped document is admitted in proof of some collateral matter it is certainly admitted in evidence for that purpose which the statute had prohibited. Insufficiently stamped promissory note is therefore inadmissible in evidence for all purposes. There is no conflict of authority that the suit based on promissory note must fail when it is inadmissible in evidence being insufficiently stamped. But the question is whether the plaintiff can bring a suit on the original transaction of loan dehors the promissory note. This necessitates an examination of the provisions of Section 91 of the Evidence Act which lays down that when the terms of a contract, or of a grant, or of any other disposition of property, have been reduced to the form of a document, and in all cases in which any matter is required by law to be reduced to the form of a document, no evidence shall be given in proof of the terms of such contract, grant or other disposition of property, or of such matter, except the document itself, or secondary evidence of its contents in cases in which secondary evidence is admissible under the provisions hereinbefore contained. Illustration (b) appended to the Section is as follows:

3. If a contract is contained in a bill of exchange, the bill of exchange must be proved.

4. As to what extent oral agreement of loan would be excluded u/s. 91 of the Evidence Act, there is sharp cleavage of opinion. All conceivable arguments, pro and contra, have been noticed in many Full Bench decisions of different High Courts in India (see Nazir Khan v. Ram Mohan Lal, AIR 1931 All 183 (FB); Sheo Nath Prasad v. Sarjoo Nomia, AIR 1943 All 220 (FB); Ramnath v. Bhagwati Prasad, AIR 1946 All 150; Domoo Khan v. Agha Arshad Khan*, AIR 1933 Pat 575 (FB); Chit Maung v. Roshan N.M.A Kureem Oomer and Co., AIR 1934 Rang 389 (FB) and Perumal Chettiar v. Kamakshi Ammal, AIR 1938 Mad 785 (FB)).

5. The clear legal position may be depicted by a short analysis. Section 4 of the Negotiable Instruments Act, 1881 defines promissory note as:

6. A ‘promissory note’ is an instrument in writing (not being a Bank note or 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.

7. Eight Illustrations (a to h) have been appended to the Section of these, only Illustrations (a) and (b) are mentioned as being promissory notes Those two illustralions are:

8. A signs instrument ill the following terms;

(a) “I promise to pay 13 or order Rs. 500”

(b) “I acknowledge myself to be indebted in B in Rs. 1,000 to be paid on demand, for value received.”

9. The Section and the two illustrations clearly show that from the definition of the Promissory note, all that can be gathered is that there is an unconditional undertaking by maker to pay a certain sum of money the instrument does not give any indication at all as to why and for what consideration the undertaking is given. In other words, the nature of the consideration for which the promissory note was executed in not be made out from the recitals of the promissory note, though in certain classes of such instruments the matter might have made it clear in law, the absence of such description would not detract from the value of the instrument being a promissory note. This aspect of the matter must always be borne in mind while examining the theory of exclusion of the oral agreement of loan.

10. The consideration of the promissory note may be complete discharge or satisfaction of a loan. This occurs when the contract between the parties is that the debtor would not be liable if the promissory note could not be enforced the instrument, in that case, is taken as a substitute of the liability in the instrument becomes inadmissible in evidence the liability cannot be otherwise enforced the acceptance of the promissory note operates as accord and satisfaction of the debt or the liability. Illustration (b) to Section 91 of the Evidence Act covers only the case of complete discharge or satisfaction of the loan.

11. Promissory note might be executed in respect of a consideration which constitutes a pre-existing debt or past liability in such cases, it ordinarily (sic) as a conditional discharge or payment of the loan or is a collateral security Conditional discharge or payment of loan implies that the plaintiff's remedy for recovery of loan for the time being is suspended and his right to sue is revived if the instrument turns out to be worthless or is not discharged by payment in due course the antecedent liability is not extinguished on the exclusion of the promissory note. It remains suspended and becomes actionable on the inadmissibility of the promissory note.

12. Whether a promissory note given in debtor to a creditor operates one way or the other is a question of fact which falls to be determined on evidence in such case Authorities are agreed that in respect of a pronote for pre-existing loan or liability, in the absence of all evidence the presumption is that it operates as a conditional payment only. The same principle would apply to a case of contemporaneous loan. In other words, if the agreement between the parties in respect of a contemporaneous loan is that the loan would not be independently actionable, if the promissory note becomes inadmissible, no suit on the original cause of action would lie. In other cases the claim on the original cause of action can succeed.

13. In Lakshmi Narain…Defendant- v. Mst. Aparna Devi…Plaintiff-., AIR 1953 All 535 the position has been well summarised the passage may be quoted as according to me it gives the correct law.

14. 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 contract 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.

15. In Ram Bahadur v. Dasuri Ram, 19 Ind Cas 840 (Cal.), Sir Ashutosh Mukherjee, J. succinctly put the same view thus.

16. It may be conceded that at first sight there does appear to be a conflict of judicial opinions upon this question; but upon a closer examination of the cases, it will appear that they may be reconciled if we recognise the principle that the true question in cases of this character is, whether the promissory note has been taken in discharge of the claim or whether it is merely taken on account of the debt, in other words, if the claim is founded on the original consideration it can be enforced, provided that the original consideration has not merged in the bond of promissory note.

17. The view I have taken does not run counter to Abdul Majid v. Ganesh Das Kalooram Ltd., ILR (1954) Cut 46 : (AIR 1954 Orissa 124) In Gour Chandra Sahu v. Garib Kar, AIR 1957 Orissa 212, the point does not appear to have been fully argued and the fine distinctions were not kept in view. The Bench decision in ILR (1954) Cut 46 : (AIR 1954 Orissa 124) was not noticed in Parmananda Patnaik v. Golakbehari Das, 25 Cut LT 545, most of the aforesaid Full Bench decisions were noticed, but my learned brother Barman, J. did not express any view on this aspect of the question.

18. The main question to be considered in this revision is whether the amendment should be allowed. On a perusal of the plaint, it cannot be said that the plaintiff did not bring the suit on the original cause of action Paragraph 2 of the plaint closely shows that the promissory note was executed by way if security for realisation of loan and in evidence thereof, in paragraph 6, the cause of action has, however, been given as the hand-note itself. It cannot be disputed that the plaint suffers from confusion of thoughts on ibis aspect of the matter.

19. The amendment, however, cannot be refused in view of the dictum in Janki Das v. Sir Kishen Pershad, AIR 1918 PC 146. Their Lordships observed:

20. 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.

21. Thus if the plaintiff could have advanced alternative cases in the plaint itself, both on pie basis of the negotiable instrument and on the basis of the consideration, it would be fantastic to contend that the amendment should not be allowed. This decision has been followed uniformly in the matter of amendment (See Sarafalli Mahomedalli v. Mahasukhbhai Jechandbhai, AIR 1933 Bom 476, P. Seshappa Setty v. Katta Venkataramana, AIR 1956 Mys 37 and 25 Cutt LT 545). The amendment is therefore allowed.

22. Allowing amendment of the plaint does not, however, mean that the plaintiff's suit on the original cause of action, if proved, must necessarily succeed. If on the evidence the Court would come to the conclusion that there was an agreement between the parties that on the promissory-note being dishonoured or becoming inadmissible in evidence, the plff. cannot bring a suit on the original cause of action, then alone the plaintiff's suit would fail and not otherwise. The order of the learned Subordinate Judge is set aside and the amendment is allowed as the defendant has been unnecessarily put to harassment for plaintiff's delay, the petitioner is to pay a consolidated costs of Rs. 50 within three weeks from to-day to the opposite party as a condition precedent, failing which the prayer for amendment would stand dismissed. Subject to the aforesaid condition, the civil Revision is allowed.

HI/D.H.Z

23. Revision allowed.