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Case Number

Second Appeal No. 516 of 1929.

Attorney(S)

Messrs. S. Varadachariar and V. Ramaswamy Ayyar for the Appellant.
Messrs. M. Patanjali Sastri and A. Nagaswami Ayyar for the Respondent.

Judges

Sundaram Chetty, J.

Acts

provisions of S. 17 of the Negotiable Instruments Act,
S. 17 of the Negotiable Instruments Act
S. 6 of the Indian Stamp Act
(2) of S. 42 of the Stamp Act,
S. 35 of the Stamp Act,
S. 36 of the Stamp Act
S. 6 of the Stamp Act
INDIAN STAMP ACT

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Smart Summary

Structured Summary of the Opinion (Second Appeal concerning Ex. B — a hundi/promissory note)

Factual and Procedural Background

This is a second appeal arising from a suit based on a document referred to as Ex. B, which the Courts below admitted in evidence as a hundi. Two questions were raised on appeal: (1) whether Ex. B is sufficiently stamped and may be admitted in evidence and acted upon, and (2) whether Ex. B is supported by legal consideration.

The lower Court and the lower appellate Court both admitted the document in evidence and treated it as a hundi. Both Courts below also found that the instrument was supported by valid consideration based on oral evidence given by the plaintiff's witnesses. The present Court is called upon to review (a) the admissibility and stamp-duty issue, involving the interplay between S. 17 of the Negotiable Instruments Act and provisions of the Indian Stamp Act (notably S. 6, S. 35, S. 36 and S. 42(2)), and (b) the concurrent findings of fact on consideration arising from the partition arrangement and related oral testimony.

Legal Issues Presented

Whether the suit document Ex. B, admitted by the lower Courts as a hundi, is sufficiently stamped and may be admitted in evidence and acted upon.
Whether the instrument Ex. B is supported by legal consideration — i.e., whether there is consideration for the hundi.

Arguments of the Parties

Appellant's Arguments (as presented in the opinion)

The appellant (through Mr. S. Varadachariar) argued that although S. 17 of the Negotiable Instruments Act gives the holder an election to treat an ambiguous instrument as a promissory note or a bill of exchange (hundi), that election should apply for the purposes of the Negotiable Instruments Act only and not for the purposes of the Indian Stamp Act.
On this footing, if S. 6 of the Stamp Act treats the instrument as a promissory note, a higher stamp duty would be chargeable (4 annas), and the instrument, being insufficiently stamped (it bore only 1 anna), could not be admitted in evidence or acted upon under S. 35 of the Stamp Act.
The appellant contended for a narrow construction of S. 36 of the Stamp Act: that S. 36 precludes an appellate Court from questioning the mere admission of an instrument by a lower Court, but does not prevent the appellate Court from refusing to act upon such an instrument if it holds the instrument was not duly stamped.
Reliance was also placed on a distinction between admission and acting upon an instrument, with reference to the wording of S. 42(2) (which deals with endorsement after levy of duty and penalty), to argue that an instrument admitted by the lower Court could be treated as inadmissible for practical purposes by the appellate Court if stamp duty was deficient.

Respondent's Arguments (as presented in the opinion)

The respondent (through Mr. Patanjali Sastri) relied on S. 36 of the Stamp Act and argued that once the instrument has been admitted in evidence by the lower Court, that admission shall not be called in question at any subsequent stage of the same suit; consequently the appellate Court is precluded from refusing to act upon the document on the ground of improper stamping.
The respondent contended that the combined effect of S. 35 and S. 36 is to make an instrument admitted under S. 35 available in that proceeding for all purposes, and that the appellate Court cannot render the admitted document practically useless by refusing to consider it in appreciation of evidence or by declining to pass a decree where it forms the basis of a suit.
The respondent pointed to judicial authority (decisions cited in the opinion) supporting the view that admission under S. 35 makes the instrument available for the proceeding as if it had been properly stamped from the outset.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Rung Lal Kalooram v. Kedar Nath Kesriwal (reported decision, Richardson, J.)	That once an instrument is admitted in evidence in any proceeding under S. 35 of the Stamp Act, it is available in that proceeding for all purposes as if it had been properly stamped at the outset; the proceeding will go through to a valid termination and cannot afterwards be challenged for want of jurisdiction by reason of non-compliance with the Stamp Act.	The Court described Richardson J.'s observations as germane and relied on the principle to conclude that S. 36 should be interpreted to prevent an appellate Court from refusing to act on an instrument admitted by the lower Court under S. 35.
Joyman Bewa v. Easin Sarkar (Calcutta High Court, later decision)	Adoption of the view in Rung Lal Kalooram that admission under S. 35 renders the instrument available for the proceeding as if properly stamped, and that such admission should not be open to challenge in the same proceeding.	The Court cited this later decision as having adopted Richardson J.'s view, using it as supporting authority for the interpretation of S. 36 advanced by the respondent and accepted by the Court.

Court's Reasoning and Analysis

The Court proceeded by addressing the two central questions in sequence and by analysing the statutory provisions relied upon by the parties.

1. Character of the instrument and effect of S. 17 (Negotiable Instruments Act):

The Court observed that the wording of Ex. B would bring it either within the definition of a promissory note or within that of a bill of exchange (which includes a hundi). The Court described the instrument as ambiguous because it can be construed either way.
Section 17 of the Negotiable Instruments Act gives the holder an election to treat such an ambiguous instrument as either a promissory note or a bill of exchange/hundi. The holder in this case elected to treat Ex. B as a hundi and sued on that basis.
The appellant argued that S. 17 should operate for the purposes of the Negotiable Instruments Act only and not for the Indian Stamp Act; the Court rejected that narrow reading because it would deprive the holder of the full advantage of the election granted by S. 17. The Court considered it reasonable to read S. 17 as operating as a proviso to S. 6 of the Stamp Act so as to give effect to the holder's election.

2. Stamp Act provisions, interplay of S. 6, S. 35, S. 36 and S. 42(2):

If S. 6 of the Stamp Act governs the instrument, it would be chargeable with the higher duty leviable on a promissory note (4 annas), whereas the instrument bore only a one-anna stamp (which would be enough if it were a hundi payable on demand).
S. 35 prohibits admission in evidence of an instrument chargeable with duty unless it is duly stamped. The appellant relied on S. 35 to contend that the instrument could not be admitted or acted upon because of deficient stamping.
The respondent relied on S. 36, which states that once an instrument has been admitted in evidence by a Court, that admission shall not be called in question at any subsequent stage of the same suit or proceeding.
The Court examined the wording of S. 36 and rejected a narrow construction urged by the appellant that would allow the appellate Court to decline to act upon an instrument even if it could not question mere admission. The Court held that if the admission in evidence made by the lower Court were open to being treated as a nullity for all practical purposes by the appellate Court, the admitted instrument would become a "dead letter" — contrary to legislative intent.
The Court contrasted S. 36 with S. 42(2) (which makes an instrument admissible and actionable where duty and penalty have been levied and endorsed) and noted that S. 42(2) has no application here because the lower Court had not levied any duty and penalty; rather it had treated the instrument as duly stamped and admitted it in evidence.
Relying on the reasoning in the cited authorities (Richardson J.'s observations and the later Calcutta High Court decision), the Court concluded that an instrument admitted under S. 35 is available in that proceeding for all purposes as if it had been properly stamped, and that S. 36 precludes questioning that admission at a later stage of the same suit.
Accordingly, even if S. 6 were held to govern the case, the Court found itself precluded by S. 36 from refusing to act upon the document; the contention that the suit document was not duly stamped and therefore could not be acted upon by this Court was rejected.

3. Consideration:

The Court reviewed the factual findings of the two Courts below that the instrument was supported by legal and valid consideration and noted they were concurrent.
Oral evidence accepted by the Courts below indicated that the hundi was executed by the 1st defendant in favour of the plaintiff's father for Rs. 2,000 pursuant to a partition arrangement effected by mediators.
The District Munsif found that the 1st defendant's agreement to pay Rs. 2,000 for the plaintiff's marriage expenses was one of the terms of the partition arrangement, and that the plaintiff's consent to accept the partition terms constituted sufficient consideration for the 1st defendant's promise.
The Court examined the plaintiff's first witness's testimony about disputes over brothers' separate earnings (hotchpot) and the resulting compromise sums (other brothers paying Rs. 9,000 each while the 1st defendant paid Rs. 2,000). From this factual matrix, the Court found it plausible that the promise to pay Rs. 2,000 was part of a compromise/resolution and not a gratuitous promise.
On the evidence, the Court was not inclined to disturb the concurrent findings of the two lower Courts that the suit hundi was supported by proper consideration.

Holding and Implications

HOLDING: The second appeal is DISMISSED with costs. The Court affirmed the concurrent findings of the lower Courts.

Implications:

The instrument Ex. B, having been admitted in evidence by the lower Court and having been treated by the holder as a hundi under S. 17 of the Negotiable Instruments Act, may be acted upon by this Court; the Court rejected the appellant's contention that the appellate Court could refuse to act upon it on the ground of deficient stamping.
The Court upheld the factual finding that the hundi was supported by legal consideration arising from the partition arrangement and related oral evidence; this concurrent factual finding of the lower Courts was not disturbed.
As a result, the judgment and decree based on the instrument in the lower Courts stand affirmed, and the appellant's challenge on stamp insufficiency and want of consideration has failed.
The Court relied on existing judicial authority interpreting S. 35 and S. 36 of the Stamp Act to reach its conclusion; the decision affirms that admission under S. 35 renders the instrument available in that proceeding as if properly stamped and that S. 36 prevents later challenge to that admission within the same suit.

N. R. R. — Appeal dismissed.

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Alagappa Chetti v. Al. Al. N. Narayanan Chettiar

In this second appeal, two questions have been raised and argued before me. The first question is whether the suit document, Ex. B, which has been admitted in evidence by both the Courts below as a hundi, is to be taken as sufficiently stamped and should be admitted in evidence and acted upon. The second question is whether this document is supported by consideration, or in other words, whether there is any legal consideration for it.

As regards the admissibility of this document, it has to be stated that the wording of the document is such as would bring it either under the category of a promissory note or under a bill of exchange which includes a hundi. The lower appellate Court says that this document is worded in the way in which hundies are usually written. That seems to be the view of the first Court also. There is, however, no doubt that this document comes also within the definition of a promissory note. At best, it may be said that this is an ambiguous document, as it can be construed either as a promissory note or a bill of exchange. In such a case S. 17 of the Negotiable Instruments Act provides that the holder may at his election treat it as either, and the instrument shall be thenceforward treated accordingly. The holder in the present case has elected to treat it as a hundi and on that basis filed this suit. If it is to be treated as a hundi, there is no question of insufficiency of stamp, and we must hold that the document has been duly stamped. If by reason of S. 17, this document should be treated by the Court as a hundi for all purposes, there is no difficulty whatever. But it is contended by Mr. S. Varadachariar for the appellant that this instrument can be treated as a hundi by reason of S. 17 of the said Act for the purposes of that Act alone and not for the purposes of the Stamp Act. This contention, if approved, would deprive the holder of the benefit conferred upon him by S. 17. The right of election given to him is a privilege which he must have the full advantage of, and that benefit should not be taken away by anything contained in the Indian Stamp Act. It would be reasonable to read S. 17 of the Negotiable Instruments Act as a proviso to S. 6 of the Indian Stamp Act.

Assuming that that section is not to be affected by the provisions of S. 17 of the Negotiable Instruments Act, we have to see how the position in this case would be. Asi have already said, this document is capable of being construed as a promissory note or as a bill of exchange. That being so, under S. 6 of the Stamp Act, it will be chargeable with the higher duty leviable on a promissory note. A stamp duty of 4 annas would be payable as a promissory note but it bears only a one anna stamp which would be sufficient, if it is a hundi payable on demand. If S. 6 of the Indian Stamp Act is to govern the present case, a difficulty arises in the matter of admitting this document in evidence. Being a promissory note, it cannot be admitted in evidence even by levying the deficient stamp duty and penalty by reason of S. 35 of the Stamp Act. But reliance is placed on the wording of S. 36 of the Stamp Act by Mr. Patanjali Sastri for the respondent, and it is contended that once this instrument has been admitted in evidence by the Court below, such an admission shall not be called in question at any subsequent stage of the suit, on the ground that the instrument has not been duly stamped. S. 35 states that no instrument chargeable with duty shall be admitted in evidence for any purpose or shall be acted upon, unless such instrument is duly stamped. The question is, whether the wording of S. 36 is comprehensive enough to include in the term “admission” the necessary consequences of such admission. It is argued for the appellant, that the appellate Court, by reason of S. 36, is precluded only from questioning the admission of such an instrument by the lower Court, but is at liberty not to act upon it, if it should hold that the document was not duly stamped. Reference was made to Sub-S. (2) of S. 42 of the Stamp Act, which deals with the effect of the endorsement on an instrument in respect of which stamp duty and penalty have been levied. Once the instrument is so endorsed, it shall become admissible in evidence and may be acted upon as if it had been duly stamped from the beginning. That section has no application to the present case as no duty and penalty have been levied by the lower Court. What the lower Court did was to treat it as an instrument duly stamped and to admit it in evidence and act upon it. The interpretation of S. 36 as contended for by Mr. S. Varadachariar seems to be a very narrow one. The result of such an interpretation would be to render an instrument admitted in evidence by the lower Court of no further use whatever to the party at any later stage of the suit. The expression “acting upon an instrument” does not merely indicate the passing of a decree upon such a document. If the Court admits a document in evidence, such document can be made use of by the Court as a piece of evidence in order to come to a conclusion upon an issue in the case or it can be considered for the purpose of understanding the evidence itself in the case. If the admission in evidence by the lower Court can alone be free from question by the appellate Court under S. 36, the document once admitted in evidence by the first Court would be practically a dead letter and be of no use whatever to the party who wanted to rely upon it. It is difficult to infer that such would have been the intention of the Legislature, when it stated that such admission of an instrument in evidence shall not be called in question at any subsequent stage of the same suit. If such a document happens to be the basis for a suit, the passing of a decree would be one of the modes of acting upon it. The observations of Richardson, J., in the decision reported in Rung Lal Kalooram… v. Kedar Nath Kesriwal…. appear to be germane to the present case. The learned Judge observes that once an instrument is admitted in evidence in any proceeding under S. 35 of the Stamp Act, it is available in that proceeding for all purposes as if it had been properly stamped at the outset and that proceeding will go through to a valid termination and cannot afterwards be challenged for want of jurisdiction by reason of non-compliance with the Stamp Act. If such an interpretation is not adopted, the purpose with which S. 36 of the Stamp Act was enacted would run the risk of being nullified. The view of Richardson J., in the said case was also adopted in a later decision of the Calcutta High Court in Joyman Bewa… v. Easin Sarkar…. (2).

On a comparison of the wording of S. 42 (2) with that of S. 36, it is urged by the learned Advocate for the appellant that a distinction between the admission of a document in evidence and the acting upon such a document was recognised by the Legislature. I agree that such a distinction does exist, but the question now is whether the wording of S. 36 can be reasonably construed in the manner set forth above. I am clearly of the opinion that once a document has been admitted in evidence by the lower Court under S. 35, such admission cannot be questioned at any later stage of the same suit or proceeding on the ground that the instrument has not been duly stamped and the natural consequences of that admission which has become final must also follow. The appellate Court cannot say that though it has bean marked as an exhibit in the case, it would not look into it and would not make use of it in the appreciation of the evidence or would not allow a decree to be passed on such a document. Even if S. 6 of the Stamp Act should be held to govern this case, the provisions of S. 36 of the Act preclude this Court from refusing to act upon this document. In any view, therefore, the contention that the suit document is not duly stamped and therefore cannot be acted upon by this Court cannot prevail.

As regards the second question, the finding of both the Courts below is that the instrument in question is borne out by legal and valid consideration. The oral evidence on the plaintiff's side which has been accepted by both the Courts below is to the effect that this hundi dame to be executed by the 1st defendant in favour of the plaintiff's father for Rs. 2,000 in pursuance of a partition arrangement entered into between the 1st defendant and his brothers and also their father in accordance with the decisions of certain mediators. As observed by the learned District Munsif the 1st defendant's agreement to pay Rs. 2,000 for the marriage expenses of the plaintiff is one of the terms of the arrangement of partition effected at the instance of mediators, and the plaintiff's consent to accept the terms of the partition in the manner decided by the arbitrators would be a sufficient consideration for the agreement on the part of the 1st defendant to pay this sum for the purpose of the plaintiff's marriage. It is difficult to believe that the lst defendant promised to pay this sum purely as a matter of grace. There seems to have been some dispute about the other brothers not having brought into the hotchpot their separate earnings. The plaintiff's first witness clearly states that two of the brothers had kept their earnings separate without throwing them into the joint stock, that the 1st defendant was saying that he had thrown his earnings into the family stock and that he should not be asked to pay as much as the other two brothers and for that reason it was decided that he should pay only Rs. 2,000, whereas, each of the other two brothers had to pay Its. 9,000 to the plaintiff. From this, it is possible to infer that the plaintiff must have set up some claim to the earnings of his brothers which have not been disclosed or brought into the hotchpot and as a compromise of such conflicting claims, the panchayatdars, who knew the family affairs very well, decided that the three brothers should compensate the plaintiff in different sums. It may be that he wanted those sums for the purpose of his marriage. It is difficult to hold upon the evidence that the 1st defendant's promise to pay Rs. 2,000 was a promise made without any consideration and purely as a matter of grace. I am not inclined to differ from the concurrent finding of both the Courts below that the suit hundi is supported by proper consideration.

The second appeal therefore fails and is dismissed with costs.

N. R. R.Appeal dismissed.

Alagappa Chetti v. Al. Al. N. Narayanan Chettiar

Structured Summary of the Opinion (Second Appeal concerning Ex. B — a hundi/promissory note)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments (as presented in the opinion)

Respondent's Arguments (as presented in the opinion)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Alagappa Chetti v. Al. Al. N. Narayanan Chettiar

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