ANIL K.NARENDRAN J.
R.F.A.No.253/2005 arises out of the judgment and decree in O.S.No.709/1999 of the Principal Sub Court, Ernakulam, and R.F.A.No.254/2005 arises out of that in O.S.No.437/2000 of the 1st Addl. Sub Court, Ernakulam. The unsuccessful defendant is the appellant in both these appeals. As parties are the same and the contentions raised in both these cases are similar, we dispose of these appeals by a common judgment.
2. R.F.A.No.253/2005 is filed by the defendant in O.S.No.709/99 on the file of the Principal Sub Court, Ernakulam. The plaintiff, the respondent herein, filed the said suit for recovery of money for realization of a sum of ₹38,97,520.55 from the defendant together with future interest at the rate of 15% per annum on the principal amount of ₹29 lakhs and costs. By judgment and decree dated 20.12.2003, the court below decreed the suit in part allowing the plaintiff to recover an amount of ₹29 lakhs together with 6% interest from 5.1.1997 till the date of realisation and proportionate costs of the suit, from the defendant and all his assets. It is challenging the said judgment and decree of the court below, the defendant is in appeal before us.
3. The plaint averments, in brief, are as follows; The defendant borrowed a total sum of ₹29 lakhs from the plaintiff as on 5.1.1997. After receiving the said amount from the plaintiff, the defendant executed a promissory note dated 5.1.1997 in favour of the plaintiff, promising to pay on demand to the plaintiff or order the borrowed sum of ₹29 lakhs with interest at the rate of 30% per annum. Major portion of the amount of ₹29 lakhs borrowed by the defendant was generated by the plaintiff utilising his capacity to raise funds from others. The defendant, in spite of demands, did not pay any amount towards the aforesaid liability, under one pretext or the other. The plaintiff issued a notice dated 15.12.1999 demanding the defendant to pay the aforesaid amount with interest on or before 18.12.1999. The defendant did not send any reply and he failed to comply with the said demand. The promissory note executed by the defendant on 5.1.1997 is supported by consideration and the suit is filed within the period of limitation. In case the defendant takes up a contention that the document dated 5.1.1997 is not a promissory note, the plaintiff is entitled to a decree as prayed for on the basis of original consideration. Therefore, the plaintiff prayed for a decree in his favour, making the defendant liable and directing the defendant to pay to the plaintiff the sum of ₹38,97,520.55 only together with future interest at the rate of 15% per annum on ₹ 29 lakhs and costs of the suit. The suit was filed on 21.12.1999.
4. The defendant filed written statement and the averments in the written statement, in brief, are as follows; the suit is barred for non-joinder of M/s Chakkiath Finance which is a necessary party even as per the alleged promissory note produced along with the suit. The defendant neither executed any promissory note in favour of the plaintiff nor borrowed any amount from him and there is absolutely no monetary transaction between them as creditor and debtor. There was no occasion for the defendant to borrow ₹29 lakhs and ₹7 lakhs from the plaintiff as alleged. The plaintiff used to deposit huge amounts in M/s.Chakkiath Finance and to the knowledge of the defendant he is collecting interest for the same from the said company. The defendant has absolutely no involvement in the business of the said financing company. The plaintiff was the legal consultant of the defendant and he was a good family friend of the defendant's brother-in-law named Ouseph Mathews. When M/s.Chakkiath Finance become bankrupt, many of the depositors initiated legal proceedings against it for recovering their amount. In the above circumstances, the plaintiff approached the defendant and requested him to issue a letter just to compel M/s.Chakkiath Finance to repay the amount outstanding to the plaintiff. The plaintiff also made the defendant to believe that such a letter is required to pacify his men and not to initiate any proceedings against the defendant. The plaintiff exercised undue influence over the defendant and managed to get a letter from the defendant that too in a white paper without any stamp. The defendant bonafide suspect that the plaintiff manipulated that letter, which was obtained under undue influence, by affixing stamp. Except in two occasions, all other times the plaintiff himself had deposited the amount in M/s.Chakkiath Finance. As the plaintiff has elected Chakkiath Finance as his creditor and collected interest from them regularly, he is estopped from contending that, it is the defendant who borrowed the amount and the amount should be repaid by the defendant. The defendant has also denied the allegation that the promissory note executed on 5.1.1997 is supported by consideration. According to the defendant, the suit is barred by law of limitation and that the plaintiff has no cause of action against him, in order to seek any of the reliefs as prayed for in the suit.
5. The plaintiff was examined as PW1 and Exhibits A1 to A7 and Exhibit B1 were marked on his side. On the side of defendant DWs1 and 2 were examined and Exhibit X1 and Exhibits X1(a) to X1(j) were marked.
6. By judgment and dated 20.12.2003, the court below decreed the suit in part allowing the plaintiff to recover an amount of ₹29 lakhs together with 6% interest from 5.1.1997 till the date of realisation and proportionate costs of the suit, from the defendant and all his assets.
7. The conclusions made by the court below are as follows; the contention raised by the defendant regarding non- joinder of necessary party, i.e., M/s. Chakkiath Finance is untenable; though Exhibit A2 is not a valid promissory note on account of suspicious circumstance under which the stamps were affixed therein, the said document can be treated as a valid piece of evidence admitting the liability as on 5.1.1997 between the parties, as the execution of Exhibits A1 to A3 documents are admitted by the defendant; as the suit is not based on promissory note alone, but is based on original consideration as well, and since passing of consideration covered under Exhibit P2 promissory note and the execution of the promissory note are different, there is no legal bar in granting a decree based on the original consideration; the amount borrowed by the defendant from the plaintiff was accounted on 5.1.1997, which has been acknowledged in Exhibit A2 document, though not a promissory note, and the debtor creditor relationship between the parties is also admitted in Exhibit A3, which is an acknowledgement regarding passing of consideration, hence limitation begins to run only from the date of Exhibit A2 and the suit is not barred by limitation; the interest claimed in the plaint at the rate of 15% per annum from the date of Exhibit A2 till the date of suit is exorbitant and the plaintiff is entitled for interest at the rate of 6% for the principal amount of ₹29 lakhs from 5.1.1997 till date of realization.
8. Heard arguments of the learned Counsel for the appellant/defendant and the learned Senior Counsel for the respondent/plaintiff.
9. The learned counsel for the appellant/defendant contended that, the court below failed to appreciate in proper perspective the defendant’s contention that the suit was barred by limitation. In order to attract Section 18 of the Limitation Act, 1963, the plaintiff must be in a position to prove acknowledgement made before the expiry of the period of limitation. Similarly, in order to attract Section 19 of the said Act, the plaintiff must be in a position to prove part payment, made before the expiry of the period of limitation. The learned counsel further contended that, there was no debtor-creditor relationship between the parties and the suit is bad for non-
joinder of M/s. Chakkiath Finance. As Exhibit A2 promissory note is a materially altered document no valid decree can be passed relying on such a document. There is total lack of pleadings on original consideration and leading questions were put to the plaintiff to bring out his case. Moreover, the source of the plaintiff is also not disclosed and the money involved is out of unaccounted transactions.
10. Per contra, the learned Senior Counsel for the plaintiff contended that, except a stray sentence in the written statement that ‘the suit is also barred by law of limitation’ no specific plea of limitation was raised in the written statement. The promise made by the defendant in Exhibit A2 in writing and signed to pay a debt, which the plaintiff might have enforced payment but for the law of limitation of suits, is valid under Section 25(3) of the Indian Contract Act. The defendant has admitted execution of Exhibits A1 to A3 documents and there is debtor-creditor relationship between the parties and the suit was not bad for non-joinder of necessary parties. Since the suit is also on original consideration, even if the promissory note is found to be materially altered, it can be used for the collateral purpose to prove the original consideration and a decree can be passed on such original consideration once the plaintiff is able to prove the same. There are sufficient pleading in the suit for passing a decree on original consideration. Moreover, a suit based on promissory note is maintainable even as a summary suit under Clause (a) to Sub-rule (2) of Rule 1 of the Code of Civil Procedure, 1908.
11. We have considered the rival submissions made at the Bar and also perused the records of the case.
12. At the outset we shall consider the contention raised by the defendant that, the suit was bad for non-joinder and mis- joinder of parties. Along with this issue we shall also consider whether the plaintiff had succeeded in proving the original consideration justifying a decree on such original consideration, as the suit is on promissory note as well as on original consideration.
13. According to the learned counsel for the defendant, there was no creditor-debtor relationship between the plaintiff and the defendant. As the amount was borrowed on behalf of M/s. Chakkiath Finance and not for the defendant, the said company should be made liable to pay amount, if any, due to the plaintiff and no liability can be fastened upon the defendant. In such circumstances, according to the learned counsel, the suit is bad for non-joinder of M/s. Chakkiath Finance and also for mis- joinder of the defendant.
14. According to the plaintiff, the defendant borrowed from him a total sum of ₹29 lakhs, as on 5.1.1997, and after receiving the said amount, the defendant executed Exhibit A2 promissory note dated 5.1.1997 in his favour, promising to pay on demand or order the borrowed sum of ₹29 lakhs with interest at the rate of 30% per annum. When the defendant failed to make payment, in spite of repeated demands, the plaintiff caused to issue Exhibit A5 lawyer notice, which the defendant acknowledged on 16.12.1999, vide Exhibit A6 postal acknowledgement. The defendant did not send any reply. As the defendant failed to comply with the demand made in Exhibit A5 lawyer notice, the plaintiff filed the suit, on 21.12.1999.
15. The documents marked as Exhibits A1 and A7 are two vouchers issued by the defendant to the plaintiff. The defendant, as DW1, admitted the execution of Exhibit A1 voucher, which is in his own handwriting and he has also put his signature at the bottom of the said voucher. Going by Exhibit A1, the defendant borrowed a total sum of ₹15,50,000/- from the plaintiff up to November, 1995. On 6.8.1996, he borrowed a further sum of ₹ 3,50,000/-. Thereafter, the defendant borrowed ₹5,00,000/- each from the plaintiff, on 23.8.1996 and 4.1.1997, respectively. Therefore, the total amount borrowed comes to ₹29,00,000/-. It is pertinent to note that, another sum of ₹7,00,000/- borrowed from the plaintiff, which is the subject matter in R.F.A.No.254/2005, arising out of the judgment and decree of the 1st Addl. Sub Court, Ernakulam, in O.S.No.437/2000, is also shown in Exhibit A1 voucher. Exhibit A7 is another voucher issued by the defendant, in respect of ₹3,50,000/- borrowed from the plaintiff. The defendant, as DW1, admitted the execution of Exhibit A7 voucher and deposed that he has issued the said voucher to the plaintiff, during August, 1999, in his own handwriting.
16. The document marked as Exhibit A2 is the alleged promissory note dated 5.1.1997, executed by the defendant in favour of the plaintiff, promising to pay on demand or order the borrowed sum of ₹29 lakhs with interest at the rate of 30% per annum. Exhibit A2 promissory note reads thus;
“Whereas I have borrowed on behalf of Chakkiath Financing Company, Kothamangalam, a total sum of ₹ 29 lakhs (Rupees Twenty Nine Lakhs) from Sri Mathai M.Paikeday, residing at SRM Road, Ernakulam, I hereby promise to repay the aforesaid loan with interest at the rate of 30% per annum to aforesaid Sri Mathai M.Paikeday or to his order or to the bearer of this instrument on demand.”
17. Going by Exhibit A2, it is the defendant who had borrowed ₹29 lakhs from the plaintiff and the defendant had also promised to repay the aforesaid loan amount together with interest to the plaintiff or to his order or to the bearer of the instrument on demand. As seen from Exhibit A2 there is no privity of contract between the plaintiff and M/s.Chakkiath Finance. It is within the realm of the defendant to decide on whose benefit the money is to be borrowed. Therefore, the defendant cannot insist that, the plaintiff should proceed against M/s.Chakkiath Finance, a stranger to the contract, to recover the money borrowed by the defendant. Therefore, we find absolutely no merit in the contention raised by the defendant that, the suit is bad for non-joinder of M/s.Chakkiath Finance and also for mis- joinder of the defendant. We reject the said contentions of the defendant.
18. The stand taken by the defendant in the written statement is that, he has absolutely no involvement in the business of M/s.Chakkiath Finance. According to him, except on two occasions, all other times the plaintiff himself had deposited the amount in M/s.Chakkiath Finance. The defendant, as DW1, admitted that, M/s.Chakkiath Finance was run by his younger brother C.K.Jacob. He has also admitted the execution of Exhibit A2, but according to him, the alleged promissory note has been materially altered after its execution, by affixing revenue stamps and putting initials on the stamps and extending the underscore of his signature to one of such stamps. Though, the defendant would contend that, he has executed Exhibit A2 as dictated by the plaintiff, nothing was brought on record to substantiate that contention. Though, the defendant acknowledged on 16.12.1999, Exhibit A5 lawyer notice issued on behalf of the plaintiff, which makes specific reference to Exhibit A2 promissory note, he has not even cared to send any reply to that notice.
19. Going by the pleadings in the written statement and the oral evidence of the defendant as DW1, the defendant has absolutely no case that, there is any material alteration or tampering of the contents in Exhibit A2 promissory note, which we have already extracted in paragraph 16 of this judgment. During cross examination, he has also admitted that, he has executed Exhibit A2 fully knowing that the said document is worded like a promissory note.
20. The document marked as Exhibit A3 is a letter dated 2.10.1997 of the defendant addressed to the plaintiff. In the said letter issued about 9 months after the execution of Exhibit A2 promissory note, the defendant sought time to solve the issue, as the financing and other business are in a standstill. It is stated in Exhibit A3 that, the only source remaining for raising money is to dispose of the fixed assets, which requires some time, as the purchasers have quoted only very low price. The document marked as Exhibit A4 is the title deed of the defendant’s property. The plaintiff as PW1 deposed that, Exhibit A4 title deed was handed over to him by the defendant. Though, PW1 was cross examined on this aspect, nothing could be brought out to discredit his version. Moreover, the defendant as DW1 could not make out even a prima facie case of any illegality in such transaction.
21. Though, the defendant would refer to a complaint filed by the plaintiff before the Assistant Commissioner of Police, Ernakulam, against one Ousepachan who is none other than the brother-in-law of the defendant, nothing was brought on record to prove such a complaint and also the settlement alleged to have been arrived at for satisfying the demand of the plaintiff. The defendant would contend that, Exhibit A2 promissory note was executed in compelling circumstances. But, there is absolutely no evidence to prove the same. Moreover, in Exhibit A3 letter issued by the defendant on 2.10.1997, about 9 months after the execution of Exhibit A2 promissory note, he has absolutely no case as to any such compelling circumstances in the execution of the said promissory note. Regarding Exhibit B1 letter dated 12.7.1997 addressed to Ousepachan, brother-in-law of the defendant, PW1 has stated that, such a letter was issued to him as he is the person who introduced the defendant to the plaintiff.
22. Therefore, based on the documents on record, especially Exhibits A1 and A2, and also the oral evidence adduced by both sides, the irresistible and the only conclusion that is possible is that, it is the defendant who borrowed a total sum of ₹29 lakhs from the plaintiff as on 5.1.1997, as alleged in the plaint. In the result, we hold that the plaintiff has succeeded in proving passing of original consideration, justifying a decree on such original consideration.
23. Now, we shall deal with the contention of the learned counsel for the defendant that, no valid decree can be passed relying on Exhibit A2 promissory note, as it is a materially altered document. According to the learned Senior Counsel for the plaintiff, since the suit is also on original consideration, even if the promissory note is found to be materially altered it can be used for the collateral purpose of proving the original consideration and a decree can be passed on such original consideration once the plaintiff is able to prove the same. As the finding of the court below that Exhibit A2 promissory note is materially altered is not under challenge at the hands of the plaintiff, we are called upon only to consider whether there is any legal bar in granting a decree based on the original consideration, relying on the said document.
24. The learned Counsel for the defendant, relying on the judgment of a Division Bench of the Allahabad High Court in Lakshmi Narain v. Mst. Aparna Devi (AIR 1953 All. 535) contended that, when the plaintiff’s cause of action on the promissory note fails because the same being materially altered or insufficiently stamped, which could not be admitted in evidence, the plaintiff’s cause of action on original consideration also fails. In Lakshmi Narain’s case (supra), the promissory note, which was insufficiently stamped, was executed simultaneously with the advance of the loan and the loan was made on the basis of the promissory note which embodied all the terms of the contract of loan and which promissory note was not admissible in evidence. The Division Bench held that, when a promissory note is not taken in discharge of an oral contract of loan but is taken only by way of conditional payment or collateral security, as it will be presumed to have been so taken unless there is a contract to the contrary, Section 91 of the Evidence Act, 1872, has no application to the case and the terms of the original contract of loan can be proved if the promissory note is not admissible in evidence or for any other reason cannot be proved. Paragraphs 27 and 28 of the judgment read thus;
“27. We think that when a promissory note is not taken in discharge of an oral contract of loan but is taken only by way of conditional payment or collateral security, as it will be presumed to have been so taken unless there is a contract to the contrary, Section 91 has no application to the case and the terms of the original contract of loan can be proved if the promissory note is not admissible in evidence or for any other reason cannot be proved. The facts that the promissory note was executed simultaneously with the advance of the loan or that the loan was advanced on the basis of the promissory note or that the promissory note contained all the terms of the contract of loan are all immaterial, provided only that the promissory note is not in absolute discharge of the original contract of loan.
28. A promissory note or other negotiable instrument is taken in discharge of a loan only when the contract is that the debtor will not be liable if the promissory note or other negotiable instrument could not be enforced. It is to such cases that illustration (b) to Section 91 applies.”
25. The learned counsel for the defendant, relying on the judgment of this Court in Achuthan Raghavan v. Varkey Variathu (1962 KLT 518 : 1962 KHC 126) contended that, once it is found that the promissory note is materially altered the suit cannot be decreed on original consideration. In Achuthan Raghavan’s case (supra) the suit was on the basis of promissory note only and this Court held that, where the suit is on the promissory note only, no decree could be granted on the original consideration. Paragraph 1 of the judgment reads thus;
“1. In this Second Appeal by the defendant, arising out of a suit on a promissory note, the two courts have concurrently held, that the plaintiff is not entitled to enforce payment, on account of a material alteration in it. Nevertheless they have decreed the suit as on the original consideration for the promissory note. It was contended on behalf of the defendant that the suit being laid on the promissory note only, no such decree could have been passed. The law is clear, that where the suit is on the promissory note only, no decree could be granted on the original consideration. Firm Tarachand v. Tamijuddin, AIR 1935 Calcutta 658, is a case in point.”
26. The judgment in Achuthan Raghavan’s case (supra) was followed by this Court in Sankara Pillai v. Usman Settu (1963 KHC 56), which was also a suit based on promissory alone. Paragraph 16 of the judgment reads thus;
“16. As the suit was based on note alone I cannot give a decree on the original cause of action; even assuming that a cause of action for money lent exists apart from the note. In this connection I may refer to the ruling of Mr. Justice Velu Pillai reported in 1962 KLT 518 where the learned Judge has held that no decree on the basis of a pro note which was not properly stamped can be passed, and no decree on the basis of the original cause of action can be given if there was no pleading to that effect.”
27. The learned counsel for the defendant, relying on the judgment of a Division Bench of the Madras High Court in Govindaraj and Co. v. Nedungadi Bank Ltd. (2003 (2) KLT SN 91 : 2003 KHC 627) contended that, material alteration of a promissory note would render the instrument void and no title can be claimed under a materially defective, altered, tampered and void instrument. Govindaraj’s case (supra) is decided on an entirely different set of facts. In that case also the suit was laid on the demand draft alone and in the said demand draft, the date, the name of the payee, the amount and the names of the drawer and drawee all had been tampered with and materially altered. Paragraph 15 of the judgment reads thus;
“15. Equally so the contention of the appellant's side that the plaintiff has not proved that the original Demand Draft was only for ₹16.50, and the payee was one Krishnalal Bhuvandas cannot be accepted. In order to prove those facts, the plaintiff Bank has produced the counterfoil of the Demand Draft bearing No. 831718, as found under Exs.A1 from which it would be abundantly clear that the same was drawn on 23.6.1979 by Marutha Road Branch for ₹16.50 in favour of one Krishnalal Bhandary on the plaintiff's Branch at Purasavakkam, Madras. A comparison of the said counterfoil pertaining to the Demand Draft No. 831718 and the Demand Draft borne by Exs.A5 and A6 would make it quite evident that the date, the name of the payee, the amount of the Demand Draft and the names of the drawer and drawee all had been tampered with and materially altered. Section 87 of the Negotiable Instruments Act reads as under:
87. Effect of material alteration:- Any material alteration of a negotiable instrument renders the same void as against anyone 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."
A very reading of the above provision of law would make it clear that material alteration of the negotiable instrument would render the instrument void. In order to avoid the instrument, the alteration should be with regard to the material particulars and should be in such a way which would vary the rights, liabilities or the 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 expressed. In the instant case, the material alteration was by way of insertion of all the above particulars by erasion and alteration.”
28. The learned counsel for the defendant, relying on the judgment of the Apex Court in Tatipamula Naga Raju v. Pattem Padmavathi (2011 (4) SCC 726 : 2011 KHC 4163) contended that, as the promissory note has been tampered with, the defendant ought not to have been saddled with the liability to pay the amount in pursuance to the said tampered promissory note, merely because the defendant had admitted execution of the promissory note. Tatipamula Naga Raju’s case (supra) is also decided on an entirely different set of facts. In that case, going by expert evidence, the Court came to the conclusion that, figure '1' was added in the promissory note so as to make the figure 1,25,000/- from the figure 25,000/-. It was in such circumstances, the Apex Court held that, the explanation given by the defendant, which was supported by ample evidence, ought to have considered by the lower appellate court and the lower appellate court should not have been guided by a mere fact that the defendant had admitted execution of the Promissory note. Paragraph 18 of the judgment reads thus;
“18. In our opinion, simply because the defendant had fairly admitted his signature, the court should not have come to the conclusion that the amount was payable by the defendant especially when there was an expert's evidence that figure '1' was added so as to make the figure 1,25,000/- from figure 25,000/- and when the mediators had deposed to the effect that there were transactions between the defendant and the son of the plaintiff and in pursuance of the said transaction, Promissory notes were executed by the defendant and one of the Promissory notes was not returned to the defendant. The explanation given by the defendant, which was supported by ample evidence, ought to have considered by the lower appellate court and the lower appellate court should not have been guided by a mere fact that the defendant had admitted execution of the Promissory note. In our opinion, in such a set of circumstances, the defendant ought not to have been saddled with a liability to pay the amount in pursuance of the tampered Promissory note for which no consideration had ever passed from the plaintiff to the defendant.”
29. Per contra, the learned Senior Counsel for the plaintiff, relying on the judgment of this Court in Ayichammal Kannoli Chathukutty v. Nakppadi Cheerukutty (1963 KLT 281 : 1963 KHC 71) contend that, even if the promissory note is found to be insufficiently stamped or materially altered it can be used for the collateral purpose of proving the original consideration and if the plaintiff is able to prove the original consideration a decree can be passed on such original consideration. In Ayichammal Kannoli Chathukutty's case (supra) this Court held that, even if the promissory note is contemporaneous with the transaction, the presumption is that a cause of action on original consideration exists independently. Paragraph 2 of the judgment reads thus;
“2. The finding of the Munsiff is "that the promissory note is in consideration of the loan and so the debt cannot be proved aliunde." The reason for this was stated to be that "the lending of the money and the taking of the promissory note are one and indivisible and the two cannot be separated as the plaintiff had attempted to do". What influenced the Munsiff was the circumstance, that the promissory note was contemporaneous with the loan. The question whether, when a promissory note is insufficiently stamped, a suit would lie on the original cause of action has given rise to a conflict of judicial opinion in the several High Courts and as observed by a division bench of the Rajasthan High Court in Champalal v. Saligram, AIR 1961 Rajasthan 235, it will be a fruitless task to endeavour to reconcile them. The Rajasthan High Court also observed thus:
"............ where a pro note has been executed simultaneously with a loan, we find a very large preponderance of opinion in favour of the liberal view that in such cases also where the promissory note fails for want of proper stamp as the basis for the suit, a suit on the footing of the independent cause of action constituted by the loan would still lie except in those cases where the promissory note was given in absolute discharge of the loan".
The learned authors Bhashyam and Adiga in their commentaries on the Negotiable Instruments Act, 1956 edition, pages 600 and 601, have formulated the three views held on the subject as follows:
"The preponderance of view is in favour of applying the presumption and principle of conditional payment not only to pre-existing debts but also to those contemporaneous with the transaction; because in all cases of loans, there is generally a cause of action independent of the note or bill. The other view is also held that in such cases there is no presumption either way and that each party has to prove his case like any other question of fact; the contemporaneous nature of the loan with the note or bill, it is said, does not decide the question. The matter depends on whether all the terms have been embodied in the writing or not. The third and extreme view is also to be found in the Lahore High Court, where the judges go so far as to say that if a note is taken for a contemporaneous debt and it is inadmissible for insufficient stamp or for any other reasons the lender has no cause of action independent of the note".
In view of the preponderance of judicial opinion, I take the view that even if the promissory note is contemporaneous with the transaction, the presumption is, that a cause of action exists independently. The Munsiff has not made a proper approach to the case and has not considered the evidence from this point of view. In revision it is not proper to enter a finding based on appreciation of evidence. The case has therefore to go back for determining whether in view of the above statement of the law, the suit as based on the original cause of action can be sustained or not.”
30. The judgment in Ayichammal Kannoli Chathukutty,s case (supra) was followed by this Court in Joseph v. Thomas (1970 KLT 656 : 1970 KHC 134) and paragraph 3 of the judgment reads thus;
“3. Even if the instrument turns out to be a forgery, the executee will have the right to fall back upon the original cause of action.
"if the instrument given is invalid for want of stamp, or if it turns out to be a forgery, or if the debtor knew of the insolvency of one or more of the parties to the bill at the time of transfer, or if it is void owing to a material alteration, the creditor does not lose his right of action on the original debt by the mere fact of his having taken the instrument as absolute payment of the debt. If the instrument is dishonoured, payment of the original debt may be enforced as if no security has been taken." (Bhashyam & Adiga, 11th Edition p. 572 & 573).
The position is also covered by other authorities. In Murugappa v. Nachiappa (AIR 1934 Mad. 503) for instance, Stone, J held:
"Where a cause of action for money lent is once complete in itself and the debtor afterwards gives a promissory note to the creditor for payment of the money at a future time, the creditor, if the promissory note is not paid at maturity, may always, as a rule, sue for the original consideration, provided that he has not endorsed or lost or parted with the promissory note under such circumstances as to make the debtor liable upon it to some third person."
A Division Bench of the Allahabad High Court held in Gopinath v. Srimati Chemsli (ILR 1938 Allahabad 741) that in a case where the promissory note is found not genuine the executee can sue on the original cause of action. The following are the facts of that case:-
"Two firms had dealings with each other extending over a large number of years; there were transactions on each side creating independent obligations on the other; accounts were drawn up between the parties at the end of every year; sometimes the balance was in favour of one firm and sometimes in favour of the other. A balance was struck, in the usual course, on 31st March, 1928, when ₹ 54 thousand odd was found due to the plaintiff's firm, and a promissory note for the amount was executed by the defendant No. 1. The balance struck on 31st March, 1929, was for ₹57 thousand odd in favour of the plaintiff's firm, including the previous ₹54 thousand, and a promissory note was executed for the amount by defendant No. 1. Neither of the defendants signed the account books on these occasions. The account was never closed and the parties continued to deal with each other on the old footing. The plaintiff brought a suit for recovery of the amount, setting forth all these details in the plaint. The promissory notes were found to be not genuine; it was found, however, that the circumstances were such that the plaintiff, who was a pardanashin lady of mature age, could not be held responsible for the production of the promissory notes."
It was held on these facts that in the circumstances, the plaintiff was entitled to fall back upon the original cause of action namely the transactions entered in the account which were antecedent in fact as well as in time to the promissory notes, and truly independent of them. It is thus clear that the cause of action on the original consideration is always available to the party. The amendment therefore, was proper. The judgment of the lower appellate court is hence correct and in confirmation of it, this Civil Miscellaneous Appeal is dismissed.”
31. In the case on hand, Exhibit A1 would show that, prior to 5.1.1997, the date of execution of Exhibit A2 promissory note, the defendant borrowed a total sum of ₹29 lakhs from the plaintiff. Relying on Exhibit A1, the defendant contended before the court below that, the consideration for the promissory note is anterior to 5.1.1997, the date of execution of Exhibit A2 promissory note, and as such the suit is barred by limitation. Therefore, even according to the case of the defendant, the passing of consideration covered under Exhibit A2 promissory note and the execution of the promissory note are not simultaneous. The evidence on record, especially Exhibit A1, and also the oral evidence of the plaintiff as PW1 has established that the consideration to Exhibit A2 promissory note was made anterior to the execution of the promissory note and it was not simultaneous to the execution of the promissory note. In such circumstances, applying the principles laid down in the decisions referred to above, we hold that court below was justified in granting a decree on original consideration, as Ext.A2 promissory note, even if found to be materially altered, can be used for the collateral purpose of proving the original consideration.
32. Now we shall consider the the plea of limitation raised by the defendant. Going by Exhibit A1 voucher dated 5.1.1997 issued by the defendant, the amount borrowed by him, up to November, 1995, is ₹15,50,000/-. This was followed by ₹3,50,000/- borrowed by the defendant on 6.8.1996 and ₹5,00,000/- each borrowed on 23.8.1996 and 4.1.1997, respectively. The defendant executed Exhibit A2 promissory note on 5.1.1997 and the suit was filed on 21.12.1999.
33. The learned counsel for the defendant would contend that, the suit is barred by limitation as there is no valid acknowledgement of debt under Section 18 of the Limitation Act or payment of debt under Section 19 of the said Act, entitling the plaintiff to compute a fresh period of limitation from the time of such acknowledgement or payment as the case may be.
34. Per contra, the learned Senior Counsel for the plaintiff would contend that, except a stray sentence in the written statement that ‘the suit is also barred by law of limitation’ no specific plea was raised in the written statement regarding limitation. The learned Senior Counsel would contend that the promise made by the defendant on 5.1.1997 in Exhibit A2 will amount to a valid promise made under Section 25(3) of the Contract Act to pay a time barred debt and hence the suit filed on 21.12.1999 is not barred by limitation.
35. The law of limitation prescribes a period within which legal remedy can be availed for redressal of the legal injury. Part II of the Limitation Act, 1963, deals with limitation of suits, appeals and applications and Section 3 of the Act deals with bar of limitation. Sub-section (1) of Section 3 of the Act reads thus;
“3. Bar of limitation:- (1) Subject to the provisions contained in Sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made, after the prescribed period shall be dismissed, although limitation has not been set up as a defence.”
36. In Salgaocar v. Board of Trustees (2005 (4) SCC 613), the Apex Court, interpreting Section 3 of the limitation Act, held as follows;
“The mandate of Section 3 of the Limitation Act is that it is the duty of the court to dismiss any suit instituted after the prescribed period of limitation irrespective of the fact that limitation has not been set up as a defence.”
Reiterating this legal position, the Apex Court in its judgment in Gannmani Anasuya and others v. Parvatini Amarendra Chowdhary and others (2007 (10) SCC 296), held as follows;
“In terms of Section 3 of the Limitation Act, it is for the court to determine the question as to whether the suit is barred by limitation or not irrespective of the fact as to whether such a plea has been raised by the parties. Such a jurisdictional fact need not, thus, be pleaded.”
37. Going by the dictum laid down by the Apex Court in the judgments referred to above, it is for the court to determine whether the suit is barred by limitation or not, irrespective of the fact that such a plea of limitation has not been set up as a defence in the written statement. In the case on hand, in the written statement, the defendant has contended that ‘the suit is barred by law of limitation’. In such circumstances, the contention of the learned Senior Counsel for the plaintiff that, in the absence of any specific plea in the written statement this court need not consider the question as to whether the suit is barred by limitation or not is only to be rejected and we do so.
38. Section 18 of the Limitation Act deals with effect of acknowledgement in writing. Sub-section (1) of Section 18 of the Act reads thus;
“18. Effect of acknowledgement in writing:- (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgement was so signed.”
39. Going by Section 18 of the Limitation Act, in order to attract the said Section two conditions are essential. Firstly, the acknowledgement must be made before the expiry of the period of limitation. Secondly, the acknowledgement must be in writing signed by the party against whom such property or right is claimed, or through whom he derives his title or liability. It is so held by a Division Bench of this Court in Chirag Enterprises, Merchant and Commission Agents v. Star Traders, Merchants and another (2012 (4) KHC 271 : 2012 (4) KLT SN 101), a decision relied on by the learned counsel for the defendant.
40. Similarly, Section 19 of the Limitation Act deals with the effect of payment on account of debt or of interest on legacy. Relevant portion of Section 19 of the Act reads thus;
“19. Effect of payment on account of debt or of interest on legacy:- Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorised in this behalf, a fresh period of limitation shall be computed from the time when the payment was made:
PROVIDED that, save in the case of payment of interest made before the 1st day of January, 1928, an acknowledgement of the payment appears in the handwriting of, or in a writing signed by, the person making the payment.”
41. Going by Section 19 of the Limitation Act, in order to attract the said Section the plaintiff must be in a position to allege and prove part payment on account of a debt or of interest on a legacy made before the expiry of the period of limitation and that such payment has been acknowledged in the manner contemplated in that Section. It is so held by this Court in Sajan Varghese v. Kerala State Electronic Development Corporation Ltd. (2010 (1) KLT 801 : 2010 (1) KHC 721), another decision relied on by the learned counsel for the defendant.
42. Therefore, the learned counsel for the defendant is right in contending that, an acknowledgement of debt under Section 18 of the Limitation Act or payment of debt under Section 19 of the said Act, entitling the plaintiff to compute a fresh period of limitation from the time of such acknowledgement or payment, as the case may be, must be made before the expiry of the period of limitation, and must be acknowledged in the manner contemplated in Sections 18 and 19 of the said Act, as the case may be.
43. But, the contention of the learned Senior Counsel for the plaintiff is that, the promise made by the defendant on 5.1.1997 in Exhibit A2 will amount to a valid promise made under Section 25(3) of the Indian Contract Act, 1872, to pay a time barred debt and hence the suit filed on 21.12.1999 is not barred by limitation. As per Section 25 of the said Act, an agreement without consideration is void unless it is in writing and registered or is a promise to compensate for something done or is to pay a debt barred by the law of limitation. Sub-section (3) of Section 25 of the Act reads thus;
“25. Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law:- An agreement made without consideration is void, unless -
(1) xxxxx xxxxx
(2) xxxxx xxxxx
(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.”
In any of these cases, such an agreement is a contract.”
44. In order to invoke the provisions of Sub-section (3) of Section 25 of the Act, the following conditions must be satisfied;
(i) it must refer to a debt which the creditor, but for the period of limitation might have enforced; (ii) there must be a distinct promise to pay wholly or in part of such debt; and (iii) the promise must be in writing signed by the person or by his duly appointed agent. Under Sub-section (3) of Section 25 of the Act, a debtor can enter into an agreement in writing to pay the whole or part of a debt, which the creditor might have enforced but for the law of limitation, and a suit can lie on a written promise to pay the barred debt as it is a valid contract; such a promise constitute novation, and hence, can form the basis of a suit independently of the original debt. This provision does not revive a dead right, but merely resuscitates the remedy to enforce the right, which already exists. A Constitution Bench of the Apex Court in Bombay Dyeing and Manufacturing Co. Ltd. v. State of Bombay and others (AIR 1958 SC 328) after reiterating the settled law that, the statute of limitation only bars the remedy but does not extinguish the debt, held that, under Section 25(3) of the Contract Act, a barred debt is good consideration for a fresh promise to pay the amount. The Apex Court in A. V. Murthy v. B. S. Nagabasavanna (2002 (2) SCC 642) reiterated that, under Sub-section (3) of Section 25 of the Indian Contract Act, 1872, a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits, is a valid contract.
45. In Chacko Varkey v. Thommen Thomas (1957 KLT 870), a Full Bench of this Court was called upon to construe Section 26 of the Travancore Contract Act (Act X of 1115), which is pari materia with Section 25 of the Indian Contract Act, 1872. In the said judgment, the Full Bench of this Court observed that, when the entire claim is barred, there is no consideration at all and the agreement will be void unless it is saved by Section 26 (3) of the Travancore Contract Act.
46. In O. M. Noor Muhammed Rawther v. K. T. Cheru (1959 KLT 294), another decision relied on by the learned Senior Counsel for the plaintiff, a Division Bench of this Court held that, Section 25(3) of the Contract Act does not require that the document should contain a promise to pay a sum of money in consideration of a debt which is barred or that it should show that the promisor knew that the debt was barred. The words used in the section show that it is the debt and not a sum of money in consideration of the barred debt that the promisor should refer to and there is nothing whatever in the section to indicate that the promisor should do more than a promise to pay a debt of which the creditor might have enforced payment but for the law of limitation of suits.
47. Therefore, there is apparent distinction between an acknowledgement under Section 18 of the Limitation Act and a promise to pay a debt within the meaning of Sub-section (3) of Section 25 of the Contract Act. Both an acknowledgement and a promise to pay a debt are required to be in writing, signed by the party or his agent authorised in that behalf and both have the effect of creating fresh starting point of limitation. But while the acknowledgement under Section 18 of the Limitation Act is required to be made before the expiration of the period of limitation, a promise under Sub-section (3) of Section 25 of the Contract Act to pay a debt can be made after the expiry of the limitation period.
48. Applying the principles laid down in the decisions referred to above, we hold that, Exhibit A2 contains an unconditional promise made by the defendant, who borrowed a total sum of ₹29 lakhs from the plaintiff, to pay the said debt and the plaintiff is entitled to rely on Exhibit A2 as a promise to pay a time barred debt under Section 25(3) of the Contract Act and therefore, the suit filed on 21.12.1999 is not barred by limitation.
49. The learned counsel for the defendant contended that, there is total lack of pleadings on original consideration and the court below ought to have eschewed from its consideration, the answers elicited by putting leading questions to PW1. Per contra, the learned Senior Counsel for the plaintiff would contend that, there are sufficient pleadings in the suit for passing a decree on original consideration. According to him, a suit based on promissory note is maintainable even as a summary suit under Clause (a) to Sub-rule (2) of Rule 1 of the Code of Civil Procedure, 1908.
50. We find ourselves unable to accept the contention of the learned Senior Counsel for the plaintiff that, the present suit is maintainable even as a summary suit. Going by Clause (a) to Sub-rule (2) of Rule 1 of CPC, suits upon bills of exchange, hundies and promissory notes are maintainable as summary suits. But, in the case on hand, as Exhibit A2 promissory note is found to be materially altered, the plaintiff is not entitled for a decree based on that promissory note and he can only seek a decree on original consideration. In such circumstances, the suit will not fall within Clause (a) to Sub-rule (2) of Rule 1 of CPC.
51. We also find ourselves unable to accept the contention of the learned counsel for the defendant that, there is total lack of pleadings on original consideration and the court below ought to have eschewed from its consideration, the answers elicited by putting leading questions to PW1. The plaintiff filed the suit on promissory note as well as on original consideration and there are sufficient pleadings in the plaint to seek a decree on original consideration. Relying on the judgment of the Apex Court in Varkey Joseph v. State of Kerala (1993 Supp (3) SCC 745) and the judgment of this Court in George v. State of Kerala (1994 (1) KLT SN 9 : 1994 KHC 221) it was contended that, the answers elicited by putting leading questions to the plaintiff will have to be eschewed from consideration. As borne out from records, no question put to PW1 was objected to by the defendant on the ground that it is a leading question. In the appeal memorandum the defendant has no case that, the court below recorded the answers given by PW1 on any such leading questions, without recording any such objections raised by the defendant. In such circumstances, the above argument of the learned counsel for the defendant is only to be rejected and we do so.
52. The learned counsel for the defendant further contended that, since the source of the plaintiff is not disclosed and the money involved is out of unaccounted transactions, the plaintiff is not entitled for a decree as prayed for.
53. Relying on the judgment of the Apex Court in G.
Pankajakshi Amma and others v. Mathai Mathew (Dead) through Lrs. (2004 KHC 1664 : 2004 (12) SCC 83) the learned counsel for the defendant contended that, as the alleged payments are made in cash, which are unaccounted transactions, no court can come to the aid of the party in an illegal transaction. Paragraphs 9 and 10 of the judgment read thus;
“9. We have heard the learned counsel for the parties.
In our view the Trial Court was absolutely right. The 1st respondent is a money lender. He has admitted that he earned ₹30,000/- from money lending business. As a money lender he is statutorily bound, by virtue of S.9 of the Kerala money lenders Act, 1958, to maintain books of accounts. His statement that he has not maintained the records which could be produced in court is very significant. That statement coupled with the further statement that both the parties had agreed that these were to be unaccounted transactions required the court to draw an adverse inference against him. Of course under S.118 of the Negotiable Instruments Act the court is to presume that a negotiable instrument has been executed for consideration. However, in this case it has been established that there were chit fund transactions between the parties. It is also established that in respect of those chit fund transactions a sum of approximately ₹25,000 was due and payable. It is established that that amount was not paid. It is an admitted position that no suit was filed for recovery of that amount. Further, having seen the suit promissory notes, as well as the other promissory notes, we are in agreement with the Trial Court that all of them appear to have been got executed on the same day. All of them are in the same handwriting and in the same ink. It is impossible to believe that over a period of two years the same pen could have been continued to be used. It is thus clear that these documents were got executed at the time that the chit fund transactions were being entered into by the parties. This rebuts the presumption that any consideration had flown under these transactions. In these circumstances it was absolutely necessary for the 1st respondent to produce his books of accounts particularly as he has admitted that he was doing money lending business.
10. There is any reason also why the impugned judgment cannot be upheld. According to the 1st respondent these transactions were to be unaccounted transactions. According to the 1st respondent, all these amounts are paid in cash. If these are unaccounted transactions then they are illegal transactions. No court can come to the aid of the party in an illegal transaction. It is settled law that in such cases the loss must be allowed to lie where it falls. In this case as these are unaccounted transactions, the Court could not have lent its hands and passed a decree. For these reasons also the suit was required to be dismissed.”
54. In Pankajakshi Amma’s case (supra), the Apex Court was dealing with a case arising out of a suit filed by a money lender, who is statutorily bound by virtue of Section 9 of the Kerala Money Lenders Act, 1958, to maintain books of accounts. He admitted that he has not maintained the records and further stated that, both the parties had agreed that these were to be unaccounted transactions. It was in such circumstances, the Apex Court held that, if the transactions are unaccounted transactions then they are illegal transactions and no court can come to the aid of the party in an illegal transaction. But, in the case on hand, it was the defendant who had accepted deposits from the plaintiff and it is not the case of the plaintiff that, the transactions were unaccounted transactions.
55. Relying on the judgment of the Bombay High Court in Sanjay Mishra v. Ms. Kanishka Kapoor @ Nikki and another (2009 KHC 1011 : 2009 Crl.LJ 3777) the learned counsel for the defendant contended that, as the amounts advanced by the plaintiff to the defendant are unaccounted money paid in cash, the plaintiff is not entitled to seek a decree from the court. Paragraphs 7 and 8 of the judgment read thus;
“7. It is true that merely because amount advanced is not shown in Income Tax Return, in every case, one cannot jump to the conclusion that the presumption under S.139 of the said Act stands rebutted. There may be cases where a small amount less than a sum of ₹20,000/- is advanced in cash by way of loan which may be repayable within few days or within few months. A complainant may not show the said amount in the Income Tax Return as it is repayable within few days or few months in the same financial year. In such a case the failure to show the amount in the Income Tax Return may not by itself amount to rebuttal of presumption under S.139 of the said Act. If in a given case the amount advanced by the complainant to the accused is a large amount and is not repayable within few months, the failure to disclose the amount in Income Tax return or Books of Accounts of the complainant may be sufficient to rebut the presumption under S.139 of the said Act.
8. In the present case, the amount was allegedly advanced in September, 2004. The amount is a large amount of ₹15 lacs. This is a case where not only that there is a failure to disclose the amount of loan in the Income Tax Return of the applicant till the year 2006 but there is a categorical admission on the part of the applicant that the amount was an 'unaccounted' amount.”
56. In Sanjay Mishra’s case (supra) the learned Single Judge of the Bombay High Court was dealing with a case arising out of a complaint filed under Section 138 of the Negotiable Instruments Act, 1881. The complainant, who was the applicant before the High Court, admitted that the entire amount, which was the subject matter of the loan, was undisclosed cash amount which was not disclosed in the Income Tax return. In such circumstances, it was held that, if in a given case the amount advanced by the complainant to the accused is a large amount and is not repayable within few months, the failure to disclose the amount in Income Tax return or Books of Accounts of the complainant may be sufficient to rebut the presumption under Section 139 of the said Act.
57. Chapter XX(B) of the Income Tax Act, 1961, speaks about the requirement as to the mode of acceptance, payment or repayment in certain cases to counteract evasion of tax. Section 269SS of the Act speaks about the mode of taking or accepting certain loans and deposits. Going by Section 269SS of the Act, if a person takes or accepts any loan or deposit for a sum of ₹ 20,000/- or more from any person otherwise than by an account payee's cheque or account payee's bank draft, the law provides for levying of penalty of a sum equal to the amount of loan so taken or accepted, unless the transaction falls under the proviso to Section 269SS of the Act.
58. In Asst. Director of Inspection Investigation v.
Kum. A. B. Shanthi (2002 (6) SCC 259) the Apex Court, while upholding the constitutional validity of Section 269SS of the Income Tax Act, observed that, the object of introducing Section 269SS is to ensure that a tax payer is not allowed to give false explanation for his unaccounted money, or if he has given some false entries in his accounts, he shall not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the tax payer would usually give the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so called lender also to manipulate his records later to suit the plea of the tax payer. The main object of S.269SS was to curb this menace.
59. Following the judgment of the Apex Court in Kum. A.
B. Shanthi’s case (supra), a learned Single Judge of the Karnataka High Court in Mohammed Iqbal v. Mohammed Zahoor (ILR 2007 KAR 3614: 2008 (1) Kar.LJ 338) held that, Section 269SS does not declare all transactions of loan, by cash in excess of ₹20,000/- as invalid, illegal or null and void and the main object of introducing the provision was to curb and unearth black money. In Mohammed Iqbal’s case (supra) the contention of the defendant was that, the loan transaction admittedly in excess of ₹20,000/- made contrary to the procedure and mode of giving and taking loans under Section 269SS of the Income Tax Act, being an illegal transaction disentitled the plaintiff to recover the suit claim. The said contention was rejected by the Court and paragraphs 6, 7, 10 and 11 of the judgment read thus;
“6. The Apex Court in the case of the Asst. Director of Inspection Investigation v. Kum. A B Shanthi while upholding the constitutional validity of Section 269SS observed thus: The object of introducing Section 269 is to ensure that a tax payer is not allowed to give false explanation for his unaccounted money, or if he has given some false entries in his accounts, he shall not escape by giving false explanation for the same. During search and seizure unaccounted money is unearthed and the tax payer would usually give the explanation that he had borrowed or received deposits from his relatives or friends sand it is easy for the so-called lender also to manipulate his records later to suit the plea of the tax-payer. The main object of Section 269-SS was to curb this menance.
7. In the light of the observations of the Apex Court, it cannot but be said that Section 269-SS only provided for the mode of acceptance payment or repayment in certain cases so as to counteract evasion of tax. Section 269-SS does not declare all transactions of loan, by cash in excess of ₹20,000/- as invalid, illegal or null and void, while as observed by the Apex Court, the main object of introducing the provision was to curb and unearth black money. To construe Section 269-SS as a competent enactment declaring as illegal and unenforceable all transactions of loan, by cash, beyond ₹ 20,000/-, in my opinion, cannot be countenanced.”
xxxx xxxx xxxx
10. This Section provides that notwithstanding anything contained in Section 271D no penalty shall be imposed on the person or assessee, for failure to comply with Section 269SS, if it is proved, that there was reasonable cause for such failure to obtain a loan otherwise than though account payee cheque or demand draft. The Apex Court in Asst. Director's case supra, having considered the import of Section 273B observed thus: If there was a genuine and bonafide transaction and if for any reason the tax payer could not get a loan or deposit by account payee cheque or demand draft, for some bonafide reasons, the authority vested with the power to impose penalty has got discretionary power.
11. The contravention of Section 269SS though visited with a stiff penalty on the person taking the loan or deposit, nevertheless, the rigor of Section 271D is whittled down by Section 273B, on proof of bonafides. It cannot therefore be said that the transaction of the nature brought before this court could be declared illegal, void, and unenforceable.”
60. In the case on hand, the plaintiff has categorically stated in the plaint that, a major portion of ₹29 lakhs borrowed by the defendant was generated by him utilising his capacity to raise funds from others. The fact that, the plaintiff had raised funds from others is not denied in the written statement, as according to the defendant, while executing Exhibit A2 the plaintiff made him to believe that such a letter is required to pacify such persons from whom the plaintiff has generated funds. Moreover, the plaintiff never admitted that the transactions were unaccounted transactions. In the absence of any cogent and convincing evidence, the contention of the defendant that, the money involved is out of unaccounted transactions and hence the plaintiff is not entitled for a decree as prayed for is only to be rejected and we do so.
61. The court below on a proper appreciation of the evidence on record decreed the suit in part and we find no reason to interfere with any of the findings of the court below in the impugned judgment. Hence, R.F.A.No.253/2005 is only to be dismissed, confirming the judgment and decree of the court below in O.S.No.709/1999.
62. R.F.A.No.254/2005 is filed by the defendant in O.S.437/2000 on the file of the 1st Addl. Sub. Court, Ernakulam. The plaintiff filed the said suit for recovery of a sum of ₹10,13,250/- from the defendant together with future interest at the rate of 15% per annum. The court below, by judgment dated 27.11.2003 decreed the suit allowing the plaintiff to realise an amount of ₹10,13,250/- with 6% interest per annum on ₹7,00,000/- from the date of suit till realisation together with costs from the defendant and his assets. It is challenging the said judgment and decree of the court below, the defendant is in appeal before this Court.
63. The plaint averments, in brief, are as follows; The defendant borrowed a total sum of ₹7,00,000/- from the plaintiff as on 7.8.1997. After receiving the said amount from the plaintiff, the defendant executed a promissory note dated 7.8.1997 in favour of the plaintiff, promising to pay on demand to the plaintiff or order the borrowed sum of ₹7,00,000/- with interest at the rate of 30% per annum. The defendant, in spite of demands, did not pay any amount towards the aforesaid liability, under one pretext or the other. The plaintiff issued a notice dated 6.7.2000 demanding the defendant to pay the aforesaid amount with interest on or before 16.7.2000. The defendant caused to issue a reply notice dated 17.7.2000 denying execution of promissory note and a debtor-creditor relationship between the plaintiff and the defendant. According to the plaintiff, the promissory note executed by the defendant on 7.8.1997 is supported by consideration and the suit is filed within the period of limitation. In case the defendant takes up a contention that the document dated 7.8.1997 is not a promissory note, the plaintiff is entitled to a decree as prayed for on the basis of original consideration. The plaintiff restricted the claim of interest at 15% per annum. Therefore, the plaintiff prayed for a decree in his favour, making the defendant liable and directing the defendant to pay to the plaintiff the sum of ₹10,13,250/- with 6% interest per annum on ₹7,00,000/- from the date of suit till realisation from the defendant and his assets with costs of the suit. The suit was filed on 2.8.2000.
64. The defendant filed written statement in O.S.437/2000, reiterating the very same contentions raised in his written statement in O.S.No.709/1999, which we have already referred to in paragraph 4 of this judgment. The defendant contended that, the suit is barred for non-joinder of M/s.Chakkiath Finance. He neither executed any promissory note in favour of the plaintiff nor borrowed any amount from him and there is absolutely no monetary transaction between them as creditor and debtor. The plaintiff exercised undue influence over the defendant and managed to get a letter from him that too in a white paper without any stamp. He bonafide suspect that the plaintiff manipulated that letter, which was obtained under undue influence, by affixing stamp. The defendant has also denied the allegation that the promissory note executed on 7.8.1997 is supported by consideration.
65. The plaintiff was examined as PW1 and Exhibits A1 to A6 were marked on his side. On the side of defendant DWs1 to 3 were examined and Exhibits B1, B2 and Exhibits B2(a) to B2(d) were marked.
66. By judgment dated 20.12.2003, the court below decreed the suit allowing the plaintiff to realise an amount of ₹10,13,250/- with 6% interest per annum on ₹7,00,000/- from the date of suit till realisation together with costs from the defendant and his assets. The conclusions made by the court below are as follows; the suit is not bad for non-joinder of necessary parties; there is no material alteration to Exhibit A1 promissory note and the same is valid and binding on the parties; the testimony of PW1 can be relied on to hold that the plaintiff has succeeded in proving that the defendant has borrowed ₹7,00,000/- from him and he executed Exhibit A1 promissory note in consideration of the same; the defendant miserably failed to prove the circumstances under which Exhibit A1 promissory note and Exhibit A5 letter stated to have been executed by him; Exhibit A1 promissory note is valid and binding on the defendant and is supported by consideration; as Exhibit A1 is a negotiable instrument, the interest at 15% per annum claimed for pre-litigation period is reasonable; the plaintiff has succeeded in proving his case and he is entitled to the plaint amount due under Exhibit P1, as prayed for.
67. Heard arguments of the learned Counsel for the appellant/defendant and the learned Senior Counsel for the respondent/plaintiff.
68. The learned counsel for the appellant/defendant contended that, there was no debtor-creditor relationship between the parties and the suit is bad for non-joinder of M/s.Chakkiath Finance, which actually borrowed money from the plaintiff. As Exhibit A1 promissory note is a materially altered document no valid decree can be passed relying on such document. At any rate, Exhibit A1 promissory note is not supported by consideration.
68. Per contra, the learned Senior Counsel for the plaintiff contended that, there was debtor-creditor relationship between the parties and the suit was not bad for non-joinder of necessary parties. As rightly found by the court below, Exhibit A1 promissory note is not a materially altered document and it is also supported by consideration. The learned Counsel also contended that, since the suit is also on original consideration, even if the promissory note is found to be materially altered it can be used for the collateral purpose to prove the original consideration and a decree can be passed on such original consideration once the plaintiff is able to prove the same.
69. We have considered the rival submissions made at the Bar and also perused the records of the case.
70. At the outset we shall consider the contention raised by the defendant that, there was no debtor-creditor relationship between the parties and that the suit was bad for non-joinder of M/s.Chakkiath Finance.
71. According to the learned counsel for the defendant, there was no creditor-debtor relationship between the plaintiff and the defendant. The defendant borrowed the amount on behalf of M/s. Chakkiath Finance and the said company should be made liable to pay amount, if any, due to the plaintiff and no liability can be fastened upon the defendant. Therefore, the suit is bad for non-joinder of M/s. Chakkiath Finance.
72. But, according to the plaintiff, the defendant borrowed from him a total sum of ₹7,00,000/- as on 7.8.1997, and after receiving the said amount, the defendant has executed Exhibit A1 promissory note dated 7.8.1997 in favour of the plaintiff, promising to pay on demand or order the borrowed sum of ₹7,00,000/- with interest at the rate of 30% per annum. When the defendant failed to make payment, in spite of repeated demands, the plaintiff caused to issue Exhibit A2 notice lawyer notice, to which the defendant send Exhibit A3 reply. As the defendant failed to comply with the demand made in Exhibit A2 lawyer notice, the plaintiff filed the suit, on 2.8.2000.
73. The document marked as Exhibit A1 is the promissory note alleged to have been executed by the defendant dated 7.8.1997, in favour of the plaintiff, promising to pay on demand or order the borrowed sum of ₹7,00,000/- with interest at the rate of 30% per annum. Exhibit A1 promissory note reads thus;
“Whereas I have borrowed on behalf of Chakkiath Financing Company, Kothamangalam, a total sum of ₹7 lakhs (Rupees Seven Lakhs only) from Sri Mathai M.Paikeday, residing at SRM Road, Ernakulam, I hereby promise to repay the aforesaid loan with interest at the rate of 30% per annum to aforesaid Sri Mathai M. Paikeday or to his order or to the bearer of this instrument on demand.”
74. Going by Exhibit A1, it is the defendant who has borrowed ₹7,00,000/- from the plaintiff and the defendant had also promised to repay the aforesaid loan amount together with interest to the plaintiff or to his order or to the bearer of the instrument on demand. Though DW1 admitted the execution of Exhibit A1, which according to him is intended only as a letter, Exhibit A3 reply notice is silent as to the execution of any such letter.
75. The document marked as Exhibit A4 is a certificate issued by the Senior Manager of Corporation Bank, Cloth Bazar Road Branch, certifying that, they have on 7.8.1997 debited a sum of ₹6,50,000/- to the savings account of the plaintiff and issued Pay Order in favour of the defendant for ₹6,50,000/- on 7.8.1997 and the defendant encashed the said pay order on the very same day itself. The document marked as Exhibit A5 is a letter dated 2.10.1997 of the defendant addressed to the plaintiff. In the said letter issued nearly 2 months after the execution of Exhibit A1 promissory note, the defendant sought time to solve the issue, as the financing and other business are in a standstill. It has been stated in Exhibit A5 that, the only source remaining for raising money is to dispose of the fixed assets, which requires some time, as the purchasers have quoted only very low price.
76. The defendant, as DW1, admitted the execution of Exhibits A1 and A5, which are in his own handwriting and he has also put his signature at the bottom of the said documents. The only case of the defendant, as far as Exhibit A1 promissory note is concerned, is that subsequent to the execution of Exhibit A1, the same was materially altered by affixing stamp and by putting initial on the said stamp.
77. As seen from Exhibit A1 there is no privity of contract between the plaintiff and M/s.Chakkiath Finance. It is within the realm of the defendant to decide on whose benefit the money is to be borrowed. Therefore, as rightly held by the court below, the defendant cannot insist that, the plaintiff should proceed against M/s.Chakkiath Finance, a stranger to the contract, to recover the money borrowed by the defendant. Therefore, the contention raised by the defendant that the suit is bad for non-joinder of M/s.Chakkiath Finance is only to be rejected and we do so.
78. Now we shall consider the contention of the defendant that Exhibit A1 promissory note is a materially altered document and no valid decree can be passed relying on such a document. The suit is based on promissory note and also on original consideration. The execution of Exhibit A1 is neither denied nor disputed by the defendant. The defendant as DW1 would depose that, the plaintiff had huge deposits with M/s.Chakkiath Finance, which later on became bankrupt. In order to compel M/s.Chakkiath Finance and to pacify the plaintiff’s men, the defendant executed Exhibit A1 in a white paper, believing the assurance made by the plaintiff that, it would be used only against the financier. According to DW1, the stamp in Exhibit A1 was affixed subsequently by extending the line underscoring the signature above the stamp and subscribing initial on the stamp, so as to take away its negotiability. On the other hand, PW1 would say that the defendant himself has written Exhibit A1 by affixing the stamp, who has also subscribed his initial across the stamp and the execution of Exhibit A1 is known to DW2. DW2, who is the brother-in-law of the defendant, though identified Exhibit A1, would say that there was no stamp affixed at the time of its execution. DW1 admitted Exhibit A5 letter dated 2.10.1997 and he would say that, it was also written by him as per the instructions of the plaintiff. Therefore, admittedly Exhibit A1 promissory note and Exhibit A5 letter are in the own handwriting of the defendant and he has also affixed his signature on both documents. In such circumstances, the court below, on a comparison of the admitted signature of the defendant in Exhibits A1 and A5, concluded that the said documents contain only the admitted signature of the defendant, which are similar in all incidents, namely, the nature of the letters written, their inclinations, relative upward and downward bending, the underscoring line, etc. The court below concluded further that, the handwriting, signature, underscoring, its relative position with the stamp,etc. would reveal that, there would be no foul play in the execution of Exhibit A1. The court has also taken note of the fact that, in Exhibit A3 reply notice, the defendant has no case that he has written letters like Exhibits A1 and A5. Though, the defendant filed I.A.Nos.2968/2003 and 3742/2003 to call for records from his erstwhile office to compare his initials in the office records with that in Exhibit A1 promissory notice, those applications were dismissed. Though, he preferred W.P.(C) No.30146/2003 before this Court, he could not succeed. It was in such circumstances, the court below, after analysing the testimony of PW1 and DWs 1 and 2, concluded that there is no material alteration to Exhibit A1 promissory note and the same is valid and binding on the parties. Moreover, as rightly contended by the learned counsel for the plaintiff, since the suit is also on original consideration, if Exhibit A1 promissory note is found to be materially altered, the same can be used for the collateral purpose to prove the original consideration and a decree can be passed on such original consideration once the plaintiff is able to prove the same. In the case on hand, out of ₹7,00,000/-
borrowed by the defendant, a sum of ₹6,50,000/- is covered by the pay order referred to in Exhibit P4 certificate issued by the plaintiff's bankers, which the defendant encashed on 7.8.1997. DW1 has also admitted encashment of that pay order for ₹6,50,000/-. The payment of ₹50,000/- in cash was one week prior to the execution of Exhibit A1 promissory note. Exhibit A1 promissory note if found materially altered can be used for the collateral purpose to prove the original consideration in respect of the said amount of ₹50,000/- borrowed by the defendant one week prior to its execution. Therefore, the contention of the defendant that Exhibit A1 promissory note is a materially altered document and no valid decree can be passed relying on such a document is only to be rejected and we do so.
79. Now we shall consider whether the plaintiff has succeeded in proving that Exhibit A1 promissory note is supported by consideration. PW1 would depose that he had acquaintance with the defendant for the last 8 to 10 years and they had many transactions between them. According to PW1, he paid the amount to the defendant with the knowledge of DW2 Ouseph Mathew. Exhibit A1 promissory note was also executed in his presence. Exhibit A4 certificate issued by the plaintiff’s banker would show that ₹6,50,000/- was given to the defendant by way of pay order from the account of the plaintiff and PW1 would also say that ₹50,000/- was paid to the defendant one week prior to that, at his residence. In Exhibit A5 letter executed around 2 months after the execution of Exhibit A1 promissory note, the plaintiff was requested to excuse the defendant for not paying the money. As rightly held by the court below, Exhibit A4 certificate issued by the plaintiff’s banker is a strong circumstance, which will go against the case set up by the defendant.
80. The defendant as DW1, admitted encashment of pay order for ₹6,50,000/- referred to in Exhibit A4 certificate. But, according to him, he has given the amount to M/s.Chakkiath Finance owned by his brother Jacob, who was examined as DW3. But, DW3 has categorically stated that, the defendant never entrusted him any amount on behalf of the plaintiff for depositing in M/s.Chakkiath Finance. Therefore, DW3 was declared hostile and the learned counsel for the defendant was permitted to cross examine the said witness. DW3 has also stated that, the deposits in favour of the plaintiff were given to the company only by DW2 himself. DW2, bother-in-law of the defendant, would depose that the defendant paid the amount to M/s.Chakkiath Finance and gave the pass book to the plaintiff. But, the defendant has no case that he has obtained the pass book and given it to the plaintiff. Therefore, as rightly noticed by the court below, the testimony of DWs 1 and 2 are contradictory and there is no corroboration as well.
81. Relying on Exhibit B2 list of creditors of M/s.Chakkiath Finance, the defendant would contend that, the plaintiff was having substantial investments in the said company. But, the defendant failed to prove that he received the amount from the plaintiff for depositing in M/s.Chakkiath Finance and he had actually deposited the said amount in that company. Nothing was brought out in the cross examination of PW1 to discredit his version that Exhibit A1 promissory note is supported by consideration. Moreover, once the plaintiff discharges the initial burden to prove execution of Exhibit A1 promissory note, the presumption under Section 118 of the Negotiable Instruments Act, 1881, that it is supported by consideration is available to it and then the burden shifts to the defendant to disprove the same. The presumption under Section 118 of the Act can be rebutted only be definite and conclusive evidence or form the facts and circumstances of the case and even from the flaws in the plaintiff’s evidence. As the defendant failed to make out a case for rebuttal of presumption under Section 118 of the Act, the court below rightly concluded that, the plaintiff has succeeded in proving that Exhibit A1 promissory note is supported by consideration. We find absolutely no reason to interfere with the above finding of the court below.
82. The court below on a proper appreciation of the evidence on record decreed the suit and we find no reason to interfere with any of the findings of the court below in the impugned judgment. Hence, R.F.A.No.254/2005 is only to be dismissed, confirming the judgment and decree of the trial court in O.S.No.437/2000.
In the result R.F.A. Nos.253/05 & 254/05 are dismissed confirming the judgment and decree of the trial courts. No order as to costs.
dsn Sd/-
ANTONY DOMINIC, JUDGE Sd/-
ANIL K.NARENDRAN, JUDGE