Pala Ram Gupta vs Harish Chander Jain

Rajendra Nath Mittal, J.—This appeal has been filed by the defendant against the judgment and decree of the Senior Subordinate Judge, Jullundur, dated October 31, 1963. The facts which have given rise to the present appeal are that the defendant incurred a loan of Rs. 5,700/- from the plaintiff on October 8, 1959 and executed a promote in his favour. Thereafter he took another loan of Rs. 3,000/- on November 24, 1959 and gave a post-dated cheque dated December 8, 1959 drawn on the Punjab National Bank Ltd. Jullundur Cantt. The plaintiff instituted the suit for recovery of Rs. 12,000/- i.e. Rs. 8,700/- on account of principal and Rs. 3,300/- as interest at the rate of 12 per cent per annum up to October 6, 1962, the date of the institution of the suit. The suit has been contested by the defendant on various grounds. He inter alia pleaded that a material alteration had been made in the pronote and that the plaintiff was not entitled to the interest at the rate of 12 per cent per annum. The other pleas are not relevant for the decision of this appeal. The trial Court held that the pronote had not been materially altered as alleged by the defendant and that the plaintiff was entitled to interest at the rate of 12 per cent per annum. Consequently, it decreed the suit of the plaintiff for recovery of Rs. 12,000/-. The defendant having felt aggrieved from the judgment and decree of the trial Court, has come up in appeal to this Court.

The first contention of the learned counsel for the appellant is that the pronote had been altered by the plaintiff-respondent. He after referring to the pronote has submitted that it was originally executed in favour of Tara Chand son of Dhuli Ram Jain, resident of Jullundur and subsequently the name of Tara Chand was scored out and that of Harish Chander was substituted. He further submits that no signatures of Pala Ram were obtained on the aforesaid cutting. He has also referred to receipt Exhibit P-2 which was executed by the defendant-appellant on the same; day and in that receipt also the name of Harish Chander had been substituted for that of Tara Chand. I have heard the contentions of the learned counsel for the defendant-appellant but am unable to subscribe to that view. In the pronote as well as in the receipt, notes have been given by the scribe that the name of Tara Chand had been scored out and that of Harish Chander had been substituted. That writing in the pronote bears the signatures of Pala Ram Kartar Singh, P.W. 4, who was the partner of the defendant-appellant deposed that the said cutting was made at the time of the execution of the document in the presence of Pala Ram. A notice was given by the plaintiff-respondent to the defendant-appellant on April 4, 1961 in in which he asked the defendant to pay the amount in dispute. In reply dated April 26, 1961, Exhibit P-5, the defendant-appellant did not deny the execution of the pronote. If he had not executed the pronote in favour of the plaintiff-respondent, he would have straight away denied the execution thereof. The aforesaid circumstances clearly go to prove that the pronote and the receipt have not been altered as alleged by the appellant. The finding of the learned trial Court on this issue in my view is correct and I affirm the same.

The second contention of the learned counsel for the appellant is that the amount of Rs. 3,000/- was given to the appellant on the basis of cheque as loan on November 24, 1959 and the plaintiff-respondent was not entitled to interest thereon at the rate of 12 per cent per annum as held by the Court. He further submits that he could recover the interest on the said amount at the rate of 6 per cent per annum. In support of his contention he has drawn my attention to the plaint and argued that no agreement regarding the interest has been pleaded therein. In the circumstances Mr. Gupta contends that the respondent could charge interest u/s 80 of the Negotiable Instrument Act, 1881 (hereinafter referred to as the Act). He also contends that if it may be held that there was any oral agreement between the parties by which the appellant was liable to pay interest at the rate of 12 cent per annum, even then the appellant in view of section 80 of the Act is not liable to pay interest at the rate of more than 6 per cent per annum. The learned counsel for the respondent has very vehemently urged that the respondent under an agreement was entitled to charge interest at the rate of 12 per cent per annum and there are no sufficient grounds to upset the finding of the learned trial Court on this question.

I find that there is substance in the contention of the learned counsel for the appellant. In the plaint it has not been pleaded by the plaintiff-respondent that there was any oral agreement between the parties by which the appellant agreed to pay interest at the rate of 12 per cent per annum. The plea which has been taken by the plaintiff-respondent in the plaint regarding the agreement of the appellant to pay interest is as follows :--

The plaintiff is entitled to Rs. 8,700/- as principal and Rs. 3,300/- as interest at the rate of 12 per cent per annum.

The learned counsel for the respondent has not specifically referred to any para of the plaint in which the respondent specifically pleaded that the appellant agreed to pay interest at the rate of 12 per cent per annum. In case the respondent was relying on the agreement of the defendant-appellant, he should have pleaded so. It is well settled principle of law that in the absence of the pleading, no amount of evidence led by the parties can be taken into consideration. In the aforesaid observations I am fortified by the observations of Privy Council in Siddik Mahomed Shah v. Mt. Saran and others AIR 1973 PC 50 (1). In the circumstances the respondent is not entitled to recover interest at the rate of 12 per cent per annum on the basis of agreement. Section 80 of the Act provides that--

When no rate of interest is specified in the instrument, interest on the amount due thereon shall, notwithstanding any agreement relating to interest between any parties to the instrument, be calculated at the rate of six per centum per annum, from the date at which the same ought to have been paid by the party charged, until tender or realization of the amount due thereon, or until such date after the institution of a suit to recover such amount as the Court directs.

According to the provisions of section 80, the plaintiff-respondent is entitled to recover the interest on the amount of Rs. 3000/- from the date of loan i.e. November 24, 1959 to October 6, 1962 at the rate of six per cent per annum which amounts to Rs. 516/-. The contention of the learned counsel for the appellant in the alternative has also great force. Chapter VI of the Act which consists of four sections namely sections 78 to 81 relates to ''Payment and Interest''. Section 78 says that "Subject to the provisions of Section 82, clause (c) payment of the amount due on a promissory note, bill of exchange or cheque must, in order to discharge the maker or acceptor, be made to the holder of the instrument." In the section, the three documents namely, promissory note, bill of exchange and cheque have been mentioned. Section 79 deals with interest when rate is specified and section 80 with interest when no rate is specified. Section 79 is as follows :--

When interest at a specified rate is expressly made payable on a promissory note or bill of exchange interest shall be calculated at the rate specified on the amount of the principal money due thereon, from the date of the instrument, until tender or realization of such amount, or until such date after the institution of a suit to recover such amount as the Court directs.

A reading of section 79 shows that it deals with only two types of negotiable instruments, namely, promissory notes and bill of exchanges. It does not deal with cheques. According to the said section interest on a loan paid on the basis of a promissory note and bill of exchange can be charged as expressly agreed between the parties. In section 80 it is provided that no person is entitled to charge interest at a rate more than 6 per cent per annum notwithstanding any agreement relating to interest between the parties to the instrument until the interest is specified in the instrument. From the aforesaid two sections it is clear that no one can charge interest at a rate higher than six per cent per annum if the amount has been advanced on the basis of a negotiable instrument, unless a higher rate of interest is specified in the instrument. Negotiable instrument has been defined in section 13 and it means "a promissory note, bill of exchange or cheque payable to order or to bearer". In the present case the amount of Rs. 3000/- has been given on loan by the plaintiff-respondent on the basis of a cheque. No rate of interest can be mentioned in a cheque. Therefore, the question of mentioning interest in cheque in dispute does not arise. In the circumstances the plaintiff-respondent is not entitled to charge interest at a rate higher than six per cent per annum from the appellant on the amount of Rs. 3000/- which was advanced on the basis of cheque on the ground that there was oral agreement to pay interest at the rate of 12 per cent per annum between the parties.

The last contention of the learned counsel for the appellant is that the trial Court has not correctly worked out the interest. The amounts of interest on Rs. 5700/- from October 8, 1959 to October 6, 6 1962 at the rate of 12 per cent per annum and on Rs. 3000/- from November 24, 1959 to October 6, 1962 at the rate of six per cent per annum come to Rs. 2049/- and Rs. 516/- respectively. Thus the respondent is now entitled to recover Rs. 2565/- on account of interest.

For the reasons recorded above, I partly accept the appeal, modify the decree of the trial Court and decree the suit of the plaintiff-respondent to the extent of Rs. 11, 265/- with proportionate costs of the trial Court. In view of the partial success of the appeal, I leave the parties to bear their own costs of the appeal.