The Firm of Shamlal and Co. and Others vs V.R.C. Rajagopala Chettiar

The plaintiffs are the appellants. The suit was filed by them for recovery of a sum of Rs. 6,490 due under a promissory note dated 21-4-1966

and for directing the defendants to pay the amount in court, in default of which, directing the plaint schedule properties to be sold for realisation of

the amount so decreed. It appears that the plaintiffs, a firm of partnership, were lending moneys to the defendant as and when he wanted a loan.

On 21-10-1964, the defendant executed a security document under which he gave his self-acquired properties as security for the due payment of

all moneys that might be borrowed by the defendant from the plaintiff under hundies, promissory notes, accounts and cheques and giving right to

the plaintiffs to proceed against the security for realisation of the moneys due, in default of payment. On 21-4-1966, the plaintiffs lent a sum of Rs.

6,000 under a promissory note executed by the defendants. On the ground that he had defaulted in payment of the money as per the promissory

note, the present suit was filed for recovery of the same. Along with the plaint, the original promissory note was also filed. The defendant raised a

number of contentions, one of which was that the suit promissory note was not properly stamped and that therefore it was inadmissible in evidence.

The trial court took the issue relating to the admissibility of the suit promissory note and ultimately came to the conclusion that though it is a

promissory note, it is not payable on demand and that therefore it should have been stamped under Article 49(b) of Schedule I to the Stamp Act

and that since the promissory note bore only a stamp of 25 paise, it was not admissible in evidence under S. 35 of the Stamp Act. Since the suit

itself was based on the promissory note, it was dismissed without going into the other issues. This judgment and decree of the trial Court was

confirmed by the lower appellate court. It is against the said judgment and decree that the present second appeal has been filed.

The suit promissory note reads as follows:--

Ezhudhikoduttha promissory note ennavendrol--Naladhu thedhi en kudumba selavirkum vyabarathirkum merpadiyaridamirundhu mulam Rs.

6,000 aarayiram mattum rokkamaka petrukkondu merpadi thokaiyai merpadiyarukkavadhu merpadiyar uttaravu petravarkalukkavadhu ketta

pozhudhu koduppadhaka oppukkondu indha rupaikku madham ondrukku Rs. 100 kku vaddi rubai 1 vidham seluthi oppukkondu madham

orumurai rubai 1,000 rubai aayiram veedham asal thokaikku seluthi varuvadhakavum oppukkondu ezhudhikoduttha promissory note.

It may be seen from the above extract that though in the earlier part of the document there is an unconditional undertaking to pay the sum of Rs.

6,000 on demand, the later portion says that the amount due under the promissory note is payable in instalments of Rs. 1,000 towards the principal

and the interest due each month. Since the amount is not payable on demand and it is payable in instalments as per the later portion of the

document, it is not one falling under Art. 49(a) as a promissory note payable on demand, and it comes under the category of a promissory note

payable on demand, and it comes under the category of a promissory note payable otherwise than on demand, and the stamp duty will have to be

paid as one for a bill of exchange. This promissory note was stamped with 25 paise stamp as a promissory note payable on demand. Under S. 35

of the Stamp Act, the instrument in question is therefore not admissible in evidence.

The learned counsel for the appellants contended that even if the promissory note is not admissible in evidence, the appellants are entitled to rely

on the original cause of action and claim a decree on that basis. According to the learned counsel, the cause of action for the suit was the

borrowing of Rs. 6,000 on 21-4-1966 and the promissory note executed on that date should be treated as a collateral security. He also contended

that there was already a registered security bound executed on 21-10-1964, giving the self-acquired properties of the defendant as security for the

due payment of all the moneys that might be borrowed by him from the plaintiffs and that in those circumstances, when the money was lent, it could

have been recovered under the original security bond itself and that when they obtained the promissory note, that promissory note also should be

treated as collateral security. There can be no doubt that if a debt exists, apart from the promissory note and independently of it, the plaintiffs can

sue for recovery of that debt, independently without basing his claim on the promissory note itself. That is what we normally call as ''on the original

cause of action''. Whether a person who has lent money on a promissory note, which is inadmissible in evidence owing to a defect in the stamping,

can sue to recover the debt apart from the note, depends on the circumstances under which the instrument was executed. As held by the Full

Bench in Perumal Chettiar Vs. Kamakshi Ammal, if the note was given in respect of an antecedent debt, or as collateral security, or by way of

conditional payment or if the note does not embody all the terms of the contract, the true nature of the transaction can be proved, but if the

promissory note embodies all the terms of the contract, no suit on the debt will lie. It is true that the fact that the execution of the promissory note is

contemporaneous with the borrowing cannot exclude the possibility of the instrument being given as a collateral security. But that will have to

depend, as already stated on the facts and circumstances of each case. In this case, the promissory note was not executed for any antecedent debt

or a liability which was existing de hors the execution. The execution of the promissory note and the lending formed part of the same transaction

and by no stretch of imagination, the promissory note in this case could be treated as a collateral security for a debt already existing. It might be

that if they had not obtained a promissory note, they might even be able to recover money on the basis of lending and enforce the same against the

security given to them on 21-10-1964. But when once lending is under a promissory note and there was no antecedent debt as such, the plaintiffs

are not entitled to say that they are claiming the money on the original cause of action. The suit also therefore could not be considered to have been

based on the original cause of action. The second appeal accordingly fails and is dismissed. But there will be no order as to costs.

Appeal dismissed.