TMI Blog1938 (2) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... the instrument are contemporaneous. Before turning to examine the decisions of this Court and certain of the other authorities to which reference has been made I should point out that the Court is not considering the case where a promissory note has been given in respect of an antecedent debt. It is well settled both in England and in this country, that where a negotiable instrument is given in respect of an antecedent debt the creditor may sue on the debt and ignore the note. We are merely concerned here with the case where the note has been given at the time of the loan or in pursuance of the arrangement then made and embodies in full the terms of the contract. 2. The earliest reported case of this Court to which our attention has been drawn is that of Krishnaswami Pillai v. Rangaswami Chetty I.L.R.(1883) Mad. 112 where a promissory note had been given by two members of a joint Hindu family in consideration of a loan to the family. The instrument was improperly stamped, but the Court held that this was no bar to the suit because the cause of action for the money lent was complete in itself before the giving of the note. The report does not set out the facts and apparently the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration of a loan the debt cannot be proved aliundi. The learned Chief Justice and Pandrang Row, J., were of opinion that in all such cases the Courts must be guided by what appears on the face of the promissory note. If it is expressed in such a way as to leave what was intended by the parties in any way in doubt, then the facts must settle the question. If it is clear on the face of the promissory note that it is the contract, then no further evidence can be permitted. The Court held that the suit was maintainable because it considered that the promissory note was merely given as a conditional payment for the paddy. Cornish, J., reserved his opinion on the question whether the payee of a note given for a contemporaneous loan has or has not a right of action on the debt. In Chockalingam Chetti v. Annamalai Chetti (1915) 34 I.C. 417 Coutts-Trotter and Srinivasa Aiyangar, JJ., expressed the opinion that the giving of an instrument in recognition of a pre-existing debt does not extinguish, but merely suspends the cause of action on the original debt. The giving of an instrument is merely conditional to its discharge. I do not regard this judgment as questioning the correctness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a Full Bench of the Rangoon High Court of which I was a member in the case of Maung Chit v. Roshan N.M.A. Kareem Oomer and Co I.L.R.(1934) Rang. 500 (F.B.) and there all the important decisions, both Indian and English, were discussed in the course of the arguments. The judgment of the Court was delivered by Page, C.J., who deduced the following propositions of law from the authorities: (1) When a loan is contracted it is an implied term of the agreement that it shall be repaid. (2) When a promissory note is given by the borrower either at the time when the loan is contracted or afterwards, the terms upon which it is given and taken is a question of fact and not of law. (3) The giving of a negotiable security by a debtor to his creditor operates prima facie as a conditional payment only, and not as a satisfaction of the debt unless the parties so regard it. (4) If the promissory note is itself the consideration for the loan or if it is accepted as an accord and satisfaction of the original debt, the lender is restricted to his rights under the instrument. (5) The lender is entitled to sue on the original consideration if the instrument is given merely as a collateral security. (6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not necessarily follow that the whole of the contract between the parties has been reduced to the form of such a document. A hundi is principally a written promise to pay a fixed amount on or after a. certain date. It does not necessarily contain all the terms of the agreement between the parties as a bond, for instance, would do. In many cases, a promissory note or a hundi may merely be a written security taken for the loan. The promise to pay the amount may be only a part of the whole contract between the parties, in which case it cannot be said that that contract has been reduced to the form of a hundi. In such cases it would be impossible to hold that the provisions of Section. 91 would exclude evidence showing the terms of the whole contract which cannot be determined from the hundi alone. 8. A decision to the same effect was given by this Court in Chidambaram Chettiar v. Ayyasami Tevan (1916)31MLJ401 , an appeal heard by Oldfield and Krishnan, JJ. Oldfield, J., said: The second question referred to us is whether the lender can be given a decree apart from the note for the money lent upon the note. It is not possible to answer this question without further knowledg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) the promissory note was not supported by consideration; (2) there had been no payments to account and the endorsements were false; (3) the suit was barred by limitation; and (4) it was not maintainable as the promissory note was insufficiently stamped. The promissory note was insufficiently stamped, but the trial Judge found against the defendant on the facts and granted a decree on the ground that the plaintiff was entitled to sue on the original consideration, because the promissory note had been executed 1 1/2 hours after the lending of the money. The learned trial Judge did not consider the question whether the promissory note embodied the whole of the terms of the contract between the parties. The case should, therefore, be remanded to the trial Court for further consideration and decision in the light of this judgment. The petitioner is entitled to his costs in this Court. Madhavan Nair, J. 13. I agree. S. Varadachariar, J. 14. I agree. In deference however to the decisions which have laid down a different rule, I feel bound to explain my inability to follow them, especially when that rule has the attraction of avoiding apparent injustice, while the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epend on, whether it is not true even in this case that the writing, namely, the promissory note is tacitly considered by the parties as the only repository and the appropriate evidence of their agreement {per Sir Richard Couch in the case already quoted from). 17. The course of decisions in the Indian High Courts may be briefly stated. The Allahabad and Lahore High Courts have after some fluctuation of opinion adopted the stricter view in their latest Full Bench pronouncements. The Madras decisions have been dealt with by my Lord who has also referred to the judgment of the Full Bench of the Rangoon High Court. In Calcutta, the stricter rule was laid down in Ankur Chunder Roy Chozvdhry v. Madhub Chunder Ghose (1837) 21 W.R. 1 but this was virtually departed from the Golap Chand Marwaree v. Thakurani Mohokoom Kooaree I.L.R.(1878) Cal. 256. Judging from the statement of facts, the last mentioned case seems to have arisen out of a suit by an indorsee of the unstamped promissory note; with all respect, it is difficult to see how the indorsee who could not even prove the note could sue on the original consideration between the maker and the payee. (See Waynawi v. Bend (1808) 1 Cam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t strictly on the rule that what is in writing shall only be proved by the writing itself, observed in Reid v. Battee (1829) M. M. 413 : 173 E.R. 1207: So much injustice has frequently been done by rigid adherence to this rule that I should certainly be reluctant to carry it into strict execution. (See Taylor on Evidence Volume, 1, Section 397.) 19. Further, rules of exclusion which had been developed mainly with a view to avoid ignorant juries being misled or confused, were not scrupulously adhered to by Courts of Chancery where the Judge himself adjudicated both on law and on fact, especially when the exclusion of a writing by reason of the prohibition arising from the Stamp laws threatened to defeat a just claim. In Huddlestone v. Briscoe (1805) 11 ves. 583 : 32 E.R. 1215 when pressed with an objection based on the Stamp laws, Lord Eldon stated that it was his 'duty to struggle to support what has been the practice of the Court'. 20. Bearing these considerations in mind, I proceed to deal with the relevant rules of the English law which are thus stated in Roscoe's Treatise on Evidence in Civil Actions (20th Edition, Vol. 1, p. 226): When the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Inhabitants of Padstow (1832) 4 B. Ad. 208 : 110 E.R. 434). Such a theory is scarcely maintainable in view of later authorities (see Alcock v. Delay (1855) 4 El. Bl. 660 : 119 e.R. 243 ; Roscoe, p. 227 Evidence in Civil Actions; see also Ram Bahadur v. Dusuri Ram (1912) 17 C.L.J. 399. If, as held by the Judicial Committee in Subramanian v. Lutchm a n, a document which was excluded from evidence under Section 49 of the Registration Act was nevertheless a written contract in the sense that its existence precluded oral evidence of the same being given, it is difficult to see how a different principle will apply to cases where the document is excluded by Section 35 of the Stamp Act. 23. Tyte v. Jones (referred to in the foot-note to Farr v. Price (1800) 1 East. 55 : 102 E.R. 22 seems to rest on another principle of the English law which the Indian Legislature had deliberately departed from, in enacting Section 22 of the Evidence Act. The proof that was permitted in Tyte v. Jones was to the effect that when the money for which the unstamped promissory note had been given was demanded of the defendant, he acknowledged the debt. This is explicable in the light of the rule support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the vendor had sold as a foreign bill what in fact was not a foreign bill. It seems to me that this decision does not warrant the conclusion that a person lending money on an unstamped note can maintain an action for money had and received. I shall recur to this point later. 25. Sutton v. Toomer (1827) 7 B. C. 416 : 108 E.R. 778 proceeded on the footing that though by reason of the alteration, the promissory note had become unenforceable, the alteration did not extinguish the debt and that it was competent to the plaintiff to give the paper in evidence to prove the terms on which the money was deposited. It is noteworthy that Bayley, J., instanced the case of a usurious security being taken for a pre-existing debt. Wilson v. Kennedy (1794) 1 Esp. 245 : 170 E.R. 345 was a case of an unstamped note given for a preexisting debt (in lieu of an acceptance of the defendant which was due when the note was given) and the language of Lord Kenyon is almost identical in terms with the first rule stated by Garth, C.J., in Sheikh Akbar v. Sheikh Khan I.L.R.(1881) Cal. 256. The same remark applies to Brown v. Watts (1808) 1 Taunt. 353 : 127 E.R. 870 and to Cundy v. Marrio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct in other reported decisions (see for instance Maung Kyi v. Ma Ma Gale (1919) 54 I.C. 84 (F.B.)). With the like respect I must add that my experience does not coincide with what the learned Chief Justice states (on page 508) to be his experience that 'it rarely if ever happens that the whole of the terms of the agreement under which a loan is made are embodied in a promissory note given to the lender by the borrower except in cases in which the parties contract that the negotiable instrument shall itself be the consideration for the loan,' if, as later observations in the judgment imply, a promissory note cannot, according to the learned Judge, be reasonably presumed to have been taken as 'consideration' for the loan. I am free to confess to some difficulty in understanding what the learned Chief Justice had in mind when he postulated the possibility of a promissory note by the borrower being 'consideration' for the loan as distinguished from the 'contract' of loan. I can understand the position taken in Kundan Lal v. Bhikari Das-Ishwar Das I.L.R.(1929) All. 530 that from the mere execution of a note it does not necessarily follow that the whole of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the contract actually made and he must prove that, if it is denied, and he must do it by the production of the writing, which, not being stamped, cannot be seen in evidence, (Ankur Chunder Roy Chowdhry v. Madhub Chunder Ghose (1873) 21 W.R. 1.) 31. This case has sometimes been explained away on the ground that the suit was there laid on the note and not on the consideration. (See Golap Chand Marwaree v. T. Mohokoom Kooaree (1878) I.L.R. 3 Cal. 314 and Krishnaji Narayan v. Rajmal Manichand I.L.R.(1899) 24 Bom. 360. This distinction wholly ignores the principle on which the decision was avowedly based. 32. It has been suggested that this principle of the 'implied promise' being superseded by the 'express' promise in writing should be limited to cases where the writing can be proved and enforced but where it is not admissible in evidence, the paper may be treated as non-existent and the objection based on Section 91 will not arise (see Mulla and Pratt, Commentaries on the Stamp Act, 3rd Edition, p. 134). The decision in Subramanian v. Lutchiman (1922) 44 M.L.J. 602 : L.R. 50 IndAp 77 : 1922 I.L.R. 50 Cal. 338 (P.C.) furnishes the answer even to this suggestio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he consideration above adverted to in connection with the theory of 'implied promise' equally apply to this way of supporting the lender's claim. In the case of a loan transaction, the principal contract itself consists of the promise to repay and it cannot be said that 'the implied promise on which the action for money had and received depends' forms no part of but is merely collateral to the main contract (per Lord Parker in Sinclair v. Brougham (1914) A.C. 398 The claim for 'failure of consideration' can arise only when the contract has been proved and the very question for decision is whether or not Section 91 of the Evidence Act prevents the contract being proved without the production of the note. 34. The observations of Bowen, L.J., in In re Guardian Permanent Benefit Building Society (1883) 23 Ch. D. 440 quoted by Lord Stunner in Sinclair v. Brougham (1914) A.C. 398 seem equally to apply to the argument of 'failure of consideration' in the present case. The unstamped promissory note has all along been unenforceable and inadmissible and both parties must be presumed to have known the law on the point. It is sometimes assumed that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it cannot on a strict interpretation of Section 91 be proved at all except by proof of the promissory note. See the similar opinions expressed by Phillips and Reilly, JJ., in Venkata-chalapathi v. Ramakrishnayya AIR1930Mad168 . 39. The question for decision as formulated by my Lord is: Whether a person who has lent money on a promissory note can sue to recover the debt apart from the note when the note embodies the terms of the contract with the borrowers but is inadmissible in evidence owing to a defect in the stamping. 40. My answer to this question is first that the existence of the debt is not a term of the contract, and even if it is recited in the promissory note it can be proved by other evidence; and secondly that the terms of the contract between the promisor and the promisee can never be wholly embodied in the promissory note. One of the terms of the contract is that the promisee agrees to accept the promissory note in satisfaction of the debt due to him by the promisor. What he agrees to accept is a valuable security and not a worthless piece of paper - which is all that the note is if it is not properly stamped. If then the note is valueless the promisor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... execution of the hundis on which the suit was brought. It was sought to make the Maharajah liable on the hundis which were drawn and accepted by an officer of his Treasury on the ground that the money was borrowed on his behalf. The Judicial Committee held that the Maharajah could not be made liable on the hundis but that the plaintiffs could in the alternative have based their suit on the consideration: It would 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. 44. In Venkatachalapathi v. Ramakrishnayya AIR1930Mad168 already cited in another connection, the principle of this decision was applied to the case of a claim on a promissory note executed by one partner in a firm on which it was sought to make the other partners liable. It was held that the plaintiff's suit as framed must fail but that he might be allowed to amend his plaint so as to make it clear that he was alternatively suing all the defendants as members of a firm on loans made to that firm. Reilly, J., as he then was said: If the firm is to be made liable the lender ..... X X X X Extracts X X X X X X X X Extracts X X X X
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