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Judgment
I.K. Kotwal, J.—This appeal under the Letters Patent is directed against the judgment of a learned Single Judge of this Court (Hon'ble Chief
Justice Jaswant Singh as his Lordship then was) and arises in the circumstances which present-by follow:
The plaintiff, who is the respondent in this appeal, has brought a suit under Order XXXVII of the Civil P.C. for the re-covery of Rs. 7,630/-
against the defendant, who is the appellant before us. An objection was taken by the defendant-appellant that the suit pronote being insufficiently
stamped Section 35 of the Stamp Act was a clear bar to its admissibility in evidence and no relief could be given to fine plaintiff-respondent on the
basis of this promote. An additional issue was raised by the learned single Judge in the following terms:
Whether the suit pronote is insufficiently stamped and as such is inadmissible in evidence?
After hearing the arguments of the learned Counsel for the parties, the learned single Judge came to the conclusion that the suit pronote being
insufficiently stamped was inadmissible in evidence, but keeping in view the averments made by the plaintiff in Paras, 2 and 3 of the plaint, the
learned single Judge held that the plaintiff-respondent was entitled to get relief on the basis of the original debt. Operative part of the judgment
appealed against reads thus:
The issue is disposed of accordingly, and it is held that the plaintiff is entitled to sue on the original debt and adduce other evidence in support
thereof.
Mr. Bhardawaj, the learned Counsel for the appellant has assailed the judgment under appeal on two grounds. His first contention is that once the
learned single Judge held that no relief could be given to the respondent on the basis of the suit pronote, the provisions of Order XXXVII of the
Civil P.C. ceased to apply to the suit and the suit amount being only Rupees 7,630.00, the High Court could not try the suit on its original side. The
other contention raised by the learned Counsel is that the suit is based purely upon a pro-note which was not and could not be a collateral security,
and the plaint also does not contain any averment entitling the respondent to get relief on the basis of the original consideration in the alternative.
The learned single Judge, according to Mr. Bhardwaj has erred in making out a case for original consideration in favour of the respondent.
Mr. Gupta, the learned Counsel for the respondent has on the other hand argued that the execution of the pronote having been admitted by the
appellant both in his written statement as well as in the endorsement made on the pronote itself, the bar created by Section 35 of the Stamp Act
cease to apply and the respondent is entitled to relief on the basis of the suit pronote. Reiterating what he had argued before the learned single
Judge, Mr. Gupta has contended that the pronote was nothing but a collateral security for the repayment of the debt incurred by the appellant
under the Hire Purchase Agreement. Lastly the learned Counsel urged that in case this Court comes to the conclusion that the suit pro-note is
inadmissible in evidence, the suit should be transferred under the provisions of Section 24 of the Civil P.C. to any subordinate court competent to
try the same.
The first contention which falls for our consideration in this appeal is as to whether the respondent is entitled to any relief on the basis of the suit
pronote. It is not disputed that the pronote is insufficiently stamped. It is also not disputed that the pronote cannot be admitted in evidence even on
payment of penalty. That the appellant had admitted the execution of the pronote both in his written statement as well as in the endorsement made
by his counsel on the back of the pronote is also incontrovertible. No difficulty, therefore, would have arisen in adjudging the suit pronote
inadmissible in evidence within the meaning of Section 35 of the Stamp Act in the absence of the aforesaid admissions made by the appellant. Mr.
Gupta has argued that the moment the appellant admitted the execution of the pronote, the question of its admissibility lost all importance and the
respondent could not be troubled any more by the mischief of Section 35 of the Stamp Act. To substantiate his argument Mr. Gupta has placed
reliance on a Single Bench decision of the Madras High Court in. Ponnuswami Chettiar Vs. Kailasam Chettiar, , wherein Rajamannar, J. while
relying upon an early Single Bench Judgment of the same Court in Alimane Sahiba Vs. Kolisetti Subbarayudu, held that when the fact of execution
of a document is admitted, Section 58 of the Evidence Act shall have full play, overriding any provision to the contrary in any other law including
the Stamp Act. These authorities no doubt support the contention raised by Mr. Gupta, the learned Counsel for the respondent; but with due
respect to the learned Judges we are unable to agree with the principle laid down in these authorities.
Section 35 of the Stamp Act to the extent it is relevant for the purpose of deciding this appeal is reproduced as below:
No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to
receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly
stamped.
A plain reading of this Section would show that it creates a three-fold bar in respect of unstamped and insufficiently stamped document; (1) that it
shall not be received in evidence; (2) that it shall not be acted upon; and (3) that it shall not be registered or authenticated.
Section 58 of the Evidence Act lays down the rule of dispensing with the formal proof of a document by examining its scribe or other marginal
witnesses or by any other mode of proving a document, when the execution of the document has been admitted by the party against whom it is
sought to be used. The object of the Section is only to use the admission pertaining to the execution of a document as an alternative to its formal
proof and not to use such an admission as a lever to circumvent other provisions of law restricting or prohibiting the use of such document. One of
such provisions of law is contained in Section 35 of the Stamp Act which ordains that an unstamped or insufficiently stamped document shall
neither be used in evidence nor shall the same be acted upon. It is, therefore, manifest that before a party can ask the court to give it relief on the
basis of a document, it shall have to cross the hurdle of Section 35 of the Stamp Act to enable the Court not only to receive such a document in
evidence but also to enable it to act upon it.
The correctness of the aforesaid judgments viz.: Ponnuswami Chettiar Vs. Kailasam Chettiar, and Alimane Sahiba Vs. Kolisetti Subbarayudu,
came to be considered by a Division Bench of the same High Court in Yasodammal and Another Vs. Janaki Ammal, wherein their Lordships held
that the aforesaid cases were not correctly decided and relying upon the judgment of the Bombay High Court in Chenbasappa v. Lakshman
Ramchandra ILR (1894) Bom 369, and a few other judgments of the Madras High Court observed as follows:
It is necessary to refer to the decision in Ponnusami Chettiar v. Kailasam Chettiar where Rajamannar J. (as he then was) has followed the earlier
decision Alimane Sahiba Vs. Kolisetti Subbarayudu, and passed a decree in favour of the plaintiff based upon the admission of the execution of the
unstamped promissory note contained in the written statement of the defendant. The attention of the learned Judge dimes not appear to have been
drawn to the several decisions referred to earlier and in particular to the observations of the Privy Council about the significant language of Section
35 of the Stamp Act. The attention of the learned Judge was also not drawn to the fact that in the later decision in Alimane Sahiba Vs. Kolisetti
Subbarayudu, was not followed. With great respect to the learned Judges, the view taken in Alimane Sahiba Vs. Kolisetti Subbarayudu, is not
correct and is opposed to the plain language of Section 35 of the Stamp Act (vide also Mullah's criticism, in Mullah's Stamp Act at P. 126);
At another place in the same judgment, their Lordships observed as under:
A perusal of the judgment shows that where a party is placed in such a predicament of not being able to validate a document by payment of
penalty, he could nevertheless be awarded relief if the unstamped document was in the possession of the other side. With respect we are unable to
agree with this view, in the first place, as observed earlier, Section 35 of the Indian Stamp Act operates as a clear bar and even the. admission of
the defendant cannot be relied upon by the plaintiff to award any relief to him. The attention of the learned Judge does not appear to have been
drawn to an earlier decision in Subbiah Pillai Vs. Muthathal Achi, in which it was held that even if the contesting party was in wrongful possession
of an unstamped document, relief could not be given to the other side. Chandrasekhar Aiyar J. who delivered the judgment took the view that the
prohibition contained in Section 35 of the Stamp Act was absolute i.e. the document could not be acted upon for any purpose whatever and the
fact that the document was being wrongfully retained by the other side would not make any difference. The learned Judge observed that once it
was conceded that the document in question was unstamped, the suppression by the defendant of the document would not render the position for
the plaintiff any the better as the prohibition in Section 35 would be attracted and would come into play.
We are in respectful agreement with the view taken by the Madras High Court in Yasodammal and Another Vs. Janaki Ammal, .
Mr. Gupta then drew our attention to a Supreme Court judgment in Javer Chand and Others Vs. Pukhraj Surana, and laying main stress upon
the parenthesis in Para. 5 of the judgment tried to emphasise that admission in regard to the execution of a document enough to overlook the
requirements of Section 35 of the Stamp Act. We are afraid we cannot agree with Mr. Gupta. The principle laid down in this authority is based
upon facts which are slightly different from the, facts of the instant case. In the case before the Supreme Court not only execution of the document
was admitted by the defendant but the document was also allowed to be ""admitted in evidence"" and exhibited as such by the defendant without any
objection and thereafter permitted to be used ""in examination and cross-examination"" of the witness in the trial court. Under these circumstances it
was held that once provisions of Section 36 of the Stamp Act were at-. tracted to a case, the bar created by Section 35 of the Stamp Act could
no more be pressed into service by the defendant either in the trial court or in the appellate court or in the revisional court and the document would
be not only admissible in evidence but relief could also be given to the plaintiff on the basis of the document on its proof. Some of the observations
made by their Lordships of the Supreme Court may be reproduced as under:
...Where a question as to the admissibility of a document is raised on on the ground that it has not been stamped, or has not been properly
stamped, it has to be decided then and there when the document is tendered in evidence. Once the Court rightly or wrongly, decides to admit the
document in evidence, so far as the parties are concerned, the matter is closed. Section 35 is in the nature of a penal provision and has far reaching
effects. Parties to a litigation, where such a controversy is raised, have to be circumspect and the party challenging the admissibility of the
document has to be alert to see that the document is not admitted in evidence by the court. The Court has to judicially determine the matter as
soon as the document is tendered in evidence and before it is marked as an exhibit in the case. The record in this case discloses the fact that the
hundis were marked as Exs. P-1 and P-2 and before the endorsement admitted in evidence under the signature of the court. It is not therefore, one
of these cases where a document has been inadvertently admitted, without the court applying its mind to the question of its admissibility. Once a
document has been marked as an exhibit in the case and the trial has proceeded all along on the footing that the document was an exhibit in the
case and has been used by the parties in examination and cross-examination of their witnesses. Section 36 of the Stamp Act comes into operation.
Once a document has been admitted in evidence, as aforesaid, it is not open either to the trial court itself or to a court of appeal or revision to go
behind that order. Such an order is not one of those judicial orders which are liable to be reviewed or revised by the same court or a court of
superior jurisdiction.
In the present case the pronote was yet to be admitted in evidence and the appellant had taken care not to allow it to be admitted in evidence and
exhibited as such by the court. The Supreme Court judgment, therefore, cannot come to the rescue of the respondent. The observation of their
Lordships of the Supreme Court in para. 5 of the judgment; ""in our opinion, the High Court has erred in law in refusing to act upon those two
Hundies which had been properly proved â€" if they required any proof, their execution having been admitted by the defendant himself"", would
only mean that once the execution of the Hundies was admitted by the defendant, the plaintiff was not required to adduce any evidence in proof
thereof; but nothing beyond that. The Supreme Court authority, therefore, also does not help the respondent.
The learned Counsel for the respondent has also placed reliance upon three more authorities viz: Lionel Edwards Ltd. Vs. State of West Bengal,
, Nagindas Ramdas Vs. Dalpatram Ichharam alias Brijram and Others, and Farbewerke Hoechst Aktiengesellschaft Vormals Meister Lucius and
Bruning a Corporation etc. Vs. Unichem Laboratories and Others, . These authorities are also of no help to the respondent for the simple reason
that no objection in regard to the inadmissibility of any document for want of due stamp was either taken or could be taken in these cases. The law
on the subject may therefore, be summed up as follows:
(i) A court is not competent to admit a document in evidence and give relief on its basis merely on the ground that the execution of the document
has been admitted by the party against whom the relief is sought when the document is not duly stamped within the meaning of Section 35 of the
Stamp Act.
(ii) If a document not duly stamped as such is tendered in evidence, the party against whom the document is sought to be used should object to its
admissibility before the document is admitted in evidence by the court, and where such objection has been taken, the court must decide the
objection in a judicial manner before it admits the document in evidence.
(iii) If a party against whom a document not duly stamped within the meaning of Section 35 of the Stamp Act is tendered in evidence, permits the
document to be admitted in evidence, or exhibited as such by the court without any objection, it cannot object to its admissibility at a later stage in
the trial court nor even in the appellate or revisional court, and relief can be given by the court on the basis of such a document.
The suit pronote has not been admitted in evidence by the learned single Judge as such no relief can be given to the respondent on its basis in
view of the clear bar contained in Section 35 of the Stamp Act. The contention raised by Mr. Gupta, therefore, fails.
This brings us to the argument made by Mr. Bhardawaj, the learned Counsel for the appellant that the learned single Judge had no material
before him to make out a case of relief on the basis of original consideration in favour of the respondent. We are not impressed by this argument,
however attractive it may be. Admittedly the loan â€" whatever its amount which may be ultimately found by the court -- was advanced in
pursuance to the Hire Purchase Agreement between the parties. It cannot be gainsaid that even if the pronote is excluded the respondent would be
entitled to a decree on the basis of the Hire Purchase Agreement on proof of its terms. The pronote cannot be considered as the only document
evidencing the loan much less when admittedly it does not embody all the terms of»the contract which are to be found in the Hire Purchase
Agreement alone. It is no doubt true that the respondent has not in so many words stated that the pronote was got executed by way of a collateral
security, yet from a combined reading of paras. 2 and 3 of the plaint and the corresponding paras in reply thereto of the written statement, it clearly
transpires that the pronote was nothing but a collateral security for the payment of debt advanced under the Hire Purchase Agreement. The learned
Counsel for the appellant has also argued that as the pronote was executed immediately after the loan was advanced, so it was enough to show
that the pronote could not have been executed by way of collateral security. To support his argument, the learned Counsel has referred to a
Division Bench decision of this Court in Ghulam Mohd. Labroo v. Habib Ullah 1966 Kash LJ 149 : AIR 1966 J & K 127 wherein Chief Justice
S.M.F. Ali (as His Lordship then was) laid down three tests for determining whether or not a promissory note could be said to have been executed
by way of a collateral security. The three tests which His Lordship laid down are reproduced below:
(i) Cases where the plaintiff sues merely on the basis of a pronote pure and simple without alleging an independent transaction. In such cases,
where the pronote is found to be inadmissible in evidence there can be no difficulty in holding that the. suit will have to be dismissed and the
transaction of loan cannot be proved.
(ii) There may be cases where there is an independent transaction of loan and after a sufficient interval of the said transaction a pronote is executed
either to guarantee the transaction entered into between the parties before or to evidence the transaction. In such cases the preponderance of
authorities are that where the original transaction is independent of and separable from the pronote the plaintiff can certainly be allowed to prove
the transaction and succeed on proof of the same.
(iii) Then there may be cases' where a transaction has been entered into between the parties and a pronote has been executed simultaneously.
These are the cases which present serious difficulty and various High Courts in India have expressed divergent views as to whether or not in such
cases the plaintiff can be allowed to fall back upon the basis of the original transaction, if the pro-note is found to be inadmissible.
The learned Counsel has argued that his case squarely falls under the third test laid down in the said authority. We have gone through this
judgment and we do not find that it supports the contention of the learned Counsel for the appellant. That there is no time gap between advancing a
loan and execution of the pronote, may be one of the tests for holding that the pronote is not a collateral security but surely it cannot be the only
test. We are in respectful agreement with the view taken by the Full Bench in Perumal Chettiar Vs. Kamakshi Ammal, where their Lordships
observed as follows:
The fact that the execution of the promissory note is contemporaneous with the borrowing cannot exclude the possibility of the instrument having
been given as collateral security or by way of conditional payment. Whether a suit lies on the debt apart from the instrument therefore depends on
the circumstances under which the instrument was executed.
Every case has to be decided on its own peculiar facts and as already observed the facts of this case show that the suit pronote was a collateral
security for payment of loan advanced under the Hire Purchase Agreement. The contention raised by Mr. Bhardawaj is therefore, overruled.
The only question which now remains to be decided is whether the learned single Judge was right in continuing with the trial of the suit which
was no more a suit to which the provisions of Order XXXVII of the Civil P.C. were applicable. There is no dispute between the parties so far as
the question of the jurisdiction of the High Court to continue the trial of the suit is concerned, and Mr. Gupta, the learned Counsel for the
respondent has conceded before us that in the circumstances as found by us the suit would be triable by a lower court which may be otherwise
competent to try it but not by the High Court. In these circumstances, therefore we are not called upon to give any finding on the right of the High
Court to try the suit. Suffice it to say that as no constitutional point is involved in the suit nor do the parties agree that the suit should be tried by the
High Court itself for the ends of justice, we are of the opinion that the suit should be tried by some lower court. Mr. Gupta's prayer however is that
the suit may. be transferred by us to some lower court in exercise of the power vested in us u/s 24 of the Civil P.C. Mr. Bhardawaj, the learned
Counsel for the appellant, has questioned our right to take action u/s 24 of the Civil P.C. on the ground that we were competent to transfer the suit
only if it was legally pending before the learned single Judge. Since the suit was not based on a negotiable instrument nor its value exceeded
Rupees 20,000/- it cannot according to the learned Counsel, be deemed to be ""pending"" before the learned single Judge of this Court within the
meaning of Section 24 of the Civil P.C. It is difficult for us to swallow this argument. The jurisdiction of a court to try a suit depends upon the
allegations made in the plaint and not on the defence set up in the written statement. A suit will be deemed to have been validly filed in a court if the
averments made in the plaint gave jurisdiction to the court to try the same. If later on it was found that the averments made in the plaint were not
correct, it cannot be said that the suit was not legally pending in the court. The result might be different where the averments in the plaint ex facie
showed that the court did not have jurisdiction to try the suit. As the averments in the plaint in the present case clearly brought the suit within the
ambit of Order XXXVII of the Civil P.C. the suit must be deemed to have been legally pending before the learned single Judge.
In taking this view we are fortified by a Full Bench judgment of the Patna High Court in Shyam Nandan Sahay and Others Vs. Dhanpati Kuer
and Others, wherein their Lordships held as under:
Where, however, there is no total lack of jurisdiction, but, on the contrary, the averments in the plaint, if not challenged manifestly bring the case
within the jurisdiction of the court in which it is filed, its proceedings are perfectly within jurisdiction, and want of jurisdiction in such case, can
rightly be waived. In other words this kind of defect in jurisdiction is not fundamental in character and does not amount to anything more than a
mere irregularity in the exercise of jurisdiction.
The lack of pecuniary jurisdiction comes under the latter of the above two kinds of defects, and therefore, is not fundamental in character. It can be
waived by any of the parties, and, if not challenged at the proper time, it cannot be questioned subsequently. This is apparent from Section 11 of
the Suits Valuation Act, which clearly shows that there is no apparent defect in the frame of a suit due to low valuation and it does not take away
the inherent jurisdiction of the court to entertain it.
Where, therefore, on the valuation given in the plaint a particular court has jurisdiction to entertain the suit, a transfer of the same to another court
under the provisions of Section 24 of the CPC is competent even though subsequently it is found that its real valuation was beyond the pecuniary
jurisdiction of that court.
We, therefore, confirm the finding of the learned single Judge on the issue of admissibility of the pronote and hold that the respondent is not entitled
to any relief on the basis of the suit pronote. We also confirm the finding of the learned single Judge that the respondent has pleaded an alternative
case for relief on the basis of original debt but we transfer the case from the file of the learned single Judge of this Court to the file of the Sub Judge
(Chief Judicial Magistrate) Jammu for its trial. To this extent the appeal is allowed, but in the circumstances of the case without any order as to
costs.
Parties are directed to appear before the Sub Judge (C.J.M.) Jammu, on January 4, 1977.
A.S. Anand, J.
I agree.