Umrao Singh vs Raunak Singh

Dhavle, J.—This application u/s 25, Small Cause Courts Act, is made by the defendant in a suit on a hand-note which was admittedly executed by him. Receipt of the consideration was also admitted, but the defence was taken that he had executed the hand-note as an agent on behalf of one Mt. Ramsawari Kuer from whom the plaintiff had agreed to buy certain properties, that the plaintiff had paid the amount mentioned in the hand-note as earnest money for his purchase, that the sale had fallen through on account of the plaintiff''s default and that the earnest money was therefore forfeited, while the hand-note was only a "nominal document" executed by the defendant in proof of plaintiff''s payment. The learned Judge below held that Section 92, Evidence Act, "bars any oral evidence in support of the defence" and as the execution of the handnote and the passing of consideration thereunder were admitted, he decreed the suit without any further evidence.

It has been contended on behalf of the defendant-applicant that evidence in support of his plea was wrongly excluded by the lower Court. Section 92, Evidence Act, no doubt excludes oral evidence to contradict, vary, add to, or subtract from, the terms of any contract which have been reduced to the form of a document. But Proviso 3 to the Section lays down that the existence of any separate oral agreement constituting a condition precedent to the attaching of any obligation under such contract, grantor disposition of property may be proved. This has been considered in a recent decision of the Judicial Committee, AIR 1938 198 (Privy Council) where Lord Wright pointed out a distinction relevant to the application of Proviso 3. A collateral agreement which alters the legal effect of a written instrument must be excluded, but an agreement that the instrument should not be an effective instrument until some condition is fulfilled, e.g. an agreement suspending the coming into force of the contract dontained in the promissory note (then under consideration) constitutes a condition precedent within the terms of the proviso and may therefore be proved.

The written statement of the defendant has been placed before me and may be summarized as amounting to this, that the handnote is only a receipt for the earnest money, that the purpose for which the money was received has been wrongly stated in the handnote and that it was not intended to attach any obligation to the handnote as such at all or (as seems to be implied) at any rate until Mt. Ramsawari Kuer failed to complete the sale to the plaintiff unjustifiably. Handnotes given in somewhat similar circumstances are nob unknown; see for example, Ahmed Saheb Bapu Saheb v. Ubhaiya Harsi A.I.R (1924) . Bom. 44 , a one of the oases cited in the lower Court, in which the note was given by way of indemnity for a contingent liability, and Shah and Kemp JJ. held that evidence of the separate agreement was admissible and that the decision in Vishnu Ramchandra Joshi Vs. Ganesh Krishna Sathe, (also referred to below) was distinguishable on the facts. In AIR 1938 198 (Privy Council) the view taken in Calcutta was approved that the proper meaning of prov. (3) to Section 92 is that the contemporaneous oral agreement to be admissible must be to the effect that a written contract was to be of no force at all and was to constitute no obligation until the happening of a certain event, which in this case would apparently be an unjustifiable failure on the part of the lady to do her part in the projected sale.

It was pointed out in Firm Sheo Prasad Ram Prasad Vs. Govind Prasad and Others that ''in a suit on a promissory note it is open to the defendant to prove that.

the promissory note was not the substantive liability such as it would be if given for a loan or for the payment of the price of goods sold and deliver, ed but was a collateral undertaking or recognition of liability arising out of another contract.

altogether, and this, not only under proviso (3) to Section 92, Evidence Act, but also u/s 46, Negotiable Instruments Act, which provides that as between the maker and the payee (inter alia) it may be shown that the instrument was delivered conditionally or for a special purpose only and not for the purpose of transferring absolutely the property therein. The same point was further elaborated in Bhogi Ram Vs. Kishori Lal whereas in Firm Sheo Prasad Ram Prasad Vs. Govind Prasad and Others . Sri Ram v. Sobha Ram Gopal Rai AIR (1922) All. 213 referred to below, was dissented from.

The only other ruling referred to by the lower Court that need be noticed is Hira Lal v. Benarsi Das A.I.R (1925) . Lah. 576 which followed the not unquestioned decisions in Sri Ram and Others Vs. Farm Sobha Ram Gopalrai, and Vishnu Ramchandra Joshi Vs. Ganesh Krishna Sathe, already dealt with. The learned advocate for the petitioner has cited AIR 1936 70 (Privy Council) a recent decision of the Judicial Committee, in which Sections 91 and 92, Evidence Act, were considered, and it was held that there is nothing in either Section to exclude oral evidence that (notwithstanding a written instrument which purports to embody a contract) there was no agreement between the parties and therefore no contract, and oral evidence showing that the document though signed by the party impugning it, was not intended to be acted upon, but was intended to be used solely for another purpose, was held to have been rightly admitted. It is thus clear that the defendant was entitled to adduce oral evidence in support of what appears to have been his substantial plea.

On behalf of the plaintiff opposite party reference has been made to Section 28, Negotiable Instruments Act, and Sadasuk Janki Das v. Sri Kishen Pershad A.I.R (1918) . P.C. 146 in support of the contention that it is not open to the defendant to escape liability on the ground that in signing the hand-note he was really acting for Mt. Ramsawari Kuer. The contention may be accepted, but does not meet the substantial plea that there was no such presently operative contract between the parties as is embodied in the hand-note, that the handnote was delivered conditionally or for a special purpose only and not for the purpose of trans, ferring absolutely property therein, or that there was a separate oral agreement constituting a condition precedent to the attaching of any obligation under the handnote.

The defence evidence has yet to be adduced, and the written statement does not precisely formulate the substantial plea, either in the terms of Section 46, Negotiable Instruments Act, or in the terms of any of the provisos to Section 92, Evidence Act. I have therefore dealt with the substantial plea in an alternative form; but, as in Firm Sheo Prasad Ram Prasad Vs. Govind Prasad and Others . I must ask the lower Court in admitting the evidence, which has been excluded on an erroneous view of the law, to do so with great care and be careful to see that in substance advantage is not taken of this decision by the defendant and his witnesses to trim their case according to what they now understand to be the admissible aspect of it in the view of the law. The decision of the lower Court is set aside and the case remanded for trial in accordance with the law. The costs of this hearing, including a hearing fee of one gold mohur, will abide the event.