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1936 Supreme(SC) 21
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD BLANESBURGH, LORD ATKIN, SIR LANCELOT SANDERSON, SIR SHADI LAL, AND SIR GEORGE RANKIN.
NAWAB MAJOR SIR MOHAMMAD AKBAR KHAN - Appellant
Versus
ATTAR SINGH (DEFENDANTS) - Respondents
On appeal from the Court of the Judicial Commissioner, North-West Frontier Province.
Decided On : April 6, 1936.
Solicitors for appellant:Stanley Johnson & Allen. Solicitors for respondents: Nehra & Co.
A receipt for money, even if specifying repayment terms and interest, is not a promissory note unless it contains an unconditional undertaking to pay, and thus is not subject to the stamping requirements of negotiable instruments.
Headnote:(A) Negotiable Instruments Act, 1881 - Section 4 - Indian Stamp Act, 1899 - Section 35 - Promissory note - A document that is primarily a receipt for money, even if it contains terms for repayment and interest, is not a promissory note unless it contains an unconditional undertaking to pay a certain sum to a certain person or bearer - Such a document is not intended to be a negotiable instrument and therefore does not require the stamping required for promissory notes.
(B) Indian Evidence Act, 1872 - Sections 91 and 92 - Oral evidence - Where a document does not purport to record all terms of a contract, oral evidence is admissible to explain the nature of the transaction, such as whether the money was a loan or a deposit.
(C) Indian Limitation Act, 1908 - Articles 59 and 60 - Loan vs. Deposit - Distinction between money lent payable on demand, where limitation runs from the date of loan, and money deposited payable on demand, where limitation runs from the date of demand.
Facts of the case:
A sum of money was given to moneylenders in exchange for a receipt stating the amount was payable after two years with interest. The giver claimed the money was a deposit and that a subsequent oral agreement was made after two years to keep the money as a deposit payable on demand. The recipients claimed it was a loan and that the amount had been repaid. The lower courts differed on whether the receipt was an improperly stamped promissory note and whether the transaction was a loan or a deposit.
Findings of Court:
The document was a receipt, not a promissory note, and thus admissible. The claim that the money had been repaid was found to be false. The court found no reason to reject the claim that a subsequent agreement was made to treat the funds as a deposit payable on demand.
Issues: Whether the receipt was a promissory note under the Negotiable Instruments Act; whether the transaction was a loan or a deposit for the purposes of the Limitation Act; and whether a subsequent oral agreement existed to keep the money as a deposit payable on demand.
Ratio Decidendi: A document is not a promissory note unless it contains an unconditional undertaking to pay; a receipt for money with repayment terms is not a negotiable instrument. Oral evidence is admissible to determine the nature of a transaction if the written document is not a complete record of the contract. Where the defense of repayment is proven false, the plaintiff's consistent account of a deposit agreement is acceptable.
Result: Appeal allowed; decree of the Subordinate Judge restored.
Legal Category Hierarchy
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commercial law
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negotiable instruments
- promissory notes
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negotiable instruments
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limitation law
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money recovery
- loans
- deposits
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money recovery
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practice and procedure
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evidence
- oral evidence
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evidence
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taxation law
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stamp act
- admissibility
-
stamp act
Judgement
Appeal (No. 62 of 1933) from a judgment and decree of the Court of the Judicial Commissioner, North-West Frontier Province (June 27, 1932), reversing a judgment and decree of the Subordinate Judge, Mardan (October 15, 1931).
On April 1, 1917, the respondents [except respondents Nos. 2 and 3, who were held not to be joint], members of a joint Hindu family, who carried on business as moneylenders, received from the appellant the sum of Rs.43,900, giving him in exchange a document of even date bearing a one anna stamp, and signed by two of the respondents, managers of the joint family. The document stated that " This (one) receipt is hereby executed by [the two respondents] . . . .for Rs.43,900....received.... for and on behalf of [the appellant]. This amount to be payable after two years. Interest at the rate of Rs.5-4-0 percent, per year to be charged." The appellant alleged that after the expiry of the two years the money, together with interest due at that time, was allowed to remain in deposit with the respondents at the same interest on condition that he could recover the amount on demand at any time.
On July 22, 1929, the appellant sent notice to the respondents claiming repayment of the money, and on their failure to comply with that notice he instituted proceedings on July 25, 1929, for recovery of the principal sum, with interest.
The first respondent, in his written statement, alleged that the appellant had not deposited the money, but had lent it, and, further, that " the plaintiff has received back his amount on the expiry of two years term mentioned in the pronote, dated April 1, 1917." The respondents pleaded that the money having been lent and not deposited, the appellants claim did not fall within art. 60 of the First Schedule to the Indian Limitation Act, 1908, and was time barred. They further denied that there was any agreement apart from that recorded in the document of April 1, 1917.
The facts and the relevant statutory provisions appear from the judgment of the Judicial Committee.
The Subordinate Judge, on a preliminary issue, held that the document of April 1, 1917, was a promissory note, was improperly stamped, and therefore inadmissible in evidence. After amendment of the plaint the judge held that the money was placed with the respondents as a deposit for two years and repayable on demand after the expiry of the two years, and he decreed the plaintiffs claim.
On appeal, the judges of the Court of the Judicial Commissioner were of opinion that the amount was not paid to the respondents as a deposit on April 1, 1917, but must be regarded as a loan, and that therefore the suit was barred by limitation under art. 59 of the Limitation Act, which provides three
Law. Rep. 63 Ind. App. 279 ( 1935- 1936) Nawab Major Sir Mohammad Akbar Khan V. Attar Singh
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years limitation for a suit for money lent under an agreement that it shall be payable on demand, the period to run from the time when the loan was made.
1936. Feb. 27,28 ; March 2,3, 5. Upjohn K.C., Wallach and Pringle for the appellant. The first question is whether the document of April 1, 1917, is a promissory note within s. 4 of the Negotiable Instruments Act, 1881. It is not a pro missory note it is taken out of the definition in
s. 4, as there is no unconditional undertaking to pay. If the document is a receipt it is properly stamped if it is a promissory note it is not properly stamped, and is inadmissible in evidence s. 35 of the Stamp Act (II. of 1899). After the two years mentioned in the document there was a new contract. [Reference was made to art. 60 of the First Schedule to the Indian Limitation Act, 1908.] A deposit, as distinct from a loan, means a passing of money not for the convenience of the man to whom it is given, but for the benefit of the person who hands it over.
[LORD ATKIN. In the case of a loan the borrower is a debtor, and he has to pay. In the case of a deposit there is no obligation to pay until demand, the person wit
