The State Bank of India vs Laishram Mohan Singh and Another

Manisana, J.—This appeal arises from the judgment and decree passed by the Sub-Judge-II Manipur in Original (M) Suit No. 21 (A) of 1973.

The facts: The Plaintiff-bank brought the suit against the Defendants claiming for a decree of Rs. 15,082.14 and future interest. The case of the Plaintiff in brief was that the bank agreed to accommodate the defancant-I Mohan Singh with loan (sic) to the extent or 25,000/- under small business finance scheme for the improvement of his business under the cash credit form (Sic) of loan. One of the terms of the loan was that Mohan Singh Defendant-1) would repay on demand the sum lent to him with interest at 2 1/2% above the State Bank of India, advanced rate minimum 9 1/2% per annum. At the time of filing; of the suit, The defendant-1 Mohan Singh was liable to pay the suit sum of Rs. 15,082.14. Out of Rs. 15,082.14, Rs. 10,697 was the principal amount, Rs. 3,862.99 was the interest and Rs. 522.15 was the insurance premium and other incidental charges. The Defendant-2 Babu Singh was the surety. The Defendants contested the suit by denying all the allegations made in the plaint except that Defendant No. 1 approached the bank for financial assistance as a loan. Further the case of the Defendants was that they never executed any document in favour of the bank.

The trial Court decreed the suit for a sum of Rs. 10,230/- (sic)of the claim of Rs. 15,082.14 and future interest at the of rate of 12% per annum. Being aggrieved by the judgment and decree, the bank filed this appeal. It may be mentioned here that the Defendants did not file appeal against the decree.

The trial Court has held that the Plaintiff failed to (Sic)ove the agreement of cash credit (Ext.-4), the agreement of Guarantee (Ext.-6) and the demand promissory note (Ext.-7). However, the trial Court, basing on three cheques (Exts. 9, 10 and 11), the money put back by Defendant-1 Mohan and other materials on record, has held that the Defendant-1 Mohan was (sic)able to pay a sum of Rs. 10,230/- with future interest at the rate of 12% per annum. But the trial Court dismissed the claim for Rs, 3,862.99 as interest and that for Rs. 522,15 as insurance premium and other incidental charges.

Mr. L. Nandakumar Singh, the learned Counsel for the Appellant, has submitted that the trial Court has illegally held that the documents, agreement for cash credit (Ext. 4), agreement of guarantee (Ext.-6) and demand promissory note (Ext. 7) have not been proved. Mr. Ibobi Singh, the learned Counsel for the Respondents, has submitted that the mere proof of the signature of the Defendants is not sufficient to prove the contents of a document. Mr. Ibobi Singh has further submitted that the agent of the bank did not sign the agreement (Ext.-4) at the place marked for the signature of the agent the bank, therefore, it could not be said that the agreement of cash credit (Ext. 4) was an agreement under the law.

Therefore, the first point for determination whether the documents, agreement of cash credit (Ext.-4) agreement guarantee (Ext. 6) and demand promissory note (Ext. 7) have been proved?

As regards the agreement of guarantee ( Ext. 6 ), in the body of the document there are blanks. There is no evidence and/or materials to show how they were meant to be filled even (sic) it is permissible under the law to give such evidence. That part, in the body of the document, it is stated that a promissory note of Rs. 25,000/- had been delivered to the bank. But the promissory note (Ext. 7) relied on by the bank is of Rs. 15,000/-. There is no evidence and/or material to clarify the matter. Therefore, the bank has failed to prove the document (Ext. 6) and cannot be used against the Defendant-2 Babu Singh, that is, the Defendant-2 cannot be held liable as a surety as hold by the trial Court.

As regards the promissory note (Ext. 7), it is a prin(Sic)ed pro-note form wherein all the blanks are filled up except he blank for the purpose of entering the amount. In other words, in the body of the pro-note the amount is left blank (sic)it has not been filled in. The pro-note reads.

Rs. 15000/-

ON DEMAND...promise to pay Shri L. Babu Singh or order at the State Bank of India IMPHAL the sum of Rupees....for value received with interest from this date at 2 1/2% above S.B.I. advance rate Minimum 9 1/2% with monthly rests.

Sri Mohan Singh

Stamps

Dt. 23.2.70 Eng.

There is also tin indorsomeut on the bank of the instrument in the following words:

Please pay to State Bank of India or Order.

L. Babu Singh

Normally, the logical order of operations in respect of printed pronote form is that the form should be first filled up, then it should be signed by the signor, than it should be accepted, then it should be negotiated, and then indorsement should be made in accordance with the Negotiable Instruments Act, for short "the Act". Section 20 of the Act deals with instrument executed or signed in bank, or inchoate stamped instrument. Therefore, the blank was intended to be filled in by the holder thereof with amount intended by him to be paid in view of the provisions of Section 20. But till the amount has been added the instrument is incomplete.

On the left hand top corner of the instrument "Rs. 15,000/-" is written in figures. As a matter of common usage or practice, the marginal figure is added at the top of an instrument as a note, index or summary of the contents of she instrument. But the amount of loan has not been filled in. The question then is,-Whether such a pronote is invalid as it is incomplete? Although, the amount of loan of Rs, 15,000/- has not been entered in the blank space in the body of the note for entering the amount, the rate of interest has been filled up creating thereby a right and/or an obligation in favour of the holder. Therefore, the marginal figures �Rs. 15,000/-� shows that it was the sum for which the ptonote was signed, and the amount can be ascertained from the face of the instrument. In view of the above discussions where an instrument is incomplete till the instrument has been filled in, the document is not invalid simply because it was incomplete. It creatos certain rights and obligation as it was acceptance in blank. This view of mine finds support from the decisions in Garrard v. Lewis (1882) 10 QBD 30, and Maung Po v. Ye Chein. AIR 1923 Rangoon 97. In Garrard (Supra), it has been held:

A document, which contains such a marginal index, but in which n blank is left by the acceptor to be filled in with the dominent and ell important statement in the body of the bill defining the amount for which it is accepted, is not a perfect bill till this dominent portion of the bill bas been filled in. The document is not invalid simply because it is incomplete. It creates certain rights and obligations just as a blank acceptance does.

In Maung Po (Supra), it has been held that it is a valid pro-note, though the amount not mentioned in the body of the document if it is mentioned some where on the document. If the amount can be ascertained from the face of the paper, the form of expression is immaterial.

In view of the above discussions, the pro-note is admissible in evidence if it is otherwise proved. The evidence of P.W. 1 Mitter and P.W. 5 Lakshmi Kumar Sharma is that Defendant Mohan Singh executed the promissory note in their presence. The witnesses have also identified the signature of Mohan Singh (Ext. 7/2) on the instrument (Ext. 7). The evidence of Defendant-1 Mohan Singh is that some blank papers and printed forms were brought by an employee of the bank, and on his advice he put signatures on those pa pars, In such a circumstances, it can safaly be held that the signature of the Defendant Mohan on the pro-note has been proved, and that the Defendant-1 Mohan Singh signed the promissory note. Therefore, presumption arisen u/s 118 of the Act as to consideration, date, etc. as provided thereunder. The Defendant has , not produced any evidence to rebut the presumption u/s 118. In this view of the matter it is held that the contents t or facts stated in the instrument (Ext. 7) have been proved.

As regards the document. Ext. 4, it is styled as an agreement of cash credit. There are two blanks left unfilled in Clause (11) of the documents. There is no evidence and/or material on records to show that how they were meant to be filled. However, if the document Is proved in accordance with law, this principle or dominent part of the document relating to the obligation to pay the principal amount, interest, etc. can be taken into consideration as it is separable from other clauses including Clause (11).

Cash credit is one of the from of advances by the bank. A Cash credit is an arrangement or agreement between a banker and his customer by or under which a banker allows his customer to borrow money upto a certain limit against bond of credit with surety generally. A customer need not borrow, an once, the whole of the amount be is likely to required. He can draw such amounts as and when required. He can put back any amount which he may find with him during the period of loan. Interest and mode of payment depends upon the agreement.

Under the cash credit form of loan, as already stated above, bank allows his customer to borrow money upto a certain limit against a bond of credit. The question than is-what is the nature of the document, Ext. 4, "although it is styled as agreement for cash credit Band means a written obligation to repay loan under a specific term. Usually or commonly, binds arc secured by mortage or otherwise. The document. Ext. 4, shows that there is an obligation to repay the loan with interest under the terms mentioned therein written on the stamp papers of Rs. 15 chargeable under Article 15 of the Stamp Act for a bond. Therefore the Ext. 4 is a bond of credit and as such the absence of the signature of the bank will not invalidate the document, Ext. 4, if it is otherwise proved in accordance with law.

As regards the proof of content of a document, the Supreme Court, in Ramji Dayawala and Sons (P) Ltd. Vs. Invest Import, has held:

Undoubtedly, mere proof of the handwriting of a document would not tentamount to proof of all the contents or the facts stated in the document. If the truth of the fact stated in a document is in issue mere proof of the handwriting and execution of the document would not furnish evidence of the truth of the facts or contents of the document. The truth or otherwise of the facts or contents so stated would have to be proved by admissible evidence, i.e, by the evidences for the truth of the facts in issue.

(emphasis added)

Therefore, mere proof of the handwriting of the document or signature of the executant would not tantamount to prove all the contents or facts stated in the document if the truth of the facts stated in the document is an issue. In such a case, the truth or otherwise of the facts or contents as stated have to be further proved by admissible evidence.

Keeping the above principle in view, let ma now examine if there is any admissible evidence to prove the document (Ext. 4.). Exts. 1 and 8 are the certified copies of the entries in the books of account, which were regularly kept in the course of business of the bank. P.W. 1 Mitter was the agent of the bank. His evidence is that the Exts. 1 and 8 tallied with the original produced by him in course of him examination. These documents are admissible u/s 4 of t he Banker''s Book of Evidence as they are entries in Banker''s Book. It has already been held that the pro-note (Ext. 7) is admissible. Ext 9 to 11 are the cheques, on the basis of which a sum of Rs. 13000/- was paid to the Defendant 1 by the bank. Relying on the said cheques the trial Court decreed the suit in favour of the bank, and no appeal has bi ten filed by the Defendants against the decree. However, I have perused the evidence on record for my satisfaction. The findings of the trial Court ralating to checks are based on the evidence of P.W. 1, Mitter and P.W. 2 13. K. Das and arc reasonable. Ext. A/5 is an application for opining cash credit account. The evidence of P.W. I Mitter is that the Defendant signed application in his presence. He identified his signature (Ext. A-5/2 ) and that of Defendant-1 (Ext. 5/1). His further evidence is that the 3 ink opened a cash credit account in the- name of i.e Defendant-1 and issued a cheque book.

The evidence of P.W. 1 Mittor and P.W. 5 Lakshmi Kumar Shamir is that the Defendant-1, Mohan, executed an agreement (Ext. 4) in their presence. They identified Exts. A/4 (I) to A/A(8) as the signatures of the Defendant-1 appended to the agreement. The evidence of P.W. 3 Ibopishak Singh is that the Defendant-1 Mohan promised to pay Rs. 1,100.- per week and put his signature in the recovery progress register. The register bears the signature of the Defendant-1. The evidence of the P.W. 1 Mitter is that the Defendant-1 approached him for a loan to the extent of Rs. 25,000/-. For the time being he sanctioned to the extent of Rs. 16,000/- and he agreed to give him higher limit if his stock position was improved. It was thereafter reduced to Rs. 13,000/- as his stock position was found worse.

Considering the overall circumstances of the case and taking into the consideration of oral evidence of the P.W.s discussed above and the documents Exts. 1, 5 and 7 to 11, in my view, the document (Ext. 4) has been proved as a bond.

The next point for determination is whether the bank is entitled to Rs. 10,697/- claimed as principal aid also the sum of Rs. 522/- claimed as insurance premium and other incidental Charges. Out of Rs. 10,697/- claimed by the bank, the trial Court decreed for a sum of Rs. 10,230/-. Therefore, the difference was of Rs. 467/- and the sum of Rs. 52215, the only evidence are the entries made in the books of account (Exts. 1 and 8).

Section 34 of the Indian Evidence Act runs:

Entries in books of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability.

A bare perusal of Section 34, it is clear that the entries in the books, of account shall not alone be sufficient to charge the Defendants with liability. In Chandradhar Goswami and Others Vs. The Gauhati Bank Ltd., the Supreme Court has held:

Original entries alone u/s 34 of the Evidence Act would not be sufficient to charge any person with liability and as such copies produced u/s 4 of the Bankers'' Book Evidence Act obviously cannot charge any person with liability. Therefore, where the entries are not admitted it is the duty of the bank if it relies on such entries to charge any person with liability, to produce evidence in support of the entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence. But no person cm be charged with liability on the basis of mere entries whether the entries produced are the original entries or copies u/s 4 of the Bankers'' Books Evidence Act.

(emphasis added)

The Defendant did not admit the correctness of the books of account and challenged them. Therefore, in the light of the decision of the Supreme Court, it is to be examined whether there is any evidence and/or material on record to show that the money was advanced as indicated in the book of account. No evidence was produced by the bank to show that the said sum of money was advanced as indicated in the entries. Even the writer of the books was not examined. Therefore, the learned Judge has rightly held that the bank failed to prove that the Defendants were liable to pay a sum of Rs. 476/- and Rs. 522.15. In this view of the matter, so far the decree for Rs. 10,230/- is concerned the judgment and decree of the trial Court is affirmed.

The last point for determination is whether the Defendant is liable to pay interest. It has already been held that the agreement (Ext. 4) is a bond, and that it has bean proved. In Ext. 4, there is stipulation or provision for payment of interest at the rate specified thereunder. If there is an agreement to pay interest it would have to be allowed independently of the provisions of the Indian Interest Act. That apart, a specified rate of interest, viz. 2 1/2% above S B I advance rate minimum 9 1/2% has been expressly made payable on the pro-note (Ext. 7). Therefore, the Defendant-1 Mohan Singh is also liable to pay interest u/s 79 of the Act also.

For the foregoing reasons, the appeal is partly allowed. Accordingly, it is hereby ordered and directed the Defendant shall pay a sum of Rs. 3,862.99 minus interest on Rs. 476/- in addition to the decree passed by the learned trial Judge. The interest on Rs. 476/- will be calculated at the time of the payment or the execution of the decree. Considering the facts and the circumstances of the case, the parties are to bear their own costs throughout. With the above observations, and directions, the appeal is disposed of.