TaxTMI 
TaxTMI 
1972 (11) TMI 97
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....missible in evidence under Section 35 of the Stamp Act. 2. The necessity to refer the question to a larger Bench arose as a result of the view expressed by Gopal Rao Ekbote, J. ( as he then was ) in Mohd. Jamal Saheb v. Munnar Begum, MANU/AP/0086/1964MANU/AP/0086/1964 : AIR 1964 AP 188 , which does not accord with the ruling of the Full Bench of the Madras High Court in Perumal Chettiar v. Kamakshi Ammal, MANU/TN/0229/1938MANU/TN/0229/1938) ). The learned Judge, Gopal Rao Ekbote, held that the plaintiff can have his money back through the document is inadmissible in evidence because it is insufficiently stamped and that Section 91 of the Evidence Act is no bar to the plaintiff succeeding on a non-contractual basis, that is, in an action for money had and received. In so coming to the conclusion, the learned Judge seems to have felt that he is not bound by the decision of the Full Bench in MANU/TN/0229/1938MANU/TN/0229/1938 as " two decisions decided in 1918 by the Privy Council ( John v. Dodwell and Co. Ltd. AIR 1918 PC 241and Juscurn Boid v. Prithichandlal, AIR 1918 PC 151 ) were not brought to the notice of the Full Bench ". Having regard to the fact that the High Courts of Al....
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....oan itself cannot be established by any means other than the promissory note itself, where the debt is not an antecedent debt, in respect of which a promissory note has been taken, because of the bar of Section 35 of the Stamp Act and Section 91 of the Evidence Act, no obligation under Section 70 of the Contract Act will arise under the theory of ' implied promise. ' 5. Mr. Venkata Reddy and Mr. M. Jagannadha Rao appearing for the respondent ( decree-holder ) contended that, even where lending of money and execution of the promissory note are contemporaneous and form part and parcel of the same transaction, the promissory thus taken operates only as a conditional discharge and not full or complete discharge of the loan and when the promissory note becomes in-admissible in evidence, the creditor will be entitled to fall back on the original demand. The learned counsel also, relying upon the language of Section 70 of the Contract Act, contended that the expression " anything " is of sufficient amplitude to bring within its ambit transactions of money and that the creditor will be entitled to recover on the principles of ' implied promise ' or ' money had and re....
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....omissory note by letting in other evidence and Section 91 of the Evidence Act will not operate as a bar and action can also be maintained on the principle of money had and received under Section 70 of the Contract Act; and (3) which say that, even where the bar of Section 35 of the Stamp Act and Section 91 of the Evidence Act is there provided the promissory note does not embody all the terms of the contract, the true nature of such transaction can be proved where the instrument is given as a collateral security or by way of conditional payment provided it is so alternatively pleaded in the plaint. In Perumal Chettiar's case. MANU/TN/0229/1938MANU/TN/0229/1938 it was the third view that was expressed by the Full Bench. We may now proceed to examine the conflicting views expressed by the High Courts in India. 8. The opinion of the Calcutta High Court, it may be said, has not been consistent. While some of the decisions adopt the strict rule of the bar of Section 91 of the Evidence Act as stated by Chief Justice Garth in Sheikh Khan, ILR(1881) Cal 256, the other decisions show a marked departure from the strict rule enunciated by Garth, C.J. which we will refer to presently. ....
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....ason the note is not admissible in evidence the creditor must lost his money. This passage was interpreted differently by another learned Chief Justice of the same Court in Pramatha Natha Sandal v. Dwarka Nath Dey. ILR (1896) Cal 851, Sir. Comer Petheram .C.J. interpreted what was held by Garth, C.J. as not in conflict with the view he was taking and after referring to the above passage from Garth. C.J.'s judgment observed (at page 853) "But a reference to the earlier portion of the Judgment shows that such was not the meaning of the Chief Justice, and that when he spoke of a deposit he did not mean a loan as he then says where money is lent and a bill or note given for the loan which is not paid at maturity, the creditor may disregard the note and sue on the original consideration. This is in accordance with the case of ILR (1878) Cal 314." That opinion of Petheram. C.J., was based on what is stated in Farr v. Price, (1800) 1 East 55 = 102 ER 22 viz. That the existence of an unstamped promissory note does not debar the plaintiff from recovering on the original consideration if the pleadings are properly framed for that purpose. ....
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....v. Rajamal Manikchand Marwari, ILR (1900) Bom 360 was dealing with a case of liability arising out of a hundi. There the plaintiff lent the defendant Rs. 675/- and at the same time took a hundi to secure its repayment. There was the admission of liability by the defendant and he had promised to pay. There was also the further fact that the hundi had been admitted in evidence, as no objection was taken as to the absence or deficiency in stamping. The learned Chief Justice, therefore, said that it is perfectly true that the terms of the contract contained in the hundi can, apart from the conditions which permit secondary evidence, only be proved by the hundi, but this does not prevent proof of the loan independently of the note. The learned Chief Justice relied upon the decision in Chenbasapa v. Lakshman Ramachandra, ILR (1894) Bom 369. Where the distinction between cases in which the suit is brought solely on the note or hundi and cases in which there is and can be a claim to recover the original loan has been acknowledged. It may be pointed out that the learned Chief Justice was not considering the question under what circumstances when an action fails on a promissory note executed....
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....e decision in Ram Sarup v. Jasodha Kunwar, MANU/UP/0042/1911MANU/UP/0042/1911 : ILR (1912) All 158which runs counter to the above view was rested on the dictum of Lord Kenyon in the well-known case of (1800) 1 East 55 = 102 ER 22 in holding that even where the debt is inseparable from the promissory note, the debt could be proved notwithstanding the note is not admissible in evidence. The learned Judges in Banarsi Prasad v. Fazal Ahmad, MANU/UP/0133/1905MANU/UP/0133/1905 : ILR(1906) All 298, though purported to follow the case of ILR(1881) Cal 256 by saying that the law on the subject is clearly stated by Garth C. J., however swung to the opposite view by observing : It seems to us therefore that the Court of first instance ought not to have summarily dismissed the plaint, but ought to have given the plaintiff an opportunity of proving the consideration of the note if there was such consideration. In a later case viz., Baijnath Das v. Salig Ram, (1912) 16 Ind Cas 33 (All) the learned Judges, after referring to the bar of Section 91 of the Evidence Act, however, took the view that where a promissory note is taken in consideration of the money advanced and is....
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.... same Court in Miyan Bux v. Mt. Bodhiya, AIR 1928 AII 371(SB). One of the learned Judges of the Special Bench, Sen. J. Refused to express any opinion on the ground that it is outside the scope of reference to determine whether a plaintiff can maintain a claim against the debtor founded upon an obligation independent of a promissory note. Although he was of the view that though the promissory note was in a form forbidden by law, it was admissible in evidence under Section 91 of the Evidence Act and the answer of two learned Judges. Boy and Kendall, JJ. Viz. The plaintiff could sue of the basis of any obligation whether antecedent to or arising simultaneously with the execution of the promissory note was not called for. The view of the Full Bench as expressed by Mukherji J., that verbal negotiations leading upto an express contract in writing cannot be set up as an independent contract and are not admissible in evidence as provided by Section 91 and that where there is an express promise will not be inferred, was overruled by a Full Bench of five Judges in MANU/UP/0007/1943MANU/UP/0007/1943( FB ). 18. A Full Bench of the Oudh High Court consisting of Wazir....
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.... plaintiff, the matter was referred to a Full Bench of five Judges by a single Judge of that Court as he felt that the Full Bench decision in AIR 1921 All 183( FB ) required reconsideration. The learned Judge, Dar, J., expressed total disagreement with the view of the Full Bench of the Madras High Court and concurred with the statement of law by Sir Arthur Page, C. J. as contained in proposition No. 3 of his judgment in Maung Chit v. Roshan and Co., AIR 1934 Rang 339= ILR Rang 500 ( FB ). He, however, found himself unable to agree with the 4th and 6th propositions of Sir Arthur Page C. J. ( which were endorsed by the Full Bench of the Madras High Court ) on the ground that he ( Page C. J. ) did not correctly state the law. To quote the learned Judge, Dar J. In my opinion the law on the subject may thus be stated. When a promissory note was given in consideration of a sum of money it is a question of fact in each case whether the sum of money was given as a loan or not as a loan; in absence of all evidence the presumption is that it was given by way of a loan, and there is a further presumption that the promissory note was given in conditional payment of the lo....
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....ake Section 91 absolutely nugatory. " Where we find it difficult to agree with Mathur, J., or Dar, J., with whom the other learned Judges of the Full Bench agreed is that it would be permissible to look at the document for the sake of determining whether it contained all the terms of the contract, after the document is held inadmissible in evidence for want of proper stamp under Section 35 of the Stamp Act. Mathur, J., in so coming to the conclusion sought support from what Sir Asutosh Mookerjee said in Ram Bahadur v. Dasuri Ram, ( 1913 ) 17 CLJ 399. "The learned vakil for the respondent has ingeniously suggested that as the instrument itself must be held inadmissible, there is no proof that the terms of the contract for payment of interest were reduced to writing. This argument is obviously fallacious. The written instrument may be looked at for the purpose of showing that the terms of the contract for payment of interest had been reduced to writing within the meaning of Section 91. Evidence Act, or oral evidence may be given to show that the contract, as a matter of fact, was reduced to writing. The learned Judge also drew support, quoting, Lord Atkin fro....
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....a collateral security only. Where it is in absolute payment or discharge of oral debt, the document alone can be used to prove the terms of the debt because in that case the debt has been reduced " to the form of a document and therefore Section 91 is no bar to the proof of the debt other than by production of the document. In Patna, as observed by Varadachariar, J., in the Full Bench decision, the question can scarcely be regarded as settled ; ( Dhaneshwar Sahu v. Ramrup Gir, MANU/BH/0007/1928MANU/BH/0007/1928) where Macpherson, J., concerned only on the ground of stare decisis. 21. A Division Bench of the Patna High Court in Sarajoo Prasad v. Rampawari Devi. MANU/BH/0126/1950MANU/BH/0126/1950 : AIR 1950 Pat 493 considered the question whether every loan carried with it a contract to repay and if so, it was open to the plaintiff to bring a suit on the original consideration of the handnote. That question was answered having regard to the facts of that case that the handnote was taken as a collateral security for the debt, for it was alleged in the plaint that, as collateral security for the two loans, plaintiff 2, defendants 1 and 2 and father of defendant 3 executed the han....
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....y ignored the existence of Section 91 of the Evidence Act and in the case of the latter, the Judges there have tried to bypass the provisions of S. 91 "by introducing such theories as that of the pronote not containing all the terms of the contract or that of the pronote not being a final accord or discharge of the date, so on and so forth." 24. The decision of the Mysore High Court in K. Anantharajaiah v. Shivaramaiah MANU/KA/0071/1968MANU/KA/0071/1968 does not render any assistance to the respondents. It was held by Gopivallabha Iyengar, J. That where a creditor lent a loan and had taken a receipt and a promissory note to evidence it, his claim for recovery of loan without producing the promissory note is not maintainable. But it is however pointed out by him, that, if the cause of action is antecedent to the making of promissory note, then there is nothing to prevent the creditor from maintaining a suit on the original cause of action founded on the loan. 25. Now it may be convenient to notice the Full Bench decision of the Rangoon High Court in AIR 1934 Rang 389 : ILR 12 Rang 500 (FB) which was approved by the Full Bench of the Madras High Court as regards the statement o....
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.... the negotiable instrument is paid or if the lender by negotiating the instrument or by laches or otherwise has made the bill his own, and thus must be regarded as having accepted the negotiable instrument in accord and satisfaction of the borrower's liability on the original consideration." Then, after quoting Esher M.R. In Re Romer and Haslam, (1893) 2 QB 286 at p. 296 and Bowen. L.J. (Ibid. P. 300):Farr v. Price (1800) 1 East 55 = (102 ER 22) and noticing English and Indian cases the learned Chief Justice proceeded to say: "4. If a promissory note or other negotiable instrument is given by the borrower to the lender and the negotiable instrument is itself the consideration for the loan, or if the promissory note or other negotiable instrument is accepted as an accord and satisfaction of the original debt, the lender is restricted to his rights under the negotiable instrument, by which he must stand or fall in the one case the note or bill is itself the original consideration and in the other the original debt has been liquidated by the acceptance of the negotiable instrument." 5. "If it is agreed between the parties that the pro....
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....ment is taken in lieu of payment, the parties intended it to be a conditional charge or a collateral security. While Mr. D. Venkata Reddy and Mr. M. Jagannadha Rao would argue that presumption automatically arises in every case of a promissory note taken in lieu of money payment, though such presumption is rebuttable. Mr. C.N. Babu and Mr. K. Jagannadha Rao contend that such a presumption does not automatically arise and it depends upon the intention of the parties and the circumstances under which the instrument was executed and whether the promissory note contains all the terms of the contract or not. 27. Before considering the correctness or otherwise of what was enunciated by the Full Bench, it may be necessary to notice what constitutes a conditional payment. Das, J. ( as he then was ) in Commr. Of Income Tax, Bombay v. Ogale Glass Works Ltd., MANU/SC/0087/1954MANU/SC/0087/1954 : [1954] 25 ITR 259(SC) explained that when it is said that a payment be negotiable instrument is a conditional payment what is meant is that such payment is subject to a condition subsequent that if the negotiable instrument is dishonoured on presentation the creditor may consi....
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.... went on to add ; " 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 a 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. 30. Mr. C. N. Babu, in the course of his arguments, sought to point out that the Full Bench departed from the strict rule of Section 91 operating as a bar stated in Pothireddy's case, ILR (1884)Mad 94, when the Full Bench said that even in the case of a contemporaneous transaction, if it could be shown that all the terms of the contract are not incorporated in the promissory note and a plea is found in the plaint to that effect so as to show that the promissory note was executed as a collateral security or conditional payment. Section 891 will not operate as a bar. The Full Bench no doubt did not make any difference between the case of an antecedent debt or a contemporaneous one in this regard but we see no conflict be....
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.... collateral security or as a conditional payment, it would be open to the plaintiff to fall back on the original demand provided such a plea is based on the pleadings. 31. Sir Richard Couch, C. J., in Kedarnath v. Sham Lall, ( 1873 ) 11 APLR 405 at p. 412 was of the opinion that the promissory note is " the only repository and the appropriate evidence of the agreement ". But that strict principle enunciated by him no longer holds the field even in the Calcutta High Court. The later decisions of the various High Courts would show the swing that, where all the terms are not embodied in the contract Section 91 is no bar to establish the true nature of the transaction viz., that was given as collateral security or by way of conditional payment. The diametrically opposite view , to what Couch, C. J., expressed as stated by the Full Bench of the Allahabad High Court in MANU/UP/0007/1943MANU/UP/0007/1943 is that, in every case, where a promissory note is executed simultaneously with the borrowing of the money, there is always a presumption that the promissory note was given by way of a conditional payment or as a collateral security and that the bar of Section 35 of the Stamp Act as to....
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.... 1808 ) 127 ER 870, relied upon by Mr. M. Jagannadha Rao is not a case of a contemporaneous transaction. That was a case where " the plaintiff declared on a promissory note with the usual counts for money, and upon an account stated. " The note " was upon a wrong stamp and therefore could not be read. " Then the plaintiff proved a distinct admission of the original debt made before the note was given. The facts of that case show that it was a case of an antecedent debt and therefore it was held that the plaintiff may prove his original debt. " 35. In Re Romer & Haslam, ( 1893 ) 2 QB 286 was also a case of a pre-existing debt for what has been held in that case that " the handing by a client to his solicitor of a negotiable security for the amount of his bill of costs, coupled with the giving of a receipt by a solicitor in which it is expressed to be taken " in settlement " of his bill does not amount to repayment in the event of the negotiable security being dishonoured, unless there be proof ( the onus of which lies on the solicitor ) that such was at the time the intention of the parties, and that the client was aware of the effect of the transaction upon his right to tax the ....
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....quence, debarred from suing on the original consideration and that his remedy, if he had one, was on the hundis. What was held by the learned Judges, Benson and Bhasyam Ayyangar, JJ., is that it is a question of fact, with regard to promissory notes or bills or hundis, whether the parties intended them to operate as absolute or conditional payment and the presumption is that the effect of giving and taking a note or bill is that the debt was conditionally paid. It was also held on the evidence that the plaintiff had accepted the hundis unconditionally and was, in consequence, precluded from suing on original debt; in other words, the acceptance of the hundis was in complete discharge of the debt and not was conditional discharge and therefore, the plaintiff, having accepted the hundis unconditionally, cannot fall back on the original debt. 39. What Benson and Sundaram Aiyar, JJ., said in Palaniappa Chetty v. Arunachellam Chetty, MANU/TN/0095/1911MANU/TN/0095/1911 is that the general presumption is that a Bill of exchange or hundi given for a debt operates only as a conditional discharge of the debt : that the execution of a formal for the amount covered by the bill of exchange o....
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.... " Apart from express agreement a creditor is not bound to accept payment in any way except cash, i. e., legal tender. If, however, he accepts a negotiable instrument, such as a bill of exchange, promissory note or cheque, it is a question of fact depending on the intention of the parties, whether it is taken in absolute satisfaction of the debt, or only in conditional satisfaction. " To the same effect is what is stated by Byles in his book on Bills of Exchange ( Twenty-second Edition ) at page 392 : The word ' payment ' is not always used in its strict legal sense. A plea of payment by bill means in law that the bill has been taken in satisfaction; but in the popular sense payment by bill may merely mean that a bill has been given for and on account of the debt. Whether a bill is taken in complete satisfaction or merely as conditional payment, is a question depending on the facts of each case, the onus lying on the party alleging that the bill operated as a complete satisfaction of the original debt, the presumption of fact being the other way. 41. Leach, C. J. and Varadachari, J., after referring to the previous cases of the court ( it is not nec....
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....Now let us examine whether the learned Judge, Gopal Rao Ekbote, J. had any valid reason in not following the Full Bench decision by invoking the theory of money had and received. He felt not bound by the Full Bench decision on the ground that the two decisions of the Privy Council in AIR 1918 PC 241 and AIR 1918 PC 151, were not noticed by the Full Bench. The question is whether those two decisions touch the question involved at all. 44. AIR 1918 PC 151, was a case where a taluk was put up for auction for arrears of rent at the instance of the Zamindar. The purchaser paid the entire amount of the purchase money and also obtained a sale certificate of payment. The purchaser received an order for possession but a third party being desirous of contesting the right of the Zamindar to make the sale, sued for reversal of the sale. A decree for reversal of the sale was passed and the suit was, therefore, brought by the purchaser to recover from the Zamindar the total amount of purchase money including interest. The Court of first instance dismissed the suit as barred by limitation and that decree was affirmed by the High Court on appeal and that decision was the subject-matter of appea....
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.... Haldane discussed the theory of " money had and received " under the Common Law of England and observed : The question in the present case, where an agent in accordance with whose instructions appellants had acted, intervened between the owner and the tort-feasor was as what was the effect and extent of such affirmance of contractual relation. Could the contractual relation be split up and only part of it be approbated while the rest was reprobated and could any obligation based on its contract be imputed to the person whose tort was waived inconsistent with the actual contract which he, in point of fact, made with the intermediary ? point was one which their Lordships were reluctant to deal with unnecessarily in an appeal from a Court which was not confined to administering the common law of England and which could be disposed of on the other principle referred to. It is, therefore, clear that their Lordships did not choose to apply the common law of England to Ceylon, which had its own laws. This decision can obviously have no application where an action is laid on an improperly-stamped promissory note, the effect of which is govern....
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.... 47. MANU/UP/0211/1929MANU/UP/0211/1929 is one of the cases where it was held that, even if the hundi is held to be inadmissible, the plaintiff would still be able to succeed if his suit can be treated as one for recovery of the money had and received or for compensation of money paid by him. That case was referred to and disagreement with the view taken there was expressed by Leach, C. J. It is not as if the learned Judge of the Full Bench did not consider the question whether the cause of action could be based on the doctrine of " money and received ", for the learned Judge, Gopal Rao Ekbote, J. To assume that the opinion of the Full Bench would have been different had they looked at those two decisions in AIR 1918 PC 151 and AIR 1918 PC 241. 48. Now it remains to be considered how far Section 70 of the Contract Act can be invoked for the purpose of recovering the loan on the theory of ' implied promise to pay ' or ' money had and received ' . Section 70 of the Contract Act is in these terms :-- Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other perso....
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.... claimed in the action was paid to the appellant-Bank as one of those designated to act in carrying out the scheme. The Bank received the money at its branch in New York, and its general manager then gave instructions from the head office in Montreal to the manager of one of its local branches, at Edmonton in the province of Alberta for the opening of the credit for the special account. The local manager was told that he was to act on instructions from the head office, which retained control. Viscount Haldane therefore observed, " It appears to their Lordships that the special account was opened solely for the purposes of the scheme, and that when the action of the Government in 1910 altered its conditions, the leaders in London were entitled to claim from the bank at its head office in Montreal the money which they had advanced solely for a purpose which had ceased to exist. Their right was a civil right outside the province and the Legislature of the province could not legislate validly in derogation of that right. The statute was held to be beyond the powers of the Legislature of Alberta, inasmuch as what was sought to be enacted was neither confined to property and civil rights....
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....yable in point of honour and honesty, although it could not have been recovered from him by any course of law; as in payment of a debt borrowed by the Statute of Limitations xx xx xx But it lies for money got through imposition. ( express or implied ) or extortion, or oppression; or an undue advantage taken of the plaintiff's situation contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant upon the circumstances of the case, is obliged by the ties of the natural justice and equity to refund the money. " Lord Sumner, in 1914 AC 398 commented on what Lord Mansfield said in these terms ( at pp. 455, 456 ) :-- "I think it is evident that Lord Mansfield did not conceive himself to be deciding that this action was one in which the Courts of common law administered " an equity " in the sense in which it was understood in the Court of Chancery and the cases actually decided show that the description of the action as being founded in the aequum et bonum is very far from being precise. Even the decision in ( 1760 ) 97 ER 676 which has since been ....
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.... obtains the benefit of the payment by the discharge of his liability then B is held indebted to A in that amount. The principle is a familiar instance of liability in quasi-contract or, as the older pleaders described it an instance of the common indebitatus count for money paid. Lord Wright, in referring to some of the authorities on it. Said (at p.545)"These statements of the principle do not put the obligation on any ground of implied contract or of constructive or notional by the Court simply under the circumstances of the case and on what the Court decides is just and reasonable, having regard to the relationship of the parties. Now what is 'just and reasonable' except 'natural justice' in another guise? But I wish to add that (as I have tried to show elsewhere) this fiction of implied contract is really unnecessary in the law of quasi-contract at the present day. It did good service in the development of that department of the English system but at its best it was quite in adequate to explain intelligibly many of the decisions on quasi-contract and on the scope of elegantia juris we should be well rid of it nowadays. In 1914 AC 398 it le....
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.... benefit derived from another which it is against conscience that he should keep. Such remedies in English Law are generically different from remedies in contract or in tort, and are now recognised to fall within a third category of the common law which has been quasi-contract or restitution. Mr. M. Jagannadha Rao also placed reliance on a passage in Anson's Law of Contract ( Twenty-third Edition ) at page 601 : " Where one person pays money to another in pursuance of an agreement which is ineffective, or which subsequently becomes so, he may recover from that other the money which he has paid ". Putting the case under the head of quasi-contractual liability, the nature of a quasi-contract is stated in Chapter XXI of Anson's Law of Contract, at page 589 in these words : " Circumstances must occur under any system of law in which it becomes necessary to hold one person to be accountable to another, without any agreement on the part of the former to be so accountable on the ground that otherwise he would be retaining money or some other benefit which has come into his hands to which the law regards the other person as better entitled, or on the ground that without such acc....
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....upplies, who instructed the contractors to proceed with the construction in accordance with the estimates submitted by them. The constructions were completed and a bill was presented.. The State of West Bengal refuted the claim on the ground that the claims made in respect of the constructions were invalid as the constructions were unauthorised and there was no valid contract as required under Section 175(3) of the Government of India Act to bind the Government of West Bengal. Their Lordships therefore held that the claim for compensation under Section 70 of the Contract Act is not made on the basis of a contract but on voluntary acceptance of a thing and there was no conflict between Section 70 of the Contract Act and Section 175(3) of the Government of India Act. In upholding the claim for compensation, Gajandragadkar, J., ( as he then was ) observed :-- Where a claim for compensation is made by one person against another under Section 70, it is not on the basis of any subsisting contract between the parties ; it is on the basis of the fact that something was done by the party for another and the said work so done has been voluntarily accepted by the other p....
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....sp; But if money is deposited and goods are supplied or if services are tendered in terms of the void contract. The provisions of Section 70 of the Indian contract Act may be applicable. In other words. If the conditions imposed by Section 70 of the Indian contract Act are satisfied then the provisions of that section can be invoked by the aggrieved party to the void contract. It is for the reason that in that case, the learned Judge said that money deposited is also recoverable by virtue of the provisions of Section 70, that Mr. M. Jagannadha Rao contended that. When a promissory note becomes invalid by reason of section 35 of the Stamp Act, it would still be open to the plaintiff to recover the money lent under the note under the provisions of section 70. As the expression "anything delivered," according to the learned counsel, is of wide import or amplitude as to take within its ambit or range money given under an invalid promissory note. That was a case where the appellant had purchased a right to pluck, collect and remove the forest produce. Out of the forest produce only the tendu leaves crop was allowed to be enjoyed by the appellant on his depositing a sum Rs. 3,000 in t....
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....y their Lordships of the Supreme Court. The remedy under Section 70 cannot be had on foot of a subsisting contract. 58. Now let us turn to Section 35 of the Stamp Act which imposed an absolute prohibition on the use of a promissory note if it is not duly Stamped. This section to the extent relevant reads : No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence. Or shall be acted upon, registered or authenticated by any such person or by any public officer unless such instrument is duly Stamped: Provided that- (a) any such instrument not being an instrument chargeable with a duty not exceeding ten naya paise only, or a bill of exchange of promissory note, shall. Subject to all just exceptions be admitted in evidence on payment of the duty with which the same is chargeable, or. In the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees of when ten times the amount of the proper duty or deficient portion th....
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....ved in evidence and cannot be looked into for any purpose whatsoever, that is to say, no part of the document, be it a single sentence or a word can be received in evidence and to do so is to do violence to Section 35. Further as pointed out by Gajendragadkar, J. ( as he then was ) the claim for compensation was not based on foot of contract, which had become invalid, but on the work of lawfully done by the contractors under the orders of the Government officials, the Government having become the beneficiary of the works executed by the contractors. The obligation to recompense or make good to the extent the Government derived benefit arose not out of the contract, which became invalid, but independently of the contract. But here, the money is sought to be recovered on the basis of the contract put in writing viz., the promissory note, which cannot at all be received in evidence and looked into for any purpose whatsoever even if it be for a collateral purpose ( see MANU/PR/0046/1945MANU/PR/0046/1945 ). 61. We may now read Section 91 of the Evidence Act to the extent material for our purpose : When the terms of a contract, or of a grant or of any other dispo....
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....nbsp; The law upon the subject admits of no doubt. The rule with regard to writings is that oral proof cannot be substituted for the written evidence which the parties have put into writing. And the reason is that the writing is tacitly considered by the parties themselves as the only repository and the appropriate evidence of their agreement. To the same effect is what is held by Patanjali Sastri, J. ( as he then was ) in Rachpal Maharaj v. Bhagwandas, MANU/SC/0046/1950MANU/SC/0046/1950 : [1950]1SCR548 while dealing with the case of deposit of title deeds: ' if the parties choose to reduce the contract to writing, the implication is excluded by their express bargain, and the document will be the sole evidence of its terms '. These cases were referred to and followed by the Supreme Court in V. G. Rao v. Andhra Bank, MANU/SC/0602/1971MANU/SC/0602/1971 : AIR 1971 SC 1613 . Referring to Ex. A-6 a document in that case, Hegde, J., observed : " If that document is considered as a contract of mortgage between the Bank and the depositors, the same having not been registered, it is inadmissible in evidence. If on the other hand that document is considered as a mere memoran....
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....on of the promissory note as a conditional discharge or collateral security are not embodied in the promissory note, it cannot be said that when the plaintiff seeks to establish on the basis of his pleadings that the promissory note was obtained by him by way of a collateral security or as a conditional payment, the bar imposed by Section 35 of the Stamp Act and Section 91 of the Evidence Act comes in the way of proving the terms relating to collateral security or conditional payment not embodied in the promissory note. To put it differently when a plaintiff sets up the case of collateral security or conditional payment on the failure of his action on foot of the promissory note, he does not seek to prove the terms contained in the promissory note, but seeks to prove the terms of the contract which are not embodied in the promissory note. In that case, it cannot be said that the plaintiff is attempting to nullify the provisions of S. 91 or by-passing or circumventing those provisions, for then his action is not on foot of the promissory note, but on the basis of the alternative cause of action shown in the plaint viz., that the promissory note was given by the debtor as a collatera....
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.... Section 29 does not say that the defendant shall affix the proper stamp on the promissory note. It only says that the defendant shall bear the expense of providing the proper stamp. That distinction should be borne in mind. The promisee can always recover the expense initially incurred by him from the executant of the promissory note. The action brought on a promissory note fails not on account of any illegality attached to it as laid down in Section 23 or 24 of the Contract Act, but because of Section 35 of the Stamp Act, which makes it 'a worthless piece of paper' for any use in evidence. In-admissibility in evidence should not be mixed up on confused with illegality. 67. Another feeble attempt was also made to contend that, when the cons, under Hindu Law are made liable for the father's debt not on the foot of a promissory note but on the basis of the personal law, why should not the debt be recovered from the promisor himself de hors or independently of the promissory not. It should be remembered that, if the action against a Hindu father, the executant of the promissory note, fails on account of the bar of Section 35 of the Stamp Act and Section 91 of the Evide....
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....on the original cause of action when the Negotiable Instrument evidencing the transaction is inadmissible in evidence under Section 35 of the Stamp Act. Having regard to the arguments advanced on both sides it was considered desirable to frame the following questions for consideration : Whether a plaintiff can bring action for recovery of the amount advanced by him basing on the original consideration when the promissory note on foot of which action is brought is inadmissible, in evidence under Section 35 of the Stamp Act, and if so, under what circumstances ? 2. If the promissory note is inadmissible in evidence whether action can be maintained for recovery of the amount either on the theory of " money had and received " or under the provisions of Section 70 of the Contract Act. For nearly a hundred years, the Courts in India have been struggling with the question whether a plaintiff is without any remedy if a promissory note executed in his favour is not stamped or insufficiently stamped and is in admissible in evidence or whether he is entitled to sue on the debt or on the consideration. Different views have been expressed from t....
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....amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion. It is seen at once that a promissory note does not come under the proviso and is covered by the main Section. 73. The relevant portion of Section 91 of the Evidence Act is in the following terms : When the terms of the contract, or of a grant of any other disposition of property, have been reduced to the form of a document no evidence shall be given in roof of the terms of such contract, grant or other disposition of the property............... except the document itself or secondary evidence of its contents in cases in which secondary evidence is admissible under the provisions hereinbefore contained. Illustration : (b) If a contract is contained in a bill of exchange, the bill of exchange must be proved. 74. Applying Section 91 to the document with which we are concerned viz; a promissory note, it is seen that if the promissory note contains the terms of the contract between the parties, then proof of ....
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.... the case. There is no presumption either that it contains all the terms or that it does contain all the terms. If it contains all the terms, no evidence shall be given in proof of the terms, except the promissory note and as the promissory note is inadmissible for any purpose, the result would be that the terms cannot be proved at all and the plaintiff is left without a remedy. If, on the other hand, the promissory note does not contain all the terms, Section 91 of the Evidence Act is not a bar and he is entitled to allege and prove such terms by evidence other than the promissory note. 76. In this connection it is necessary to bear in mind that a promissory note may be executed in different circumstances. (a) A person may incur a debt in the first instance and subsequently execute a promissory note promising to pay the amount due by him. For example, a promisor may purchase certain goods from the promisee and become indebted to him for the sale price and later on at the instance of the promisee execute a promissory note for the value of the goods purchased by him; or the promisor might have borrowed certain sum of money even without a document and later o....
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....ue upon the original cause of action, namely, the advancing of the loan by the promisee, or incurring of the debt by the promisor. The observation of Leach C. J. In MANU/TN/0229/1938MANU/TN/0229/1938 : AIR 1938 Mad 785 ( FB ) at p. 786, that where a negotiable instrument is executed in respect of an antecedent debt the creditor may sue on the debt and ignore the note would be applicable only to this class of cases and not the first where the debt is completely discharged and the promissory note is intended to substitute the debt. 79. Even in a case coming under (b) where the promissory note is simultaneous with the loan, it is still open to the parties to prove that the promissory note was not regarded as the embodiment of the contract but only taken by way of collateral security or by way of conditional payment. Where a promissory note has been executed subsequent to the incurring of the debt or simultaneously, the question still remains whether it was intended by the parties to reduce the terms of the contract into the form of a promissory note, or whether it was intended merely to be a conditional payment or by way of collateral security and that has to be decided with refere....
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.... Section 35 Stamp Act bar the way. But if it does not embody all the terms of the contract the true nature of the transaction can be proved ; and where an instrument has been given as a collateral security or by way of conditional payment, a suit on the debt will lie. The fact that the execution of the promissory note is contemporaneous with the borrowing cannot exclude the possibility of the instrument having been given as a collateral security or by way of conditional payment. Whether a suit lies on the debt apart from the instrument therefore depends on the circumstances under which the instrument was executed. I an however, of the view that this passage does not lend support to the argument that the plaintiff can sue on the debt only in cases where the promissory note was executed by way of conditional payment or by way of collateral security. These are only two of the instances referred to, where the promissory note does not embody all the terms of the contract. The general principle as laid down in the decision of the Full Bench is that if the note does not embody all the terms of the contract the true nature of the transaction can be proved. I do not think there is any wa....
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....ting or not. If one has to close ones eyes to the terms of the promissory note, because it is unstamped, then it is impossible to ascertain whether it contains all the terms of the contract or not. The oral evidence or other evidence has to be placed side by side with the document and only then can it be found out whether all terms of the contract are contained in the document. 83. Before concluding the discussion on this point reference may be made to the decision of the Privy Council in AIR 1918 PC 146. There it was held that in an action on a bill of exchange or a promissory note against a person whose name properly appears as party to the instrument it is open either by way of claim or defence to show that the signatory was in reality acting for an undisclosed principal. In the course of the judgment they remarked 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 . But as they found that the plaint did not embrace both these forms of relief and was confined to an action brought upon the hundies themselves, the sole question for decision....
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....n for the recovery of the amount paid on foot of Section 70 of the Contract Act there is insuperable difficulty in the way of the plaintiff obtaining a decree. In order to obtain a decree the plaintiff has to prove that the defendant has derived the benefit, in this case that he received the amount of the loan. 87. No evidence other than the promissory note is admissible to prove that the amount of the loan was received by the promisor, as the amount of the loan is one of the terms of the contract. He cannot prove the same by the production of the promissory note as it is not admissible for any purpose under Section 35 of the Stamp Act ; with the result there is no evidence before the Court as to the amount of the loan received by the defendant. If, on the other hand the promissory note does not contain all the terms of the contract it has already been held that the plaintiff is entitled to sue on the original consideration. In that event there is no need for him to have recourse to Section 70 of the Contract Act. In such a case it does not make any difference whether the plaintiff's right is described as one based upon the original consideration or on the footing that the d....
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....oving the fact that he performed the work or that the defendant derived benefit or advantage and claiming compensation on that basis. In the present case. However, the plaintiff is precluded from proving the fact of the loan in view of Section 91 of the Evidence Act read with Section 35 of the Stamp Act. In this connection it was argued on the strength of some cases that the amount of the loan is not a term of the contract. I fail to see how such an argument can be advanced. If the amount of loan itself cannot be treated as a term of the contract. I wonder what else can be regarded as a term of the contract in the case of a promissory note? 89. I may however. State that I am not in agreement with that view expressed by Varadachariar J in MANU/TN/0229/1938MANU/TN/0229/1938 : AIR 1938 Mad 785 (FB) (Suprs) that "Sec 70 of the Contract Act is scarcely appropriate to a case of money lent to the defendant and there is no possibility in such a case or event a contemplation of the "thing delivered." Being restored which obviously means in specie; and lending money to the defendant cannot be described". This is the view of Vaaradachariar H. Only and cannot in any sense be regarded as the....
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....w was in error in deciding the case without recording the evidence of the parties it is only with reference to the second question that Gopal Rao Ekbote, J. took the view that the plaintiff is entitled to claim his money back also on the theory to money had and received. 92. AIR 1918 PC 241 (Supra) was a case from Ceylon. After referring to (1760) 2 Burr. 1005 and (1914)A. C. 398 their Lordships of the Privy Council observed that they where reluctant to deal with the question on the footing of money had and received. As they were of the opinion that the appeal could be disposed of on another ground. I am unable to find anything in the decision of the Privy Council which would cover a case of the right of the person to claim refund of the money which was advanced on foot of an insufficiently stamped promissory note. In AIR 1918 PC 151 the Privy Council had to deal with the question of limitation. Though they observed that the facts of the case would more nearly approach the formula of "money had and received" by the defendant for the plaintiff's use they said in view of the course the suit had taken and of the attitude of both sides they ought to deal with the face on the ass....
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....nt between the parties as a collateral security or conditional payment; and 3. Promissory notes executed for monies lent under it. Where the amount lent and the promissory note form part and parcel of the same transaction. 96. In the first category of cases. Where there is an antecedent debt either on accounts settled. Goods supplied monies lent or for any other claim where the cause of action is complete in itself there is no dispute that de hors the promissory note . the party can fallback on the original consideration. In the second of the categories, where a promissory note is executed either after the incurring of the debt or even simultaneously with the lending on a specific understanding or agreement that the promissory note is only to serve as a collateral security or as a conditional payment, it is well settled that if the promissory note cannot be proved by reason of the provisions of Section 35 of the Stamp Act and Section 91 of the Evidence Act, the claimant can fall back on the original debt and the passing of the consideration thereunder. In both the cases, however the fact of the execution of the promissory note and the terms contained therei....
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....dying or not embodying all the terms of the contract in the judgment of Leach. C.J. in MANU/TN/0229/1938MANU/TN/0229/1938 had led to the contention that in case of the instrument does not contain all the terms of the contract, the promisee will be entitled to sue on the original consideration. A scrutiny of the Judgment shows that the above observations were made only in relation to the category of instruments that were executed as collateral securities or as conditional payments. This is made abundantly clear by the following paragraph contained in the Judgment of the Full Bench at Page 945 :- In my opinion the law may be stated shortly this way. If the promissory note embodies all the terms of the contract and the instrument is improperly stamped no suit on the debt will lie. Section 91 of the Evidence Act and Section 35 of the Stamped Act bar the way. But if it does not embody all the terms of the contract the true nature of the transaction can be proved and where an instrument has been given as collateral security or by way of conditional security or by the way of conditional payment a suit on the debt will lie. The fact that the execution of the promissor....
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....o force in the contention that if all the terms are not contained in the document the party can sue on the original consideration. 102. It is only in cases where there is an agreement that the promissory note is executed by way of collateral security or as a conditional payment . The question arises whether the terms which spell out that agreement if contained in the document that is defective, can be looked into. It is permissible to the party to prove other circumstances by leading evidence to show that the promissory note was executed as a collateral security or as a conditional payment but if those terms are contained in the document itself, they will also be hit by the provisions of Act 91 of the Evidence Act . However, if the document that purports to be a promissory note becomes inadmissible as a promissory note the terms contained in it relating to its being executed as a collateral security or as a conditional payment , being in the nature of an agreement, will be saved by the proviso of Section 35 of the Stamp Act and by paying penalty it can be admitted in evidence as an agreement containing the terms. This proof will however be need not for suing on the promissory no....
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.... chargeable with a duty not exceeding ten naya paise only, or a bill of exchange or promissory note shall subject to all just exceptions be admitted in evidence on payment of the duty with which the same is chargeable or in the case of an instrument insufficiently stamped of the amount required to make up such duty together with a penalty of five rupees or when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees of a sum equal to ten times such duty or portion. As seen from the proviso, there is no scope for paying a penalty in the case of a bill of exchange or a promissory note so as to make it admissible in evidence under Section 42 (2) of the Act. The prohibition enacted by Section 35 makes such an instrument not duly stamped inadmissible in evidence for any purpose. The Privy Council in its decision in MANU/PR/0046/1945MANU/PR/0046/1945 says that the words ' for any purpose' should be given their natural meaning and effect and would include a collateral purpose. Hence such an instrument would be inadmissible in evidence whether it is intended to use it as the basis of a claim or for a collateral purpose. There is a difference betw....
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....huswami Mudali v.Verri Chetti . ILR (1907) Mad 382 and Ankur Chunder Roy Chowdhry V.Madhub Chunder Ghose (1874 ) 21 Suth WR 1) 110. "The rule with regard to writings " says Sir Richard Couch C.J. in (1873) 11 Beng. LR 405 is that oral proof cannot be substituted for the written evidence of any contract which the parties have put into writings And the reason is that the writing " is tacitly considered by the parties themselves as the only repository and the appropriate evidence, of their agreement". Following this decision the Privy Council upheld, in ILR Cal 338 = MANU/PR/0062/1922MANU/PR/0062/1922 : AIR 1923 PC 50 the objection that oral evidence was not admissible as the memorandum therein constituted the contract between the parties and that Section 91 was a bar. The aforesaid two cases have again been approved and followed by their Lordships of the Supreme Court in MANU/SC/0602/1971MANU/SC/0602/1971 : AIR 1971 SC 1613 . It is also well established that when there is specific provision in the Evidence Act like Section 91, resort cannot be had to equitable principles for the admission of any evidence which is otherwise inadmissible. Thus where a promissory note is not admissib....
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.... on the debt. These cases recognise the principle that the fact that the loan and the note are contemporaneous is not conclusive of the non-existence of an obligation apart from the note itself and permit only such evidence as to whether the note was given as a conditional payment or a collateral security both of which postulate a debt or for the conditional discharge of which or for security which the promissory note is taken. This view does not recognise the applicability of theories based upon implied promise or money had and received or Section 70 of the Contract Act to such cases. 113. Nearly a century ago Sri Richard Couch C.J. and Glover J. have negatived a claim based on unstamped promissory note on the ground that it was inadmissible in evidence and observed: This instrument clearly comes within these words (of the Stamp Act) and the plaintiff cannot make use of that part of it which states the deposit of the money and say from the deposit there arose a contract on the part of the defendant to repay it because here the parties have made an express contract which has been put in writing. The plaintiff cannot resort to any implied contract; if he rec....
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....t the contract was contemporaneous with the note and that Section 91 of the Evidence Act was a bar to an attempt to prove the original consideration. This decision was followed by Benson & Sundarayyar J.J. 462 by Sadasivayyar and Spencer J.J. in Muthu Sastrigal v. Viswanatha Pandara Sannadhi. MANU/TN/0433/1924MANU/TN/0433/1924 by Pillay and Anantakrishnayyar JJ. Gura Sahu v. Krishnamma MANU/TN/0214/1932MANU/TN/0214/1932 by Anantakrishnayyar J. In Alimane Sahiba v. Subbarayudu, MANU/TN/0036/1932MANU/TN/0036/1932 by Pandalai J. In Chandra Sekaran v. Srinivasa MANU/TN/0236/1932MANU/TN/0236/1932 by Varadacheri and Burn JJ and in Chockalingam Chettiar v. Palaniappa Chettiar MANU/TN/0303/1934MANU/TN/0303/1934) The (FB) in Ramaswami Pillai v. Murugaiah Padavachi ILR Mad 268 : (MANU/TN/0174/1935MANU/TN/0174/1935 : AIR 1936 Mad 179) reviewed all these cases as well as those in which a contrary view was expressed and after referring to the divergence of views in other High Courts Beasely C.J. observes as follows:- So far as the Madras High Court is concerned the preponderance of opinion seems to be to support the respondent's argument. But all the courts take the vi....
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....nt only and not as a satisfaction of the debt, unless the parties so regard it. 119. After further consideration Leach C.J. observed in regard to this proposition that it must depend upon the facts of the particular case and that there is no presumption that the instrument has been given as conditional payment. Varadachariar J. In his concurring judgment has discussed elaborately the case law, English and Indian, bearing upon the subject and rejected the pleas of conditional discharge, implied promise money had and received, and Section 70 of the Contract Act. 120. The Full Bench decision can be taken to have settled the law finally so far as the Madras High Court was concerned and has been uniformly followed eversince. The plaintiff therefore in a suit upon a promissory note which is improperly stamped is at liberty to prove the true nature of the transaction. If he is able to establish that the instrument was given as a collateral security or as a conditional payment the suit on the debt can be proved, without any bar under Section 91. Evidence Act. 121. The case in Calcutta High Court reveal an approval as well as disapproval of the view expressed in ILR(1881) Cal 256 o....
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....am J., in MANU/UP/0074/1903MANU/UP/0074/1903 : ILR (1904) All 178, that a plaintiff cannot set up a case independent of the note in view of Section 91 and cannot prove orally the terms of the contract in MANU/UP/0289/1930MANU/UP/0289/1930. But this view was not accepted in the Full Bench in MANU/UP/0007/1943MANU/UP/0007/1943 wherein it was held that other evidence to prove the terms of the contract independently of the pronote is admissible that a pronote cannot be said to contain all the terms of the contract of loan and therefore the contract of loan could be proved independently of the note. In one respect it differed from the Full Bench of Madras High Court. It holds that there is a presumption that a pronote is given only as a conditional payment while the Madras view is opposed to it. A Full Bench of Allahabad High Court in Major Mistri v. Binda Debi. MANU/UP/0024/1945MANU/UP/0024/1945 also holds a similar view. But in Ramnath v. Bhagwati Prasad MANU/UP/0031/1945MANU/UP/0031/1945 a Bench held that where a pronote contained all the terms the plaintiff cannot fall back on the independent cause of action to recover the loan because there is no cause of action independent of and ....
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....roved. In Ranchhod v. Ravji Bhai MANU/MH/0280/1925MANU/MH/0280/1925 this decision was followed, But in MANU/MH/0375/1926MANU/MH/0375/1926 the learned Judge while following the decision in ILR (1909) Bom 360, laid down three pronositions. In Soma Bhai v. Kalyan Bhai MANU/MH/0130/1937MANU/MH/0130/1937 also Rangnekar J. Followed the principle laid down in ILR (1900) Bom 360. 127. In Mohan v. Ramji MANU/NA/0091/1930MANU/NA/0091/1930 and Lal Bahadur v. Gulam Yasin MANU/NA/0036/1932MANU/NA/0036/1932 (2) the Nagput J.C.'s Court held that a suit would be on the debt, In Ananda Namdeo v. Pundalik Tukaram MANU/NA/0288/1936MANU/NA/0288/1936 : AIR 1936 Nag 225. It was held by Stone C.J. and Niyogi J. At page 227 as follows:- In every case it becomes a question of fact whether the promissory note was intended to constitute the contract or serve some collateral purpose. In the former case Section 91, Evidence Act would preclude proof of the contract otherwise than by the document itself. If it is inadmissible for any reason, the contract cannot be proved by any extraneous oral evidence. Nor can the money be recovered for the use of the lender a person pays money to a....
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....learned Judge followed the decision in Chinnappa Pillai v. M.R.Muthuraman Chettiar. (1911) 9 Mad L.T.281. In Dhaneswar v. Ramrup MANU/BH/0007/1928MANU/BH/0007/1928 the conflict between these two views was noticed by a Bench which ultimately preferred to follow the principle of an implied promise in every promissory note as laid down in ILR (1896) Cal 851. In Abdul Md Khan v. Mahananda , this view was held to be correct by another Bench of the same Court. In Domoo Khan v. Agha Arshad MANU/BH/0203/1933MANU/BH/0203/1933 the Full Bench decided the case on the basis of the first proposition laid down in ILR (1881) Cal 256 Manohar Lal., J., held in Anuplal Mahto v. Mahesh Jha MANU/BH/0050/1937MANU/BH/0050/1937 that evidence on original consideration was admissible. In Kesho Das v. Hari Kishundas MANU/BH/0166/1937MANU/BH/0166/1937 another Bench held that the consistent view in that High Court to be to allow evidence on original consideration or an implied contract to repay. In MANU/BH/0126/1950MANU/BH/0126/1950 : AIR 1950 Pat 493 Ramaswami & S.Prasad JJ. Preferred to lay down the law that a promissory note may be given as conditional payment of collateral security in which case a suit on ....
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....Full Bench decisions in MANU/UP/0007/1943MANU/UP/0007/1943 and MANU/UP/0024/1945MANU/UP/0024/1945 and held that unless there are circumstances or evidence to show the contrary a promissory note is always given as a conditional payment and hence a suit on the debt would lie. The Full Bench decision in MANU/TN/0229/1938MANU/TN/0229/1938 : AIR 1938 Mad 785 was not considered in this case also. 136. In the case before the Full Bench decision in AIR 1934 Rang 389 : ILR 12 Rang 500 the suit was based upon the promissory note or in the alternative for money lent. Page C. J. who spoke for the Full Bench laid down six propositions which, except for the third one, were accepted by the Madras Full Bench in MANU/TN/0229/1938MANU/TN/0229/1938 says Page C. J., at page 391 :-- I apprehended that the same principles apply as between borrower and lender and that when a promissory note or bill of exchange is given for a loan prima facie it is given and taken as conditional payment and not in accord and satisfaction, of the debt, if the promissory note or bill of exchange is taken as a conditional payment, and that term is embodied in the document cadit questio, but if it is ....
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.... in itself whether for goods sold or money lent or for any other claim and the debtor then gives a promissory note to the creditor for the payment of money at a future time the creditor may, if the money is not paid on the maturity of the pronote fall back on the original consideration. This is in accordance with the 1st proposition laid down in ILR (1881) Cal 256, But it is to be noted in this connection that the suit promissory note in this case was executed after settling accounts relating to dealings in silver. Hence it is a clear case of an antecedent debt. 140. In R. K. Radhu & Co. v. Mathra Das , AIR 1936 Pash 146 Jolly Officiating C. J. speaking for the F. B. held that where a contract is wholly contained in a pronote, which is inadmissible in evidence the person suing on the pronote is precluded from proving the debt independently of the pronote. Says the learned Judge at page 147 :-- Now where the contract is contained wholly in the pronote, it is clear from the provisions of Section 91, Evidence Act and Illustration (b) thereto that the plaintiff will be precluded from proving the debt alinude; in the present case even in the amended plaint the s....
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.... Court in MANU/TN/0229/1938MANU/TN/0229/1938 finds acceptance, more or less, generally in the decisions rendered by the Lahore, Punjab, Patna, Kerala, Sind, Peshawar, Jammu Kashmir and Mysore High Courts. The contrary view taken by the other High Courts viz; Calcutta, Allahabad, Oudh, Bombay, Hyderabad, Tripura, Rangoon and Madhya Bharat, is based either more upon the theory of an implied promise in every contemporaneous loan or upon the presumption that a promissory note is only a conditional payment in the case of every loan transaction. This conflict it, appears to me, is irreconcilable at the present moment and it is only an authoritative pronouncement by their Lordships of the Supreme Court that can set at rest or give a quietus to this age-long controversy. 145. As far as this case is concerned we have to see which view is acceptable as one based upon principle and in tune with the legal provisions arising in this matter. 146. As stated supra the provisions of the Evidence Act cannot be departed from in our country by courts to evolve an equitable principle howsoever laudable it may be. ( Vide Maung Kyin v. Ma Shwe Law ILR 45 Cal 320 : (AIR 1917 PC 207). Hence the bar l....
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....essed our view already that Section 35 imposed a bar on the reception of any, but the original instrument and forbade the reception of secondary evidence. 148. There can be no doubt that term of the loan or borrowing is the most important term of the contract while the terms as to rate of interest, duration of the loan or the method of payment etc., are incidental or ancillary terms of such a contract. If the contract of loan is reduced to writing one cannot resort to an implied promise to pay, out of such an express contract, as it would amount to violating or bypassing the strict mandatory provisions of the Evidence Act. The promise to pay whether express or implied is contained in every case of loan or borrowing and once it takes the form of writing both get merged in the document. One cannot be separated from the other as both mean the same thing. If the express promise cannot be proved on account of a legal bar the implied promise contained in that writing cannot also to be proved as the legal bar would equally apply to such proof. By permitting proof of such an implied promise in case of promissory notes executed for contemporaneous borrowing the law enacted in Section 91 ....
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.... was also held in Chidambaram Chettiar v. Ayyaswami Thevan ILR 40 Mad 585 : ( AIR 1917 Mad 201 ) and accepted by their Lordships Leach C. J. and Varadachariar J. In the Full Bench decision in MANU/TN/0229/1938MANU/TN/0229/1938 appears to me to lay down the law correctly. Thus in a case where all the terms of the contract of a loan are not incorporated in the promissory note, the true nature of the transaction may be proved, if there is an alternation and proof about it, and where on such proof it is established that the promissory note was executed as a conditional payment or a collateral security, the claim can be decreed on the basis of the original debt or original consideration. 151. Then coming to the theory of ' money had and received ' adopted in some of the decisions this again depends upon the theory of an implied promise to pay. It appears from the discussion in 1914 AC 398, that this theory is applied generally in the case of contracts in rem and not in personam. As this also depends upon the proof of a contract and inasmuch as the bar under Section 91 is to that very proof, a resort to this theory of ' money had and received ' is quite inappropriate a....
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....lated by the following words : Once it is realised that the cause of action for a claim for compensation under Section 70 is based not upon the delivery of the goods or the doing of any work as such but upon the acceptance and enjoyment of the said goods or the said work it would not be difficult to hold that Section 70 does not treat as valid the contravention of Section 175 (3) of the act. 154. The case in MANU/SC/0051/1963MANU/SC/0051/1963 : [1964]2SCR859 related to a void contract or a contract which was non est. In MANU/SC/0009/1968MANU/SC/0009/1968 : [1968]3SCR214 also as a result of the contravention of the mandatory provisions of law the contracts therein became nullified and void and it was recognised therein that there was no contract in existence. It was made clear that the juristic basis of obligation was not founded upon any contract or tort but upon the third category of law, namely, quasi contract or restitution. As in the present case before the Full Bench, the existence of the contract or its validity cannot be disputed, the principles of the above three decisions cannot apply therein. Moreover resort to Section 70 in this case also would a....
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....ench consisting of seven Judges upheld the view expressed in AIR 1938 Mad 785 ( FB ) and held that Section 70 of the Contract Act cannot be invoked on the theories of implied promise, money had and received, quasi-contract and just and reasonable or unjust enrichment or any other equitable doctrine. It further expressed its disagreement with the views taken by Gopala Rao Ekbote J. in Moahamad Jamal Saheb's case, MANU/AP/0086/1964MANU/AP/0086/1964 : AIR 1964 AP 188 . 161. In view of this it must be held that the suit is not maintainable. The lower Court's decree is therefore, set aside. The revision petition is accordingly allowed . But in the light of the lower Court's finding of fact that the defendant had in fact received the amount from the plaintiff. I direct the parties to bear their own costs. C. R. P. No. 577 of 1965. 162. The revision petition also comes up before me after the Full Bench of seven Judges expressed their view in regard to the maintainability of a suit on an unstamped or insufficiently stamped document in C. R. P. No. 255/65 and batch dated 3rd October, 1972. The Full Bench of seven Judges affirmed the decision of the Full Bench of the Mad....
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....the debt. Nevertheless, it decreed the suit on the principle that money was had and received by the plaintiff. 167. In the light of these facts, and following the rule laid down by the Full Bench in C. R. P. No. 255 of 1965 and batch D/- 3-10-1972 it must be held that the suit is not maintainable. 168. Consequently, the decree of the lower Court is set aside and the revision petition is allowed. In view of the fact that the defendant had received the money. I direct the parties to bear their own costs. C. R. P. No. 2234 of 1968. 169. This is yet another case which comes up before me after the decision of the Full Bench in C. R. P. No. 255 of 1965 and batch dated 3rd October, 1972. This is a plaintiff's revision petition. The lower Court found, as a fact, that the defendant had borrowed the sum of Rs. 290 /- from the plaintiff. It also held that the execution of the promissory note was contemporaneous with the borrowing. In view of the fact that the promissory note was insufficiently stamped following the decision in MANU/TN/0229/1938MANU/TN/0229/1938 : AIR 1938 Mad 785 it is dismissed the suit Perumal Chettiar's case, AIR 1938 Mad 785 ( FB ) is now affirmed by t....