1938 (2) TMI 8 - HC - Indian Laws

Summary

Issues Involved:
1. Whether a person who has lent money on a promissory note can sue to recover the debt apart from the note when the note embodies the terms of the contract but is inadmissible in evidence due to a defect in stamping.
2. The applicability of Section 91 of the Indian Evidence Act and Section 35 of the Stamp Act in such cases.
3. The distinction between antecedent debt and contemporaneous loan in the context of promissory notes.
4. The relevance of English law principles in the Indian legal context concerning promissory notes and debt recovery.

Issue-wise Detailed Analysis:

1. Recovery of Debt Apart from the Promissory Note:
The primary question is whether a lender can sue to recover the debt if the promissory note, embodying the terms of the contract, is inadmissible due to improper stamping. The court recognized that in England, the right to sue on the original consideration is acknowledged, and some Indian judges have applied the same principle. However, Section 91 of the Indian Evidence Act prohibits proving the terms of the contract except through the document itself or admissible secondary evidence. The court noted that if the promissory note embodies all the contract terms and is improperly stamped, no suit on the debt will lie. However, if the note does not embody all the terms, the true nature of the transaction can be proven, and a suit on the debt will lie if the instrument was given as collateral security or by way of conditional payment.

2. Applicability of Section 91 of the Indian Evidence Act and Section 35 of the Stamp Act:
Section 91 states that no evidence shall be given in proof of the terms of the contract except the document itself. Section 35 of the Stamp Act prohibits an improperly stamped negotiable instrument from being put in evidence. The court emphasized that these statutory provisions must be strictly adhered to, unlike the English rules of evidence, which are judge-made and allow more flexibility. The court concluded that if the promissory note embodies the entire contract and is improperly stamped, the suit must fail due to the prohibitions of Sections 91 and 35.

3. Distinction Between Antecedent Debt and Contemporaneous Loan:
The court differentiated between promissory notes given for antecedent debts and those given contemporaneously with the loan. In cases of antecedent debt, the creditor may sue on the debt and ignore the note. However, for contemporaneous loans, if the promissory note embodies all the terms of the contract, the suit on the debt is barred if the note is improperly stamped. The court reviewed various precedents and noted that when the loan and the note are contemporaneous, the instrument itself is the only evidence of the transaction, barring other evidence under Section 91.

4. Relevance of English Law Principles:
The court discussed the applicability of English law principles, noting that while English rules of evidence are judge-made and flexible, Indian law is statutory and rigid. The court highlighted that English law tends to ignore stamp objections, whereas Indian law strictly prohibits the use of improperly stamped documents as evidence. The court referred to several English and Indian cases, concluding that the Indian statutory provisions must be followed, and the principles of English law cannot override them.

Conclusion:
The court held that if a promissory note embodies all the terms of the contract and is improperly stamped, no suit on the debt will lie due to the prohibitions of Sections 91 and 35. However, if the note does not embody all the terms, the true nature of the transaction can be proven, and a suit on the debt will lie if the instrument was given as collateral security or by way of conditional payment. The case was remanded to the trial court for further consideration in light of this judgment.