R. Duraisamy vs S. Rajan

M. Vijayaraghavan, J.—The Second Appeal is arising out of the Judgment and Decree passed by the First Appellate Court in A.S. No. 234 of 1997, dated 14.12.1998 in reversing the Judgment and Decree passed by the Trial Court in O.S. No. 223 of 1996, dated 27.1.1997.

The Second Appeal was preferred by the Appellant/First Defendant. For better appreciation of the Second Appeal, brief averments made in the Plaint are as follows :

The First Defendant is the nephew of the Plaintiff and other Defendants are business partners. The First Defendant approached the Plaintiff for substantial amount for his business and on the Promissory Note, the Plaintiff, on 28.8.1991, gave a sum of Rs. 20,000/- in cash to the First Defendant as a loan. As agreed by the First Defendant, the Plaintiff went to his business office on the same day evening and obtained the Promissory Note executed by the First Defendant as an acknowledgment and as security for the debt advanced. In spite of the demand, the First Defendant did not care to pay the interest on the amount borrowed. Hence, the Plaintiff sent a notice dated 13.2.1993 demanding to repay the loan with accrued interest. But the First Defendant sent a reply notice dated 19.2.1993 admitting the borrowal but denied the other allegations. Later, the Plaintiff came to know that the First Defendant has defrauded and cheated the Plaintiff by handing over the insufficient stamp Promissory Note, which is a fraudulent act. The Plaintiff has filed a Suit as against Defendants 2 to 16 to avoid the technical defects since they are the partners of M/s Elite Bankers, Erode and he has prayed to pass a decree against the Defendants severally and jointly to pay a sum of Rs. 28,100/- with future interest at the rate of 18% from the date of Suit, till the date of realization of the entire debt with costs.

Brief averments of the Written Statement and the Additional Written Statement filed by the First Defendant are as follows :

It is false to say that the First Defendant approached the Plaintiff for loan and on 28.8.1991, the Plaintiff gave a sum of Rs. 20,000/- in cash to the First Defendant as loan and also on the same day evening, the First Defendant gave a printed cover containing a printed Promissory Note signed by him as acknowledgment and security of the advance received. It is false to say that the First Defendant admitted his borrowal in his reply notice. It is false to say that the transaction was between the Plaintiff and the First Defendant alone and the First Defendant has no independent obligation to the Plaintiff to repay the loan amount. The Suit Promissory Note is not supported by consideration and it is a fabricated and forged document and also there is no cause of action for filing the Suit. The First Defendant has denied the signature found in the Promissory Note and the First Defendant never borrowed any amount from the Plaintiff at any point of time. On 26.11.1991 at about 7.30 p.m. the Accused in S.C. No. 190 of 1994 on the file of the I Additional Sub-Court, Erode, along with 10 unknown persons trespassed into the office of the First Defendant, assaulted and threatened to kill him and also obtained the First Defendant''s signature and thumb impressions in 10 unwritten stamp papers, 10 unwritten conquer papers, 10 unwritten white papers and in several unwritten Promissory Notes over its stamps. The First Defendant suspected that the Plaintiff might have fabricated the Suit Promissory Note with the help of the above said signatures. Since the Promissory Note is insufficiently stamped, it is not an admissible evidence under the law. Hence, the Suit has to be dismissed with costs.

Brief averments of the Written Statement of the Tenth Defendant adopted by Defendants 2 to 9 & 11 to 16, which are as follows :

These Defendants are not aware of the transaction between the Plaintiff and the First Defendant. These Defendants are not liable to pay any amount borrowed by the First Defendant by playing fraud on him. The Plaintiff was cheated by the First Defendant by handing over the Promissory Note of M/s Elite Bankers, Erode, in which the First Defendant was the Managing Partner and the partnership business was closed as early as 31.3.1989, which was started on 22.5.1985. The First Defendant, without producing the correct account, committed many irregularities in the conduct of the business and recklessly borrowed amount from others by using the business name. The partners of the firm/Defendants 2 to 10 filed a Suit in O.S. No. 73 of 1993 for dissolution of the firm and the same is pending before the I Additional Sub-Court, Erode. Defendants 11 to 16 have nothing to do with the said partnership business M/s Elite Bankers, Erode and they are not liable to pay to the Plaintiff for the borrowing of the First Defendant. The borrowal of Rs. 20,000/- made by the First Defendant is nothing but a forgery and the other Defendants are not responsible or liable to pay the same. There is no cause of action to file the Suit as against these Defendants and the Suit is liable to be dismissed with costs.

The following substantial questions of law arise for consideration in the Second Appeal :

Whether the First Appellate Court is right in accepting the insufficiently stamped Promissory Note as admissible in evidence under Section 35 of Indian Stamp Act read with Section 91 of Indian Evidence Act only because it has been marked as exhibit before the Trial Court?

Whether the First Appellate Court is right in construing the Suit as a Suit on original date of cause of action, while the Promissory Note is insufficiently stamped and not acceptable in evidence, without any prayer for amendment to that effect?

Whether the First Appellate Court is right in decreeing the Suit on an inadmissible Promissory Note because the Appellate/Defendant had failed to examine himself as witness?

The learned Counsel for the Appellant/First Defendant submitted that the Suit itself is filed, based on Ex. A1-Promissory Note, dated 28.8.1991, which is insufficiently stamped and the same could not be considered as a valid evidence and the deficit of the stamp to the value of five paise has not been properly dealt with under Section 36 of the Indian Stamp Act, 1899. Moreover, at the time of marking itself before the Trial Court, the said document Ex. A1 was objected and hence, the provisions of Section 36 of the Indian Stamp Act, shall not apply to the facts and circumstances of the case, since the Suit itself is based on the Promissory Note filed by the Plaintiff and the decision of the First Appellate Court in reversing the finding of the Trial Court on the basis of the original cause of action is unsustainable. In the light of the borrowal, the proof is quite contra to the pleadings made and hence, the decision of the First Appellate Court necessarily has to be reversed. There is no quarrel over the insufficiency of the stamp affixed on Ex. A1-document construing Promissory Note.

But, it is the consistent case of the First Respondent/Plaintiff that it is not a Promissory Note and it is only a receipt, since the money, which is advanced as loan amount was paid by the Plaintiff to First Defendant in the morning of 28.08.1991 and in the evening, the said Ex. A1 document was obtained as acknowledgment as well as security for the same. Moreover, it was pointed out that even though there is an objection raised while marking of Ex. A1 through PW1 (Plaintiff), the said objection was overruled by the Trial Court and the same was marked as a receipt. Even then the learned Counsel for the Appellant/First Defendant is aggrieved by the decision arrived at by the Trial Court, there is nothing on record that at time he has preferred any Revision, though there was sufficient time. Even thereafter, till date, the decision of the Trial Court in marking Ex. A1, document as an admissible evidence by construing the document as a receipt, has not been questioned before the Appellate Forum and hence the decision in admitting the above Ex. A1 document as a receipt, holds good. Furthermore, the learned Counsel for the First Respondent/Plaintiff submitted that the Trial Court, without adverting to the above decision made by it, while marking Ex. A1 document as receipt, gave a finding that Ex. A1 document is a Promissory Note, which was insufficiently stamped and thereby dismissed the Suit.

In the light of the above submission made, a careful perusal of the original deposition of PW1 reveals that at the time of marking of Ex. A1 document, the Trial Court admitted Ex. A1 document as receipt and aggrieved by the decision made thereunder, the Appellant/First Defendant has not desired to go for Appeal/Revision. As rightly pointed out by the learned Counsel for the First Respondent/Plaintiff, no Appeal/Revision was preferred, even though the First Appellate Court made a reference to the Revision, the same is not borne out by the records.

Hence, it is made clear that after a perusal of the Trial Court Judgment, it is seen that the learned Trial Judge, who himself has admitted the document A1 as a valid evidence without adverting to the above decision made earlier at the time of recording the evidence, came to the conclusion that Ex. A1 is a Promissory Note, which is insufficiently stamped and thereby gave a decision, rejecting the claim made under Ex. A1 Promissory Note, and dismissed the Suit.

In the Second Appeal, the three substantial questions of law raised are with reference to the insufficient stamp affixed to the Promissory Note (i.e.) Ex. A1 document and with regard to the transaction of Rs. 20,000/-, that is borrowal by the First Defendant from the Plaintiff and there is a concurrent finding in this regard by the Trial Court as well as the First Appellate Court, over which, there is no quarrel in this Second Appeal.

Moreover, the learned Counsel for the First Respondent/Plaintiff emphasized the above case of the Plaintiff that the Promissory Note was obtained by the Plaintiff in the afternoon, for which a sum of Rs. 20,000/- was paid on the same day morning. It is nothing but an acknowledgment and security for the loan borrowed. Under these circumstances, it is only a receipt and not a Promissory Note and he cited a Judgment of this Court in Sivabh agiathammal and others v. Thangappa Nadar, 1976 (89) LW 94. This Court has held as hereunder :

"3. On Appeal, the Lower Appellate Court upheld the borrowing but however confirmed the finding that the Promissory Note being insufficiently stamped it was not open to the Plaintiff to recover the same and the Suit will not lie on the debt since the Promissory Note embodied all the terms of the contract.

A careful reading of the Plaint will clearly show that the borrowing is in the morning of 24th April 1964 and in the evening the Promissory Note came to be executed. Therefore, the Courts below are not rights in holding that the Suit cannot be maintained on the original cause of action. I say so, because the very Full Bench judgment on which both the Courts below relied Perumal v. Kamakshi (1) clearly lays down whether a Suit lies on the debt apart from the instrument therefore depends on the circumstances under which the instrument was executed. If really the instrument is only as evidence of the leading, certainly the Suit will lie. In this connection, I may usefully refer to the observations of the Full Bench made at page No. 789 :

"The question is, how far does this Rule or the reason of the Rule apply to cases in which a person borrowing money executes as part of the same transaction a Promissory Note in favour of the same lender ? That the terms as to rate of interest, date of payment, etc, form part of the contract and cannot be proved except by proof of the note seems to be more or less admitted".

"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."

Therefore, the finding of both the Courts that the Suit is not maintainable is incorrect and is liable to be set aside. In as much as the Lower Appellate Court has held that the borrowing is true and the Suit will have to be necessarily decreed, and consequently, the Plaintiff succeeds and he will be entitled to a decree as prayed for. But the parties will bear their respective costs throughout. No leave.

Taking into consideration the fact that the loan amount of Rs. 20,000/- was paid on 28.8.1991 and Ex. A1 document was executed on the same day evening and, moreover, the decision of the trial Court in admitting Ex. A1 document as a receipt, the decision of this Court cited by the learned Counsel for the Plaintiff is squarely apply to the facts and circumstances of the case and agreeing with the same, this Court holds that Ex. A1 document is a receipt and not a Promissory Note and hence, the question of insufficient stamping does not arise. Above all, as already pointed out, for argument sake, even if Ex. A1 is construed as a Promissory Note and insufficiently stamped, the said Ex. A1 document has been admitted by the trial Court while marking and, as against this decision, there is nothing on record to show that the Appellate Court has reversed this finding and hence, the document once is admitted as an evidence, such admission shall not be questioned at any stage of the same Suit (or) proceedings on the ground that the instrument has not been duly stamped.

A careful reading of Section 36 of the Indian Stamp Act, 1899 would show that the document once admitted in evidence, even though it is insufficiently stamped, cannot be questioned. Under these circumstances, even though Ex. A1 is Promissory Note and insufficiently stamped and already admitted as a evidence, it shall not be questioned now by the Appellant. Even though the formal objection was made, which was overruled and a decision was also made by the Trial Court in admitting Ex-A1 as a documentary evidence, which is made final. Moreover, the learned Counsel for the First Respondent/Plaintiff has placed reliance upon the ruling of the Apex Court, emphasizing the above statutory provisions contained under Section 36 of the Indian Stamp Act, 1899 in Barium Chemicals Limited v. Vishwa Bharati Mining Corporation, 2009 (16) SCC 262. Para No. 3 of the above said judgment is extracted hereunder :

"3. The order of the High Court does not conform to the requirements of Sections 35 & 36 of the Stamp Act. A document which is not duly stamped and is also not registered though required to be registered can be admitted in evidence for collateral purposes under proviso to Section 49 of the Registration Act but so far as the stamp duty is concerned, if the document is not duly stamped it has to be dealt with under Section 35 of the Stamp Act before it is admitted in evidence failing which, by virtue of Section 36, admission of document in evidence cannot be questioned at any later stage."

The judgment cited by the learned Counsel for the First Respondent/Plaintiff is squarely apply to the facts and circumstances of the present case and with due respect of the above judgment, this Court holds that Ex. A1 document, which was admitted as an evidence, shall not be questioned in the proceedings by the Appellant/First Defendant.

After taking into consideration the decision of the Trial Court in admitting Ex. A1 as a receipt, reversing the judgment of the Trial Court by the First Appellate Court based on the original cause of action, is in no way construed as a decision arrived at by the First Appellate Court without having any evidence on record and as against the law.

It is the definite case of Defendants 2 to 16 including the Appellant/First Defendant that the execution of Ex. A1 document was totally denied and moreover, the signature of the First Defendant in Ex. A1 was obtained by force by the Accused in S.C. No. 190 of 1994 along with 10 unknown persons on 26.11.1991. Moreover, such a signature and thumb impression of First Defendant were obtained in 10 unwritten white papers, 10 unwritten conquer papers and in several unwritten Promissory Notes over its stamps and one of the signatures obtained, had been forged as Promissory Note and the present Suit is filed by the Plaintiff.

Even though such a wild allegation is made to rebut the claim made by the Plaintiff, the Appellant/First Defendant has not chosen to examine himself to substantiate his case before the Trial Court. Pointing out the above conduct of the Appellant/First Defendant, the learned Counsel for the First Respondent/Plaintiff submitted that the Court can presume that the case set up by the Defendants is not correct and very well reject the contention made by the Appellant/First Defendant and he also cited a judgment of the Apex Court in Vidhyadhar v. Mankikrao and another, AIR 1999 SC 1441(1). Paras 15 & 16 of the above said judgment are extracted hereunder :

"15. It was Defendant No. 1 who contended that the Sale Deed, executed by Defendant No. 2 in favour of the Plaintiff, was fictitious and the whole transaction was a bogus transaction as only Rs. 500/- were paid as sale consideration to Defendant No. 2. He further claimed that payment of Rs. 4,500/- to Defendant No. 2 at his home before the registration of the deed was wholly incorrect. This plea was not supported by Defendant No. 1 as he did not enter into the witness box. He did not state the facts pleaded in the Written Statement on oath in the Trial Court and avoided the witness box so that he may not be cross examined. This, by itself, is enough to reject the claim that the transaction of sale between Defendant No. 2 and the Plaintiff was a bogus transaction.

Where a party to the Suit does not appear into the witness box and states his own case on oath and does not offer himself to be cross-examined by the other side, a presumption would arise that the case set up by him is not correct as has been held in a series of decisions passed by various High Courts and the Privy Council beginning from the decision in Sardar Gurbaksha Singh v. Gurdial Singh, AIR 1927 PC 230. This was followed by the Lahore High Court in Kirpa Singh v. Ajaipal Singh, AIR 1930 Lahore 1 and the Bombay High Court in Martand Pandharinath Chaudhari v. Radhabai Krishnarao Deshmukh, AIR 1931 Bombay 97. The Madhya Pradesh High Court in Gulla Kharagjit Carpenter v. Narsingh Nandkishore Rawat, AIR 1970 Madh Pra. 225, also followed the Privy Council decision in Sardar Gurbakhsh Singh''s case (AIR 1927 PC 230) (supra). The Allahabad High Court in Arjun Singh v. Virender Nath, AIR 1971 Allahabad 29, held that if a party abstains from entering the witness box, it would give rise to an inference adverse against him. Similarly, a Division Bench of the Punjab and Haryana High Court in Bhagwan Dass v. Bhishan Chand, AIR 1974 P&H 7, drew a presumption under Section 114 of the Evidence Act against a party who did not enter into the witness box."

Even though the Defendants have raised a serious objection about the existence of Ex. A1 document, it is fairly admitted by the learned Counsel for the Appellant/First Defendant that the First Defendant has not entered into the witness box before the Trial Court to prove his consistent case. Hence, the judgment cited by the learned Counsel for the First Respondent/Plaintiff is squarely apply to the facts and circumstances and with due respect after following the above judgment, this Court holds that the strong case put forth by the Appellant/First Defendant cannot be true and the same is rejected.

It is not disputed that the First Appellate Court, after reversing the judgment and decree of the Trial Court, granted a decree as prayed for jointly and severally as against Defendants 1 to 16. As against the First Appellate Court''s judgment and decree, the Appellant/First Defendant alone has preferred this Second Appeal and there is no Appeal or Cross-Appeal preferred by Defendants 2 to 16 and thereby the findings of the First Appellate Court already made is final and binding with regard to Defendants 2 to 16.

As already held by this Court that Ex. A1 is a receipt, the decision of the First Appellate Court in reversing the decree passed by the Trial Court on the basis of original cause of action and moreover, the status of the document Ex. A1, even though, construed as a Promissory Note and insufficiently stamped which was duly admitted as an evidence, the same could not be questioned in the subsequent proceedings as per Section 36 of the Indian Stamp Act, 1899.

Since the findings given by the First Appellate Court are based on the available evidence of both oral and documentary, and also following the statutory provisions contained under the Indian Stamp Act, 1899, the third substantial question of law raised by this Court is decided in favour of the First Respondent/Plaintiff and against the Appellant/First Defendant.

In the result, the Second Appeal is dismissed with costs. The judgment and decree of the First Appellate Court are hereby confirmed.