CHINNAYYA NAIDU Vs. SRINIVASA NAIDU

JUDGEMENT

(1.) The suit is filed on an insufficiently stamped promissory note. The learned Subordinate Judge has on the allegations in the plaint and the recitals in the note, holding that no-action would lie on the original consideration, dismissed the suit, without taking evidence. On this point there is-a marked conflict of judicial opinion in this Presidency, although the lower Court assumes that the law is clear and settled. Two recent decisions will serve to show how divergent the views taken by this Court on this question are. In Murugappa Chetty v. nachiappa Chetty 1934 Mad. 503, the question arose before Stone, J., in a case on the original, side of the High Court. There a hundi for Rs. 10,000 addressed to the plaintiff's firm was handed by the plaintiff to defendant 1 who deeming it equivalent to cash, executed in favour of the plaintiff a promissory note for that sum. The question arose, was there a cause of action independent of the note? Stone, J., thus observes: Had the transaction in question stopped with the giving of the letter empowering defendant 1 to go to Madras and collect Rs. 10,000 it would not be arguable but that the plaintiff had a cause of action springing out of the contract of loan. What is there that makes the letter given by defendant 1 to the plaintiff and a promissory- note to secure the re-payment of that loan a. merger or a novation extinguishing the earlier contract and turning these two contracts into-one, a contract contained in a promissory note? I cannot understand under what principle of law the first contract is to be regarded as extinguished.

(2.) This is a very emphatic statement of the law as understood by that learned Judge. Just a few months after that decision, Varadachariar, J., delivering, the judgment of the Bench consisting of himself and Burn, J., expressed himself quite definitely holding the opposite view. Says the learned Judge: The note as well as the loan were contemporaneous and there is really no question of a. definite anterior liability apart from the note...he must be permitted to prove the very terms contained in the suit letter under the guise of art original debt. To permit him to do so will be in the very teeth of Section 91, Evidence Act : Chockalingam Chettiar V/s. palaniappa Chettiar 1935 Mad. 23.

(3.) The conflict, to which I have referred, is thus brought out by these two judgments, both of recent date, and an examination of the authorities will show that throughout there have been two radically opposite views which have found expression in two sets of decisions. In Pothi Reddi V/s. Velayudasivan (1887) 10 Mad. 94 the terms of a contract to repay a loan of money having been settled and the money paid, a promissory note embodying those terms was executed later in the day. The note was not stamped and the plaintiff was not allowed to fall back upon the contract evidenced by the loan. A similar view was taken in Muthu Sastrigal v. Viswanatha Pandara Sannadhi 1914 Mad. 657. There the loan was treated as having become merged in the promissory note and as no suit could lie on the unstamped note, the plaintiff could not fall back upon the loan. In Chandrasekharam Pilli V/s. Srinivasa Pillai 1933 Mad. 71, Krishnan Pandalai, J., held, following : Muthu Sastrigal V/s. Viswanatha Pandara Sannadhi 1914 Mad. 657, and several decisions by single Judges, that Section 91, Evidence Act, precluded the proof of the loan, on the ground that its terms were reduced to writing and embodied in the note which became inadmissible.