Laduram Marwari v. Bansidhar Marwari

Varma, J.:— This second appeal arises out of the appellate judgment of the officiating Subordinate Judge at Monghyr, dated 16th September 1933, by which he partly decreed the suit of the plaintiffs. In order to understand the point of law that has been urged before us, it is necessary to give the short facts of this case. The suit was to recover a sum of Rupees 1,950 principal besides interest at the rate of Rs. 1-12-0 per cent, per mensem. It was said that the loan was advanced by plaintiff 2 out of her own money but in the name of her son, plaintiff 1. The defendant admitted that he had executed a hand-note but with regard to the particular hand-note that was produced in the case, his contention was that the original hand-note that had been executed was tampered with and that the sum of Rs. 950 had been altered into Rs. 1,950. He further alleged that the hand-note which he had executed for the sum of Rs. 950 was not for consideration paid in cash at the time of the execution, but that it was for sums found due from him on an old account. He further said that on account of certain acts of bis, the plaintiff was-annoyed with him and therefore he had filed the suit for a sum of Rs. 1,950. The trial Court found that the hand-note was a forged document and also that the sum of Rs. 950 was advanced to the defendant in cash by plaintiff 1 on 21st Paus 1338 Fasli. For these reasons the trial Court dismissed the suit on the ground that when the plaintiff had tampered with the hand-note, a decree could not be passed even for the amount admitted by the defendant. On appeal the lower Appellate Court agreed with the trial Court that the hand-note was tampered with and that Rs. 950 was converted into Rs. 1,950 but gave a decree to the plaintiffs for the sum of Rs. 950. In the course of the judgment the lower Appellate Court has observed as follows:

A reference to the plaint will show that the suit is not based on the hand-note alone. But the plaintiffs' case is that the defendant took the amount in cash and executed the hand-note for the same. The suit is thus principally based on the advance of the amount, though the hand-note is put in evidence to show the advance and also the terms in which the advance was made. It is proved apart from the hand-note that the defendant took Rs. 950 in cash from the plaintiffs on 21st Pous 1338 Fs. The defendant admitted that Rs. 950 was actually due by him on the date that hand-note was executed, but he says that it was due on account of previous transactions. If his case had been accepted, then the suit would probably have failed as being barred by limitation.

2. Mr. Satya Sunder Bose on behalf of the appellant has drawn our attention to para. 3 of the plaint which runs as follows in the paper book:

The defendant took a loan of Rs. 1,950 in cash from the plaintiff in order to meet his necessities and executed the hand-note in suit payable on demand, dated 26th Paus 1338 Fs and affixed his thumb impression and signature by his own pen thereon and made it over to the plaintiff.

3. Mr. Bose however takes exception to the expression “handnote in suit” and urges that “handnote bunai dawi inaultalab” should be translated as “the hand-note which is the basis of the suit.” He has also referred to para. 6 of the plaint where the cause of action is mentioned. That paragraph runs as follows:

The cause of action arose on 26th Paus 1338 Fs the date of the execution of the handnote and on 1st April 1932 when the demand was made for the last time. As the defendant resides at a place within the jurisdiction of this Court, hence taking into consideration the value of this suit, this suit has been instituted in this Court.

4. Mr. Bose urges that looking at these two paragraphs of the plaint, it is clear that the suit was based on the handnote and, as the handnote has been found to be a document which has been forged, the case is covered by the decision in 11 Pat 782.1 In that case their Lordships (Khaja Mohamad Noor and Dhavle, JJ.) observed as follows:

Having come to Court with tampered hand-notes, the plaintiff is not entitled to any decree as was held in AIR 1921 Cal 452.2 The same principle seems to have been laid down in an earlier case in 33 Cal 812.3

5. Our attention has been drawn to a number of cases in which this point has been discussed. In 7 Cal 2564 the distinction between two types of cases was pointed out: (1) when the cause of action is complete in itself and the debtor gives a bill or note to the creditor for payment of the money at a future time, the plaintiff can sue for the original consideration, and (2) when the original cause of action is the bill or note itself and does not exist independently of it, then if the note is not admissible in evidence for want of proper stamp or some other reason, the creditor must lose his money. But in the same volume in 7 Cal 6165 it was held that a person who had a bond executed in his favour by one of three brothers forged the signature of the other two brothers to the bond and brought a suit upon it in its altered form against the three brothers, the suit when based upon such a document must fail. Their Lordships went further and held that no Court should allow any amendment to enable the plaintiff to succeed on a document in its forged state.

6. 5 CWN 566 has been relied upon for the proposition that even if the promissory note be a forgery, the plaintiff could succeed if he could prove the loan by independent evidence. In 33 Mad 7467, where the case in 33 Cal 812 was relied upon, a negotiable instrument was altered by causing the words “or order” to disappear. The alteration was such as enabled the plaintiff to sue at a place where he could not sue without the alteration. It was held that if the document upon which the suit is based was materially altered, the plaintiff could not be allowed to succeed and the decision in 33 Cal 812 was approved in this case.

7. Mr. Rajkishore Prasad appearing on behalf of the respondents has drawn our attention to a number of cases. He has first referred to the case in 1 PLT 2038 where their Lordships of this Court (Mullick and Sultan Ahmad, JJ.) held that even if the handnote produced in the case was found to be forged, the plaintiff could maintain the suit on the basis of their accounts. There the plaintiff alleged that the defendant had money transactions with him and had purchased cloths from the shop of the plaintiff which were entered in the books of accounts kept in the shop. After an adjustment of accounts which the defendant admitted, he executed the handnote in suit and handed it over to the plaintiff and the date of cause of action according to the plaint was 21st April 1914 when the handnote was executed. The trial Court held that the statement of accounts between the parties as alleged by the plaintiff was not proved nor that the defendant executed the hand-note, and therefore dismissed the suit. The lower Appellate Court observed that:

The shop books may be good, bad or indifferent, but as they are not the basis of the case, they cannot avail except as corroborative evidence on only one point, viz. whether there were any dealings between the parties and whether anything was due to the plaintiff by the defendant. The case before me as framed stands or falls on the genuineness of the handnote.

8. Mullick, J. observed:

Now, if the handnote is a forgery, then undoubtedly the plaintiffs can fall back upon their claim on the account stated. But the finding of both Courts is that the allegation that there was a stated account is false, and that in fact and truth no account was stated or adjusted between the parties,

9. In that view of the matter their Lordships dismissed the appeal in spite of their observation that even if the note produced was a forgery the plaintiff could sue on the accounts stated. In AIR 1923 Cal 3189 a contrary view was expressed that even if promissory note sued upon was a forgery, the plaintiff would succeed on proof on the loan by independent evidence. The next case for consideration is AIR 1926 Cal 83110 where, although a mortgage deed was found to be invalid on account of subsequent alterations, it was held that the mortgagee could recover upon the original consideration. In that case their Lordships of the Calcutta High Court distinguished the case in 33 Cal 812 on the ground that there the suit was based not upon the original consideration but upon the bond itself. Their Lordships further referred to the case in 23 Cal 8511 for the proposition that if the original consideration could be proved by independent evidence, the plaintiff was entitled to succeed even if the document produced in support of the case be found to be altered. In 7 Pat 84512 the handnote in suit was found to have been insufficiently stamped. Kulwant Sahay, J. was of opinion that where a handnote bore a one anna stamp instead of a two anna stamp, the plaintiff was entitled to prove the loan by other evidence. Macpherson, J. expressed some doubt on the point but yielded to the authority of the series of decisions of the Calcutta High Court prior to 1916, and he said that had it been open he should have experienced considerable hesitation in rejecting the opposite view.

10. Mr. Rajkishore Prasad further observes that the lower Appellate Court had found the suit was on loan itself, and in support of this he refers to para. 2 of the plaint which runs as follows:

As the amount sued upon belongs to the private fund of plaintiff 2, she is made plaintiff 2 and as she was a pardanashin lady the handnote in suit was got executed in the name of plaintiff 1.

11. But it must be remembered that the construction of a plaint is a question of law. The Full Bench decision in 53 All 11413 lays down that it is not open to a party who has lent on terms recorded in a promissory note which turns out to be inadmissible in evidence for want of proper stamp duty, to recover his money by proving orally the terms of the contract, in contravention of the provisions of Section 91 of the Evidence Act. In cases in which there is already a completed cause of action for recovery of money on foot of a distinct and separate transaction, and a promissory note is afterwards given as a collateral security, the creditor may, if the promissory note be inadmissible in evidence, recover on the original consideration and evidence aliunde can be given to prove the same. But where the promissory note and the lending of the money are part and parcel of the same transaction and the terms of the loan are the very terms of the promissory note, the contract of loan cannot be proved apart from the document itself and the plaintiff's suit must fail if the document itself be inadmissible in evidence.

12. Our attention has been drawn further to a Single Bench decision in AIR 1936 Cal 12714 where it has been held that if a promissory note is not admissible in evidence on account of its being insufficiently stamped, the plaintiff is entitled to sue on a cause of action which is independent of promissory note. In a Full Bench decision of the Madras High Court in AIR 1936 Mad 17915, it has been held that if the promissory note itself is a contract, then no further evidence can be permitted, but if it is expressed in such a way as to leave the parties in any doubt, then the facts must settle the question. A Full Bench decision of our Court in 14 PLT 65116 follows the decision in 7 Cal 256 and lays down that 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. But this was a case which was based on the finding of the lower Court that the plaintiff had proved that there was an independent contract to repay the advance.

13. Now in the case before us the plaintiff relies upon a handnote for a sum of Rs. 1,950 executed by the defendant on 26th Paus 1338 Ps for the said amount received in cash. There is no story of there being a previous due independent of the handnote and this handnote has been found to be forged. In most of the cases dealing with forged handnotes to which I have referred, it was clear from the plaint that there was originally a previous consideration and then a handnote was executed which was found to be forged: vide 7 Cal 256, 5 CWN 56, 37 Mad 746, 1 PLT 203, AIR 1923 Cal 318 and AIR 1926 Cal 831 (case of an altered mortgage deed). But here in the present case looking at the plaint it is clear that there was no story of any previous account of which the handnote was merely a piece of evidence. The cases in 7 Cal 256, 53 All 114, AIR 1924 Cal 452 and 33 Cal 812 are more applicable to the facts of the present case. Cases of handnotes which were held to be inadmissible on account of insufficiency of stamps or otherwise are distinguishable from cases of forged handnote, and in such a case I prefer to follow the decision of our own High Court in 11 Pat 782. I would therefore allow the appeal with costs throughout.

14. The matter however does not end here. Mr. Rajkishore Prasad appearing on behalf of the respondents urges that he should be given an opportunity to amend his plaint and relies upon the cases in AIR 1936 Mad 78517 and 57 Bom 80218 where the handnote was executed for a previous debt which was agreed to be paid by instalments. It was held in the former case that the suit brought within three; years of the last payment of instalment, was not time barred. The Court allowed, the plaint to be amended. A similar view was taken in the case reported in 57 Bom 802, but both these cases were dealing with cases in which there was no promissory note which was found to be forged. But authority is not wanting: vide, 7 Cal 256 in which it has been held that when a party comes to a Court with a forged document, he should not be allowed to amend the plaint in second appeal.

Dhavle, J.:— I agree that the appeal should be allowed and the suit dismissed. The lower Appellate Court observed that the suit was “principally” based “on the advance of the amount, though the hand-note was put in evidence to show the advance and also the terms on which the advance was made.” This point was not expressly dealt with by the learned Munsif because he dismissed the suit on the authority of such cases as 25 IC 667,19 following 33 Cal 812, and 107 IC 475.20 The learned Subordinate Judge points out correctly enough that the former of these rulings related to a suit based on the hand-note itself; as to the latter, he observes, that it “was decided by a Single Judge of the Hon'ble Calcutta High Court,” when he might with greater propriety have pointed out that the learned Judge Duval, J. found that it could not be said that the plaintiff had really produced any evidence at alt apart from the tampered deed to prove the debt. The extract quoted by my learned, brother clearly shows that the lower Appellate Court was wrong in concluding, that the suit was based “principally” on the advance. At the same time para. 2 of the plaint speaks of the advance which is the basis of the suit (zar-karza bunae davi), and para. 5 mentions the defendant's agreement to pay interest. Though, as in 9 Rang 56,21 which was followed in 158 IC 533,22 the plaint was apparently drafted as for a suit on the handnote, it disclosed a cause of action in respect of the advance even independently of the handnote, notwithstanding the fact that the cause of action is dated the “26th Paus 1338 Fasli, the date of the execution of the handnote” and the later date of demand. The learned Subordinate Judge says that it is proved “apart from the handnote” that the defendant took Rs. 950 in cash from the plaintiffs on 21st Paus 1338 Fasli. It seems to me that this finding is clearly vitiated by an error of law. It was not the case of the plaintiffs that Rs. 950 was advanced in cash on the 21st Paus, and the evidence adduced by them which was all to the effect that Rs. 1,950 had been advanced on 26th Paus, has been concurrently disbelieved by the lower Courts. Nor was it the defendant's case that Rs. 950 was advanced in cash on 21st Paus or on any other date. Both the Courts below have found that Rs. 950 was advanced in cash on 21st Paus only because the handnote in its original condition said so and the defendant's story of the hand-note being executed in consideration of dues on two other notes was found unacceptable by them. But it is well settled that a plaintiff who sues upon a fraudulently altered document is not entitled to relief on the document even in its original condition: see cases like 7 Cal 616 and 28 CWN 70,23 though (a consideration which does not arise in the case of handnotes) such alterations may not affect a title to property already created and yet this is what the learned Subordinate Judge has done in substance. It is true that he carefully leaves the hand-note out of consideration when, dealing with the consequences if the defendant's story of past advances had been accepted, he observes then the suit would probably have failed as being barred by limitation. For the plaintiffs would not have been able to take advantage of the fresh acknowledgment and promise to pay as made in the document. Under the issue relating to the interest claimed, he also speaks of the handnote “having been eliminated from evidence.” But he clearly overlooks this—as did the trial Court—when arriving at the finding that Rs. 950 was advanced in cash, and actually relies on the circumstance that “the handnote itself shows that it was for a cash loan.” On the plaintiff's story the defendant was under no pre-existing liability; the fraudulent alterations made the handnote void, and though no doubt the document could be used for collateral purposes, it was in my opinion erroneous in law to use it as the foundation of any relief to be given to the plaintiffs in respect of a loan not of the 26th but of the 21st Pus 1338 (a data not in suit). No cash advance could legally have been found by the Courts of fact independently of the altered handnote, and the suit must fail whether it is regarded as a suit on the hand note or as a suit on an original consideration of the 26th Paus.

15. In this view the question which has been recently discussed by Full Benches in Allahabad, Rangoon and Madras (53 All 114; 12 Rang 50024 and 59 Mad 268) does not really arise—the question viz. whether it was open to the plaintiffs to sue on the loan apart from the altered handnote. In 7 Cal 256 referred to by my learned brother, Garth, C.J distinguished between (1) cases in which a bill or note is taken by the creditor on account of the debt and (2) cases where the original cause of action is the bill or 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 with interest at six months date ??? so that there is no cause of action for money lent for 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.

16. If the learned Chief Justice spoke of a deposit by way of example, that, I think, was because the cases that he distinguished on this ground immediately after, wards, 21 WR 125 and 24 WR 88,26 were cases of deposits, though the particular case before him was a case of what he calla “a sort of loan transaction”, though without any loan independently of the note. In 8 Cal 721,27 which was decided about a year afterwards, the learned Chief Justice indicated clearly that his second class of cases included cases of advances on bills for he said that if the consideration for the bill (a hundi for Rs. 500) had been an independent cause of action complete in itself, before the bill was given, the appellant's contention, that though the instrument itself was not admissible in evidence they were entitled to recover upon proving the consideration for the bill, would have been well founded. In 23 Cal 851, Petberam, C.J was of opinion that Garth, C.J when he spoke of a deposit did not mean a loan, and that an implied contract to repay money lent always arises from the fact that the money is lent, even though no express promise, either written or verbal, is made to repay it and that the creditor may maintain an action against the debtor for breach of his implied promise or contract, entirely independently of any security which may have been given for the advance. The same view was apparently taken by Jenkins, C.J in 24 Bom 360.28 A hand-note given by a debtor to a creditor may—like negotiable instruments in England—be a conditional payment of the debt, or it may be a collateral security which the creditor may or may not avail himself of as he pleases, or again, as usually happens in the mofussal in this country, it may be the sole consideration for the advance embodying in writing all the terms on which the advance is made. In the last class of cases and it was evidently this class that Garth, C.J had in mind in the case before him (for he distinguishes 3 Cal 31429 and 1 East 5530), it seems dear that it is not open to the creditor to recover his money independently of the hand-note by proving orally the advance and the terms of an implied contract in contravention of the provisions of Section 91 of the Evidence Act. As was pointed out in 10 Mad 9431:

It is a necessary condition to every written contract that the terms should be orally settled before they are reduced to writing and to hold when such a contract has been reduced to writing that a plaintiff can take advantage of the absence of a stamp on the promissory note to sue at once for the return of money which he may have contracted to lend for a fixed period, would entirely defeat the provisions of Section 91 of the Evidence Act.

17. Another way of putting the case against treating the money paid at the very time of the execution of a promissory note which is inadmissible in evidence as giving rise to a contractual or other obligation, is found in the observations of Sadasiva Ayyar, J. in 38 Mad 66032:

To import the doctrine laid down in English cases about vague obligations to repay arising out of equity and not out of contract, or about obligations which can be enforced if the plaintiff skilfully draws up his plaint as one on account for money had and received, concealing the real contract of loan which had been reduced to the form of document is, it seems to me, merely trying to nullify Section 91 of the Evidence Act.

18. Where there is an express contract promise of repayment put into writing as part of the loan transaction, it seems to me that if the plaintiff recovers at all, it must be on the contract actually made and not on some implied contract, though it will of course be open to a creditor, who lends irrespective of a hand, note and afterwards takes a hand-note merely by way of conditional payment or collateral security, to rely on the implied promise contained in the receipt of the money by the debtor. Whether a hand-note is the sole consideration for the advance, and not merely a conditional payment or a collateral security, must be a question of fact. This question has not been investigated below. I should be inclined to doubt very much whether the hand-note in the present case was anything other than the entire consideration for the advance. The learned Subordinate Judge relied on AIR 1923 Cal 318 in support of the proposition that “if a promissory note sued for is a forgery, the plaintiff will succeed on proof of the loan by independent evidence”. That was a case where the defendant admitted executing a bond for a smaller sum than the plaintiff claimed to have advanced, and the Court of fact had found that this smaller sum had been paid to the defendant. Upon this, Newbould and Panton, JJ. accepted the creditor's contention, following 5 CWN 56, that “even if the promissory note sued upon were a forgery, the plaintiff would Succeed on proof of the loan by independent evidence”. In 28 CWN 70 Newbould, J. himself noticed that 5 CWN 56 was not a case of material alteration of a bond but a case where the whole bond was held to be a forgery, so that all that the case established was that the plaintiff may succeed even though some of the evidence that he produces is entirely forged, a proposition which on the doctrine in (1791) 2 RR 399,33 is of little help in cases where plaintiffs sue on notes materially altered by them. Eankin, J. in the same case pointed out how an independent cause of action must be shown if the doctrine in (1791) 2 RR 399 is not to take effect and how where there is an express promise, an implied promise will not be inferred. This was the case on which the decision in 11 Pat 782, to which I was a party, a suit on the basis of hand-notes that had been tampered with, was based. Reference was also made to 33 Cal 812, a case in which the contention was negatived that the plaintiff was entitled to succeed on the basis of the original consideration and to rely upon the altered bond as embodying an acknowledgment sufficient to save the bar of limitation. This case was commented upon in 53 Cal 418,34 the other case relied on by the Subordinate Judge who has, however, overlooked the fact that Chatterjea and Page, JJ., both held in this case that (to quote Page, J. at p. 431 of the report):

If the execution of a document is the consideration for a contract, the legal obligations of the part; executing the document to the other party to the contract are limited to those which can be enforced under the document and not otherwise.

19. In our own Court, Kulwant Sahay, J. held in 7 Pat 845 that:

Even in cases where the lending of the money and the execution of the promissory note are contemporaneous, the plaintiff is entitled to maintain a suit for recovery of the money lent and to adduce evidence, other than the instrument or the promissory note itself, in order to prove the loan.

20. The learned Judge put this on the ground that:

Apart from the instrument, namely, the promissory note, there is always a contract to repay a loan, and such contract can be proved independently of the instrument.

21. Macpherson, J. who agreed to the answer proposed by Kulwant Sahay, J. in that case, was however by no means of the same view, and sitting with Agarwala, J. in 14 PLT 651, referred the matter to the Full Bench. Kulwant Sahay, J. (sitting with Jwala Prasad, J.) having in the meanwhile re-affirmed his view in 11 Pat 135.35 The point was, however, not decided by the Full Bench, as the learned Judges found that by reason of the terms of the judgment of the lower Court the general question whether parallel evidence of what was said to be a written contract could be allowed did not arise. That question, as I have already indicated, does not arise in the present case because it is clear not only that the alterations of the hand-note make-relief on it impossible, but also that the learned Subordinate Judge has not been able to arrive at a finding that the plaintiff had advanced any money to the defendant on the date stated in the plaint.

V.B.B/R.K

22. Appeal allowed.