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Dhaneshwar Sahu v. Ramrup Gir And Ors.
Structured Summary of the Provided Opinion
Factual and Procedural Background
The reference originates from the Subordinate Judge of Chapra in a suit for recovery of money. The plaintiff alleged that defendant No.1, as the karta of his family, borrowed Rs. 350 from the plaintiff and executed a hand-note dated 24 May 1925 promising to pay principal and interest on demand. The plaint claimed Rs. 350 (principal) and Rs. 89 (interest after remission), totalling Rs. 439. The plaint recorded the cause of action as arising on 24 May 1925 (date of the hand-note) and on 20 July 1927 (date of last demand).
The learned Subordinate Judge found the hand-note to be insufficiently stamped (it bore a one-anna stamp instead of a two-anna stamp) and therefore inadmissible under proviso (a) to Section 35 of the Indian Stamp Act. The Subordinate Judge was uncertain whether, in that situation, the plaintiff could nevertheless adduce other evidence to prove the loan because the authorities in this Court were in conflict. He referred the question to this Court: whether a suit must fail when it is based on an instrument which is inadmissible in evidence where the transaction of the loan and the execution of the instrument are contemporaneous and constitute one transaction. The Subordinate Judge expressed his opinion that, under Section 91 of the Indian Evidence Act, other evidence should not be allowed and the suit must fail.
Legal Issues Presented
- When a suit for recovery of money is founded on an instrument (a promissory hand-note) that is inadmissible in evidence because of insufficient stamping, must the suit fail if the loan and the execution of the instrument were contemporaneous and constitute a single transaction?
- If the instrument is inadmissible, may the plaintiff adduce other evidence to prove the underlying loan (i.e., the original consideration) and obtain a decree?
- If other evidence is admissible to prove the loan, are there limits (for example, regarding proof of the rate of interest) on what evidence may be led apart from the instrument itself?
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Barham Deo Rai v. Ram Kishun Mahton, 60 Ind. Cas. 652 : 2 P.L.T. 184 | Held that a plaintiff who proves the loan by other evidence is entitled to a decree even though the hand-note is inadmissible; wrongful admission issue not open under Section 36 of the Stamp Act where document admitted by trial court. | Identified as one of two conflicting Single Judge decisions; used by this Court as authority supporting the proposition that proof of the loan by other evidence can sustain a suit despite inadmissibility of the instrument. |
| Chotolal Sahu v. Gumani Chaudhary, 95 Ind. Cas. 348 : 7 P.L.T. 589 : (1926) Pat. 158 : A.I.R. 1926 Pat. 432 | Held that if a suit is founded on an instrument and that instrument cannot be proved (because inadmissible), the suit must fail; relied on Madras decision (Chinnappa Pillai). | Identified as the conflicting Single Judge decision representing the opposite view: that a suit based on an inadmissible promissory note is not maintainable where the note is the original cause of action. |
| Chinnappa Pillai v. Muthuraman Chettiar, 10 Ind. Cas. 669 : 9 M.L.T. 281 | Laid down that where a loan and the execution of a promissory note are contemporaneous and constitute one transaction, a suit based on the original consideration is not maintainable if the promissory note is inadmissible for insufficiency of stamp. | Quoted in Chotolal Sahu and relied upon by that decision; treated in the opinion as the leading Madras ruling representing the contrary view. |
| Suruj Lall v. Anant Lal, 55 Ind. Cas. 556 : 1 P.L.T. 203 | Two-Judge decision adopting the rule in Sheikh Akbar: when a cause of action for money is complete in itself, and a note is subsequently given, the creditor may sue for the original consideration even if the note is inadmissible; but if the original cause of action is the note itself (does not exist independently), the creditor loses his money if the note is inadmissible. | Regarded by the court as an important two-judge authority supporting the view that a suit need not fail whenever the instrument is inadmissible, provided the cause of action exists independently of the instrument. |
| Sheikh Akbar v. Sheikh Khan, 7 C. 256 : 8 C.L.R. 528 : 3 Ind. Dec. (N.S.) 713 | Explained the distinction between (a) causes of action that are complete independently of a subsequent bill or note, and (b) those that exist only by virtue of the bill or note; illustrated by deposit-then-note example where the note is the sole contract. | Used as the foundational articulation of the critical distinction on which the court relied to allow proof of the underlying loan when the cause of action is independent of the instrument. |
| Paramatha Nath v. Dwarka Nath Dey, 23 C. 851 : 12 Ind. Dec. (N.S.) 565 | Petheram, C.J., held that an implied contract to repay money lent arises from the fact that money is lent even without an express promise; thus a contract to repay exists apart from any promissory note. | The opinion cites this authority to support the proposition that an implied contract to repay enables proof of the loan independently of the instrument; it helps justify admitting other evidence to establish the loan itself (though not terms exclusive to the instrument). |
| Golap Chand v. Thakurani Mahokoon Kooaree, 3 C. 314 : 2 C.L.R. 112 : 2 Ind. Jur. 601 : 1 Ind. Dec. (N.S.) 787 | Held that a plaintiff in a suit on a promissory note written on unstamped paper is not debarred from giving independent evidence of consideration. | Referred to as long-standing authority supporting the view that independent evidence of the loan may be admissible despite the instrument being unstamped or inadmissible; cited to show consistent Calcutta High Court practice. |
| Balbhadar Prasad… (Plaintiff) v. The Maharaja Of Betia… (Defendant), 9 A. 351 : A.W.N. (1887) 49 : 5 Ind. Dec. (N.S.) 668 | Represented the position of the Bombay and Allahabad High Courts in agreement with the Calcutta view that independent evidence may be admissible to prove the loan. | Cited to show that other High Courts (Bombay and Allahabad) were aligned with the Calcutta High Court practice of allowing independent proof of consideration where appropriate. |
| Jacob & Co. v. Vicumsey, 102 Ind. Cas. 138 : 29 Bom. L.R. 432 : A.I.R. 1927 Bom. 437 | Explained that transactions may be of three kinds: (1) contract wholly contained in the promissory note (then suit cannot lie if note inadmissible); (2) promissory note as conditional payment (then plaintiff can sue on the loan if note is worthless); (3) promissory note as security (then plaintiff may sue on the loan irrespective of stamping). | Relied on for the classification of transaction types, demonstrating that in some categories a suit on the underlying loan persists even where the instrument is inadmissible; the opinion adopts this taxonomy as doctrinal support. |
| Radhakant Shaha v. Abhoyahurn Mitter, 8 C. 721 : 11 C.L.R. 310 : 4 Ind. Dec. (N.S.) 466 | Referenced as an explanation by the learned Chief Justice of the Sheikh Akbar decision. | Mentioned by Macpherson, J. to indicate uncertainty whether Sheikh Akbar was correctly interpreted in subsequent Calcutta and Patna decisions; used to acknowledge doctrinal complexity and to justify a cautious adherence to precedent. |
| Parsotam Narain v. Taley Singh, 26 A. 178 : A.W.N. (1903) 217 | Referential comparison cited in the opinion (no detailed rule stated in the text). | Mentioned by Macpherson, J. in comparing authorities; used to indicate the judge's caution about interpretations but without detailed application in the present reasoning. |
Court's Reasoning and Analysis
The Court begins by acknowledging a conflict between two Single Judge decisions of this Court: Barham Deo Rai (which permits proof of the loan by other evidence despite inadmissibility of the instrument) and Chotolal Sahu (which holds that a suit founded on an instrument which cannot be proved must fail). The Subordinate Judge's reference asked which rule should prevail when the loan and the execution of the instrument are contemporaneous.
The Court explains that the apparent conflict is resolved by recognizing a principled distinction described in the authorities: whether the cause of action for money is complete in itself independently of the instrument, or whether the cause of action is the instrument itself and does not exist independently. The Court relies upon the two-Judge decision in Suruj Lall which adopts the statement in Sheikh Akbar and explains this distinction.
The Court analyzes Section 91 of the Indian Evidence Act, which provides that terms of a contract reduced to a document must be proved by that document. The court observes that Section 91 restricts evidence only as to the terms of a contract embodied in the document. The Court then relies on Petheram, C.J.'s statement in Paramatha Nath that an implied contract to repay money lent arises from the act of lending itself even in the absence of an express promise. From this, the Court reasons that, ordinarily, when money is lent and a promissory note is given contemporaneously, there is an implied contract to repay that can be proved independently of the note (i.e., the contract to repay the loan exists apart from the instrument). What cannot ordinarily be proved except by the instrument are the special contractual terms contained in the instrument (for example, the agreed rate of interest).
The Court categorizes transactions (as previously noted in Jacob & Co.) into three types: (1) contract wholly in the note, (2) note as conditional payment, and (3) note as security. Where the contract is wholly in the note the plaintiff cannot succeed if the note is inadmissible; where the note is conditional payment or security, the plaintiff may sue on the underlying loan. The Court further points to consistent Calcutta High Court authority (and agreement from Bombay and Allahabad High Courts) that allows independent evidence of consideration despite an unstamped or inadmissible note.
On this basis the Court concludes that even when the lending and the execution of the note are contemporaneous, the plaintiff is entitled to maintain a suit for recovery of the money lent and may adduce evidence other than the promissory note to prove the loan itself, provided he can prove it. However, the Court is careful to limit the scope of admissible evidence: evidence other than the instrument cannot be used to establish the contractual terms contained exclusively in the instrument, such as the agreed rate of interest; although the plaintiff may nonetheless be entitled to a reasonable compensation by way of interest apart from the contract contained in the hand-note.
Macpherson, J. expressly concurs with this answer. He notes that his concurrence is influenced by stare decisis because the pre-1916 Calcutta authorities and subsequent authorities in this Court (and unreported cases) favour the same rule, despite a recent Single Judge decision following the Madras view. He also records some hesitation about whether Sheikh Akbar was correctly interpreted in later decisions, showing a measured approach rather than an expansion beyond the cited authorities.
Holding and Implications
Holding: The reference is answered in favour of the plaintiff's ability to sustain the suit: the suit is maintainable, and if the plaintiff proves the loan by other evidence he will be entitled to a decree. The plaintiff cannot give other evidence to establish the rate of interest contained in the hand-note, but he may be entitled to a reasonable amount as compensation by way of interest apart from the contractual terms of the hand-note.
Implications:
- The direct effect is that a plaintiff whose suit is founded on an instrument inadmissible for insufficiency of stamp may nonetheless proceed and obtain relief if he can independently prove the underlying loan (i.e., that the cause of action exists independently of the instrument).
- Evidence of terms that are exclusively contained in the inadmissible instrument (for example, the contract rate of interest) cannot be proved except by the instrument itself; however, the court may award a reasonable interest as compensation even where the agreed contractual rate cannot be proved due to inadmissibility.
- The opinion sides with the line of authorities from the Calcutta High Court (and agreements from Bombay and Allahabad High Courts), and a two-Judge decision in this Court (Suruj Lall) — thereby affirming that rule in the present reference while acknowledging contrary Single Judge authority (Chotolal Sahu/Chinnappa Pillai) and the doctrinal tension.
- The Court's answer resolves the specific referred question for the case at hand but does so by applying existing authorities; the opinion adheres to precedent rather than purporting to create a novel rule beyond what the cited authorities establish.
This summary is prepared exclusively from the provided opinion. No information has been added beyond what appears in the opinion text.
1. This is a reference made by the Subordinate Judge of Chapra in a suit for recovery of money. The plaintiff's case, as made in the plaint, was that the defendant No. 1 as the karta of his family borrowed from the plaintiff a sum of Rs. 350 carrying interest at Re. 1 per cent, per month and executed a hand note, dated the 24th of May, 1925, in favour of the plaintiff. He promised to pay on demand the principal and interest, and all the members of his family were benefited by the loan. The claim was made for the principal amount of Rs. 350 and Rs. 89 as interest, after remission, making a total of Rs. 439. He stated that his cause of action arose on the 24th of May, 1925, the date of the execution of the handnote, and on the 20th of July, 1927, the date of the last demand.
2. The learned Subordinate Judge found that the promissory note should have been stamped with a two annas stamp, but it bore a one anna stamp only. The hand-note was, therefore, inadmissible in evidence according to proviso (a) to Section 35 of the Indian Stamp Act. It was, however, argued before him that, if the handnote was inadmissible, the plaintiff was entitled to adduce other evidence in support of his claim. The learned Subordinate Judge was doubtful whether other evidence could be admitted as there was a conflict of rulings on the point in this Court. He has accordingly referred the question to this Court, whether the suit must fail when it is based on an instrument which is inadmissible in evidence, when the transaction of loan and execution of the instrument are contemporaneous and constitute one transaction, his own opinion being that according to Section 91 of the Indian Evidence Act other evidence should not be allowed to be adduced in such a case and the suit must fail.
3. The two rulings of this Court which are in conflict with each other, and which have been referred to by the Subordinate Judge, are the decisions in the cases of Barham Deo Rai v. Ram Kishun Mahton 60 Ind. Cas. 652 : 2 P.L.T. 184 and Chotolal Sahu v. Gumani Chaudhary 95 Ind. Cas. 348 : 7 P.L.T. 589 : (1926) Pat. 158 : A.I.R. 1926 Pat. 432. Both these decisions are of Single Judges of this Court.
4. In Barham Deo Rai v. Ram Kishun Mahton 60 Ind. Cas. 652 : 2 P.L.T. 184 the suit was based on a hand-note bearing an adhesive stamp which was, however, not initialed or cancelled as required by the Stamp Act and it was, therefore, deemed to be an unstamped document and inadmissible in evidence. It was held in that case that the document having been admitted by the trial Court, the question of the wrongful admission of the inadmissible document could not be raised in a superior Court under Section 36 of the Stamp Act. It was, however, held by this Court that a plaintiff who proved the loan by other evidence is entitled to a decree, although the loan was advanced under a handnote which could not be proved as it was inadmissible in evidence and that it was immaterial that in the plaint the date of the cause of action was given as the date of the execution of the handnote, and reference was made to several rulings of the Calcutta, Bombay and Allahabad High Courts.
5. In Chotolal Sahu v. Gumani Chaudhary 95 Ind. Cas. 348 : 7 P.L.T. 589 : (1926) Pat. 158 : A.I.R. 1926 Pat. 432 the suit was also based on a handnote which was not stamped and could not be received in evidence, and the Munsif held that as the plaintiff had failed to prove the handnote, upon which the suit was brought, the suit must fail. It was held by this Court in that case, that if the suit is founded on an instrument, and that instrument cannot be proved, the suit must fail; and reliance was placed upon the Madras decision in Chinnappa Pillai v. Muthuraman Chettiar 10 Ind. Cas. 669 : 9 M.L.T. Cas. 669 : 9 M.L.T. 281, in which it was laid down that, where a loan and the execution of a promissory note are contemporaneous and constitute one transaction, a suit based on the original consideration, if the promissory note is inadmissible for insufficiency of stamp, is not maintainable.
6. It must be admitted that the two decisions are conflicting. The attention of the learned Subordinate Judge, however, does not appear to have been called to another decision of this Court which was a decision of two Judges in Suruj Lall v. Anant Lal 55 Ind. Cas. 556 : 1 P.L.T. 203. In that case it was held that the law on the subject was clearly and correctly stated in' the case of Sheikh Akbar v. Sheikh Khan 7 C. 256 : 8 C.L.R. 528 : 3 Ind Dec. (N.S.) 713 and their Lordships held that when a cause of action for money is once complete in itself, 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 the debtor is not also made liable upon the note to some third person; but when the original cause of action is the bill or note itself, and does not exist independently of it, and the said note is inadmissible in evidence, the creditor must lose his money. This decision, therefore, lays it down as a settled point of law that a suit for money does not necessarily fail if the instrument upon which it is based is found to be inadmissible in evidence on account of its being insufficiently stamped or not stamped at all.
7. A distinction is made between the class of cases where the loan is advanced and the cause of action for money is complete, and subsequently the debtor gives a bill or a note to the creditor for payment of the money, and the class of cases where the original cause of action is the bill or note itself, and does not exist independently of it. This distinction was clearly brought out by Garth, C.J., in Sheikh Akbar v. Sheikh Khan 7 C. 256 : 8 C.L.R. 528 : 3 Ind Dec. (N.S.) 713. The second class of cases, namely, cases where the original cause of action is the bill or the note itself, was illustrated by Garth, C.J., with reference to a case, when, in consideration of A depositing money with B, B contracts by a promissory note to re pay it with interest at six months' date and the learned Chief Justice pointed out that in such a case there was no cause of action for money lent, or otherwise than upon the note itself, because the deposit was made upon the terms contained in the note, and no other; and 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. The reason why in that particular class pleases the suit must fail is that under Section 91 of the Indian Evidence Act when the terms of a contract, or of a grant or of any other disposition of property has been 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, except the document itself; and illustration (b) to the section runs thus:
If a contract is contained in a Bill of Exchange, the Bill of Exchange must be proved.
8. It is, however, to be noticed that Section 91 merely lays down that the terms of the contract between the parties must be proved by the document itself, and by no other evidence. When money is lent, and a promissory note is given by the borrower to the lender, the terms of the Contract between the parties will ordinarily refer to the contract of re payment by the borrower, and the contract as regards the rate of interest. As was pointed out by Petheram, C.J., in Paramatha Nath v. Dwarka Nath Dey 23 C. 851 : 12 Ind. Dec. (N.S.) 565 an implied contract to re-pay money lent always arises from the fact that the money is lent, even though no express promise, either written or verbal, is made to re-pay it. It follows, therefore, that apart from the instrument, viz., the promissory note, there is always a contract to re-pay a loan, and such contract can be proved independently of the instrument. It is only the other contract relating to the rate of interest which can only be proved on reference to the instrument itself. I am, therefore, of opinion 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. It may be that ordinarily the plaintiff may find it difficult to prove the loan apart from the promissory note, but, if he is able to do so, there is no reason why the suit should fail and why the plaint should not be entertained.
9. It was held so long ago as the year 1878 in Golap Chand v. Thakurani Mahokoon Kooaree 3 C. 314 : 2 C.L.R. 112n : 2 Ind. Jur. 601 1 Ind. Dec. (N.S.) 787 that the plaintiff, in a suit on a promissory note written on unstamped paper, is not debarred from giving independent evidence of consideration ; and this view has been consistently followed in the Calcutta High Court and was also accepted by this Court in the case of Suruj Lall v. Anant Lal 55 Ind. Cas. 556 : 1 P.L.T. 203. The Madras High Court appears to have taken a different view; but the Bombay and the Allahabad High Courts are in agreement with the Calcutta High Court, vide Balbhadar Prasad…(Plaintiff); v. The Maharaja Of Betia…(Defendant).* 9 A. 351 : A.W.N. (1887) 49 : 5 Ind. Dec. (N.S.) 668, and the recent decision of the Bombay High Court in Jacob & Co. v. Vicumsey 102 Ind. Cas. 138 : 29 Bom. L.R. 432 : A.I.R. 1927 Bom. 437 where it was pointed out that the transaction may be one of three kinds : either the contract may be considered as contained wholly in the promissory note or Bill of Exchange as in illustration (6) to Section 91 of the Indian Evidence Act, in which case if the plaintiff could not sue on the promissory note he could not sue at all; or, secondly, the promissory note may be regarded as a conditional payment of the amount of the loan in which case, if the promissory note is insufficiently stamped, it is only a worthless piece of paper and the plaintiff can sue on the loan ; and, thirdly, the promissory note may be passed as a security for the loan in which case there is no necessity for the plaintiff to sue on the promissory note at all and whether it is properly stamped or not he can bring a suit on the loan.
10. I am, therefore, of opinion that this reference should be answered by saying that the suit giving rise to the reference is maintainable and if the plaintiff can prove the loan by other evidence he will be entitled to a decree. He cannot give any other evidence as regards the rate of interest, but he may be entitled to a reasonable amount as compensation by way of interest apart from the contract contained in the handnote.
Macpherson, J.
11. I agree to the answer proposed. In so doing I make a concession to the principle of stare decisis, the authorities in the Calcutta High Court prior to 1916 and the authorities in this Court thereafter including unreported cases, being all in favour of that answer with the exception of a recent decision of a Single Judge of this Court who followed the Madras view without discussing the Calcutta and Patna decisions. Had the point been open, I should have experienced consider able hesitation in rejecting the opposite view. In particular I am not confident that the decision of Sir Richard Garth in Sheikh Akbar v. Sheikh Khan 7 C. 256 : 8 C.L.R. 528 : 3 Ind Dec. (N.S.) 713, as ex plained by the learned Chief Justice himself in Radhakant Shaha v. Abhoyahurn Mitter 8 C. 721 : 11 C.L.R. 310 : 4 Ind. Dec. (N.S.) 466, has been correctly interpreted in the subsequent Calcutta and Patna decisions [compare Parsotam Narain v. Taley Singh 26 A. 178 : A.W.N. (1903) 217.]
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