Promissory Note

( 1 ) THIS is a defendants second appeal arising out of a suit for recovery of money. The plaintiff-respondent claimed a sum of Rs. 1,500/- on the basis of a promissory note dated 8-9-1941 executed by the defendant-appellant in favour of the plaintiffs father, Chanara shekhar, for a sum of Rs. 1,250/- with interest at 6 percent per annum. In the alternative it was pleaded that the plaintiff was entitled to the decree claimed on the basis of, the original loan of Rs. 1,250/-which was, advanced to the defendant-appellant before the promissory note was executed by the defendant for the amount of the loan. It was admitted in the plaint that the promissory note bore a stamp of one anna and was, therefore, under-stamped. The receipt accompanying the promissory note was, however, duly stamped.

( 2 ) IN defence, the defendant admitted that the sum of Rs. 1,250/- was. borrowed by him from the plaintiffs father but it was pleaded that the promissory note was executed simultaneously with the advance of the loan and the loan having been made on the basis of the promissory note which embodied all the terms of the contract of loan and which was not admissible in evidence, the suit was not maintainable on /the , basis of the original loan. The trial Court dismissed the suit on the ground that the transaction of loan was simultaneously made with the execution of the promissory note and that all the terms of the transaction of loan were embodied in the promissory note, with the result that the terms of the contract of loan could only be proved by the production of the promissory note, which could not be done because it was insufficiently stamped. The lower appellate Court, however, took a contrary view. It held that although the transaction of the loan and the execution of the promissory note took place simultaneously nevertheless, when the promissory note could not be relied upon because it was insufficiently stamped, it was a mere collateral security and the plaintiff could sue on the basis of the original loan. The lower appellate Court, therefore, decreed the suit. Against this decree the defendant has appealed to this Court and the sole question for determination is whether the plaintiff-respondent is entitled to sue on the basis of the original loan when the contract of loan was simultaneously made with the execution of the promissory note and the loan was given on the basis of the promissory note which was intended to be by way of a collateral security. The promissory note was in the following terms :

"we Lakshmi Narain, Rama Shankar, and Kundan Lal Avasthi having borrowed Rs. 1,250/-from Chandra Shekhar Vaid Aganhotri for the purpose of depositing the pre-emption money, agree that we shall, on demand, pay the said amount with interest at the rate of 8 per cent. per annum to the said creditor. Therefore this promissory note has been executed, so that it may remain as sanad (evidence) and may be of use when needed. Dated: 8th September, 1941. "

( 3 ) ON the point under consideration there has been considerable divergence of judicial opinion. In --nazir Khan v. Ram Mohan, AIR 1931 AH 183 (PB) (A), a suit was brought for the recovery of a loan on the allegation that the loan had been advanced on foot of. a promissory note. The claim was based on the original contract, of loan, because the promissory note being insufficiently stamped could not be admitted in evidence. In defence the taking of the loan as alleged by the plaintiff was denied. It was pleaded that a sum of Rs. 50/- alone was borrowed which had been repaid. The Full Bench held that: (a) where there was a completed cause of action for recovery of money on foot of a distinct and separate transaction, and a promissory note was given as a collateral security, the creditor could sue for the recovery of money on the original cause of action even if the promissory note was not, for any reason, admissible in evidence; (b) but where the making and handing over of the promissor