Wednesday 28 October 2015

When any document will be treated as promissory note?

 In the case on hand, the recitals in Exhibit A1 is to the

effect that, on demand the appellant undertakes to pay a sum of


8,00,000/- to the respondent with interest at the rate of 18% per

annum, for value received. In Validation of document v. State

(AIR 1955 Madras 652) a Full Bench of the Madras High Court

held that, "the mere omission of the expression 'to the order of'

would not render a document any the less a promissory note, if

otherwise it fulfilled the definition of the term 'promissory note'.

Actually a promissory note need not contain this expression. It is

sufficient if there is an unconditional undertaking to pay a certain

sum of money to a certain person." Following the said judgment and

also the judgment of the High Court of Gujarat in Shah Chhabildas

Mangaldas v. Luhar Mohan Arjan (AIR 1967 Gujarat 7) and the

judgment of the High Court of Andhra Pradesh in Bahadurrinisa

Begum v. Vasudev Naick (AIR 1967 AP 123), a learned Single

Judge of this Court in Hameed Haji v. Appukutty (1968 KLT 869)

has reiterated that, "the absence of the expression 'or to the order

of' will not make the document any the less a promissory note."

Therefore, Exhibit A1, which contains an express unconditional

promise made by the appellant to pay on demand a certain sum of

money to the respondent for value received, is an instrument having


the essential features of a promissory note and the contention to the

contra raised by the learned counsel for the appellant can only be

rejected.
  IN THE HIGH COURT OF KERALAAT ERNAKULAM

                                            PRESENT:

                          THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN
                                                   &
                       THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN

               FRIDAY, THE 27TH DAY OF FEBRUARY 2015

                                      RFA.No. 415 of 2014 (B)
                                        

          K.VIJAYAKUMARN NAIR @ VIJAYAN.
          
Vs
            AJIKUMAR, 
            P.N.RAVINDRAN & ANIL K.NARENDRAN, JJ.
           




      The appellant is the defendant in O.S.No.236 of 2010 on the

file of the Subordinate Judge's Court, Nedumangad. The respondent-

plaintiff filed the said suit for realisation of money. The court below

by the judgment and decree dated 29.11.2013 decreed the suit

allowing the plaintiff to realise an amount of 11,36,000/- together

with interest at the rate of 6% per annum on the principal amount

of 8,00,000/- from the date of suit till realisation. It is aggrieved by

the said judgment and decree of the court below, the appellant is

before us in this appeal.

      2.     We heard the arguments of the learned counsel for the

appellant/defendant and perused the judgment and decree of the

court below. We have also perused the records of the case made

available by the learned counsel for the appellant.


      3.   The plaint averments, in brief, are as follows; The

defendant had borrowed an amount of 8,00,000/- from the plaintiff

on 29.5.2008 agreeing to repay the said amount with interest @18%

per annum and executed a promissory note dated 29.5.2008 in his

own handwriting in favour of the plaintiff. In spite of repeated

demands, the defendant did not repay the said amount. On 8.9.2010

the plaintiff caused a lawyer's notice to be issued calling upon the

defendant to return the aforesaid amount. As the defendant failed to

repay, the plaintiff filed the suit for realisation of an amount of

11,36,000/- together with future interest at the rate of 18% per

annum from the date of suit till the date of realisation, from the

defendant and his assets, both movable and immovable.

      4.   The defendant filed a written statement admitting that, he

had borrowed an amount of 8,00,000/- from the plaintiff, through

one Sunil Kumar, who is the brother-in-law of the plaintiff. The

defendant further admitted the execution of a promissory note for

8,00,000/- in favour of the plaintiff, which was given to the plaintiff

through the said Sunil Kumar. Later, the defendant repaid the said

amount of 8,00,000/- together with interest to the plaintiff, through

Sunil Kumar, who had agreed to return the promissory note


obtained by the plaintiff. After one week, when the defendant

approached Sunil Kumar for return of the promissory note, he was

informed that it was lost from the hands of the plaintiff. The

defendant demanded a written receipt from the plaintiff for

repayment of the amount already made. Accordingly, the plaintiff

has issued a receipt in favour of the defendant for the amount

already received towards principal amount and interest due under

the promissory note. Subsequently, the relationship between the

defendant and Sunil Kumar got strained and it is at his instigation,

the plaintiff filed the suit for realisation of money, misusing the

aforesaid promissory note.

      5.   The plaintiff was examined as PW.1 and Exts.A1 to A4

were marked on his side. On the side of the defendants Dws.1 and 2

were examined and Exts.B1 to B3 were marked. On an appreciation

of the facts of the case and the evidence on record, the court below

decreed the suit allowing the plaintiff to realise an amount of

11,36,000/- together with interest @6% per annum on the

principal amount of 8,00,000/- from the date of suit till realisation.

      6.   The learned counsel for the appellant would contend

that, in the absence of an undertaking to pay a certain sum, which is


an essential feature of a promissory note under section 4 of the

Negotiable Instruments Act, 1881, Exhibit A1 promissory note is

unenforceable. It is well settled that, the question as to whether an

instrument is a promissory note or not has to be ascertained by

reading the instrument as a whole, regardless of its form or

nomenclature. Therefore, mere writing of the words 'Promissory

Note' on the top of Exhibit A1 will not make it a promissory note.

The real character of Exhibit A1 has to be determined by reading it

as a whole. Section 4 of the Negotiable Instruments Act, 1881, reads

thus;

      "4. 'Promissory Note': A 'promissory note' is an
      instrument in writing (not being a bank-note or a currency-
      note) containing an unconditional undertaking, signed by
      the maker, to pay a certain sum of money only to, or to
      the order of, a certain person, or to the bearer of the
      instrument."

Therefore, if there is an unconditional undertaking, signed by the

maker, to pay a certain sum of money only to, or to the order of, a

certain person, or to the bearer of the instrument, it will be a

promissory note.

      7.   In the case on hand, the recitals in Exhibit A1 is to the

effect that, on demand the appellant undertakes to pay a sum of


8,00,000/- to the respondent with interest at the rate of 18% per

annum, for value received. In Validation of document v. State

(AIR 1955 Madras 652) a Full Bench of the Madras High Court

held that, "the mere omission of the expression 'to the order of'

would not render a document any the less a promissory note, if

otherwise it fulfilled the definition of the term 'promissory note'.

Actually a promissory note need not contain this expression. It is

sufficient if there is an unconditional undertaking to pay a certain

sum of money to a certain person." Following the said judgment and

also the judgment of the High Court of Gujarat in Shah Chhabildas

Mangaldas v. Luhar Mohan Arjan (AIR 1967 Gujarat 7) and the

judgment of the High Court of Andhra Pradesh in Bahadurrinisa

Begum v. Vasudev Naick (AIR 1967 AP 123), a learned Single

Judge of this Court in Hameed Haji v. Appukutty (1968 KLT 869)

has reiterated that, "the absence of the expression 'or to the order

of' will not make the document any the less a promissory note."

Therefore, Exhibit A1, which contains an express unconditional

promise made by the appellant to pay on demand a certain sum of

money to the respondent for value received, is an instrument having


the essential features of a promissory note and the contention to the

contra raised by the learned counsel for the appellant can only be

rejected.

      8.   The learned counsel for the appellant would contend that,

the appellant had already discharged 8,00,000/- borrowed from the

respondent through DW2 Sunil Kumar, as evidenced by Exhibit B1

receipt dated 16.12.2009. It is contended that the court below ought

not to have ignored Exhibit B1 receipt on technicalities, since the

written statement contained a specific plea of discharge. The learned

counsel has also contended that, the appellant was denied a fair

opportunity before the the court below to prove Exhibit B1 receipt

through an expert.

      9.   In the plaint, the definite case of the respondent was

that, on 29-5-2008 the appellant had borrowed an amount of

8,00,000/- from him, agreeing to repay the said amount with

interest @18% per annum and executed a promissory note dated

29.5.2008 in the own handwriting of appellant in favour of

respondent. In the written statement the appellant had admitted

the transaction mentioned in the plaint and also the execution of a

promissory note in favour of respondent. His only contention was


that he has discharged the entire liability. According to the

appellant, he had borrowed the money and returned it through DW2

Sunil Kumar, brother-in-law of the respondent. When the appellant

has admitted the transaction and raised a plea of discharge, the

burden is upon him to prove the alleged discharge of the liability.

      10. The suit was filed on 13.9.2010. The appellant, who was

examined as DW1, has admitted that, on receipt of summons he

entered appearance on 13.10.2010 by filing vakalath. Thereafter,

the written statement was filed only on 22.10.2011, in which the

appellant had raised a contention that, he had repaid an amount of

8,00,000/- together with interest to the respondent, through DW2

Sunil Kumar, who had agreed to return Exhibit A1 promissory note

obtained by the respondent. According to the appellant, after one

week, when he approached DW2 Sunil Kumar for return of the

promissory note, he was informed that it was lost from the hands of

the respondent. The appellant demanded a written receipt from the

respondent for repayment of the amount already made. Accordingly,

the respondent issued a receipt in favour of the appellant for the

amount already received towards principal amount and interest due

under the promissory note. Though the appellant has raised a


contention in the written statement that the respondent had issued a

receipt for repayment of amount covered by Exhibit A1 promissory

note, he has not produced the said receipt along with the written

statement.

      11. The respondent, who was examined as PW1, has

categorically stated that, the appellant has not repaid the amount

through Sunil Kumar and that, he had never issued any receipt to

the appellant, as averred in the written statement. On 11.11.2013,

at the time of cross-examination of PW1, the appellant produced

Exhibit B1 receipt dated 16.12.2009, which was marked subject to

the objection of the respondent. PW1 has categorically denied the

execution of Exhibit B1 receipt. He has also deposed that, Exhibit B1

receipt is a fabricated one, which is not in his handwriting and the

signature on the said receipt is also not his.

      12. Order VIII of the Code of Civil Procedure, 1908

(hereinafter referred to as 'the Code'), deals with written statement,

set-off and counter-claim. Going by sub-rule (1) of rule 1A of Order

VIII of the Code, where the defendant bases his defence upon a

document or relies upon any document in his possession or power,

in support of his defence or claim for set-off or counter-claim, he


shall enter such document in a list, and shall produce it in court

when the written statement is presented by him and shall, at the

same time, deliver the document and a copy thereof, to be filed with

the written statement. Sub-rule (2) of rule IA mandates that, where

any such document is not in the possession or power of the

defendant, he shall, wherever possible, state in whose possession or

power it is. Sub-rule (3) of rule 1A states that, a document which

ought to be produced in court by the defendant under rule 1A, but,

is not so produced shall not, without the leave of the court, be

received in evidence on his behalf at the hearing of the suit. As per

sub-rule (4) nothing in rule 1A shall apply to documents produced

for the cross-examination of the plaintiff's witnesses, or handed over

to a witness merely to refresh his memory.

      13. In     Bhanumathi v. K. R. Sarvothaman and others

(2010 (4) KLT 809) a learned single Judge of this Court repelled

the contention that, the Court has no power to receive in evidence at

the time of hearing of the suit documents which ought to have been

produced along with the plaint or written statement, holding that in

view of the amendment brought about by the Amendment Act 22 of

2002, inserting sub-rule (3) in rule 14 of Order VII and sub-rule (3)


in rule 1A of Order VIII of the Code, and by using the expression

'shall not without the leave of the court be received in evidence on

his behalf at the time of hearing of the suit', the court has the power

to receive in evidence even at the time of hearing of the suit

documents which ought to have been produced along with the plaint

or the written statement though a party cannot claim a right to

produce such documents at the time of hearing. The learned single

Judge noticed that, in the affidavit filed in support of the application

for leave it was stated that the applicants were not in custody of

those documents at the time of filing of the written statement and

having regard to the facts of the case the court below accepted the

reason stated therein as sufficient to grant leave to introduce the

documents in evidence. That discretion having been exercised in

accordance with law and as it is not shown to be arbitrary or

perverse, the learned single Judge refused to interfere with the

same.

      14. Going by sub-rule (1) of rule 1A of Order VIII of the

Code, a document in the possession or power of the defendant on

which he bases his defence or claim for set-off or counter-claim shall

be produced at the time of presentation of the written statement. As


required under sub-rule (2) of rule IA, if any such document is not in

the possession or power of the defendant he shall, wherever

possible, state in whose possession or power it is. If any document

falling under sub-rule (1) of rule 1A is not produced at the time of

presentation of the written statement, the defendant has no right as

such to produce such a document in evidence at the time of hearing.

However, in view of sub-rule (3) of rule 1A, the court has the power

to grant leave to receive such documents in evidence even at the

time of hearing. Since sub-rule (3) is an exception to the general

rule contained in sub-rule (1) of Rule 1A, the court must exercise

sound discretion while granting leave to receive such documents, on

the defendant satisfying the court that, those documents could not

be produced at the time of presentation of the written statement, for

convincing reasons.

      15. In the case on hand, the suit was filed on 8.9.2010. On

receipt of summons, the appellant entered appearance through

counsel, on 13.10.2010. Thereafter, on 22.10.2011, he filed a

written statement raising a plea of discharge. However, no document

in support of such a plea of discharge was either specifically

mentioned in the written statement or produced in court at the time


of presentation of the written statement. Later, on 11.11.2013, at

the time of cross-examination of the respondent as PW1, the

appellant produced in court a receipt dated 16.12.2009 (marked as

Exhibit B1 subject to the objection of the respondent), alleged to

have been issued by the respondent. Instead of producing the said

document in court along with an application under sub-rule (3) of

rule 1A of Order VIII of the Code seeking leave of the court to

produce such a document, the appellant attempted to mark the said

document during the cross-examination of the respondent as PW1,

contending that, it is a document intended to be handed over to PW1

merely to refresh his memory, the production of which would fall

under clause (b) of Sub-rule (4) of Rule 1A. We are unable to accept

the said contention raised by the learned counsel for the respondent.

Exhibit B1 receipt is a document which should be the basis for the

plea of discharge raised by the appellant in his written statement. It

is a document, which the appellant ought to have produced in court

at the time of presentation of the written statement, in view of the

provisions contained in sub-rule (1) of rule 1A. Such a document

cannot be termed as one intended to be handed over to PW1 merely

to refresh his memory, falling under clause (b) of sub-rule (4) of rule


1A. Exhibit B1 is the basic document relied on by the appellant to

prove his plea of discharge raised in the written statement. If the

appellant could not produce the said document at the time of

presentation of the written statement, for any convincing reasons, it

is for him to produce the same in court along with an application

under sub-rule (3) of rule 1A, seeking the leave of the court. Having

failed to do so, it is not open for the appellant to contend that the

court below erred in not receiving Exhibit B1 receipt into evidence.

      16. In the written statement, the appellant has admitted that

he had borrowed an amount of 8,00,000/- from the respondent

through DW1. He has also admitted the execution of Exhibit A1

promissory note in favour of the respondent. But, the appellant

would contend that, later he repaid the said amount together with

interest to respondent through DW1, who had agreed to return

Exhibit A1 promissory note obtained by the respondent. After one

week, when he approached DW1 for return of the promissory note,

he was informed that it was lost from the hands of the respondent.

Then he demanded a written receipt from the respondent for

repayment of the amount already made. Accordingly, the respondent

issued Exhibit B1 receipt in his favour for the amount already


received towards principal amount and interest due under the

promissory note. Exhibit B1 receipt was marked subject to objection.

The   respondent    has raised serious    disputes regarding the

genuineness of Exhibit B1 receipt and contended that it is a

fabricated document. On a comparison of the signature of the

respondent in the plaint with that in Exhibit B1 receipt, the court

below found that there is considerable difference between the two

signatures. Further, going by the averments in the written

statement, it was one week after repayment, the appellant had

approached DW1 for return of Exhibit A1 promissory note, then he

was informed that it was lost from the hands of the respondent.

Thereafter, as demanded by the appellant, the respondent issued

Exhibit B1 receipt dated 16.12.2009. But, the defendant, while

examined as DW1, has deposed that he got Exhibit B1 receipt on the

date of repayment itself, i.e., on 16.12.2009. DW1 had no definite

case regarding the date of repayment and the amount paid towards

interest. Further, DW2, who was examined on the side of the

appellant had denied his involvement in the transaction. On

analysing the evidence of DW2, the court below came to the

conclusion that he is a total stranger to the transaction and he is


unaware of anything mentioned in the plaint and the written

statement. It was in the totality of these circumstances and the

evidence on record, the court below came to the conclusion that, the

appellant has not succeeded in proving the plea of discharge raised

in the written statement. We find absolutely no grounds to interfere

with the said finding of the court below.

      17. The learned counsel for the appellant would contend that,

the court below has not granted a fair opportunity to the appellant

to prove Exhibit B1 through an expert. A reading of the impugned

judgment would show that, though the appellant had applied for

comparison of the signature in Exhibit B1 receipt with the admitted

signature of the respondent in the plaint, he had not taken any steps

to get an expert opinion on the signature in Exhibit B1. In such

circumstances, having failed to take steps before the court below to

get an expert opinion on the signature in Exhibit B1 receipt, the

appellant cannot now contend that, no fair opportunity was afforded

to him to prove Exhibit B1 through an expert.

      18. The learned counsel for the appellant would further

contend that, as the time fixed in Exhibit A2 lawyer notice for

sending a reply was only 3 days the appellant could not send any


reply to that notice. As we have already noticed, the suit was filed

on 13.9.2010 and the defendant entered appearance on 13.10.2010

by filing vakalath. Thereafter, the written statement was filed only

on 22.10.2011. If the plea of discharge pleaded by the defendant

was genuine, he could have send a proper reply to Exhibit A2 lawyer

notice and nothing prevented him from sending such a reply, even

after entering appearance in the suit. Therefore, the contention of

the learned counsel in this regard can only be rejected.

      19. Lastly, the learned counsel for the appellant would

contend that, even if it is assumed that the respondent is entitled for

the principal sum, the court below went wrong in awarding interest

for the period subsequent to the deposit of the plaint claim in court.

Going by the decree, the plaintiff is allowed to realise the plaint

claim with interest at the rate of 6% per annum, on the principal

amount of 8,00,000/- from the date of suit till realisation. Merely

for the reason that, during the pendency of the suit, the appellant

had deposited the plaint claim in court in order to avoid an order of

attachment before judgment over his property, it cannot be

contended that, once the suit is decreed the respondent is

entitled for interest on the plaint claim only upto the date of such


deposit. Such a deposit by the defendant, during the pendency of

the suit, can never be treated as a deposit of money, in terms of

Rule 1 of Order 21 of the Code. We, therefore find absolutely no

merit in the contention raised by the learned counsel for the

appellant that, the court below ought not to have granted interest on

the plaint claim from the date of such deposit made by the

appellant.

      We accordingly hold that no grounds have been made out to

interfere with the findings of the court below in the impugned

judgment. The appeal fails and it is dismissed in limine.

                                                    Sd/-
                                          P.N.RAVINDRAN, JUDGE

                                                     Sd/-
                                       ANIL K.NARENDRAN, JUDGE




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1 comment:

  1. With due respect towards judiciary, I feel that "an instrument containing an unconditional undertaking to pay a certain sum of money to a certain person and the same is attested" is a Bond but not a Promissory note in the absence of words "order of or to the bearer".

    The Hon'ble judge failed to consider the judgment reported by the Hon'ble A.P. High Court in "Allani Lingaiah vs Paidimarri Sathya Babu, Sarpanch ... on 19 November, 1996" categorically held that such an instrument would fall under the definition of Bond but not under Promissory Note. I think the said judgement was not brought to the notice of the Hon'ble court.

    Anyhow, so far as courts in A.P. are concerned, the ruling of Kerala High Court is not a binding precedent..

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