Suresh Chandra vs Satish Chandra

N.N. Sharma, J.—This is a Defendant''s appeal directed against judgment and decree of Sri Rati Ram, learned Civil Judge, Rampur dated 19th March, 1974, in Civil Appeal No. I 27 of 1972 arising out of original suit No. 526 of 1970 by which learned Civil Judge affirmed the judgment and decree of learned Munsif who allowed Plaintiff''s claim.

It appears that Plaintiff Respondent Satish Chandra filed a suit against Defendant-Appellant for recovery of Rs. 2200/- with the allegations that Defendant-Appellant borrowed a sum of Rs. 1285/- from Plaintiff on 1-10-1967 and executed a pronote and receipt in his favour as a collateral security. The amount carried interest at the rate of Rs. 2% per month and was payable on demand. Nothing was paid despite demands; hence the suit.

Defendant contested the suit on the pleas that he had never borrowed any amount from the Plaintiff. The pronote and receipt were without consideration. The Defendant had partnership business with one Shyam Behari Lal Jain who is father-in-law of Plaintiff. Defendant had taken some money time to time from Shyam Behari Lal Jain which was to be adjusted against the partnership accounts. Shyam Behari Lal Jain had obtained this pronote and receipt for the consideration of money he had advanced. The pronote and receipt were Benami and, therefore, the Plaintiff had no right to sue. The pronote in suit was void for being materially altered.

Learned Munsif allowed the claim and the learned lower appellate court dismissed the appeal with costs as given above. Aggrieved by the decision, Defendant has filed this appeal.

I have heard learned Counsel for the parties and perused the record.

On behalf of Appellant, it was pointed out that according to the concurrent findings of the courts below, the advance was made simultaneously with the execution of the pronote and receipt and the loan was advanced by the Plaintiff on the basis of pronote executed by the Defendant.

It was further found that there has been a material alteration in the pronote and receipt. It appears that this advance of Rs. 1285/-was evidenced by pronote Ex. 1. Only two stamps were affixed on it. Each stamp was worth ten paisa. When Plaintiff learnt that the pronote is deficiently stamped, he affixed another stamp of ten Naya Paisa and altered figure ''20'' in the pronote by changing the digit ''2'' into ''3''. He also extended the line on the new stamp as pointed out by expert, Mohd. Inamur Rahaman DW 1 in his statement and report Ex. A 6 (paper No. 23-A) and as testified by Defendant Suresh Chandra DW 2. This finding that there has been material alteration in the pronote executed by Defendant was not assailed before me on behalf of Respondent also.

Thus, learned Counsel for the Defendant-Appellant urged that it was not open to the Plaintiff to fall back upon the original cause of action when the pronote was inadmissible in evidence.

Receipt Ex. 2 runs as below:

I Suresh Chandra Jain received Rs. 1285/- us the consideration of the promissory note executed by me from Satish Chandra Jain and execute this receipt to be an evidence.

Thus, the learned lower appellate court held that the money was borrowed by Defendant on the basis of promissory note only. The promissory note was executed first and the money was taken lateron. Learned lower appellate court also found that the pronote was not executed as a collateral security. Advance of money and execution of pronote and receipt were simultaneous. Thus, this receipt disclosed that the amount was advanced by the Plaintiff on the pronote executed by Defendant. Advance of loan was not an independent act apart from the execution of pronote receipt. However, learned lower appellate court did not go the whole hog and held that original contract was provable by oral evidence also.

It appears that in Lakshmi Narain v. Mst. Aparna Devi AIR 1953 All. 535 in which Plaintiff claimed a sum of Rs. 1500/- on the basis of a promissory note dated 8-9-1941 executed by Defendant in favour of Plaintiff''s father Chandra Shekhar for a sum of Rs. 1250/- with interest at 6 per cent per annum, it was held, after a review of several authorities that a promissory note or other negotiable instrument is taken in discharge of a loan only when the contract it that the debtor will not be liable if the promissory note or other negotiable instrument could not be enforced. In all other cases, Plaintiff had a right to fall back on the original contract. In view of this authority, the claim was allowed by learned appellate court. Learned Counsel for the Appellant pointed out that on the aforesaid finding recorded by the learned lower appellate court, the claim should not have been allowed. In his statement, Satish Chandra merely testified that Defendant Appellant had taken a sum of Rs. 1285/- from him as loan. The amount carried interest at the rate of Rs. 2% per month. The amount was payable on demand. Pronote and receipt were executed in his presence. Defendant executed them himself. The documents were attested by the witnessess. He denied any alteration. Faqir Chand (PW 2) who is alleged to be an attesting witness of Ex. 2 also testified about the advance. It was pointed out that there was forgery in the receipt also and his signature occurred in different ink and different language which did not exist at the time of execution of the receipt. On this point, there is the statement of Suresh Chandra DW 2 who testified that he never borrowed the amount from Plaintiff. He had dealing with Shyam Behari Lal Jain, father-in-law of Plaintiff and it was at his request that he executed the pronote and receipt in favour of Plaintiff. He further testified about the two stamps affixed on the pronote at that time. He further testified about the alteration in figure ''20'' which was changed to ''30''.

Thus, he did not testify about any agreement amongst the parties to the effect that the promissory note was taken in discharge of the loan and there was any agreement that the debtor will not be liable if the promissory note could not be enforced. In this view of the matter, learned lower appellate court rightly found that Section 91 of the Evidence Act did not operate as a bar to the suit.

However, learned Counsel for the Appellant pressed Section 87 of Negotiable Instruments Act before me and his contention was that in view of the material alteration, the claim should not have been allowed. Section 87 of the aforesaid Act reads as below:

Any material alteration of a negotiable instrument renders the same void as against any one who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties;

any such alteration, if made by an endorsee, discharges his endorser from all liability to him in respect of the consideration thereof."

The provisions of this section are subject to those of Sections 20, 49, 86 and 125.

There is no dispute on the point that there has been material alteration in the pronote in this case. The rule relating to effect of material alteration in a deed was pointed out in Nathu Lal v. Mt. Gomti Kuar 1940 AWR (PC) 107 : AIR 1940 160 at page 163 in the following terms:

A material alteration is one which varies the rights, liabilities, or legal position of the parties ascertained by the deed in its original state or otherwise varies the legal effect of the instrument as originally expressed, or reduces to certainty some provision which was originally unascertained and as such void, or may otherwise prejudice the party bound by the deed as originally executed.

The effect of making such an alteration without the consent of the party bound is exactly the same as that of cancelling the deed. The avoidance of the deed is not retrospective and does not revest or re-convey any estate or interest in property which passed under it. And the deed may be put in evidence to prove that such estate or interest so passed or for any other purpose than to maintain an action to enforce some agreement therein contained.

The next question is whether the Plaintiff on such negotiable instrument could sue the Defendant on the original contract in respect of an instrument which was negotiated to him though he could not sue on the instrument as being void by the alteration.

Learned Counsel for the Respondent argued before me that as the Plaintiff could fall back upon the original contract so the material alteration in document Ex. 1 should not operate as a bar and Plaintiff was entitled to a refund of the advance u/s 65 of the Contract Act.

I do not subscribe to this view for the simple reason that there is positive finding of the learned lower appellate court before me on the point that the money was borrowed by Defendant in this case on the basis of pronote vide receipt Ex. 1. Pronote was executed first and money was taken lateron. The contention of Plaintiff that money was borrowed first and pronote was executed lateron as a collateral security was repelled by the learned lower appellate court. I confirm this finding. Thus, the advance of money in this case was not independent of the execution of pronote but on the basis of the pronote itself.

In Sheo Nayak Vs. Babau and Another , it was observed:

Where it is not possible to separate the transaction of the alleged loan from that of the pronote and the making and handing over of the note and the payment of the money form part and parcel of the same transaction and if the pronote turns out inadmissible in evidence for any reason, say for a material alteration in the pronote after its execution, the pronote is rendered void u/s 87, Negotiable Instruments Act, it is not open to the Plaintiff suing on the pronote to recover his money by proving orally the terms of the contract by setting up a case independent of the note. Though the pronote can be used in evidence to prove the fact that a particular sum was paid on a particular date, the pronote having been executed to set out the terms of contract, cannot be used in evidence nor external oral evidence can be given to prove that money was paid as loan to Defendant to be repaid by him to Plaintiff, such evidence not being admissible u/s 91, Evidence Act.

Where therefore a Plaintiff suing on the pronote has been found to have voluntarily and fraudulently caused material alteration in the pronote and has thus destroyed the evidence of his debit, he is not entitled to a decree on the original cause of action, the note having been rendered inadmissible in evidence by such alteration.

In Palakurthi Appalaraju v. Tyla Yedukondalu AIR 1938 A P 713, it was laid;

When owing to its invalidity a promissory note cannot be the basis of a suit, the Plaintiff can obtain a decree on the basis of the original debt only if the debt has an independent existence apart from the promissory note. When there is no interval of time between the two and the debt itself is evidenced by the note, the Plaintiff cannot rely on the debt.

A similar point came up for consideration in Laduram Marwari Vs. Bansidhar Marwari and Another, in which it was observed:

Where a Plaintiff sues on a handnote which is the basis of the cause of action not existing independently of it, and the handnote is proved to be tampered with the Plaintiff is not entitled to any decree not even for the amount admitted to be borrowed by the Defendant.

Such forgery in a negotiable instrument defeating the object of section 87 of the Negotiable Instruments Act cannot be countenanced by a court of law.

In view of the aforesaid facts of the case, I find that the impugned judgment and decree cannot be allowed to stand.

No other point is argued before me.

In the result, the appeal is allowed. The impugned judgment and decree are set aside. Plaintiff''s suit is dismissed with costs throughout.